Where is the US economy headed?

I never said it was entirely Obama's doing, but he is now president and it is clearly now his responsibility to push the correct policies to pull us out of this. It is now his economy, not Bush's, and so he is no longer an innocent bystander. Every time he says "I inherited a problem, blah blah blah, " people are increasingly knowing that old excuse is getting old and ringing more hollow all the time.

You also have to recognize that we have had a Democratic Congress for most of the last 60 years, and Democrats have created much of the entitlement spending that is now breaking the bank. Also, Obama's spending spree is not helping, he cannot and will not spend us into prosperity. And the current Democrat controlled Congress is really a bunch of losers, starting with Reid and Pelosi.

They have a couple ideas in the works. One is to have banks pre-pay three years worth of quarterly fees which would generate about $45 billion. The can also use an emergency credit line run by the Treasury, but that puts us in a position of the Treasury bailing out the FDIC.

Time magazine has a pretty good article on it this week.

http://www.time.com/time/business/article/0,8599,1926877,00.html?iid=tsmodule

Thanks for the link. So long as the problem is Capital, not Cash Flow, I can get along with Prepaid Expenses. I used to do it all the time with insurance premiums, though never for a policy duration of more than one year.

The question of the prepaid capitalization being sufficient is a big one. The dilemma is how to keep folks from bailing on the small banks over to the big banks which are already too big to fail and getting bigger all the time. Smoke and mirrors, for sure. I'm becoming more convinced time that the "recovery" being manufactured by the Fed is a giant undertaking to instill a (false?) sense of optimism in the American consumer.

Okie is right. The government can't spend it's way out of a recession, but the consumer can - they just have to be convinced to crack open the piggy bank. It started to work -- consumer spending is back up in August, saving rates were starting to retract -- but the unemployment numbers are something the Fed can't control.

TARP funds were given to ease the credit crisis. Easing the credit crisis was supposed to ease business nervousness so they would create and/or keep jobs to ease unemployment. Reduced unemployment increases consumer confidence so they start spending money. The consumers buy us out of the recession. But TARP funds aren't making their way to business. Business isn't reducing unemployment (it's still increasing), consumers might be tricked into spending for cars when subsidized, but their eyes are wide open and they're watching the numbers like never before (not a bad thing).

One good thing I see in all of this mess is the bailout of the auto industry. I think of it as a jobs bill, not a stimulus bill. I don't care if all of those GM workers are making a product that no one wants to buy - they're employed, paying taxes, and not pushing the unemployment numbers to a level that causes wide-scale panic (smoke and mirrors).

I don't point the finger at anyone other than the voter who continued to vote for career politicians whose main objective was to get reelected. I also point my finger at party loyalists (both parties) who vote along party lines in order to perpetuate the gotcha game called Congress.

Our representatives don't represent us. They represent their parties and the lobbyists who represent special interests not necessarily beneficial to the American taxpayer.

American voters gave away control. People from all ideologies have begun to figure that out. It wasn't the Dems in Congress, it wasn't one President or another President, one program or another program. It was us and only by becoming informed and knowledgeable about just what it is we've given away can we think about getting it back under control.

[quote="JPB"Okie is right. The government can't spend it's way out of a recession,[/quote]
Why not?

Well, for one thing we have no money. We're also at great risk of running out of customers to purchase our debt. The Fed has been printing money and dumping it into US Treasuries and mortgage-backed securities ($2 trillion, with a T so far). But, because they have no money, they're borrowing it from themselves and increasing their own debt.

We're in the same position today (if not worse) than we were in 2008. It was private debt then, whereas it's public debt now, but increasing the federal debt liability will not convince the 70% of our economy represented by consumers to open their wallets, which is truly what's needed to turn the economy around.

The concept of a "jobless recovery" is looming... estimates are that it will another 5-7 years before unemployment returns to the 5-6% level. Chances are fairly good that we'll get comfortable and complacent once the unemployment numbers show a true turnaround, but that point is out there somewhere in the future.

