Anyone who has read this blog for any period of time knows I’m a pessimist on the economy, in short I don’t see any reason to be hopeful:

Retail sales unexpectedly fell in December, leaving 2009 with the biggest yearly drop on record and highlighting the formidable hurdles facing the economy as it struggles to recover from the deepest recession in seven decades.

In another disappointing economic report, the number of newly laid-off workers requesting unemployment benefits rose more than expected last week as jobs remain scarce.

Still, many economists, puzzled by the retail sales decline that follows reports from retailers of brighter holidays, cautioned that the December figures don’t necessarily signal a big consumer pullback and could be a blip.

Right, retail sales fell 0.3 percent in December, overall sales for 2009 fell 6.2 the sharpest decline on government records going back to 1992.

On the jobs front, the Labor Department reports that new claims for unemployment insurance rose by 11,000 to a seasonally adjusted 444,000, sharply higher than the 3,000 new claims forecast by economists.

Add to that a record number of foreclosures:

A record 2.8 million households were threatened with foreclosure last year, and that number is expected to rise this year as more unemployed and cash-strapped homeowners fall behind on their mortgages.

The number of households that received a foreclosure-related notice rose 21 percent from 2008, RealtyTrac Inc. reported Thursday. One in 45 homes were sent a filing, which includes default notices, scheduled foreclosure auctions and bank repossessions.

In December, more than 349,000 households, or one in 366 homes, were hit with a foreclosure-related notice. That represents a 14 percent spike from November and a 15 percent jump from December 2008.

Banks repossessed more than 92,000 homes, up 19 percent from November. That increase was likely due to lenders working to clear their books at the end of the year, RealtyTrac said.

And the looming dollar crisis:

The United States must soon raise taxes or cut government spending to curb its debt, and failure to act will risk a crippling dollar crisis as investor confidence ebbs, a panel of experts said on Wednesday.

“It has got to be done. It will be done some day. It may be done with enormous pain. Or it may be done more rationally,” said Rudolph Penner, a former head of the nonpartisan Congressional Budget office who co-chaired the 24-strong Committee on the Fiscal Future of the United States.

President Barack Obama’s administration will present his budget for fiscal 2011 early next month amid intense pressure to live up to election campaign promises not to raise taxes on middle class Americans, while confronting a record deficit.

As a result, Obama is expected to focus on long-term fiscal discipline, while maintaining policy support for an economic recovery in the near-term as the country rebuilds after its worst recession since the Great Depression.

And you can understand why I’m pessimistic about the chances for a meaningful economic recovery anytime soon. I’m sure there’s reasons for optimism, but I can’t find them. Everything I seen is pointing towards 1970s style stagnation.

The Arab states named in the report have issued denials… there may still be a grain of truth in the report though as  both Russia and China have been very vocal in their calls to end the Dollar’s reign in international trading:

Leaving aside the viability of the unified GCC currency – Oman and the Emirates have made clear they don’t want to play – the story has a ring of truth about it.

Russia and China have both been vocal in their call to end the hegemony of the greenback in international trade. The single GCC currency, if and when it happens, would be more likely to use a currency basket than a direct dollar peg. With the possibility of intervention now back in its arsenal Japan will clearly do what it feels necessary to protect its deflationary economy from an over-strong currency. France, of course, would take any opportunity to give Washington one in the eye.

In that light it is no surprise that the dollar has taken a bit of a beating since the news broke. It has lost one euro cent and half a yen overnight, adding to the losses it had already made on Monday in the absence of any helpful comment from G7.

Regardless The Independent’s report should server as a stark reminder to our elected leaders of need for sound fiscal policy, a strong stable dollar and real energy independence.

Sarah Palin makes the case on her Facebook page:

All of this is a result of our out-of-control debt. This is why we need to rein in spending, and this is also why we need energy independence. A weakened dollar means higher commodity prices. This will make it more difficult to pay our bills – including the bill to import oil.

