While Dark Clouds Remain Overhead, a Bit of Good Economic News

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Finally, a bit of good news ... 2nd quarter growth was revised to an annual rate of 3.3 percent this week, led by an increase in domestic manufacturing and, of course, consumer spending sparked by those stimulus checks. New unemployment applications nosed down by a hair last week -- although the average over the last four weeks is the highest since 2003.

Unfortunately, this is a blip in the long line of bad reports. Consumer spending edged up, but consumer confidence is in the toilet. The growth in manufacturing is largely due to the weak dollar -- 2nd quarter exports grew at an annual rate of 13.2 percent and imports declined by 7.6 percent. One could argue that this is a good thing -- that we're just naturally equalizing our monster trade deficit -- but of course all these things are interrelated. With the declining dollar and an overall weak economy, international investment money is drying up, which may lead to a liquidity problem. That, in turn, is putting the financial system at greater risk of disruption, in part because it's leaving a lot of American debt -- from mortgages to auto loans -- without the backing of investors, who are fleeing in droves.