Oddly, the action reminds me of my first few days as a fishing guide. There I was, a typical East Coast grad student with a vision and not much of a plan.

As I dropped my bags on the dock outside the state’s southernmost airport, I used the change in my pocket to dial my only contact in the 49th state. She did not answer. In fact her phone was disconnected.

Great… 4,000 miles from home and stranded in the rain.

I must have looked lost because a bushy bearded that most resembled the kind I’m used to see begging for change, asked me where I was headed. I told him some basic details and he grabbed my bags.

With nothing to lose, I followed.

Within an hour, I was strapped into a floatplane cruising 750 feet above what would turn out to be my new home for the next two years.

On the dock, I saw a figure.

Little did I know it would be the girl I would marry and who is now eagerly counting down the last four months until she becomes a mother.

For me, uncertainty led to great things. I see much the same for the country today.

Over the last six months, the economic data has told us very little. For the last several quarters, we’ve been told to “wait for next month’s figures.”  Or we heard “this time next year, things are going to be better.”

So far, even with the help of massive stimulus and governmental manipulation, we’ve done little more than tread water. Instead of following the creepy guy on the dock, we’re waiting around for somebody familiar to pick up the phone.

Until, that is, today. Look at the market. It’s in crazy rough shape, cutting nearly two percent from the top indices.

At first glance, it’s horrifying.

But with some careful studying and a keen eye for what it all means, it is fantastic news. Right now, we’re circling over our destination and are closer than ever to uncovering our fate.

For America, until last night, the question was if the country’s citizens would roll over and let a government force us into something highly unpopular. Today, we know democracy still rules and the political power players are laying flat on their butts from a catastrophic blow.

They may get back up and throw a few more punches our way, but they will never have the deadly dangerous momentum they had just 48 hours ago.

For the nation’s economy – here’s the truly good news – a strong dollar and slipping interest rates proves we remain the beacon of safety for global investors. China may be a powerhouse, but when things get tough, we always run to those we trust the most.

As commodity prices plummet today, the prices you and I pay for just about everything from heating oil to creamed corn will follow. Just as inflation threatened to crimp our shot at growth, Mother Economy proves her ability to create equilibrium.

If all of this is sounding different than what you are hearing on TV or reading in the rags, you’re right. It is different. It’s the contrarian’s take. When everybody is fleeing for the exits, we’re holding the door open, eagerly waiting to take what they left behind.

It’s a good idea to be buying what these folks are selling today.

***As a guy that has spent thousands of hours on the nation’s coastal waterways, I have had my share of run-ins with the Coast Guard – all of them good.

To prove that the core of this nation remains strong and true, I have included a press release my friends at the Coast Guard emailed me this morning. It’s a small glimpse of what Americans are doing to help their global brothers in trouble.

Here it is:

The first U.S. asset to arrive on scene to Haiti after the earthquake remains engaged in Haitian relief operations one week later.

The Portsmouth based Coast Guard Cutter Forward arrived off Port au Prince Jan. 13, at about 8 a.m. The crew provided air traffic control for military aircraft due to the damaged and inoperable control tower at Toussaint Louverture International Airport. They also began assessing the port, and ferrying supplies and injured people with their small boat and helicopter.

One of their primary missions was to pave the way for supplies to be delivered into the port of Cap Hatien. They began assessing the port and noted significant damage and destruction of its infrastructure adding to the difficulty of bringing aid to the country.  The Detroit based MH-65 Dolphin helicopter crew, that deployed with the Forward, flew over some of the roadways leaving the port and verified that relief efforts delivered to Cap Haitien can be trucked to Port au Prince. They also observed multiple oil, fuel and sewage spills in the area.

Monday they were able to perform medical evacuations with their helicopter from the Killick Haitian Coast Guard base to the Sacred Heart Hospital in Milot.

“The flight mechanic talked about two children on the first flight who wanted to hold his hand for comfort,” said Cdr. Diane Durham, the commanding officer of the Forward.

“I am glad to be a part of the relief efforts in Haiti. It is a life changing experience and is the reason I joined the Coast Guard. It feels good to be part of something bigger than myself,” said Fireman Kendall Wilson, a crewmember aboard the Forward.

