Global

Friday marked the end of the worst quarter for the world stock markets in three years, and one of the best for US bonds. The debt crisis in Europe that escalated into a European bank crisis was the main reason for the decline. Unfortunately, the European policy makers were on holiday during August.

One of the biggest problems in Greece is tax evasion. As the Greeks implement austerity measures that include increased taxes, the problem of evasion is expected to increase. Interestingly, the Internal Revenue Service in Greece is on strike, so there is no agency to collect the increased taxes.

The United States

Bank of America announced Thursday that it will charge $5 monthly for its debit card. This fee may be quickly implemented at other banks. The new fees may drive bank customers away from debit cards and back to credit cards, which, interestingly, would benefit the banks implementing the fee. This action may be a good lesson for government on how to properly encourage behavior, as opposed to granting tax breaks and spending taxpayer money.

The economy, as measured by GDP, was not as weak as thought during the second quarter. The revision revealed that growth was slightly more than 1%. It is reasonable to expect sluggish growth as consumers pay down debt and rebuild credit. Consumers are doing the right things.

At the end of July 2011, 45.3 million people in 21.5 million households (approximately 18% of US households) were receiving food stamps. The number of persons receiving food stamps has increased 8.3% in 12 months and is up 56.7% over three years. The average monthly benefit per household in July 2011 was $284. I am not sure that government's focus on refinancing mortgages through lower interest rates addresses this problem.

AAA reported a 9 cent drop in average gasoline prices last week in the US.

Washington

The New York Post reports that among elected members of Congress, 80% have no business acumen. About one-third studied government and law, 20% studied humanities, and 12% have an educational background in science and technology. Business, accounting and economics were studied by only 20%. Few have the education or real-world experience to understand the issues on which they make decisions. The over-representation of the legal field may explain why we get 2,400-page laws.

Starting the Week

The market starts this week concerned again about the Greek debt situation and its impact on European banks.