In his book Architects of Ruin, Peter Schweizer points out that the Obama administration is focusing primarily on “green energy,” while ignoring our need to develop our domestic conventional energy resources.[5] We’re ignoring the looming crisis caused by our dependence on foreign oil. Because we’re dependent on foreign nations for our oil, we’re also at their mercy if they decide to dump the dollar as their trade currency. We can’t allow ourselves to be so vulnerable to the whims of foreign nations. That’s why we must develop our own domestic supplies of oil and gas.

Though the chant of “Drill, baby, drill” was much derided, it expressed the need to confront this issue head-on before it reaches a crisis point.

Bottom line: let’s stop digging ourselves into debt and start drilling for energy independence.

Gas prices have dropped considerably since the last oil shock made energy independence a front burner issue in the minds of most Americans… The coming debate on Cap and Trade may help bring the issue of energy independence back to the forefront but I suspect it’ll be lost in amongst the debates on the new taxes, costs, and mandates Cap and Trade create.

Whether we like it or not our economy is powered by oil and natural gas… and there is simple no reason not to tap into a significant domestic reserves of both.

Related

• UN calls for new reserve currency – AFP

I’m leaning toward dead cat bounce for various reasons… In short all the money the Federal Reserve and the Federal Government are pumping into the economy will have a positive effect and we will see GDP rebound in the short term. In the longer term though all that spending will to lead to a weakening of the dollar and rising inflation that will choke off any recovery. You simply can not spend your way into long term prosperity.

Related

• Roubini says U.S. economy may dip again next year – Reuters
• U.S. Inflation to Approach Zimbabwe Level, Faber Says – Bloomberg News
• New Investor Worry: Treasury Selloff Spiking Interest Rates – CNBC
• Thousands of New Jobs ‘Created’ by Obama’s Stimulus Are Summer Jobs for Teens – CNSNews.com
• Leap in U.S. debt hits taxpayers with 12% more red ink – USA Today
• Bond Vigilantes Confront Obama as Housing Falters – Bloomberg News
• Dollar Hits 5-Month Low on Rise in Risk Appetite – CNBC
• US economy sinks at a 5.7 percent pace in 1Q – Examiner.com

(CNSNews.com) – An Arizona congressman wants to know why Treasury Secretary Timothy Geithner isn’t facing tough questions over his apparent about-face on whether the U.S. would consider China’s request to abandon the dollar as the global currency, in favor of a mix of currencies.

Geithner told Congress under oath Tuesday that he wouldn’t consider China’s proposal to shift away from the U.S. dollar toward a world currency — then the following day (Wednesday) said the U.S. would “be open” to the idea.

Rep. John Shadegg (R.-Ariz.) thinks the Treasury secretary’s swift about face demands an explanation.

“Beginning with his tax difficulties, and continuing through the puzzling narrative of when and what he knew about the AIG bonuses, Treasury Secretary Geithner has done little to inspire the confidence of the American people,” said Shadegg.  “Oddly, Secretary Geithner continued his bizarre and puzzling conduct this week, making flatly contradictory statements about the dollar in a span of only 24 hours. This weakens confidence not only in him, but in the currency he is entrusted to protect.

Shadegg isn’t alone in wanting answers, Rep. Michele Bachmann (R-MN) has introduced legislation that would bar the dollar from being replace by any foreign currency:

“Yesterday, during a Financial Services Committee hearing, I asked Secretary Geithner if he would denounce efforts to move towards a global currency and he answered unequivocally that he would,” said Bachmann. “And President Obama gave the nation the same assurances. But just a day later, Secretary Geithner has left the option on the table. I want to know which it is. The American people deserve to know.”

My guess is that Sec. Geithner simply misspoke but at the same time I’m not sure how he could make that mistake.

Treasury Secretary Timothy Geithner sent the dollar tumbling with comments about China’s ideas for overhauling the global monetary system, only to drive it back up by affirming that it should remain the world’s reserve currency.

Geithner was initially asked at a Council on Foreign Relations event in New York about proposals from People’s Bank of China Governor Zhou Xiaochuan for a new international reserve currency. He said “as I understand his proposal, it’s a proposal designed to increase the use of the IMF’s special drawing rights. And we’re actually quite open to that.”

