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.

The rulers of Iran are losing their patience with the election protests of the last few days. They are selectively tightening their grip on the freedom of the press, freedom of speech, freedom to travel and peaceful marches by disenfranchised voters that believe the reported results of a Mahmoud Ahmadinejad victory were a fraud.

The government is cracking down by not renewing visas for the foreign journalists, confining others to their hotels, and limiting all broadcasts and news outlets.

If anything can be gleaned from this, one only need take a brief glance at history to learn that a nation with totalitarian rule begets a totalitarian economy.

The landslide victory of current president Mahmoud Ahmadinejad and the announcement of same, only hours after the voting polls closed, even though paper ballots had to be hand counted, has cast serious doubts about the election results.

Last week I wrote of Iran's great potential but today much of that potential has evaporated for the time being, and perhaps for another four years. The rulers of Iran have decided that the devil they know is better than the one they don't. Unfortunately, as far as politicians go, they may have gotten exactly that.

With "Buy American" policies in the stimulus package, one of the worst things to come out of the recession is a return to protectionist trade policies and a belief that "keeping the money over here" is the best thing for the United States economy.

Brazilian President Luiz Inacio Lula da Silva blasted protectionist trade policies in a speech to bankers and business leaders in what Bloomberg is calling "his most high-profile defense to date of free trade, which he says is necessary to protect jobs in poor countries beset by the global crisis."

This post was written by Minyanville contributor Bennet Sedacca.

My main reason for being long equities was purely a technical/sentiment call. But many of those that were asking me if they should liquidate their portfolios just 10 days ago were asking me what to buy and how long I thought the rally would last. I must confess that my honest to goodness answer is/was 'no idea.' But the change in sentiment was what quickly caught my attention.

Further, TV commentators and others turned bullish awfully quickly.

But the REAL reason is that MACRO TRUMPS TECHNICALS.

I just saw the latest Credit Market Debt/GDP number as of 12/31 (and this is before GDP was going to drop and before all of the recent issuance) and it was a stunning 370%. A record high by a long shot.

So much for de-leveraging. In fact the economy is getting MORE leveraged.

The Congressional Oversight Panel (COP) reports today that Hank Paulson's Troubled Asset Recovery Plan (TARP) stole $78 billion of our money. This sounds like a huge under count to me -- I would put the figure at much closer to $350 billion. The questions now are what to do about TARP and whether similar waste can be prevented for the next $350 billion.

How did COP arrive at the $78 billion? It claims that TARP received bank assets worth $176 billion in exchange for capital purchases of $254 billion. Two hundred banks have gotten TARP money so far. In addition to assets, TARP has gotten preferred stock and warrants in exchange for its cash. And I would guess that the amount taxpayers have lost is well in excess of the $78 billion.

President-elect Barack Obama campaigned -- and has continued to generate positive press -- on his commitment to job creation.

I've been scratching my head at this for awhile and wondering: Why is job creation a worthy goal? Shouldn't the goal be economic growth, and job creation is a happy byproduct of that?

Writing in Reason, Jacob Sullum, dissects exactly why Obama's rhetoric on job creation is nonsensical, illogical, and flies in the face of economics:

Obama also wants to spend $60 billion to "provide financing to transportation infrastructure projects across the nation." He says "these projects will create up to two million new direct and indirect jobs and stimulate approximately $35 billion per year in new economic activity. Fixing a bridge, widening a highway or building a light rail system may or may not make economic sense. But the fact that it involves paying people to operate jackhammers and pour concrete does not make it any more worthwhile. If creating jobs can justify transportation projects, why not fill the country with bridges to nowhere.

My optimistic hope is that Obama realizes that job creation is not a worthy goal and mentions only because he's politically savvy enough to know that it will generate consensus around his ambitious proposals. But if his billions of dollars in infrastructure projects are motivated by a desire to create jobs, we are in a lot of trouble.

Today, the President-elect is meeting at the White House with the current President. No President in U.S. history has left his successor with two long wars with no end and an economic depression. That is until the current one. But George W. Bush has more trouble in store for his successor. And he's piling on the problems in his usual secretive manner -- hoping nobody will notice.

How so? First, the Treasury Department this morning announced that it would increase the size of the bailout of American International Group (NYSE: AIG) from $143.7 billion to $150 billion and it would do so from funds in the $810 billion bank bailout bill. Second, he snuck a $140 billion bank tax break into that same bailout bill that would encourage bank mergers by allowing profitable banks to pay less tax by using the losses from unprofitable ones they buy to offset their taxable income.

Each of these moves is complex but the bottom line is that more of your money is going to bail out the mistakes of a handful of executives without any input from taxpayer representatives. The new AIG bailout swaps a program that gave it $143.7 billion of taxpayer money -- the original $85 billion loan for warrants to buy 79.9% stake; plus $37.8 billion more to cover losses from AIG's money-losing securities lending unit; plus another $20.9 billion worth of Commercial Paper -- for a new deal.

What might be considered a recession in the US is probably different from what a recession would look like in China. In the US, the economy has to have two quarters of negative GDP growth. In an economy like the one on the mainland, which has been growing at 10% a year, an economic calamity might begin if the move in GDP expansion slipped to 5%.

At a slower rate of growth, wage increases for China's middle class might stagnate. This group is the engine of the country's great improvements in consumer spending. Factory employment could drop if exports slowed due to a recession in Japan and the West.

