U.S. Economy Tumbles, $1 Trillion Stimulus Package on the Table

by Trader Rich

How long can the U.S. dollar rally on the technical charts alone?Right now, the U.S. economy is continuing its tumble. Even though there are plenty of opportunities for the individual investor in this economy, and ways for individuals to take advantage of certain situations, as a whole the U.S. economy is in pretty dire straits.

As continued issues surround the U.S. auto industry (and its hopes for a bailout) and increasing emphasis is placed on preventing foreclosures, calls for a record-breaking stimulus package are being made. True, the recently-passed 0 billion stimulus package blew all previous records away. But now there are calls for a trillion stimulus package.

Things are getting desperate. Yesterday’s public unveiling of the Fed’s Beige Book underscored that view.

Meanwhile, the U.S. dollar continues its rally in forex trading. Against all fundamental common sense, the greenback is king in currency trading. It’s all about the technical charts right now. The U.S. dollar has seen a rally, and it will continue to see a rally if traders continue to rely solely on the charts.

Besides, even with the U.S. economy in its current state, it is still expected that it will hold up better, and recover quicker, than the economies of other regions, such as Britain, Australia and the euro zone. So, even though the U.S. economy is bad, bad, bad, the others are seen as worse.

But how long can this continue? The Forex Blog reports on the U.S. economy:

Based on almost every measure, the US economy remains dangerously over-leveraged. Fueled by cheap credit, household debt, government debt, and financial sector debt have exploded over the last couple decades, such that total US debt is estimated at a whopping %350 of GDP.

At some point, the fundamentals are going to matter again. And when they do, heaven help the U.S. dollar.