INFLATION NOT INEVITABLE – The level of bank reserves has soared more than tenfold, the amount of credit the Fed has extended has doubled to more than $1.6 trillion and the government is projecting that this year's fiscal deficit will top $1 trillion, the highest level relative to GDP since World War II. Regardless, Kiplingers believes current policies won't spark inflation as long as policymakers keep their sights firmly fixed on their stated long-term goal of price stability.

INFLATION RISK - According to a study by a regional Fed bank, the Federal Reserve is risking inflation after doubling the size of the U.S. monetary base and will face tough choices if prices start to rise before a recovery begins. Fed officials agree they need an exit strategy to soak this money back up once the recession ends. They don't think it is an inflation risk right now because banks are still too scared to lend the extra money out in a way that would boost the broader money supply and lead to higher prices.

IMF PREDICTS "GREAT RECESSION" - The International Monetary Fund (IMF) predicts that the world economy is likely to contract in 2009, bringing about a global "Great Recession."  "The IMF expects global growth to slow below zero this year, the worst performance in our lifetimes." They also urged advanced countries not to focus exclusively on their own problems, specifically citing the impact of current economic conditions on Africa where the crisis could send million of Africans into poverty and strain fragile political systems.

EMPLOYMENT TREND AT 35-YEAR LOW - The Conference Board's Employment Trends Index in February fell to 91 and represents a decline of 21.7% from 2008. "Over the past year, the Employment Trends Index has declined faster than at any other time in its 35-year history, with the most severe decreases taking place since the fall." The Department of Labor reported that the U.S. unemployment rate in February climbed to a 25-year high of 8.1%...the result of 651,000 Americans losing their jobs.

FEDERAL CHARTER - Rep. Barney Frank has voiced support for an optional federal charter, especially for life insurance, as Rep. Melissa Bean and Rep. Ed Royce continue to retool their legislation that would create an optional federal charter for all insurers and said they hope to have their bill introduced in the House within weeks. Frank, chairman of the House Financial Services Committee, said in his comments it is "overwhelmingly likely" House Democrats will move to create an OFC for life insurers.

HARTFORD BREAK UP? - Hartford, dealing with financial losses and ratings downgrades, is reportedly negotiating a possible sale of its life insurance and annuity operations to Sun Life.

ECONOMISTS DISAGREE - Some economists say the stimulus plan will make things worse. Others say it is absolutely necessary.  Some say it is too large, some too small. However, the honest ones admit they don't know the right course. It's bad enough that few economists predicted how bad things would get. What's worse is that even now the profession is foggy and conflicted about how to get out of this mess. At the core of the debate is whether we are experiencing a dangerous spiral or a necessary reset? Most of the economists in the "dangerous spiral" camp agree more or less with the late British economist John Maynard Keynes, who warned that economies can get stuck in a trough of insufficient demand for goods and services. He advocated fighting the Great Depression by using government spending to lift demand. But that view is hardly unanimous. In late January The New York Times published a full-page ad signed by about 250 economists, including Nobel laureates and other luminaries, slamming the Obama plan and saying, "Notwithstanding reports that all economists are now Keynesians...we the undersigned do not believe that more government spending is a way to improve economic performance."

A TOUCH OF SANITY - Unionized workers at Ford have approved contract changes that include freezing wages and cutting benefits in a move aimed at helping the automaker remain competitive. A majority of hourly workers voted in favor of modifications to the 2007 contract with Ford, eliminating cost-of-living increases and cash bonuses. The agreement is expected to be a model for Chrysler and GM.

IRRATIONAL PESSIMISM – Alan Greenspan's "irrational exuberance" seems to have been replaced with "irrational pessimism"...a fear that stock prices are headed in only one direction - lower and lower.  "You can get to emotional extremes in both directions of the market. Savvy investors think in those terms and they know how to get that to work in their favor."  

FRANK INQUISITION - Investor's Business Daily is not a fan of Barney Frank..."Congressman Barney Frank says he wants some of those responsible for our current financial meltdown to be prosecuted. First up in the court dock: Rep. Barney Frank, D-Mass. For Frank, perhaps more than any single individual in private or public life, is responsible for both the housing market mess and subsequent bank disaster. And no, this isn't partisan hyperbole or historical exaggeration. It was Fannie Mae and Freddie Mac, the two so-called Government Sponsored Enterprises (GSEs), that lay behind the crisis. After regulatory changes made to the Community Reinvestment Act by President Clinton in 1995, Fannie and Freddie went into hyper-drive, channeling literally trillions of dollars into the housing markets, using leverage and implicit taxpayers' guarantees. Still, from the early 1990s on, many people both inside and outside Washington were alarmed by what they saw at Fannie and Freddie. Not Barney Frank: Starting in the early 1990s, he stood against efforts by regulators, Congress and the White House to get the runaway housing market under control. He opposed reform as early as 1992. And, in response to another attempt bring Fannie-Freddie to heel in 2000, Frank responded it wasn't needed because there was "no federal liability there whatsoever."

PENSION PLANS ERODE - BNY Mellon reports that continuing stock-market declines further eroded the health of U.S. corporate pension plans in February. Funding ratios for the typical plan have fallen more than 32% since the beginning of 2008. All levels of government pension plans have undoubtedly experienced a similar drop except those that are completely unfunded and rely on "pay as you go"...a guaranteed recipe for bankruptcy!

TRAVEL INDUSTRY PROTEST – A predictable consequence of bashing corporations for "extravagant" entertainment of employees and customers has been a steep decline in travel industry revenues. Travel executives have protested with open letters to Congress and the President asking them to "shut up." This might have an effect on incentive trips provided by insurers and other financial product providers.