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  • More Americans on Government Dole Than Ever

    IN THIS ISSUE:

    1. GDP Growth in the 1Q Was Disappointing

    2. The Fed's Decision & the Press Conference

    3. Editorial: A Tale of Two Recessions

    4. Reliance on Uncle Sam Hits a Record

    5. Unemployment Devastates Savings - and Benefits

    Introduction


    Our main topic this week is a new report from USA TODAY which found that Americans depended more on government assistance in 2010 than at any other time in the nation’s history, based on federal data. A record 18.3% of the nation's total personal income in 2010 was a payment from the government for Social Security, Medicare, food stamps, unemployment benefits and other programs.

    Yet before I get into our main topic, there has been some important news on the economy and the Fed since last week's letter. Last Thursday's initial report on 1Q GDP was considerably weaker than expected. The government reported that 1Q GDP rose at an anemic annualized rate of only 1.8%, as compared to 3.1% in the 4Q of 2010.

    The Fed's monetary policy committee met last week and decided that the latest round of quantitative easing (QE2) will end in June as scheduled, and that no new QE3 is in the works. They also announced that short-term interest rates will remain near zero for an extended period. And Fed Chairman Bernanke continued to maintain that he believes rising inflation is temporary. I'll have more details below.

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  • The Mother of All Budget Deficits

    President Obama unveiled his fiscal year 2011 federal budget last week, and it is another whopper. If approved, he would spend a record $3.83 trillion and run a deficit of at least another $1.3 trillion. The actual deficit could be much higher because his assumptions about the economy are considerably too optimistic in my opinion and that of many economists. Obama's new budget projections now show that the budget deficit for FY2010, which ends on September 30, will be much higher than previously forecast - a whopping $1.6 trillion. This week, we will examine the implications of trillion dollar deficits as far as the eye can see.

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