The Coast Guard Cutter Forward deployed with Maritime Intelligence Support Team 0410 and an MH-65 Dolphin helicopter crew from Air Station Detroit.

In total, the Coast Guard has medically transported 29 critically injured U.S. Embassy personnel out of Haiti, evacuated approximately 662 American citizens and delivered 512 urban search and rescue team members to Port au Prince.

The Coast Guard will continue to support the massive relief effort in Haiti by providing humanitarian assistance to Haitian survivors, evacuating critically injured U.S. personnel and evacuating U.S. citizens from Haiti. The complexities crews face with this massive relief operation are immense due to the magnitude of damage to Haiti’s infrastructure.

Additional Coast Guard assets responding to the area are:

- An HC-144A Ocean Sentry aircraft from Coast Guard Aviation Training Center, Mobile, Ala.
- An HC-130J Hercules fixed-wing aircraft from Coast Guard Air Station Elizabeth City, N.C.
- An HC-130 Hercules fixed-wing aircraft from Coast Guard Air Station Sacramento, Calif.
- Two HC-130 Hercules fixed-wing aircraft from Barber’s Point, Hawaii.
- Two MH-65 Dolphin helicopter crews. They are from the Coast Guard HITRON based in Jacksonville, Fla., and Coast Guard Air Station Detroit, Mich.
-Two HU-25 Falcon jet crews from Coast Guard Air Station Miami, Fla.
-The Coast Guard Cutter Valiant, a 210-foot medium endurance cutter homeported in Miami, Fla.
-The Coast Guard Cutter Mohawk, a 270-foot medium endurance cutter homeported in Key West, Fla.
- The Coast Guard Cutter Tahoma, a 270-foot medium endurance cutter homeported in Portsmouth, N.H.
- The Coast Guard Cutter Oak, a 225-foot seagoing buoy tender homeported in Charleston, S.C.

That’s the kind of showing that makes me proud to be an American, even if I am contrary.

For years, the Street has looked at any Chinese economic data with a weary eye. Without the checks and balances of a democratic government, Beijing had plenty of reasons to manipulate its growth figures.

Even though all signs point to a strong, stimulus-fueled recovery, most pundits refuse to believe the country’s tales of double-digit GDP growth.

But the folks at Goldman Sachs are taking the disbelief in a different direction. According to reports from the banking behemoth’s analysts, China likely grew by 13.1% last month.

It is a bold claim in a year when Chinese officials estimate domestic growth of a much more moderate 8.5%. It is also a bold claim for a company whose “book” is filled with Chinese investments. After the action of the past two years, Goldman is obviously just as adept at using its shaky “research” to its own advantage.

But why is China’s GDP debated so ferociously? And more importantly, why do we care how fast the country expands?

It’s all about the currency. Without a yuan that freely floats against the dollar, it is in China’s best interest to put its best foot forward. Right now, with such a large gap between American and Chinese economic growth, it is strategically important for China to appear weaker than its foreign competitors.

Weakness means strength.

For Goldman, perceived strength equals stronger trading profits.

Believe who you want. They’re all liars.

*** It is a different story a third of the way around the world in Iceland. For the country that has become the punch line of banking circle jokes, the government’s recent decision to repay its obligations to the Netherlands and Britain was an important step in the recovery process.

If it were not for the Icelandic president’s veto, the country would be cutting a check for $5 billion to the Dutch and British.

With nearly a fifth of the economically ravaged country’s citizens signing a petition stating their disdain for getting stuck with such a sizeable bill, President Grimsson was compelled to veto his government’s legislation for just the second time in the country’s 66-year history.

Now it is not his constituents Grimsson has to worry about. It is his European brethren.

Obviously, London and The Hague are none too happy. The International Monetary Fund, with its plans to send the troubled country a bailout check worth $4.6 billion, is downright confused. And the European Union doubts whether Iceland will maintain its fast track to joining the pact.

All in all, this is a no-win situation in Iceland that proves even the most expensive of government bailouts and stimulus programs will not erase the far-reaching effects of a global financial meltdown.

