Economic Update

Financial Crisis Continues

• US GDP grew $400 billion to $14.5 trillion in 2010– US debt is at about the same number, 100% of GDP

– Deficit spending grew to $1.5 trillion per year

– So the improvement was largely faked by massive influx of borrowed or printed capital

• Stock market back up (money had to go somewhere)– Housing and employment still in the doldrums

Percent US workforce in manufacturing

Euro: Danger of Disintegrating?

• Vulnerable to debt defaults by member nations

• Spiking interest rates on weakest member country debt

– Troubled economies can barely service their debt

– Forced austerity programs leading to much unrest

• New debt restructurings, loans and losses are inevitable.

Germany 119,000,000,000

France 90,000,000,000

Italy 78,700,000,000

Spain 53,500,000,000

Netherlands 25,140,000,000

Belgium 15,000,000,000

Greece 12,300,000,000

Austria 12,240,000,000

Portugal 11,000,000,000

Finland 7,900,000,000

Ireland 7,000,000,000

.. Total 440,000,000,000

EFSF contributions

Madrid protest, May 20

Japan Unfolding Debt Disaster

So, what of China?

US debt ratchets higher

Conclusions

• The crisis is still very much with us

• US dollar and economy is in deep trouble– But likely no other currency will replace it in next few years

– May rise is short term but expect much more trouble starting in the fall.

• Eurozone is in trouble principally due to troubles of members it is sworn to support

• Japan, already in major debt is likely to lose its positive balance of trade while rebuilding

• China is severally overextended in money supply and facing its own large housing bubble crisis