If America ran its books more like a business, the real state of its finances would be clearer. U.S. budget scorekeepers now predict a $1.34 trillion deficit for 2010, a tad less than forecast in March. Still, it’s an enormous gap. And the headline number lowballs the shortfall.
Economist Robert Brusca sums up today’s terrible economic news pretty well:
The day that optimism died. It has a time. It is sort of official: August 19, 2010. … The weak LEI is only bad news of the sort we have been getting. The rise in the jobless claims number posts a 500K number and makes the backtracking official and really bad. … But the report that disturbs me most is the Philly MFG index. The Philly index is actually a very good business cycle index. It does this job better than the ISM for some reason I can’t explain. … Optimism has died and there is a reason. Things are not getting better at even the same rate. Those seeing the economy as getting better are in a distinct and shrinking minority. … Brace yourself. I’m sorry to be the bearer of this bad news. This is not what I had expected. I don’t know how much it will shake markets but I’d eventually expect something that can be measured on the Richter scale.
Bond guru Bill Gross warned on Tuesday that without U.S. government guarantees, only mortgage bonds backed by super-safe loans, would interest him. He frets too much. The funeral of Fannie Mae and Freddie Mac may be coming, but housing support from D.C. will live on. The key question is how much.