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Growth and Paying Down Debt

December 29, 2011 – 6:05 pm

The few economic statistics out this week have been good with Consumer Confidence up to 64.5 for December and Pending Homes Sales rising 7.3%, a strong showing compared to the 1% increase that was expected. Unemployment claims rose to 381,000 which was an increase of 15,000 but still well below 400,000 and continues to be in a healthy downward trend. The four week average is at 375,000. Also, the Chicago PMI came in at 62.5% when expectations were for it to be at 60%.

These numbers were up but are still showing only improvement, not a strong recovery growing economy. We are growing but struggling to maintain that growth.

The big headwind going into 2012 will be Europe. The uncertainty with their debt problems, and falling into a recession by most standards, will be its impact on the U.S.

It will take years to address debt taken on by the governments in Europe and that is only if they have the political will to do so. We have a similar problem in the U.S. At the same time economies need the liquidity in the banking system to keep growing. It is a delicate balance and so far Europe is not doing a good job at that balance. Will we do any better in the U.S.? In the long run higher inflation will help by paying future debt with inflated dollars. But without a growing economy it will be a struggle, if not impossible, to pay down debt.

Good Trading
Steve Peasley

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