Best wishes to all and, next to world peace among people, we should hope for the same among world markets.

I have let some time pass before commenting on a recent example of how fragile a world we live in. This past year through a time of greater economic danger, fear and volatility than most of us has experienced in a life time, many people cannot fathom how close we came to the edge of Hades.

Export orders were on the rise in October in China, suggesting a strengthening recovery and an opportunity to cut back on stimulus spending. The manufacturing measure grew at its fastest rate in the past year and a half, according to the HSBC (NYSE: HBC) purchasing managers' index. It increased to a seasonally adjusted 55.4 from 55 in September.

If you're looking for a reason behind the gain, it's all in the flow of capital. In addition to the government's economic stimulus package, $1.27 trillion in new loans were written to help deliver the country from the global financial crisis.

There are two competing positions on consumer sentiment right now. One is that it turned south last week, as people worried about their jobs – always a bad sign for spending. The other is that consumer sentiment didn't crap out in July: it fizzled in May. So, it's not a question of whether consumers aren't confident in the U.S. economic machine, it's just a matter of when the collective mood changed.

The July camp is set up around the Reuters/University of Michigan Surveys of Consumers, which makes now the weakest point for consumer sentiment since March. Those who favor May look to domestic demand for foreign goods, which went soft two months ago, bringing the monthly trade deficit to its narrowest since 1999. The U.S. trade gap unexpectedly tightened to $26 billion in May, with exports up 1.6% and imports down 0.6%, according to the U.S. Department of Commerce.

You might have thought that the cost of the stimulus package about to be signed into law was $789.5 billion, but it looks like the total bill for taxpayers -- the numbers detailed below exclude all the infrastructure investment -- must be much bigger.

That's because the subset of the total package that goes to consumers adds up to $42.8 billion on top of that total headline number, or $832.3 billion by my calculation. So there is either something wrong with the $789.5 billion figure, which is being highlighted in the media, or the cost estimates for the components are being calculated differently than the top-line number.

If you work in an organization, it looks like you'll be a big fat target for your headcount-cut-hungry bosses this year. That's because the economy is contracting fast -- many expect GDP to have slumped 5.4% in the fourth quarter of 2008. And those economists see GDP shrinking 4% this year. That means job losses not seen since 1982 (as I posted last week, these forces led to 40,000 layoffs on one day earlier this month).

How bad? The National Association for Business Economics (NABE) surveyed 105 corporate economists between December 17 and January 8 and found that 84% of them expect their employers to either cut significantly or make no change in its headcount. Specifically, the surveyed companies had the following to say:

• Job reductions through attrition or significant layoffs (39%) -- up from 32% in the previous survey it conducted in October 2008
• No change in employment (45%)
• Hiring (17%)

These forecasters are reporting customer demand dropping, capital spending reductions and shrinking profit margins. These reports are symptoms of a deflationary spiral which, as I posted, works as follows:

Like all good marriages, the union of Barack Obama and the American people will start tomorrow with the best of intentions. The problem is that it won't last, particularly when it comes to the economy.

The president-elect already is at odds with House Speaker Nancy Pelosi over whether to repeal the Bush tax cuts before they expire in 2010, according to the Wall Street Journal. The economic stimulus package is expected to top $850 billion as part of Obama's pledge to create jobs and reducing taxes. Meanwhile, the housing market continues to stink and the stock market continues to be dreadful.

Improving the economy is going to be a long, painful process. Think turning around a super-tanker and you get the idea. Good news is going to be hard to come by over the next 12 months. Bad news will be plentiful. Here are some predictions of the troubles that lie ahead for the economy no matter despite Obama's best intentions.

• Corporate bankruptcies -- Experts are predicting one of the biggest waves of corporate bankruptcies and restructurings in years. Already, Circuit City Stores Inc. (OTC: CCTYQ) has bitten the dust and the year is just getting started. Loads of retailers who are already operating on the razor's edge of profitability may be pushed over the edge. I doubt that enough credit will be unlocked by government fiat to address this problem.

