Budget Deficit in Free-Fall

And today we have this.

 

<div class='quotetop'>QUOTE(Dragonfly @ Feb 27 2007, 10:36 AM) [snapback]397312[/snapback]</div>

Yep, this one should make us all a bit nervous... especially when the word 'recession' is bandied about by key economic players (Greenspan used it yesterday). The dow dropped 546.02 at one point today, or 4.3% of it's overall value. At closing, all gains made this year were wiped off the slate... not good for a single day.

I'm curious what would have happened if trading curbs hadn't kicked in. Controls are in place to make sure there isn't a panic or a machine-controlled sell-off. It will be interesting to watch what happens in the morning. If the Dow stays reasonable flat or picks up a bit, we're probably OK for now. If it takes another dive (even a small one out of the gate), it could be a sign of severe trouble. I'm going to be watching the Chinese markets tonight... those might be a good indicator.

China's economy leverages the U.S. quite a bit... thanks to unbalanced trade, we're one of their best customers. The market seems to be worried that a U.S. recession will impact China's economy significantly too. It probably would.

The housing market is in the toilet, durable goods orders in January dropped significantly, and the government GDP predictions have been revised significantly lower. Americans are worried about the supposedly 'strong' economy Bush keeps saying we have (Laura said it again on Larry King last night). Of course, the economic indicators don't seem to be showing that the economy is "strong", rather that it is slow and potentially recessionary.

Part of this goes back to the incredibly weak U.S. dollar, and the fact that on the world stage, our money is worth a lot less than it was when Bush took office. I worked in Europe in 2001, when the Euro was worth 88 U.S. cents. Today, that same Euro is worth $1.32 USD. Think about that for a moment... the U.S. dollar is worth 66% of what it was in 2001... that means you've essentially lost a third of your buying power on the world stage. Other currencies have shown similar gains against the dollar during Bush's reign. A weaker U.S. dollar means increased costs for China, and less profit for Chinese companies selling goods to the U.S. So, why doesn't China just sell goods to Europe, where the Euro is strong? Because Europe is a responsible trader, and sets trade quotas to keep things in balance. The Bush administration has ignored balance, instead embracing so-called "free trade", and this has gotten us into trouble.

So, to coin our illustrious topic starter, Dr. Berman, should we give credit where credit is due?