While the dumb money is chasing the rally in stocks; the smart money is keeping a close eye on the economy. Bill Bonner has been hammering home this point in the Daily Reckoning. We’ve been doing the same here at Notes. (Consider it a friendly warning.)

U.S. President Barack Obama yesterday (Wednesday) released a proposed housing program designed to prevent up to 9 million “at risk” Americans from losing their homes.

The week begins with a bang, according to the Financial Times. The FT reports that, “The Obama administration is gearing up for a ‘big bang’ announcement within the next two weeks that will combine a bank clean-up with measures to reduce home foreclosures and probably steps to kick-start credit markets.”

Citigroup Inc. (C) today (Monday) unveiled plans to cut more than 50,000 jobs in the “near term” and slash expenses by 20% to preserve capital as it faces a global slowdown that’s expected to push well into 2009.

Data shows just how bad things are…  Trade deficits narrow…  EU confirms they are in a recession…  RBA intervening again… And Now… Today’s Pfennig!

The credibility of Libor is in doubt so interbank lending rates could be higher than reported. If estate agents were woodworm, many a British high street would complain of infestation.

I was talking to a friend of mine, Richard, last night… about the economy, the thrilling life I lead, eh? “They should just hike rates and be done with it. Jack them up to a crippling level,” he said, emphasising the word ‘crippling’. “Start the recession, so we can get it over with, quicksticks!”