Odd as it may seem, a GDP improvement that might be considered robust in the US could be a disaster for the Chinese.

According to Bloomberg, China's industrial output rose at the slowest rate in six years and much of that was due to a drop in export demand. The nation is now looking at tax cuts to improve growth prospects. That sounds a bit like the tax rebate program in the US.

The Chinese consumer fuels much of the import demand in the country. Many of those imported goods come from the US. It is a bit of a vicious cycle. China and America have become co-dependent

Douglas A. McIntyre is an editor at 247wallst.com.

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.

The global stock market had more ups and downs this week than the career of Britney Spears. Don't look for the bottom to appear anytime soon following the worst week for global equities in six years.

A parade of superlatives continues to weigh on the mind of investors, most of them bad. Unemployment is at a five-year high. Payrolls shrank by 84,000 last month, according to the Labor Department. That's more than 75,000 economists predicted, the Associated Press said. Rising interest rates spurred the biggest increase in the foreclosure rate in almost three decades, according to Bloomberg News.

Sure oil prices are dropping to near $105 but they are still high. No car, truck or airplane was ever designed with the thought that oil would be anywhere near that high. Gasoline prices have also come down but they are still at levels that many Americans can not afford.

Amidst all of the talk of hockey moms, jabs at Democrat Barack Obama, and media bashing, there was not much discussion of the weak economy at this week's Republican National Convention.

In fact, the Republican gathering was notably short on talk of the main issue on the minds of voters. Sure, there was "drill baby drill," but is that really an economic policy? Can Americans drill their way out of the credit crisis? Can we drill our way out of the housing slump? Can we drill our way to prosperity?

No less of a flaming liberal than CNBC's Larry Kudlow took note.

"As we head into the closing night in St. Paul, there has so far been no reference to the weak economy," Kudlow said on the network's blog before John McCain's acceptance speech last night. "There has been no economic-recovery message and no growth message."

Interestingly, the Republican platform contained language inserted by economic conservatives rejecting the Bush administration's rescue of Bear Stearns Cos., and possible bailouts of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), according to Bloomberg News. The document purposely did not mention the credit crunch because delegates were afraid that any solution that they would offer might make things worse, Bloomberg says. The GOP's embrace of free trade may sell well on Wall Street, but it won't win votes on Main Street where workers are fearful of their jobs being shipped to lower-cost countries overseas.

No wonder the GOP did not say much on the economy.

Most Americans are suffering because of high gas prices, a volatile stock market and plunging home prices. Though technically the economy may be strong and may not even be in a recession, most people and businesses believe they are worse off than they were a year ago.

The United States, the most powerful nation the world has ever seen, will be getting a run for its money from China in the decades to come. According to a report by Albert Keidel of the Carnegie Endowment for International Peace, China's economy will surpass the U.S. by 2035 and will be twice its size by the middle of the century.

The thought of the U.S. not being number one is mind blowing, but not surprising. China's growth rate during this decade has averaged more than 10% and is still going strong even amid a global economic slowdown. Meanwhile, Chinese exports to the U.S. exceeded imports by about $75 billion between January and April. Chinese exports probably were not slowed much by the recent devastating earthquake that killed more than 69,000 probably did little to slow China's economy.

Not surprisingly, talk of protectionism seems to be on the rise in the U.S. One foolish member of Congress has proposed slapping new tariffs on Chinese goods to punish the country for currency manipulation. Such a law would probably be struck down by the World Trade Organization. Barack Obama, the presumptive Democratic presidential nominee, pledges to fight for a "a trade policy that opens up foreign markets to support good American jobs." He also wants to "amend" the North American Free Trade Agreement. Republican John McCain takes the opposite approach, vowing during his recent overseas trips to continue President Bush's free trade agenda.

The New York Times reports that the European Central Bank raised its equivalent of the Fed Funds rate to 4.25%. Meanwhile, Bernanke's economic wrecking crew has kept the U.S. rate at 2%. Investors will sell dollars and buy Euros. That will cause the dollar to lose even more of the 72% it's lost since January 2001. But none of this is really happening because AFP reports that President George Bush has declared that "we're strong dollar people."

The key to U.S. policy is repeated denials of the obvious -- which is that U.S. policy is consistently intended to weaken the dollar. The reason is that a weak dollar makes the goods of big U.S. corporate exporters relatively cheap when they sell overseas. And of course, since oil is traded in dollars, a weak one causes the price of oil to spike. It now resides at a comfortable $146 a barrel, up 508% since January 2001.

But Reuters reports that Treasury Secretary Hank Paulson -- who last year brought us "subprime is contained" -- now says that the weak dollar is not to blame for high oil prices. With apologies to the old E.F. Hutton advertisements -- which said "When E.F. Hutton talks, people listen" -- when Hank Paulson talks, people snicker.

If an enemy sworn to the destruction of the global economy was given free reign, it would follow the strategies of its current leaders.

One key to destroying an economy is to break its pricing mechanism. What does an effectively functioning pricing system do? It creates a market of buyers and sellers who can meet, agree on a price, conduct the transaction, and create an information trail that permits future market participants to judge what might be a fair price for their transactions.

Another key to destroying an economy is to put too low a price on risky behavior. Why is it important to price risk accurately? Because if decision-makers do not assess the risk at the time of their decision, the economy will end up paying for the under-priced risk long after those decision-makers have left office.

So how have current leaders broken the pricing mechanism and under-priced risk? Here are three ways: