The Economy Guy

4 straight UP days as stocks climbed today from a negative start to end up 247 points.  All the news was negative, but stocks ignored the news.  It’s that season again when stocks go up.  Watch out for 2009 when stocks will go down again.  Also, where is all the TARP money going that the Treasury is giving to the banks??  Into Treasuries is my guess.  They need to make their balance sheet look better, and what better way than to hold Treasuries???

Bonds set a new record, closing at 3.00% for the 10 Year Treasury.  There is a significantly low volume of trading in bonds, and that means a high volatility.  That’s the world we live in as most people’s money is on the sidelines.

The Dollar gained, but struggled doing it.  Gold fell $9 as people took profit from the recent run up.

Oil and gasoline went up today – a big see-saw action over the past 4 days.  We’ll have to wait awhile to see where oil is going next.

Jobless Claims were 529,000 for the past week.  While this was down from the previous week, it still indicates a severe decline in employment, and a major increase in unemployment benefits.

Durable Goods Orders were DOWN 6.2% – the greatest amount of decline in 2 years.  This was caused by the usual suspects – like auto sales.  However, more surprisingly, the declines were across the board in all sectors.  Steel, for example, had a decline of 12.6% – the BIGGEST EVER DECLINE for steel.

The EU has announced a $256B Stimulus Plan.  (Kind of puny compared to US Stimulus Plans – past and present.)  To give you insight in how the EU works, the EU is directing each nation to increase spending – decide on the individual programs – to create the Stimulus Program.  This is an interesting model, as it would compare to the US Government directing the 50 States to come up with its own Stimulus Plan – rather than having a centralized plan.  Just shows a major difference between the US and Europe.

His most recent appointment is Paul Volcker as head of his White House Economic Board.  Paul Volcker is a former FED Chairman, and was the person who brought us out of the run-away inflation of the 1980’s.  Volcker increased interest rates massively, and painfully, putting the US into a deep recession – but nothing as bad as our current recession will be.

The question for you to debate tonight is “Will the appointment of Paul Volcker mean that we will face massive interest rate hikes in a few years when inflation rears its ugly head?”  Naturally, this assumes we will have inflation in the future, and could be part of your discussion.