Interesting side note: The dollar is down after Australia announced it will increase interest rates pushing both stocks and commodities higher. Gold reached a record high with Merrill Lynch now projecting a $1500/oz spot gold price. I wonder when Bernanke will consider raising interest rates here? Not any time soon, I imagine.

Also, rumors abound about the Arab states meeting in secret with China, Russia, Japan, and France to end USD dealings for oil. China has also expressed concern with the amount of US debt it's holding.

OPEC will get off of the dollar, and this is going to hurt America very much, the shocker is that it might happen very soon. I don't think that anyone expected this to happen for a decade or so. I shows how much power America has lost in a short amount if time, namely sep 08 till now.

400 banks w/FDIC have failed and this is money the government will have to pay to those banks. Where R we headed......the toilet....wait let me change that for JPB......we R in the toilet and it has been flushed. This has been coming on ever since Reagan......let's face it taxpayers paid for Nancy's inaugural gown, 18.000$ and from there the spending just continued.

That's the problem with our government printing more money while keeping interest rates down; they're just creating inflation without public investment to support the dollar. What we will see is the value of the dollars continued devaluation as the government prints money without anything to support it; monopoly money is what they're creating.

I used to think Greenspan did a poor job of managing our money,, but Bernanke is worse! When foreign governments like China and Japan losses faith in the US dollar, that's when the value of our money will be worth zilch, and our inflation is going to kill us; it's only a matter of when.

IMHO, gold is a poor investment. What will you buy with an ounce of gold? Who will accept gold in place of currency?

I believe that the base of our economy is strong enough to survive this period of uncertainty, but our government cannot keep increasing the national debt like there's no tomorrow. I'm still against the universal health care they are now planning, because they still haven't told us how they are going to pay for it.

That may be the straw that breaks the camel's back.

That will never happen; Americans are prone to ignorance of fiscal matters, and they have no concept of how national debt can handicap any economy. The world's economy today is much different than it was during the last century, and most people do not understand how one economy impacts the world's economy based on the value of money.

okie is always wrong; much of what Obama does today is impacted by what Bush left Obama. That's not to say Obama is making all the right decisions, but trying to correct a world financial crisis is not an easy task.

Even I disagree with all of what Obama has done, but no president can't correct a world financial crisis in nine months - even god.

Do you even disagree with TARP 1 & 2 and the stimulus bill?

You know I do; but I tend to get a lot of flak for that view.

I disagree with parts of TARP 1 and 2, and also do not agree with how all the stimulus money was spent. They should not be bailing out companies with bad management; they should be allowed to go bankrupt. It's not fair to all the other workers who have worked for bad companies with bad management who will not get the same bailout to continue their jobs and benefits, but they will be the ones paying taxes in the future to bailout the fed's overspending and higher deficits.

Cicerone,

Have you asked yourself why the administration made the choices to which you object, and what that implies for other aspects of extended government intervention in the economy?

The simple fact is that organized labor is a very powerful force in the democrat party: its direct political contributions to candidates and its "educational" programs in support of them that are exempted from campaign finance restrictions are a very large fraction of the Democrat total. The bailout of General Motors was in fact a public bailout of the UAW, not the corporation.

Similarly TARP Round II spending and the subsequent Democrat "stimulus" bill were also heavily tilted towards Democrat support groups, even including Acorn. A very large fraction of the "stimulus" bill was simply grants to state governments to keep their brueaucracies going in a period of reduced collections from state sales and income tax revenues. All this accomplished was to delay the inevitable financial crisis in state governments. We will very likely see new legislation renewing and extending these state grants. All of this reflects an unaccountable government spending money that doesn't yet exist and thereby undermining the whole economy for everyone - including themselves.

George, TARP 1 was a Henry Paulson construction. Goldman Sachs is now sitting very pretty. TARP and the bailouts cross administrations.

****, I will! And so will almost anyone on the planet.

My gold purchased in 2003 has paid off handsomely and continues to do so to this day.

Cycloptichorn

And there's more than one way to invest in gold. My mining shares are up 68% since July. They're easily exchangeable on the open market and will be in great shape when Bernanke lifts the lid on inflation.

Who's your holding company? My mining shares aren't up that much!

Cycloptichorn