What these two stories should tell investors is there is one thing controlling the markets these days… greedy, selfish, economically retarded governments.

China is lying about its economic growth. Iceland is realizing why its government up and walked out. And Goldman is raking in money like never before.

All of the conniving and manipulations adds up to volatility and, more importantly, unpredictability.

By traditional measures, market volatility is on the decline. But let me ask you, do things feel any safer than a year ago? Is the future really that much more clear? Absolutely not.

We’ve got guys trying to blow up planes with their underwear and a congress trying to skirt the democratic process to pass legislation that will rewrite a huge chunk of the nation’s economy.

It is far from safe out there. That’s why gold remains above the $1,100 mark, the dollar remains historically weak and it is why few businesses are willing to seek out growth.

The situation is as bleak as ever.

I am not saying we are going back to Dow 6,000 anytime soon, but all this nonsense about the recession being over and a straight road to recovery awaiting us is pure junk.

I’d rather believe in global warming than a safe and secure economy. And we all know how Al Gore is feeling these days.

*** Since China is a hot topic today, you can add Australia to the list of countries not so happy with Beijing’s antics.

After entering a $20 billion deal to buy liquefied natural gas from Australia’s Woodside Petroleum, China has announced the contract’s deadline has passed and it is backing out of its previous decision.

As natural gas prices have plummeted over the past two years, thanks to massive efforts in drilling technology and recovery techniques, China now realizes the figures in the proposed deal are no longer viable.

This is good news for gas investors across the globe.

If you recall, over at TFN Strategic Trader, we recently locked in gains of 400% by playing the industry’s moves. China’s indecisiveness and a recent surge in prices have created yet another profit opportunity.

The LNG market is on the ropes. With the help of economic recovery, gas exporters may be able to gain enough strength to re-enter the fight. But if traditional fuel sources begin to pay off like they are expected to, there may be no reason to endure the hassle and expense of compressing gas and shipping it across the globe.

This is going to be an interesting industry over the next year. Contrarian investors will be wise to pick up any of the “apparent” losers on dips. What is a loser today is likely to be a winner tomorrow. At least until it’s a loser again.

Got it? That’s trading for you.

With the nation’s unemployment rate officially in double-digit territory and the under-employed rate ready to the 20% mark, the politicians that promised bliss in the days ahead are eating their words today.

And that means Wall Street is eating its recent gains.

For nearly a month, the Dow has hovered around the 10,000 mark. After hundreds of billions of dollars were withdrawn earlier this year, it was relatively easy to put that money back to work and send the equities market higher.

But now that the economic data is showing facts of slower-than-expected expansion rather than “ideas” of growth, investors are forced to explain their logic. The Dow doesn’t want to budge from 10k.

So far, I’ve heard very few reasons for prices to go any higher. Maybe in China or Australia, but certainly not here in the land where everything is changing.

Think about what has occurred over the past twelve months and tell me if you believe today’s companies are worth as much as they were two years ago or even five years ago.

We’ve had government takeovers of major banks, mortgage lenders, auto manufacturers and insurers. Washington has told people how much they can make in a year. Legislators even introduced retroactive taxes.

Then there is the threat of cap and trade blowing energy prices (an input to nearly every American business) sky high. Now it is mandatory healthcare and the risk to corporate payrolls, tax structures and discretionary spending.

After all that, I hate to think about what is next. An assault on allergens?

*** Maybe I’m just being too pessimistic. After all it has been a long week and I spent five hours at the airport in the middle of the night yesterday waiting to pick up my mother-in-law.

Don’t get me wrong. I think there are some fantastic buying opportunities out there. There are just not in the places most Americans are looking.

But since the mother-in-law brought me eighty pounds of fresh Alaskan salmon, halibut and moose meat (she’s as close to Sarah Palin as you can get without committing to Playgirl), I am starting to feel a bit generous today.

That means I’m going to share with you what I am certain will be the biggest gainers of the next twelve months.

First… healthcare. Think about it. Who is easier to rip off than the federal government?

