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The U.S. federal deficit continues to soar (US red ink rising even higher, to$1.8T; AP). This is more than four times the record budget deficit of last year but will be dwarfed by the 2010 budget, which currently stands at $3.6 Trillion. Budget deficits are not expected to dip below $500 Billion per year and over the next decade prediction call for a total deficit of over $7 Trillion. The problem is that those forecasts are based on extremely optimistic economic predictions, such as a GDP contraction of only 1.2% for 2009 and an economic expansion of 3.2% for 2010, and therefore a far shot from actual figures.

GDP contraction will most likely be at least three times as big for 2009 as used in the budget projections and there may be a continued contraction in GDP for 2010. The 2010 budget if filled with counter-productive measures which will only increase the deficit and nothing more. There is an increase of fear in regards to the continued rise in the federal budget, which will cap any potential recovery. There simply is no room for a sustainable economic recovery with deficits. An economy can't borrow itself out of a recession or a depression. The more the economy is pushed with counter-productive measures the more the economy will push back and the downward spiral will only accelerate, with false signs of stability.

In attempt to continue the display of ignorance, arrogance and stupidity, the Obamanites have issued a progress report on the $787 Billion stimulus package (White House updates stimulus progress; CNNMoney.Com). The Obamanite stimulus package, just like TARP, will only stimulate the federal deficit an nothing more. Ultra-short term job creation in one sector of the economy, mainly construction and governemnt, is sacrfifized for long-term economic plans in order to create the illusion of growth and change. A lot of money will be sent to education, since the teachers union one of the biggest Obama supporters. The $787 Billion stimulus, just like the $3.6 Trillion budget, is porked up and will partially pay off for the received votes.

In the meantime, another dead cat bounce initaitve of the Obama administration, more counter-productive moves have been initiated or increased on the housing front (Gov't expands housing plan, off to slow start; AP). In essence, the plan offers support to those who have purchased a home they could not afford with money they did not have. In order to make things worse, those who lend them the money did not have it either, you get the idea.

Since the current hype is to focus on minor issues which are part of the side-effect of larger problems while the core will be ignored until it explodes, the Obamanites push a credit card reform which prohibits rate increases and days notices to customers before legit rate hikes (Obama urges Congress to act on credit card bill; AP). Nice move but equivalent then to pour a bucket of water in the Atlantic in order to raise the overall water level. The Senate pushes the bill (Senate deal reached on bill to impose credit card curbs; CNNMoney.Com).

The credit card crisis will dwarf the 'regular credit crisis' and will have far more negative effects on the economy. Unfortunately the looming credit crisis is ignored just as the current credit crisis has been ignored.

Could it get worse?

Yes we can...

GM plans to chop about 42% of its dealership or 2,600 while Chrysler plans to trim down 27% or 850 dealerships (Dealers Fighting Day Of Reckoning; CNBC). There may be more to come but the NADA begs the socialists for help already. It was an obvious step to shed dealerships when the suppliers collapse. The NADA is not the only one who begs the socialists (US auto suppliers lobby for federal support; AP). As dumb and ignorant as the socialists and the Obamanites are, they slowly run out of means to support idiocy.

The suppliers act like they should produce just for the sake of production and manufacture parts which will never be used. The dealers want to load up showrooms with cars nobody wants to buy. Face reality, the industry will shrink and that means that the total labor force will shrink with it. It was inevitable for years and now reality caught up with the illusion that mismanagement can continue to keep a business afloat forever.

Chrysler initiated a new round of buyout offers at seven of its eight plants which are due to close as part of its bankruptcy proceedings (Chrysler offering buyouts to union workers; Reuters). All 26,000 hourly workers in the U.S. have been offered $50,000 cash and a $25,000 voucher for a new Chrysler car. Those who don't take it, too bad as it may be the best they can get from Chrysler. The irony is that, if they would take the money and decide to be smart with it, they would earn more every month then they currently earn from their job.

Ford has problems as well and walks a fine line between bankruptcy and survival, even though management if very confident that their restructuring plans will work. AT least they are ready to cut more expenses if necessary (Ford profit target on track, to cut more if needed; Reuters). The control of the Ford family may help Ford to make it through this crisis. Ford has the best chance of survival, Chrysler already filed for bankruptcy and sold out to Fiat while GM will file for bankruptcy sooner or sooner. Ford, if they implement a smart startegy, could come up as a huge winner...

The Commerce Department reported a 0.4% drop in retail sales (U.S. retail sales slump for second straight month; Reuters). Dumb Money hoped for a better figure, which is pathetic. The global recession saw China's exports drop (China's exports sink, but factory investment rises; AP). Exports drop but China, at least partially, is able to offset that drop with a domestic increase in factory investment. China benefits from their increase in domestic development and capitalistic approach to business and equity markets.

