Blanchard and Company Rare Coins and Economic's
August 7, 2009
Fannie
Mae has asked the government for $10.7B in capital aid following
a Q2 loss of $14.8B, the eighth consecutive quarterly loss.
In the last 2 years, the Fannie Mae's combined losses total
$101.6B and since April the mortgage lender has pulled $44.9B
in Treasury funds. The company has stated, "we do not
expect to operate profitably in the foreseeable future."
In a measure passing at 60-37, the Senate approved an additional
$2B for the "Cash for Clunkers" as expected.
Retailer's yesterday same-store sales reports did not meet
consensus estimates, as a result of July sales suffering from
low sales due to a later back-to-school shopping season and
thrifty consumers tightening their belts and waiting for discounts.
A first since April 2008, the unemployment rate has decreased
and job losses have slowed, with the jobless rate dropping
from 9.5% in June to 9.4% in July. Inflation and the speed
of money will rapidly increase if this persists. However,
if the rates do not continue to improve, the government will
be forced to put more money into the economy, which will also
cause long-term increased inflation.
Developed countries' monetary easing can bring about currency
instability and "severe" inflation, China's central
bank has once again cautioned. Yesterday The People's Bank
of China warned, "Failure to manage the degree of easing
may lead to concerns about mid- and long-term inflation and
exchange-rate stability." China, the owner of $801.5
billion of Treasuries, urged the U.S. to enact policy that
will protect the value of the dollar this past month at a
summit in Washington.
Despite huge bailouts and bankrupt relief from creditors,
the automobile industry—the only remnant of America's manufacturing
base—is surviving only due to "Cash for Clunkers,"
a program that will take away demand for years to come and
add hundreds of billions to the nation's deficit. This merely
delays the inevitable crash of the automobile industry.
Appearances of income statements showing profits are deceiving
as banks use government bailout funds for record bonuses and
unreported real estate and credit card losses should be noticed.
However, if the banks were to recognize this, it would result
in their demise.
2009's deficit has reached two trillion dollars, an ominous
indicator that it could reach three trillion dollars and even
more staggering estimates in the future. It appears that the
president does not know how to proceed economically, and when
the dollar inevitably fails, we will be unable to unburden
ourselves of our economic woes onto foreign nations. The dire
economic forecast will continue to rapidly worsen.