Stock markets worldwide tumbled last week on the fear that Europe's ballooning debt crisis might have a spillover effect far beyond its borders.  American companies scrambled to ascertain their exact exposure to the potential defaults of government bonds issued by the PIIGS countries (i.e., Portugal, Ireland, Italy, Greece and Spain).  Some bond watchers believe the problem is regional in nature and will not significantly impact the US.  However the similarities to the beginnings of the subprime crisis from the fall of 2008 were a little too close for comfort.  By week's end, the S&P 500 was down 4.3% YTD (total return), having fallen 7.2% in less than 3 weeks (source: BTN Research). 
 
It was ironic that a week that highlighted the lack of fiscal discipline of a few European countries was the same week in which President Obama submitted his fiscal year 2011 budget to Congress.  The budget recommendations called for government spending of $3.83 trillion, $1.27 trillion more than the proposal anticipates in tax receipts.  Just a week earlier, the government estimated total deficits over the upcoming decade would exceed $6 trillion (source: White House, CBO).  
 
Fed Chairman Ben Bernanke will be queried by the House Financial Services Committee on Wednesday (2/10/10) to explain his plans for an exit strategy to reverse the easy monetary policy the Fed has been following since the fall of 2008.  The emergency lending programs implemented over the last 1 ½ years designed to ease our financial crisis have placed more than $1 trillion into our economy, money that the Fed believes will eventually need to be removed (source: Federal Reserve).