The dollar slid as much as 1.3 percent against the euro within 10 minutes of news accounts of Geithner’s remarks. The U.S. currency was down 0.6 percent at $1.3553 as of 12:31 p.m. in New York.

Roger Altman, who worked with Geithner as deputy Treasury secretary in the Clinton administration, later asked Geithner whether he wanted to “clarify” his remarks.

“I’d like to ask one final question, in effect on behalf of the market,” said Altman, founder of Evercore Partners Inc. “Let me ask the question this way. Do you see any change over the foreseeable future in the basic role of the dollar as the world’s key reserve currency?”

‘Strong’ Dollar

Geithner responded by saying that “I think the dollar remains the world’s dominant reserve currency.” In an interview with CNBC broadcast after the event, the Treasury chief said that a “strong dollar” is in “America’s interest.”

Inexperienced, incompetent and in over is his head.

Related

• Still Mr. Lonely: Another Treasury pick jumps ship – Michelle Malkin
• Fumble! Geithner speaks, dollar dives – Hot Air
• Geithner Reiterates Support of a Strong Dollar – Wall Street Journal
• Geithner gaffe roils markets – Washington Times

The first two are from today’s Wall Street Journal:

The Greatest Scandal, Wall Street Journal, July 28, 2008

The profound failure of inner-city public schools to teach children may be the nation’s greatest scandal. The differences between the two Presidential candidates on this could hardly be more stark. John McCain is calling for alternatives to the system; Barack Obama wants the kids to stay within that system. We think the facts support Senator McCain. Read the rest…

Docking Paychecks for Politics, Wall Street Journal, July 28, 2008

The mighty Service Employees International Union (SEIU) plans to spend some $150 million in this year’s election, most of it to get Barack Obama and other Democrats elected. Where’d they get that much money? Read the rest…

The Second two are from today’s New York Sun:

The Tipping Point, By Michael Barone, Creators Syndicate Inc. July 28, 2008

Sometimes public opinion doesn’t flow smoothly; it shifts sharply when a tipping point is reached. Case in point: gas prices. $3 a gallon gas didn’t change anybody’s mind about energy issues. $4 a gallon gas did. Evidently, the experience of paying more than $50 for a tankful gets people thinking we should stop worrying so much about global warming and the environmental dangers of oil wells on the outer continental shelf and in Alaska. Drill now! Nuke the caribou! Read the rest…

Thinking About the Dollar, By Martain Feldstein, Project Syndicate, July 28, 2008

How much further will the dollar fall? Or has it already fallen so far that it will now start to move back to a higher level? Read the rest…

And finally from the American Thinker:

The Operative Term is ‘Hubris’, By J.R. Dunn

He has a seat on his campaign aircraft marked “president”. He has taken a shot at creating his own presidential seal, complete with Latin motto. He has laid claim to personal control over the world’s oceans and seas. He has repeatedly attempted to dictate how and on what level he, his ideas, and his activities may be discussed. He has encouraged a portrayal of himself as a messianic figure, including a portrait of himself as Christ, complete with halo. He is even now completing a triumphant grand tour of the old world, during which he attempted to shanghai an ancient monument for personal use without consulting the host government. Read the rest…

We’re finally starting to see some signs of life from the Bush administration and republicans in congress. Unfortunately, what we’re seeing is another half measure… I’m all for increasing domestic oil production and building new refineries, but those measures won’t have a significant short term impact on the price we pay at the pump.

It’s the dollar stupid!

Since 2001 the value of the dollar versus foreign currencies has declined to the point where we ought to start calling it the American Pesso, seriously, it’s the weak dollar more than anything else that is driving up the price of oil and other commodities.

If the president and congress were really interested in bringing down the prices we at the pump, or in the supermarket for that matter, in the short term they’d be talking about strengthening the dollar not arguing about whether we should drill domestically or not.

Just my two cents.