The honeymoon between President-elect Barack Obama and the American people may end about the time crews finish cleaning up from tomorrow's inauguration festivities. For now, the American people and Congress are willing to cut the charismatic politician some slack, especially when it comes to his troubled nominee for Treasury Secretary.

Priority number one for the first African-American leader of the free world is the U.S. economy. It's more important than the war in Gaza, more important than education and more important than the fight against terrorism. The U.S. economy is in its worst shape since the early 1980s. If the slump, which has already lasted 12 months, lingers for more than 16 months than it will equal the Great Depression, according to Reuters.

Obama is well aware of the challenges that lie ahead. CNN reports that he is planning to meet with his top aides Wednesday "to map out how to step up his personal lobbying efforts to get Congress to pass his stimulus plan, which has a price tag of $825 billion."

Democratic presidential candidate Barack Obama, who has made the economy a focal point in his campaign, is slipping in the polls as the popularity of opponent John McCain surged after his selection of the Alaska Gov. Sarah Palin as his running-mate.

Now Obama and his supporters are hoping that their support for a second economic stimulus -- worth about $50 billion -- will grab the attention of voters fascinated by Palin, the moose-hunting hockey mom conservative firebrand. That's going to be a challenge.

Voters now are focused on Palin. They are gobbling up every detail about her life -- The Bridge to Nowhere (which she actually supported for a while), her baby with Down's Syndrome, her pregnant teenage daughter, whether she wanted to ban books from the local library. The list is endless. The McCain campaign is fueling interest in "Sarah Barracuda" by keeping her away from the media. This week, Palin is supposed to sit down with Charlie Gibson of ABC News. More interviews will follow though apparently not with Oprah Winfrey.

Democrats, including this one, are betting that once Palin is no longer the flavor of the week voters will move onto more pressing issues such as the economy (and, of course, "American Idol"). The economy is in terrible shape. The federal budget deficit is soaring and unemployment is at record levels. Former Treasury Secretary Larry Summers endorsed the second stimulus plan today in testimony before Congress.

Congressional Democrats, including Sen. Robert Byrd, D-W.Va, are pushing for the enactment of a second economic stimulus bill worth $24 billion, including a $6 billion lifeline for the beleaguered auto industry. Odds of it passing in a presidential election year are slim to none.

Democrats, though, are giving the people what they want. Regardless of whether it's a good idea or not, it's fantastic politics. Democrats can prove to voters, who are fed up with the lousy economy, that they "feel their pain," leaving aside the debate of whether it's needed.

That explains why House Speaker Nancy Pelosi, D-Calif., says that the second stimulus bill will need to have bipartisan support -- as the first one got -- because it is vital for the economy. Like the first economic stimulus plan, Byrd's bill will be temporary, targeted and provide disaster relief, according to CQ Politics.com.

"The Speaker earlier had vowed to enact a second measure, totaling at least $50 billion, before Congress leaves this year," the website says. "But the president and congressional Republicans have been less enthusiastic about the idea, repeatedly arguing that lawmakers should wait to assess the impact of the tax rebates and other incentives enacted in February."

Some people waiting for their economic stimulus checks may be in for a shock.

According to USA Today, about $2 billion in payments from 1.8 million checks are being confiscated from people who owe child support, student loans and back taxes. Taxpayers get letters from the government explaining why their bank accounts are not being stimulated and so far few have complained, according to a Treasury Department official quoted by the newspaper.

I am all for making sure that children get the financial support they deserve. People also should not be able to dodge student loan payments or tax bills. The government, though, cannot impose a one-size-fits-all solution. For instance, what if someone is laid off and is already behind in their bills? The economic stimulus is supposed to help people in need, right?

Though the economic stimulus checks have helped boost retail sales, investors should keep their expectations in check. Many of the people I know are using their stimulus checks to pay bills, not buy big-screen televisions. A good portion of my stimulus is going right back to Uncle Sam for taxes I need to pay for being self-employed. That's another rant for another time.

