A key indicator of where the economy is going is housing starts. According to new figures just released by the U.S. Department of Commerce, new single-family home sales are down to a record low of more than 48% YoY with January sales down 18% YoY. The average price of a home sold in the U.S. in January was $234,600, down from $260,200 in December, and down a significant $284,600 from last year. Sales in the Northeast were down 12.5% from December, and 50.9% year over year. Sales in the Midwest were down by 5.6% from December, and down 33.8% year over year. The western U.S. saw the biggest fall of 59.9% year over year in new home sales.

With slumping demand and prices, I would expect construction and housing starts to dip, which will adversely affect the construction sector and likely cost thousands of jobs. Experts now predict the Dow Jones Industrial Average could fall to about 3,000-4,000 points by the end of the year, and with key indicators such as housing starts and sales, that figure unfortunately is looking more and more probable.

North America’s largest telecommunications maker Nortel has announced it will cut 3,200 jobs internationally in 2009, on top of the 1,300 job cuts announced in November 2008. The laid off employees will not recieve any severance or other compensation. Although a tuff decision that will financially affect employees and their families, the company says the cuts are necessary. Nortel recently filed for chapter 11-bankruptcy protection on Jan 14, 2009 as the company tries to regroup under these tuff economic times.

GM has just posted a massive $9.6 billion Q4 loss right as GM CEO Rick Wagoner prepares to meet with Obama’s economic team this Thursday to seek more help. Q4 sales were down to $30.8 billion, down 52% YoY. For all of 2008, GM posted a $30.9 billion loss. GM also posted a massive $38.7 billion loss in 2007. Reports indicate Wagoner may ask the Obama camp for an additional $2 billion for March just to continue operating. GM may need up to $17 billion by the end of 2009 to stay alive. The question remains with gloomy sales figures if GM can change, or if the bailouts will continue to mount for the taxpayer without any improvement.

In related news, Japanese carmaker Nissan reached a deal with its union to cut 1,400 jobs in Barcelona as part of a cost cutting restructuring plan outlined in October 2008. Nissan now forecasts a net loss of $2.8 billion by the end of March 2009.

Obama today announced his first federal long term 10-year budget. The budget calls for $3.6 trillion in total spending for 2010, while it believes it will receive $2.4 trillion in revenue.

Te budget forecasts the deficit will top $1.75 trillion (12.3% of U.S. GDP) in 2009 and hopes to slash that in half by 2013. The White House is forecasting unemployment to top 8.1% in 2009 and fall by about 5.5% by 2014. The budget also assumes real GDP to fall by 1.2% in 2009, but grow substantially by 3.2, 4, and 4.6% over the next three years respectively. Read the full story

Europe’s four largest economies – Germany, Britain, Italy, and France – have just wrapped up an emergency meeting in Berlin to deal with the global economic crisis that is especially hurting eastern-northern European countries. They have collectively agreed that the IMF emergency fund should be doubled, if not more than doubled to at least $500 billion. The move comes to help counter a possible long lasting worldwide depression. British PM Gordon Brown is also preparing to inject the UK’s Northern Rock bank with £14 billion in capital to encourage lending and to help revive the mortgage market in the UK.

President Obama has now directed his U.S. Treasury Timothy Geithner to begin implementing tax cuts that will benefit 95% of all Americans by April 1st. The tax cuts come part of the recently passed $787 billion stimulus package, of which $282 billion has been earmarked for tax cuts. Obama just said in his weekly presidential radio address that “a typical family will begin taking home at least $65 more every month,” and went on to say, “Never before in our history has a tax cut…gone to so many hard-working Americans,”

Fixing the economy remains Obama’s top priority, which will be a very tuff task given he inherited a $1.3 trillion deficit from the Bush Administration and of course, the Afghanistan and Iraq wars. Obama recently pledged thousands of more troops to be assigned to Afghanistan to fight alongside the Canadians.

Obama also aims to cut the current $1.3 trillion (9.2% of GDP) U.S. deficit by half by 2013 as his administration is set to reduce spending on the Iraq war, cut unneeded public programs, and by increasing taxes on wealthier people.

More massive job cuts from the Royal Bank of Scotland are expected this week which could be anywhere between 12,000-20,000. RBS CEO Stephen Hester (paid by a $1.73 million annual salary) is believed to announce new cost cutting measures Thursday, along with the announcement of the job cuts, as the bank is expected to announce a massive $40.4 billion loss for all of 2008.

The new unprecedented cost cutting measures come as UBS tries to avoid full nationalization. More job cuts are also expected in the U.K, where 2,000 of the 80,000 current jobs have already been cut in that country. RBS will also commit to selling Read the full story

The Canadian government says from the Sheridan Hotel it looks forward to working with GM, and it is glad that no more GM layoffs, or plant closures will be made in Canada. GM says it is committed to keeping 17%-20% of its total production in Canada. GM is still seeking billions more in bailout loans from the U.S. and Canada. The company says the Canadian bailout loans should be proportional to the U.S. loans in terms of cars produced. GM is also seeking lower labor costs and will require capital to pay off legacy costs including pension plans, as the current pension reserve is bankrupt.

In related news, automaker Saab has went into bankruptcy credit protection, as the company continues to struggle. Saab had a $340 million 2008 annual loss. The court order has given the company three months to reorganization as the company struggles to raise capital. The Swedish government said it will not provide additional aid. GM says it intends to sell off the Saab brand soon. Saab employees about 4,500 people mainly in Sweden.

The IRS is asking a Miami district court to force UBS AG to disclose the names of account holders with Swiss Bank accounts who have avoided U.S. taxes. The IRS claims there are up to 52,000 accounts with positions totaling $15 billion+ UBS AG says it will fight the court order and says it shouldn’t have to disclose the information as it already has a current agreement with the U.S. government, and given Swedish financial and privacy laws. UBS has already agreed to pay $780 million in U.S. fines for aiding accounts in avoiding U.S. taxes. U.S. Justice Department acting attorney general John DiCicco said in a statement, “Americans are losing their jobs, their homes and their health care, it is appalling that more than 50,000 of the wealthiest among us have actively sought to evade their civic and legal duty to pay taxes,”

President Obama has just unveiled $75 billion of the $787 billion economic stimulus package will go towards foreclosures. The money will be used to help responsible struggling home owners refinance their < !- google_ad_section_start ->mortgage< !- google_ad_section_end ->s with fixed-rate 15 or 30 year mortgages at current market lending rates which are about 5% The plan only applies to home owners that still owe more than 80% of their home’s value as of March 4 2009 when the plan takes into effect. Additionally, the new payments cannot exceed 31% of the homeowners total income.

People are struggling to pay their < !- google_ad_section_start ->mortgage< !- google_ad_section_end -> payments because of falling wages, massive job cuts, the credit crunch, and falling home prices (aggregate home prices in the U.S. are down just less than 20%). Obama believes under the plan, about 9 million Americans will be helped to avoid foreclosure. Read the full story