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Not a lot to say in this short review.

Looks like credit worthiness is on the mend thanks to federal deficit spending.

While what’s been done hasn’t been my first choice for public policy, it nonetheless has added net financial assets to the non govt sectors and helped bring down debt ratios.

As they used to say, when Detroit sneezes the economy catches a cold.

The Great Mike Masters Inventory Liquidation that began in July ended around year end.

The weakening economy caused the federal deficit to rise the very ugly way via the automatic stabilizers.

By year end the deficit was high enough to turn the tide.

The rising federal deficits added to savings of net financial assets and began easing debt ratios.

Headwinds remain, including US domestic loan loss issues and China looking like markets could take a breather with talk of government action to slow credit expansion, but as long as US federal deficit spending persists at sufficiently high levels, it looks like the worst is behind us for US GDP, with unemployment likely to peak later this year at about 10%.

This is creating unwelcome social tensions for the administration, with the apparent winners being banks, corporations, the investor class in general, and higher income earners.

State and local governments are also in a bind, as they lay off essential employees while funding a few ‘shovel ready’ federal infrastructure projects.

Health care reform held the promise of adding to aggregate demand but it now looks like the final bill will be ‘revenue neutral.’


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