1) The dollar is actually deflating right now.  The dollar hasn't deflated in over 50 years.  Inflation is measured by the consumer price index typically.  The talk about inflation is completely overblown (at least in the short run).  In the long term we definitely do need to address the national debt, although you could make a strong argument that somewhat higher inflation would actually be a good thing.

http://forecasts.org/inflation.htm

U.S. Inflation Rate Forecast

Year Over Year Change in Consumer Price Index Percent

http://www.shadowstats.com/charts_republish#cpi

2) Interest rates going up is actually a sign that the economy is recovering.  People are putting their money into higher risk investments (like the stock market), which shows that the markets are less volatile than they have been.  Government bonds are considered the "safest" of all types of investments.  I think it is a good sign that the interest rates on bonds are normalizing.  Low interest rates are one of the reasons why we got into this recession in the first place.

3) The Fed has determined that the banks are in a good enough position to start paying back some of the TARP money.  You are overestimating how bad the banking system's situation actually is.  Their performance has actually been incredibly good compared to most people's expectations.  And their capital reserves have substantially increased.

Here are the trends on job loss numbers and unemployment rates, including the most recent numbers in yellow:

http://www.nytimes.com/interactive/2009/05/07/business/20090508-labor-picture-graphic.html

And here is the unemployment rate:

And here are a bunch more numbers that go into the unemployment rate:

Number of Jobs 12-month change, in thousands

One month change	-0.3%
One year change	-3.9%

Discouraged WorkersNot looking for work because of the economy, in thousands

One month change	+7%
One year change	+98%

@akuma587:

1- I was not talking about the short term, of course. The money printing started recently, these things take time. But the problem is not just inflation, it's countries like Russia, Brazil and China making moves to decrease the importance of the dollar.

I'm not an expert on the economy but it seems that all of that will have a consequence eventually.

2- Just because people are investing in the stock market, doesn't mean the economy is recovering. It just means enough people think so.

3- The capital requirements of the big banks were definited by the stress tests, which had too optimistic assumptions even in the worst case scenarios. There must be some consequence to that.

Another thing... aren't many of the banks receiving money through AIG, which got bailed out by several hundreds of billions? AIG is now essentially a way to funneling money to banks and other institutions, with less transparency.

There are so many bailout programs that it gets hard to follow the money these days:

http://www.realestatechannel.com/us-markets/commercial-real-estate-1/bob-knakal-2009-new-york-commercial-real-estate-trends-troubled-asset-relief-fund-tarp-office-market-rates-469.php

Doesn't it really depend on what stocks are being bought? I mean, it says something about the economy if the stock market is up because lots of people bought stocks in repossession firms.

You're #2 criticism sort of contradicts your #1 criticism.  The higher interest rates mean that foreign investors are more likely to invest in the U.S. dollar (by buying goverment securities).  So I don't really understand why you are criticizing the dollar depreciating (which is different than inflation by the way) and then turning around and criticizing the fact that interest rates are rising.  It would hurt the dollar MORE if interests rates remained low.

As for your #2 point, can an economy recover if the stock market is depressed and no one is buying anything?  Investment in the stock market may not be sufficient for an economic recovery, but it is necessary.

And a lot of people are missing the two big white elephants in the room, China and oil.

As for China, they have really hurt our currency because they do not allow the yuan to naturally fluctuate on the world currency markets.  This more than any other factor has led to our huge trade deficit, which is largely responsible for the depreciation of the U.S. dollar as a world currency.  China is using a protectionist policy to keep their currency artificially depreciated, and that throws off the entire balance and results in a boon to the euro and the yen.

As for oil prices, the price of oil is pegged to the U.S. dollar.  OPEC has a monopoly on oil and wants to get as much money from it as possible.  So when they raise the price of oil, it hurts the U.S. dollar.  Speculators on the oil market are also hurting the U.S. dollar. 

Really both of those things have been the biggest factors in the U.S. dollar taking a beating on the currency markets.  Forcing China to operate by the rules of the free market and getting ourselves out from under the thumb of OPEC by producing our own energy is our best option.

Not to mention the U.S. dollar depreciating isn't all negative.  It makes our goods cheaper overseas and increases our exports while simultaneously decreasing our imports.  This eventually corrects trade imbalances, which are a huge factor in why our currency is not doing well on the world market.  But once again, China is throwing off the equation with their protectionist currency policy.

And as for your #3 point, it sort of contradicts your other points.  According to some people's theory, the government's intervention into the market will be extremely harmful in the long run.  Assuming that premise, aren't you criticizing the government for not intervening into the banking sector enough?

You are kind of all over the map on this stuff.

@akuma587:

True, higher interest rates mean it becomes more attractive to invest in those. But those rates are the result of supply and demand. If rates go up it means supply is too high or demand is too low.

In essence, it means it's more expensive for people and the government to get money, which isn't good in a recession and may cause more foreclosures and the like. The whole point of solving the credit crunch was to make it easier to borrow money.

If you check out articles like this one, it's pretty obvious that these high rates are not desired by the central banks.

That's precisely my point... it's not sufficient. It's nice that the stock market is going up, but it's a pretty minor thing.

I'm not saying the government didn't intervene enough. I'm also not saying it invervened too much.

I'm saying the banks look under capitalized, which follows from the fact that their capital levels were defined from too optimistic assumptions which have already been broken. Note the word government doesn't even appear in this statement.

I'm not here to be ideological, I just want to discuss a few separate facts without regard to the philosophy behind these decisions.

I understand, but sometimes solving one problem actually makes another problem worse. And sometimes what people consider to be a problem is actually a good thing if you consider it in the long run, like interest rates.

In all honesty, the credit crunch is a good thing. We are way overleveraged in terms of the credit markets. Things are normalizing to where they should be. Loose credit was one of the reasons why we got into this crisis in the first place.

Really one of the most worrying trends (at least if you have a pre-recession mindset) is that consumer spending is pretty tepid and that consumer saving is going up. In the long run, that could actually be a good thing if we sort of shift over to more of an investment based economy rather than a consumer spending driven economy (which leads to the excessive highs and lows we have seen in the credit markets among other things). Not too mention our past consumer spending habits (with a negative savings rate) were completely unsustainable. In the short run though, it will cause major problems as our economy revolves around consumer spending.

Interest rates in the US are skyrocketing not because people are demaning more money but because people are demanding far less debt than is being produced ...

Essentially, the Federal Reserve takes the Treasury's debt, generates an IOU with a certain value and a date where they're going pay this out and sells it for a price lower than it value at maturity and this determines the interest rate that they talk about in their rate setting meetings. For example, selling a $100 treasury with a collection date 1 year in the future for $97.5 you end up with an interest rate that is (slightly more than) 2.5%.

Now, how this influences other interest rates is because this treasury debt is 100% safe and you will get that dollar value from the government at maturity so all other debt needs to have a premium in order to attract investors because of the risk they represent. For the past couple of weeks, there has been low demand for treasury bonds which has resulted in the government reducing the price they sell their bonds at and (therefore) increasing the interest rate of all debt.

The outcome from this will (likely) be that the treasury and federal reserve will push for more quantatitive easing (printing money) resulting in a devaluing of the dollar; and China could follow through on its threats and stop/slow down the purchase of US debt and/or (re)moving the peg with the US dollar, which would result in higher interest rates and higher inflation.

UK's economy is the best in Europe apparently.

http://news.bbc.co.uk/1/hi/business/8099408.stm

Interesting... though it would be nice to see some reasons behind that claim in the article.