The North American Free Trade Agreement, or NAFTA, was an important point in Obama's Presidential Campaign platform. However, he seems to be backing away from his promise to renegotiate the agreement. In a meeting with Mexican President Felipe Calderon in April, Obama said that any NAFTA renegotiation would need to wait until after the economic crisis passes. Any disruption to NAFTA trade could further slow the economy.

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In May, the amount of Americans' credit card debt dropped 3.7%, after plummeting more than 11% in each of the previous three months. Even with the drop-off, consumers still owe $928 billion, or $7,931 per household. (Source: Federal Reserve, G.19 Release, July 8, 2009)

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The Federal Government is now looking at increasing its regulation of commodities markets, including oil prices. Most analysts feel it will keep oil prices from skyrocketing when commodities traders start speculating, which many experts believe happened last summer. The Commodities Futures Trading Commission (CFTC) announced it will start hearings this summer. While increased oversight is needed, regulation of U.S. commodities markets alone don't go far enough to solve the problem.

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GM's bankruptcy, filed June 1, was approved by the court yesterday. Unfortunately, this is what it took to get the 100 year old American institution to become competitive. The Federal government now owns 60% of GM, paying $50 billion to keep it afloat.  In return, GM will:

• Close 40% of its 6,000 dealerships.
• Shut down 11 factories.
• Reduce health benefits for 650,000 retirees.

(Source:  CNN ; Washington Post)

These are all painful emergency measures that should have been made gradually over the last 20 years. Instead, GM offeredshort-term solutions to boost sales, such as zero-percent financing. Read more...

Another 467,000 workers became unemployed in June, sending unemployment to 14.7 million and the unemployment rate to 9.5%. Since the recession began in December 2007, 7.2 million workers have become unemployed. Over half (4.4 million) have been unemployed for over two years.

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China insists on using its growing economic clout to replace the dollar a new global currency. China is right to be alarmed at the dollar's drop in value, down 11% since March. China is the largest foreign holder of U.S. Treasuries, and it just saw its investment deteriorate.

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The Securities and Exchange Commission (SEC) has increased regulations on money market funds. The agency seeks to require money market funds hold more liquid assets. This will allow them to sell their holdings quickly in case of sudden withdrawals, thus protecting the value of your investments in money market funds. Read more...

The BEA final report revised the U.S. GDP growth rate for Q1 2009 to -5.5%. This is better than the 5.7% decline reported in the preliminary report. However, this is still the third declining quarter in a row, and the fourth since the recession began in Q4 2007. The slowdown in Q1 was less than the 6.3% drop in Q4 2008. This is the first time since the Great Depression that GDP fell more than 5% for two quarters in a row. The silver lining is that a large contributor to the decline was a decrease of business inventories. This means that inventories are getting lean, potentially boosting production next quarter if orders hold steady. (Source: GDP News Release)

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A reader asks:

What actually happens in a foreclosure?

After about three months of missed payments, the foreclosure department will send a notice of default, asking that you pay up by a deadline. If you miss that deadline, the loan will be sent to a local attorney to begin foreclosure proceedings. All this time, late fees and legal fees are accruing. The impending foreclosure must be advertised and will eventually result in a public auction of the property. Most states allow you to save your home by negotiating a loan modification throughout the process. However, if you haven't paid and are still in your home at the time of the auction, the Sheriff's Department may have to remove you from your home. Read more...

Many readers are concerned about the value of the dollar, which has declined 11% since March. Those who live overseas, including military families, are finding their living costs rising dramatically. Readers ask if the dollar will continue to decline?

Unfortunately for those readers, it will. The Treasury must sell more notes to finance the Economic Stimulus Package. The U.S. debt has risen to $11.4 trillion, which is concerning China and other investors in Treasuries. Finally, the Fed Funds rate is at zero, making the return on the dollar lower than other currencies. These pressures will continue to drive the dollar down.

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