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CrushTheStreet.com wanted to thank our members for the great amount of support and positive feedback from our report on the Federal Reserve. Expect updates and for us to continue to cover the current actions of the Fed.

 
If you’ve missed our last article, you can read our report on our site or by visiting this link.

 

Federal Reserve

 

The US Federal Reserve sent $76.9 billion in profits to the Treasury last year, according to the central bank’s preliminary results, showing how the Fed’s unconventional monetary policy has turned it into the most profitable bank in history. There really is no better marriage of best interests when looking at the government to the Fed’s relationship. The more money America goes in the hole for, the more profitable the Federal Reserve becomes and the more the government can act as they will. The Fed has bought billions of dollars in Treasury securities to drive down long-term interest rates. The Fed earns interest of more than 1 percent on many of those securities while it pays only 25 basis points to banks on their reserves. Federal Reserve Chairman Ben Bernanke is trying to gain the support of the public by making the central bank more open and predictable. The Federal Reserve recently decided to publish its interest rate forecasts, as well as projections for upcoming rate hikes. The next time the Fed meets is on January 24-25th, and will release these new data points at the conclusion of its meeting. The central bankers may also consider another round of quantitative easing. CrushTheStreet.com sees the likelihood of the Fed doing something that will be a political step-up for the current administration in office.   

Collapse Totally in Tact
 

Consumers got back into the borrowing game in November, as households bought cars and used credit cards for holiday spending, leading to the largest monthly increase in a decade. Borrowing jumped by $20.4 billion, the largest surge since November 2001, to $2.48 trillion. Borrowing has actually increased for the past three months, as the people’s perception on the economy has slightly improved according to the Fed.

 
Savings hit a 10-year high of 8.3 percent in May 2008, during the peak of the recession, gradually dropping to 3.5 percent by November, the lowest rate since the 2.6 percent recorded in December 2007 when the recession started, according to the Federal Reserve.
 

Analysts argue that the high levels of unemployment and underemployment are the biggest drag on consumer spending. We would tend to agree, considering unemployment officially dropped to 8.5% recently with labor participation rates at 1984 lows. Since January 2007, participants in the labor force have actually declined by 7.5 million.

  

There is no secret though and most agree, more jobs and higher wages are needed to increase consumer spending. Even though the illusion of a better economy with misleading statistics have boosted the confidence of some spending, it will not be enough to overshadow the lack of people who are unemployed and out of work. 

 

U.S. corporations ended 2011 with the slowest profit growth in two years. This was a time where some were optimistic about holiday spending boosting profits which turned out to be a failure.

 

In Europe, where austerity measures are tightening and unemployment remains at a 13-year high, data shows households and businesses are more reluctant to spend. In China, residential property values are falling and the ruling Communist Party is shifting focus to supporting growth.

 

China Flag

 

 

China is likely to face a trade deficit in 2012, partly driven by the deteriorating eurozone crisis and a possible debt default by Greece, economists warned on Monday.

 

Stephane Deo, managing director of European Economic Research with UBS AG, said China’s 2011 exports to the European Union registered the worst performance among the country’s main trading partners. The high likelihood of a default by debt-ridden Greece, which some analysts predict will happen in March, will further drag down the trade volume, making the first quarter the toughest for Chinese exports. More and more dismal events are piling upon each other and making a global recovery less and less of a reality. 

 

Chinese new loans totaled 640.5 billion yuan ($101 billion) last month, the highest amount since April, the People’s Bank of China said yesterday. That exceeded the estimates of all 18 economists surveyed by Bloomberg. M2, a measure of money supply, rose 13.6 percent, the fastest pace since July. That compared with the 12.9 percent median of 18 estimates. Sounds like they’re taking steps to being just like the American economy.  

 

CrushTheStreet.com wants to congratulate Ron Paul for finishing 2nd place in New Hampshire. To see where he has come from and the momentum that he has generated to get where he is now, is absolutely astonishing. The story is yet to be told on who will be the next president of the United States of America. Do your part and spread the truth. Get behind someone that has strong convictions and has been 100% right about the economy since the beginning.

 

Be sure to visit CrushTheStreet.com for featured videos, news stories, and live metals pricing. We currently have a video posted on how “unions killed the twinkie.”

 

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“Democracy shows not only its power in reforming governments, but in regenerating a race of men and this is the greatest blessing of free governments”-Andrew Jackson 
 

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