Everyone knows that the U.S. housing market caused the current economic funk.
But here's the irony: The American housing market - a principal actor and victim of a bubble that burst, causing the worst recession since the Great Depression - may now be in a position to save the U.S. economy.
In other words, if we fix the housing market, we stand an excellent chance of fixing the economy.
And my housing plan may be the dual fix we've been looking for .
Plan Generates Huge ResponseIn Money Morning exactly one week ago, I presented a plan to fix the broken U.S. housing market. And while I wanted feedback on the plan, I was stunned to receive hundreds of e-mails, phone calls and comments - underscoring just what an intensely emotional topic housing continues to be in this country.
Many people lauded my plan. But I was somewhat surprised at the number of people who trashed it. For those critics, the main issue was that they didn't feel the plan addressed the real root causes of the current housing crisis.
I got an earful about what the root problems are. Eventually, it struck me. It wasn't my plan that people didn't like, it was that I didn't explain how my housing plan would fix those root problems.
Those root problems are no small thing. They caused the housing crisis in the first place. They're keeping the housing market from recovering now. And they're a major drag on the U.S. recovery - and could end up as a proximate cause, or key catalyst, of the much-feared "double-dip recession."
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Gas Prices, Bad Weather Slam U.S. Economy; GDP Growth Slowed to 1.8%
The U.S. economy's struggling recovery hit another bump in the road in the first quarter, with brutal winter weather and rising gas prices combining to put the brakes on growth.
According to the U.S. Commerce Department, gross domestic product (GDP) growth slowed to an annual rate of only 1.8%, compared with 3.1% in the last quarter of 2010. The GDP measures all the goods and services produced in the United States.
"The biggest factor was weather. It hurt consumption and construction," Stephen Stanley, chief economist at Pierpont Securities, told Reuters. "Energy hurt consumption as well. Higher gasoline prices took a bigger bite out of people's budget."
We Want to Hear From You: What Do You Think Of President Obama's Proposed Tax Deal?
For months now, U.S. President Barack Obama watched as the expiration date for the Bush tax cuts drew closer and closer – with no signs of compromise among Congressional Republicans.
So in an attempt to beat the Dec. 31 deadline – and the big tax increase facing American individuals and businesses – President Obama on Monday struck a controversial compromise with Republicans.
Pundits are now questioning his call. Did President Obama cave to pressure, or did he pull off a sly political coup? Will this decision aid a still-struggling U.S. recovery, or will it add to the mountain of existing U.S. debt and stick future generations with the tab?
U.S. Economy Forecast: Five Ways to Profit in 2011 – Even With a Double Dip Recession
It's been a dull year for the U.S. economy.
But don't expect a repeat in 2011.
In fact, as we enter the New Year for the U.S. economy, investors face some major risks. Should the U.S. Federal Reserve opt to maintain its record-low-level of interest rates, it's very likely that we'll see the kind of virulent inflation that will send commodity prices skyward, and inflict some real long-term damage in the process.
With higher rates, the U.S. economy could experience its second downturn in three years, the kind of "double-dip" recession that would boost an already scary jobless rate - while also sending U.S. stocks into a bearish tailspin.
With uncertainty the watchword for the New Year economy, U.S. investors need to position themselves to cash in should the currently anemic U.S. advance continue, while at the same time making sure to protect themselves against a potential downturn.
As contradictory as that might sound, it is possible to do both.
For top investment ideas for 2011, please read on...
Don't Let the Third-Quarter GDP Revision Sour You On Stocks
There has been a lot of hand wringing and tongue clucking about the latest revision to U.S. gross domestic product (GDP). But the reality is that the third-quarter U.S. GDP data isn't as important as most people think.
In fact, there are plenty of reasons to remain bullish on stocks.
The second read on third-quarter GDP growth came in at 2.5%. That is nothing like the 9% growth of China, the 8% of Singapore or the 5% growth of Thailand. It's not even like the 4% growth that we expect from of a full-strength U.S. economy.
However, forward indications of economic growth suggest the economy is stabilizing.
No Rest for the Weary: Unemployment to Remain High Through 2011 and Beyond
Stocks are up nearly 70% from their bear market lows. Corporate profits are rising. And the economy is expanding. Yet the unemployment rate continues to hover around 10%.
Neither President Barack Obama's $787 billion stimulus program, nor the U.S. Federal Reserve's quantitative easing has generated enough good news to convince companies to hire meaningful numbers of new workers.
Of the 8.7 million people who lost their jobs during the recession, more than 7.3 million are still without work. There are still nearly five job seekers for every job opening. In fact, adding in workers who are working part time but looking for full-time work and those who have given up looking all together brings the "real" unemployment rate to a staggering 17% compared to 16.5% last year, the latest government report shows.
Why the Federal Reserve's Quantitative Easing Strategy Won't Save the US Economy
With a second round of "quantitative easing" underway, the U.S. Federal Reserve wants us to believe that it is doing its duty as the nation's central bank – promoting maximum employment, keeping a lid on inflation and making sure that long-term interest rates remain at reasonable levels.
This is known as the Fed's "dual mandate," since the inflation and interest-rate objectives are really the same goal.
But here's a shocker: The Federal Reserve's real dual mandate is to enrich the banks the central bank is created by and works for – and to cover Congress when its laws enrich banks at the expense of jobless American taxpayers.
Understanding how quantitative easing works is simple. Understanding how banks and Congress are manipulating this economic tool is just a tad more complicated. Understanding how quantitative easing will impact your life – and your financial future – is just a matter of understanding the facts
For additional insights on the Fed's true workings, please read on...