Just ask Haliburton, Goldman Sachs and whoever sold those $750 toilet seats.

Within a year of signing some diluted version of Pelosi-care, the headlines are going to be filled with record-breaking profits out of the nation’s largest healthcare providers and drug companies.

If Wall Street has the nerve to toss out billions in bonuses while the ink on their bailout checks is still drying, imagine the kind of zeroes that will be added to the paychecks of healthcare executives.

I can hear the excuses now. “If we want to save lives, we have to retain the best workers.”

It is going to be a feeding frenzy when Uncle Sam is the third-party payer.

Next, forget about gold.

One reader wrote to me yesterday and said, “I think it will hit $2,000, but it will probably hit $600 first.”

Could not have said it better myself. Gold’s value is too tied up with political moves and currency fluctuations. With one well-timed press release, China can send the price wherever the heck it wants.

I don’t want my wealth facing that kind of risk, especially after we just rammed Beijing with the largest tariffs yet.

That’s why my money is on palladium. It’s much harder to find and has a huge industrial demand.

Palladium is at the heart of the world’s commodity carry trade. I told TFN Strategic Traders to play Stillwater Mining several months ago and the trade nearly doubled in a week. It is still a good buy, especially as China’s auto industry takes shape.

Finally, go short on natural gas. Get as much leverage as you can because prices are about to plummet fast.

On Wednesday, the International Energy Agency was one of the first major groups to back my opinion. In a draft of a report due out next week, the influential group warned of a massive glut of natural gas as global demand begins to top off and turn around just as we are pulling more of the stuff out of the ground than ever.

But don’t wait until Tuesday to read the report. You can read my version right now. In it, I recommend three ways to play the situation.

So far, two of the plays would have already doubled your money. All three are well into positive territory. Prices are almost out of my buying range, so do not hesitate to take action.

*** Before I go for the week, I need to make a correction. Yesterday, I inadvertently said the Senate extended unemployment benefits for 14 months. The actual extension is 14 weeks.

I apologize for accidentally releasing my psychic secrets. The 14-month extension won’t come until next spring, when Congress finally makes it illegal to layoff any employee.

Enjoy a great autumn weekend,
Andrew Snyder

The monthly ADP Employer Services (ADP) survey – which tracks private non-farm payroll employment – stunned economists, showing a surprising increase from the 476,000 jobs lost in November.

The decline was the worst in the history of the survey, which began reporting in 2001. And if the findings are matched by the official government jobs report, due out Friday, it would be the biggest employment drop since the U.S. recession of 1975.

“This is an eye-poppingly bad number,” Art Hogan, the New York-based chief market analyst at Jefferies & Co. (JEF), told Bloomberg News. “The economy is in very difficult shape and that’s been proved out over the economic data from the past month.”

In fact, the numbers echo a trio of downbeat economic reports from the manufacturing, housing and service sectors reported by Money Morning just yesterday. Those numbers very graphically portray the severity of the current recession.

The economy has shed 1.9 million jobs this year as payrolls have dropped the last 11 straight months. U.S. companies slashed 533,000 jobs in November, according to the U.S. Commerce Department, and the unemployment rate grew to 6.7%, its highest level since 1974.

Unemployment numbers are considered by economists to be a snapshot of the health of both the labor markets and broader economy.

Job losses of this magnitude have a profoundly negative impact on the U.S. economy – and major ripple effects on economies worldwide – because jobless consumers are forced to cut back on spending. Fully 70% of all domestic economic activity is powered by consumer spending.

Stocks Can’t Weather the Storm

In response to the latest news, U.S. stocks slid and experienced their worst losses in two weeks, reversing a pattern in which investors seemed to be ignoring bad news as they bid up shares and notched steady gains.

The Dow Jones Industrial Average fell 245.16 points, or 2.72%, to close at 8,769.94. The Standard & Poor’s 500 Index declined 28.05 points, or 3.0%, to close at 906.65. The tech-focused Nasdaq Composite Index fell 53.32 points, or 3.23%, to end the day at 1,599.06.

