The State of the Economy in the United States

The Fed will have a lot to grapple with today as it releases its FOMC statement.

We talked about inflation yesterday. It’s seemingly everywhere.

I saw this list in the Chicago Sun-Times today which nicely illustrates the economy’s issues:

* Home values: Down 12.7 percent nationwide in February compared with February 2007, according to the Standard & Poor’s/Case-Shiller index, out Tuesday. Chicago prices dropped 8.5 percent.

* Foreclosures: Up 112 percent in the first three months of this year, compared with a year ago. Almost 1 in every 194 U.S. households were in some stage of foreclosure, RealtyTrac reported Tuesday.

* Gas prices: $3.789 a gallon Tuesday in the Chicago area, a new record. That compares with $3.096 a year ago. Nationwide, the average is $3.607. Oil futures prices are up 74 percent from a year ago.

* Job losses: Some 80,000 jobs were lost in March nationwide. The Labor Department is expected to show another loss of 65,000 when it releases its April report Friday. The unemployment rate is 5.1 percent.

* Food prices: Egg prices have soared 35 percent in the last 12 months, to $2.20 a dozen; corn prices are up 26 percent, and rice is up 70 percent.

You have the housing deflation, which is massive. And then you have food and energy inflation, also massive.

Housing is most American’s largest asset, however. Earlier this week, one of the co-founders of KB Homes, one of the largest home builders, said he believes we’ll see at least another 20% decline in home prices.

If that isn’t deflationary- what is?

But the Fed has been flooding the world with cheap money (again.) That’s inflationary.

Will they finally stop today? And if they stop- will they start raising rates in the next few months?

Stay tuned. It’s about to get very interesting.