The Early Shift will return next week.  Have a good 4th of July!

G.M. is headed to the bankruptcy court today to set the government approved restructuring plan in motion.

The outlook for the global economy improves and the dollar falls.  As the experts become more optimistic about the growth outlook for 2010, investors are starting to shift to higher-yield assets and once again direct the flows of capital into the emerging economies, judging that the risk is subsiding.

The prognosis for the U.S. housing market is not that rosy, however.  Even though the wave of foreclosures from the bad subprime deals has subsided a new wave of foreclosures brought on by high and increasing unemployment is forming.

Just before leaving town for the 4th of July recess, the House passed the climate change legislation.

President Obama praised this first step, calling it “extraordinary,” but was less enthusiastic about the provision in the House version of the bill that would impose a tariff in 2020 on imports from countries without systems for pricing or limiting carbon dioxide emissions.  Expect a battle in the Senate after Congress returns.

Speaking of political battles: as the healthcare overhaul plans are being debated in Congress, the President can not afford to sit on the sidelines.  Once in a while he has to signal one way or the other what compromises he is willing to make in order to accomplish the reform.  There are signs that one of them is taxing the healthcare benefits that people do have.  Not that we know for certain, though. 

And…speaking of signs: apparently, there has been an increasing incidence of crop circles in Australia, but turns out it’s not the extraterrestrials trying to communicate with the Earthlings.  It’s stoned wallabies (we kid you not!)

There is no rest for the. . .  Bank of America CEO Ken Lewis.  Mr. Lewis was called to testify on the Capitol Hill again today, this time before the House Committee on Oversight and Government Reform.  The bone of contention is BofA’s purchase of Merrill Lynch late last year, and the government bailout to the tune of $20 billion that was needed later to cover some surprising losses on Merrill’s balance sheet.  Mr. Lewis has been and continues to insist that the U.S. government applied a great deal of pressure to BofA’s management to accept the Merrill deal.  The House Committee will be calling former Treasury Secretary Paulson and the Fed Chairman Ben Bernanke to testify next.

U.S. stocks are on the move today buoyed by the increase in May retail sales and the fall in the initial weekly jobless claims to 601,000, the lowest level since January.  By mid-day trading, all U.S. major stock exchanges gained well over 1% in value, with S&P 500 advancing the farthest 1.73 percent, a seven-month high.

Of course, we have a long ways to go to recover from the recession.  By just one measure, household wealth, the U.S. economy lost $1.3 trillion in the first quarter of 2009, according to the Federal Reserve Flow of Funds report released today.

The Obama Administration is taking further steps to ensure that even after the U.S. economic activity returns to its pre-crisis levels it won’t be all business as usual for the American corporations.   The Administration is proposing new legislation that would increase the oversight of the executive pay at publicly traded firms by the companies’ shareholders and the SEC.

The Federal Reserve today said that the outlook for the U.S. economy is… well, less bad.  The Fed’s June Beige Book showed signs of improvement in some economic indicators, even as the economic conditions deteriorated further between mid-April and May.

One area where the picture is definitely not improving is trade.  U.S. April trade deficit has increased (yes, you read it right—increased!) even as the global demand for goods has continued to slow.  That is affecting the demand for U.S. goods worldwide, and the U.S. exports are falling.  However, China seems to be unaffected, as the U.S. continues to buy Chinese goods, increasing our trade deficit overall to $29.2 billion in April and with China specifically to $16.8 billion.

The sale of Chrysler to Fiat is delayed by the Supreme Court. 

“Nowhere else in the world is so much money spent with such poor results.”  Opening line of a Washington Post take on health reform challenges. 

Is deglobalization inevitable?  Fascinating piece by David Smick, also in the Washington Post. 

UK’s Ambassador to the U.S. Nigel Sheinwald is on a speaking tour of the U.S. decrying Buy America laws.  No word on EU subsidies to EADS or European procurement protections, however.

Jobs report is out this morning.  Markets likely to rise on the news that job losses were 345,000 last month.  But here are some facts worth considering: 156,000 manufacturing job losses recorded last month with more auto-related layoffs ahead; 9.4% unemployment rate, the worst since 1983; and, the U-6 rate now stands at 16.4%. 

Is there a buyer for GM’s Saturn?  Meanwhile, the sale of GM’s Hummer to a Chinese firm may face some hurdles…in China.

Today is the 20th anniversary of China’s communist government’s brutal slaughter of student democracy activists at Tiananmen Square.  (Does anyone still think that economic growth inevitably leads to openness and democracy?) 

House Speaker Nancy Pelosi sets down a June 19 deadline for committee action on climate change legislation. 

Senators slam GM and Chrysler plans to close dealerships. 

President Obama outlines his goals on health care reform in a letter to Senators Kennedy and Baucus.  The taxation of employer-provided benefits was not addressed, but it’s clearly on the table.

The big economic news today is the testimony of the Fed Chairman Bernanke on the Hill.  Mr. Bernanke testified before the House Banking Committee, and budget deficits were on his mind. 

Funny, how the whole world keeps talking about it.  The Chinese, for instance, have been grumbling about the health of their dollar investments for months.  They’ve been raising “serious concerns”, even if disingenuously, about the stewardship of the U.S. economy by the government that “keeps printing money.”  The Chinese government is now taking steps to demonstrate exactly how concerned they are about the dollar by establishing trading regimes with their partners like (drum roll, please) Malaysia, that only rely on yuan and ringgit. 

This piece of international theater notwithstanding, Bernanke’s concern about the health of the U.S. economy is without an ulterior motive.  In fact, it is his job. “Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth,” said the Fed Chairman in his prepared remarks to the Banking Committee.

The markets were in the sour mood with the Dow spending all day in the negative territory from the gains of yesterday.  All three major U.S. exchanges finished the day of trading in the red.

Mystery solved!  A Chinese company is set to buy GM”s Hummer brand. 

 ADP’s payroll report for May estimates 532,000 job losses in the private sector. 

Lou Uchitelle writes an insightful piece in the New York Times on the ripple effect of GM’s bankruptcy. 

Meanwhile, the New York Times editorial board lays a big egg with its screed on Buy America rules.   For the truth on Buy America, read our report.