Intel Corp. (INTC) and Alcoa Inc. (AA) exacerbated the slide, providing still more evidence of declining corporate revenue and layoffs. Intel projected that fourth-quarter revenue would fall 23% from 2007 levels because of weak demand, while Alcoa announced it will eliminate 13,500 jobs, or 13% of its work force.

Intel shares dropped a little more than 6.0% yesterday, while Alcoa shares shed more than 10% of their value.

“These are extraordinary times, requiring speed and decisiveness to address the current economic downturn,” Alcoa’s Chief Executive Officer Klaus Kleinfeld told MSNMoney.

The hardest-hit U.S. business sector was the service sector, which lost 473,000 jobs in December. The two other hard-hit sectors were consumer goods, which shed 220,000 jobs, and manufacturing, which jettisoned 120,000 workers.

“December does typically see seasonal hiring for the holiday season and plainly the anticipation of poor Christmas sales has played a major role in pushing down the adjusted numbers,” Alan Ruskin, an analyst at RBS Global Banking & Markets (ADR: RBS) told The Financial Times.

Official Government Report on Tap Friday

All eyes now turn to the afore-mentioned official government labor report, due on Friday. If the results match it would represent yet another historic number, making it the biggest employment drop since the 1975 recession.

ADP collects a wealth of information as it processes 500,000 payrolls for U.S. companies with aggregate employment of more than 24 million. It issues its report two days prior to the government report.

After it significantly undershot the government labor report in November, ADP changed its methodology “to improve the correspondence between nonfarm private employment estimates, and estimates published in the government report,” according the company’s website. Even so, some economists are revising their forecasts upwards.

“The drop in ADP employment in December is staggering and suggests that our original projection of a 500,000 decline in payrolls in December is too small,” RDQ Economics economists John Ryding and Conrad DeQuadros wrote in a research note.

The official employment numbers on Friday could show that as many as 700,000 jobs were lost in December, according to Ian Sheperdson, chief economist at High Frequency Economics. That would be the biggest drop in 59 years.

“This is shockingly awful,” Mr Sheperdson said. “We await Friday with trepidation.”

Source: Stocks Fall as ADP Report Says U.S. Shed 693,000 Jobs in December

Yesterday, China’s benchmark Shanghai Composite Index dropped 5.2 percent after economic data revealed wholesale price inflation jumped to its highest level in 12 years in July.

However, Taipan Daily editor Justice Litle says China’s long-term outlook remains strong – and some China plays look more favorable than they have in years. Here are Justice’s six reasons why the China bears are wrong…

Reason to Buy China #1: The Silly Season Is Over

Chinese investors went through a mania phase last year. There were tales of lines half a mile long snaking out from the doors of the local stock brokers. In April 2007 alone, nearly 4.8 million new trading accounts were opened in China — more than the prior two years combined.

All these new buyers led to a silly season for Chinese stocks. You could see it in the difference between Shanghai A-shares and Hong Kong H-shares…

At one point, companies with dual listings in Shanghai and Hong Kong were getting as much as an 80% premium on the A-shares price. This was a reflection of Chinese capital controls — it’s still tough for mainland Chinese to get their money out — and naive buyers who wanted to play at any price.

Now that the frenzy has subsided, real values are starting to show up again. The hot money has burned itself out, providing opportunities for those who see longer-term value and aren’t out to just flip a quick buck.

You see this pattern play out over and over again when a new opportunity comes to a place. Investors get excited and lose their heads, they push things way too far, and then the market comes crashing back to earth. That’s when the patient players get interested.

Reason to Buy China #2: Oil Is Coming Down

As of this writing, crude oil is more than 20% off its near-term highs. It looks like oil could be heading for the $100 mark — a possibility we pondered in “What If the Price of Oil Implodes.”

One of Asia’s greatest challenges has been keeping a lid on inflation pressures. It’s not easy to grow like crazy without seeing the price of basic goods and services rise too quickly.

Oil closing in on $150 a barrel threatened to swamp Asia with inflation on a local level — as the price of transport, food, and fuel went up — and also to cut into export profits as shipping costs rose.

With oil backing off, China and India can breathe a little easier. The fear that high-priced oil might kill the Asian miracle is lifting. That gives them more time to tap alternative energy solutions and build economic strength at home.

