Fed posts record profit for 2009

Since the beginning of 2009 the Fed has been aggressively buying bonds, to bring interest rates down and prop up the U.S. economy. By the end of 2009 the Fed owned $1.8 trillion in U.S. government debt and other mortgage-related securities, up from $497 billion a year earlier. This unprecedented action from Mr. Bernanke helped the Fed to its largest profit since the U.S. central bank was launched in 1914, namely $46.1 bn in interest income for the American tax payer.

This raises the question, are we out of the woods yet?

Currently there are three major indicators pointing out that we have overcome the worst of the economic downturn;
1. The U.S. unemployment rate surprisingly fell to a 5-month low of 9.7% and factory payrolls picked up for the first time since 2007.

2. U.S. GDP grew by almost 6% in the fourth quarter of 2009, marking a major turnaround from the previous quarters.

3. The price of Gold is starting to correct quite significantly, which leads to believe that the level of uncertainty in the market is decreasing.


Source: Stockhouse.com

However some risks still remain. Industrial output in Germany, Europe's largest economy, unexpectedly fell sharply in December 2009, leading us to believe the recovery could take a little longer then anticipated. Business lending is still at an all time low, especially in the U.S. with business bankruptcy filings up 7% in January from a year ago. President Obama's recent proposal to aid small business lending still shows us how fragile the U.S. economy really is.