The much-touted “Summer of Recovery” is turning out to be just the opposite.  It is clear that our most conservative monetary body is bracing us for more – and continued bad news.  When the Fed speaks, the world listens; but when the Fed speaks with a shaky voice, then we had better pay attention.  The simple fact that the Fed has to “stand ready” to step into the markets again should be a telling sign that we are still teetering on a cliff.

Congress is calling its members into an emergency session to borrow and spend $26 billion, tax foreign companies, and pay off the teachers unions… oh, and toss in a few billion for Nancy Pelosi’s state of California.  News coverage yesterday was focused on some key elections but investors and economists focused on what signals the Federal Reserve was sending.

It is very important to understand that the Federal Reserve is limited in its ability to play a dramatic role in pumping blood into our economy.  They can buy treasuries to keep interest rates at an all-time low, but their balance sheet is already bloated.  They are privy to information and a view of the economy that we are not.  One moment they say we are experiencing a “modest” recovery and then they turn and say the recovery is not all it’s cracked up to be.  Their solution?  They point to Washington to step in again and implement more failed programs.  But the government is just like a deer in the headlights.

It’s election time and politicians are hocking programs while the Fed is trying to convey that we are still in trouble and will be for a long time.  Saving jobs and bailing out states that have to make very hard choices is not the answer.  It just makes us further in debt and is like placing a band-aid on the fiscal irresponsibility of the states.  Something massive needs to be done across the entire economy, but it seem like the political machine is just trying to win more votes while they jam through every piece of legislation they can to help them maintain their jobs.

It is clear from what we heard yesterday that Wall Street is not swayed.  In fact, they are scared to death.  All the negative numbers coming out (and more to come) is causing big economic problems and unless they fix the root of the problem, consumers, we are going to stay in big trouble.  I am hopeful someone will listen to the 2-step program I have come up with to solve this issue once and for all.