Reason to Buy China #3: The Locals Are Optimistic

The news reports mostly focus on the bad things — civil unrest, government crackdown, pollution and so on. That’s the nature of the beast mostly… for the most part, good news isn’t as interesting as bad.

But a recent survey from the Pew Research Center shows that most Chinese feel positive about where their country is headed. According to the survey, 86% are “content with the country’s direction.” (That’s up from just 25% six years ago.)

Perhaps even more surprisingly, six in 10 Chinese reported being satisfied with their jobs. And 70% were in favor of China’s shift toward a free-market economy.

The biggest concern in the Pew Survey? Rising prices. But that concern is addressed by the fact that oil is headed down these days — not marching higher as it had been for most of the year.

Reason to Buy China #4: The Growth Is Still There

China has had an amazing run, growing its economy at a near double-digit pace since the early 1980s. But the dragon isn’t done yet — not by a long shot.

Global Insight, an economic consulting firm, forecasts that China will overtake the U.S. as the world’s largest manufacturer in 2009. This is as much because the U.S. base is shrinking, even as China’s is growing… but that still counts as an eye-opening stat.

Plus for the longest time, China was seen as the world’s source for low-tech goods. Chinese factories were known more for sneakers, trinkets and cheap plastic toys than items of real value…

That’s all changing now as China moves up the quality food chain. Now we are seeing savvy companies like China Medical Technologies (NASDAQ:CMED) produce some of the most sophisticated high-tech devices in the world. As China gets better at enforcing intellectual property laws, its high-tech skills will only increase… and profit margins, too.

Reason to Buy China #5: Personal Savings and Domestic Demand

Perhaps even more impressive than China’s long-term growth rate is the personal savings rate.

Americans spent more than a dollar for every dollar they earned in 2006. The U.S. savings rate actually went negative. The Chinese, meanwhile, salt away 35 cents for every dollar they earn.

Just imagine how much extra money you’d have on hand if you’d managed to save 35% of your income, year in and year out, ever since you started working. Then just think of all the things you could buy with that cash.

Part of the reason the Chinese save so much is because there’s no real social safety net. But that’s changing, too: As the Chinese economy evolves, things like insurance and healthcare and retirement plans grow more affordable.

The upshot is, at some point, China’s big savers will feel a little bit more comfortable spending some of that cash they’ve saved up. And the newly minted middle class in China are already taking a hard look at things like cars, air conditioners, washing machines and so on.

As local economies grow, the locals themselves feel more comfortable spending a portion of their ample savings. That in turn leads to more domestic growth, which leads to a more positive outlook, which in turn increases spending. Chinese domestic demand is headed into a virtuous cycle that could run for decades.

Reason to Buy China #6: Huge Foreign Reserves

In balance sheet terms, China is rich… massively rich.

We’ve already seen what can happen when cities and counties go bankrupt. The residents of Orange County, California, got a nasty taste of that. Jefferson County in Alabama was on the brink this year, too. (As with Orange County in 1994, they took on some really dumb trades.)

So it’s not good when some regional authority — be it local or national — is running short on cash. China doesn’t have that problem. If anything, they have the opposite problem. Economist Brad Setser estimates that China has somewhere between $2.3 trillion and $2.4 trillion in excess reserves.

That’s a lot of dough… enough to make a 20% down payment on the entire U.S. economy! And hundreds of billions more roll in every quarter.

Point being, money can’t always prevent bad things from happening. But it sure can fix a lot of things. If China has to take extra steps to keep economic growth on track or keep the domestic demand side humming, it certainly won’t be stymied by lack of funds.

Source: Six Reasons to Buy China

This past Friday with King Juan Carlos, the Spanish economy seems to have faltered again and this has occurred several times in recent months. There are already some who are speaking of reforms, hoping this slip will not be transformed into a fall, one that will leave more than a bruise.

What is happening with the Spanish economy?

The Spanish economy is facing several negative situations at the same time. One of them is linked to what it is happening with the value of the euro. The appreciation of the euro is playing a very dirty trick on Spain. Spain’s current account reached record deficit levels the first quarter of this year, constituting nothing less than 12.1% of the GNP.

