Why USA is likely to landup in deeper debt?

Never have I seen the VIX be at maximum value for so many days. A lot of it is due to illiquid stocks, the market still doesn't dare to stage a rally above 1200 points.

In the midst of writing this article congress is still fine tuning the 700 billion government facility rescue plan.

If the plan has been approved, question is how soon will the federal government start absorbing those toxic assets from the financial institutions. My guess is probably ASAP, though I could be wrong.

I think the FED could have made a mistake to announce this 700 billion rescue plan when the Dollar has just undergone a rally up to 80 points (DXY). Sure enough, that helped to lower crude oil prices for a brief period. But look at where crude oil is at now...its back to 109.

This 700 billion dollars could come from other institutions, whether foreign or domestic. If the dollar gets weaker, this 700 billion could mount up to 1 trillion or more. For the past few years, many businesses around the world lost confidence in the dollar and opted for the EURO or AUD because these currencies were stronger.

Global slowdown will eventually affect US exports and decrease demand for the dollar. Europe is not so bad because the Eurozone has a combined currency consisting of many nations.

Due to globalization, many jobs and manufacturing have moved overseas. Therefore, reducing chances of job growth. A lot of these is due to higher expectations for companies to make more profits in the past. And many CEO's were just doing their jobs by adopting a globalization strategy to make investors happy.

I think the only way for the US economy to heal itself is domestically. A stronger dollar wouldn't do any good if the US wants to improve international trade. Eventually, the FED will come to realize that they should have inflated the dollar first to improve the situation instead of pushing for this 700 billion rescue package.

Any comments are welcome.