Want to know how much the Republicans are the creek in this presidential election? A Bloomberg News/Los Angeles Times poll found that voters believe Democrats are better able to handle the economy than President George W. Bush by a margin of 51% to 29%.

Moreover, more than two-thirds respondents said they believed the economy was doing badly, up from 56% in December. More people -- about 80% -- see a recession as likely, up from 71%. A Wall Street Journal/NBC News poll found similar results.

Is it any wonder that President Bush buried the bipartisan hatchet and worked out a fiscal stimulus package?

Wouldn't the economy have gotten more of a kick if unemployment insurance was extended?

That issue will be hotly debated when the bill gets to the Senate. Sen. Max Baucus, the chair of the Senate Tax Committee, told the Wall Street Journal that leaving it out was a "mistake." Let's hope the new spirit of bipartisanship in Washington lasts a little longer.

But I wonder whether sending tax rebates -- mine would be about $1,500 -- will really stimulate the economy? Odds are pretty good that my wife and I are going to wind up handing a lot of that money right back to Uncle Sam which isn't very stimulating if you ask me.

The stock market is not exactly cheering about the announcement of a $140 billion stimulus plan which would give people $800 tax rebate checks. In a $14 trillion economy, that 1% of GDP rebate won't do much.

I think the money would go much further if it was used to recapitalize the banks that are writing down their collateralized debt obligations (CDOs). To maintain their capital ratios -- for instance, Citigroup (NYSE: C)'s Tier 1 capital ratio target of 7.5% -- banks that write down their assets need to either raise more capital or shed more assets or both.

But the great thing about recapitalizing banks is that they could lend out that capital to people who would put down some of their own capital and borrow the rest to make a purchase. $1 of capital invested in a bank could add almost $17 to GDP. Here's a rough example: if a bank trying to maintain a 7.5% capital ratio gets $1 of capital, then it can theoretically make roughly $13.33 worth of loans. If a person wants to buy a house with a 20% down payment, then that $13.33 can be used to buy $16.66 worth of real estate.

After watching part of Fed Chair Ben Bernanke's testimony before Congress this morning, it's clear that he supports economic stimulus but does not want to exacerbate long-term deficit problems by making the stimulus permanent. I give him credit for trying to strike a healthy balance between helping the economy in the short-term without making the deficit worse. Although no politician will dare say this, as I posted here, I think the right answer is to let the recession happen without government interference.

Any presidential candidate who does not support either fiscal stimulus -- in the form of a tax rebate or a government check to citizens -- a tax cut, or both is cruising for a bruising. That's because in an election year, a politician who does not get on the bandwagon will be severely criticized by rivals for not caring about people.

There are two reasons I think economic stimulus is the wrong answer. First, it will have the negative consequence of increasing the Federal deficit which will lead to more borrowing. This will contribute to inflation and the further decline of the dollar. Consumers will be squeezed further as they suffer due to rising unemployment and stagnant wages even as prices of energy and food keep going up.

Sometimes, the market works in mysterious ways. This isn't one of those days.

The Dow Jones industrial average plunged more than 234 points to 12,543.95 after Citigroup Inc. (NYSE: C) posted a record $10 billion loss, retail sales were weaker than expected, and oil prices declined, dragging down energy stocks. The Nasdaq Composite Index, fell 58.70 to 2,419.60 and the S&P 500 index dropped 32.10 to 1,384.15.

In an interview with Bloomberg News, veteran market pundit Laszlo Birinyi said, "There seems to be no end of bad news. Trying to bottom-fish may work when you're out there angling, but I'm not sure it works with financial markets.''

Good point. Investors in volatile markets often forget that stocks, such as Citigroup, are cheap for a good reason. Trying to pick a bottom in this market is going to be difficult because there hasn't been anything quite like the subprime mortgage meltdown.