How has this happened? The main blow to the Spanish’s current account was the significant deterioration of the trade balance. The level of imports has grown to a rate of 10.5% year-on-year, which represents a rate of growth of more than double that of the level of exports, which has only grown at the rate of 5.1%.

However, one of the factors explaining the increase in the level of imports is the increase in the price of the energy. These higher energy costs generated a rise of inflationary pressures. In fact, the preliminary economic data shows that in the month of May, inflation was sitting at 4.7%, its highest level in more than eleven years.

This situation, created by major inflationary pressures, is occurring in the context of economic deceleration (a situation many are already calling “recession”). In the case of the real estate market, Spain was one of the countries affected the worst in continental Europe. The data shows that in March there was a 38% drop in mortgages over that of March of 2007. The sale of houses also fell a dramatic 38.55%. In April, a large deceleration in construction was observed (as well as a slowing down of other economic activity). This lack of new construction has tested the rest of Spain’s economy by, in effect, spilling over into the rest of its activities.

So it is in this context of frustration, confronting Spaniards, that they find themselves not speaking of “consumer confidence” but rather what I would call the “distrust of consumers”. And this level of “confidence by Spanish consumers” hit its lowest level in fourteen years this April.

What will the Spanish government do in the face of this situation?

For Rodrigo Rato, the former Managing Director of the International Monetary Fund, it is in his expert opinion that Spain is facing a situation requiring that it consider the possibility of undertaking its first program of structural reforms since the country entered the Eurozone. It is these measures that are going to need to be more than Spain would ordinarily have considered since joining that union.

It is true that Spain has had past success with the implementation of reforms, especially when the various sectors of the Spanish economy agreed to the necessity of those measures. According to Rato, Spain also enjoys many benefits of membership in the Eurozone such as: “the advantage of stability, without currency exchange or monetary policies”. In his opinion, situations like the present one adequately demonstrate that the Spanish economy will be difficult to control without the enactment of some sort of monetary policy.

Rato goes on to note that one thing is certain: the government of Spain must react to the current situation quickly before time runs out. Spain must accept the fact that it must effectuate urgent changes, and now. Ex-president Felipe Gonzalez has already predicted there could be a serious energy crisis facing Spain by 2012. As one can see, the situation is complex.

Beyond all the debate that is generated by this situation confronting Spain, we will have to hope that within a month the Cabinet will approve a package of measures that will devise to stabilize the economy. Some of the things that they are contemplating are tax reductions for industry and the elimination of many administrative regulations to increase openness in the marketplace.

The Spanish government promises an ambitious package… Will its aims be realized? We will meet again tomorrow,

Horacio Pozzo

Editor’s Note: The economic figures in Spain have deteriorated. Rato proposes reforms, and hopes that the government approves a package of economic measures soon. Send your comments to me at: paola@latinforme.com

Federal Reserve policy makers, sensing both renewed inflation dangers and a possible economic boost from government rebate checks, may be nearing a pause in interest-rate cuts after the fastest reductions in two decades.In remarks this week, Fed Governor Kevin Warsh, San Francisco Fed President Janet Yellen and three other district- bank presidents voiced concerns about rising prices. Harvard University economist Martin Feldstein, who for almost 30 years has headed the group that decides the dates of recessions, called for an end to Fed rate cuts.

Investors are increasingly taking such talk, along with economic data and company earnings, as signs that the Fed will leave interest rates unchanged for the rest of the year after a quarter-point move on April 30. The central bank has already lowered rates three times this year, to 2.25 percent.

“There’s a whole lot of ‘flation’ going on.” says Bill Bonner. “The de-flation takes the air out of housing and the financial industry; the in-flation gasses up commodities, gold and oil. Together, they are re-adjusting the U.S. economy (and, to a lesser extent, the United Kingdom and other Anglo-Saxon economies) downward…reducing the value of assets and labor (more about that too…keep reading), but also reducing the value of their debts. This is fine with us…it’s just capitalism at work.”