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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.

 


Blanchard and Company Rare Coins and Economic's

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