Market Commentary

If the United States thought they would be able to flex their political muscles in South Korea at the G-20 summit last week, their game plan did not play out as anticipated.  Instead of receiving the backing of other countries in support of our claim that China has been manipulating its currency, the Chinese were able to turn the tables on the USA and our recently publicized $600 billion "print and spend" plan.  The rest of the world seems to find far more similarities than differences between what the Chinese are doing (maintaining a weak yuan to aid its domestic exporters) and what the Federal Reserve just announced (buying $75 billion of Treasuries per month for the next 8 months to lower interest rates, weakening the US dollar, and aiding our domestic exporters).  President Obama's efforts to explain the distinctions between the 2 monetary policies fell on deaf ears (source: BTN Research). 

It has been widely rumored that the President's deficit reduction commission was struggling to meet its 12/01/10 deadline to produce tangible recommendations to slow down if not reverse our country's runaway deficits.  The 2 leaders of that commission floated a trial balloon last Wednesday (11/10/10) that spared almost no area from harsh cost cuts.  The $3.8 trillion of proposed spending reductions targeted the military, Medicare, Social Security, the deduction for home mortgage interest expense, and farm subsidies.  There was something for both political parties to dislike.  The commission's 18-member panel now has just 2 weeks to draft its final recommendations (source: National Commission on Fiscal Responsibility and Reform).