U.S. exports have collapsed as well, and so have imports but at a slower pace, and the trade deficit continue to accumulate, but at a slower pace. The politically sensitive deficit with China continues to increase. The housing market continues to melt away. Dumb Money sees signs of economic stability but admits that they are at low levels (Trade, housing data more stable, but still weak; AP). Another bubble of hope is created by Dumb Money which will be busted by reality.

More economic problems for the U.S. come from the Treasury, which reported a record fall in tax revenues for the month of April (U.S. posts first April budget deficit since 1983; Reuters). An accounting 'gimmick' has been used to not show the impact of the TARP and other bailouts since the Obamanites don't wish to be faced with high deficit numbers. Whatever it takes to create an illusion which they can try to sell to the public.

China reported an increase in retail sales (China retail sales jump, industrial output slows; AP). Strong domestic demand has given China a cushion while carefully placed government projects provide a further boost to the country. China seems to, at least for now, learn from previous mistakes made by other countries and tries to avoid those. China, for a welcomed change, does not blame the markets but rightfully puts the blame on market participants and their lack of knowledge.

The U.S. Treasury, under the mismanagement and lack of leadership of Timothy Geithner, seeks even more control over financial markets and mirror the socialist power trip in an effort to crumble any recovery and tighten the grip on the economy (Treasury asks for control of derivatives market; AP). One of the least intelligent representatives of the human species now seeks control of the most sophisticated part of financial markets. Geithner, who over the course of his career made nothing but mistakes and enforced counter-productive moves, has no idea about how the markets work.

Financial markets do not need to be fixed and over-regulated, they need to be left alone as they work to perfection. Dumb Money companies who were run by idiotic management teams were forced to fail, such as Bear Sterns, Lehman Brothers, Washington Mutual in the financial sector; Chrysler in the auto sector and AIG as well as GM and Citigroup will follow soon, Bank of America and plenty of others are lined up for failure, too. The system works perfect.

Assume you purchase a new car and it runs just fine until one day you decide to run it into a concrete wall at full speed.

Would you go to the auto manufacturer and blame them, force them to build better cars?

Exactly, you would not unless you are an idiot. The same hold true for global equity and financial markets.

The Treasury, in yet another brain fart, wants to extend their assistance for failure to insurers (Insurers get preliminary OK for Treasury funds; AP). Apparently insurers have not learned anything from banks who regret ever taking socialist dollars. U.S. Bancorp is just the latest bank who scrambles to rid itself from the socialist parasite which came with TRAP money (U.S. Bancorp CEO: We could exit TARP in a few weeks; Reuters). TARP, which was designed by Dumb Money for failure, has totally ignored the 8,000+ small banks (Small Banks Need Capital, Too, But Could Face Harder Time; CNBC). They should be very happy about that as it will ensure that those small banks who deserve to fail will do so and those who deserve to succeed will grow bigger over time as they snap up assets of rivals while TARP will crumble those destined for failure eventually.

AIG is just one of those prime examples of how TARP only delayed the inevitable. AIG was destined for failure but TRAP get them afloat for a while in an artificial bubble. $200 Billion later, lawmakers question the health of AIG (US lawmakers question AIG plan, future; AP) while AIG's CEO Liddy defends the worthless company with his worthless input (AIG's Liddy: We don't need more government money; AP). Lawmakers question AIG's health about $200 Billion and nine months too late but the second wave of the financial crisis should take care of that. Freddie Mac, just like Fannie Mae, can follow AIG hand in hand (Freddie Mac seeks $6.1B in US aid after loss; AP).

In the meantime, documents were revealed which indicate that the International Beggar himself, Paulson, forced nine banks to accept TARP money (Documents: Paulson forced nine bank CEOs into bailout; AP). That is one way to crush nine competitors of his former employee, in which he holds a huge stake, Goldman Sachs. The potential collapse of Goldman Sachs last year paved they way for TARP and of course TARP backfired. Goldman Sachs rushes to repay TARP and hopes to move on unscathed. Paulson is not the only one in trouble as the FBI probes insider trading by two SEC enforcement attorneys (FBI probes possible insider trading by SEC lawyers; AP). The SEC is just one institution which enjoys even more power under Obama and therefore further hinders a financial recovery.

Remember the rating agencies and how they were constantly wrong with their ratings and all the criticism they drew?

They claimed everything is fine and CDO's are safe, until it all collapsed and then they changed their ratings. Well, at least S&P tries to avoid the same mistake and offers a first insight into reality (U.S. banking crisis may last until 2013: S&P; Reuters). This is the first attempt to break the ignorance and false optimism, although the 2013 target is still very optimistic. Nevertheless, it is a start and maybe more beneficial steps will follow, time will tell.