Tuesday, February 22, 2011 – 09:30 a.m.

Don’t be fooled! It’s not working.

Efforts by the U.S. Treasury and Federal Reserve to prop up investment markets, known as QE2 (Quantitative Easing – 2nd phase), doesn’t appear to be working.

Why you ask?

The problem is global, and one country, the United States, isn’t big enough to change the game any longer.

The U.S. has too much debt and everyone is figuring it out, including investors and voters.

Politicians and public sector unions are quickly becoming the whipping posts of the citizenry as the U.S. Government is desperately attempting to support stock and bond prices and in-turn public pension funds.

Any pickup in investment earnings obviously could provide some relief and reduction in the massive nationwide unfunded liability facing public pension systems.

The Bond Market

As inflation, driven by higher energy and food prices, continues its highest climb in years, bond prices will come under further pressure and raise yields. Expect principal erosion to bond holders. The Federal Reserves plan to buy $600 billion in Treasury securities isn’t enough to keep rates down for long.

Expect even higher mortgage rates from here.

The Stock Market

It is what it is.

A large run-up with no share volume. Meaning a handful of investors and money managers are driving up prices.

People are getting suckered back in to an already inflated equity market. Another hard fall is due, with individual investors and retirees being the ones most impacted.

The business networks have become the cheerleaders in the effort to influence investor psychology. The only problem here? People haven’t forgotten about what happened two years ago, when they were slaughtered.

The Economy

First off, unemployment is worsening. The U.S. Labor Department’s adjusted numbers aren’t even close. Other private survey organizations, Gallup for one, give a completely different assessment.

The underemployment rate, a number reflecting all unemployed and people working part-time who are seeking full-time work, is exploding. The underemployment number is just under 20% nationally according to Gallup.

Federal, state and local governments across the country are finally initiating long overdue layoffs. Layoffs delayed by stimulus spending.

Government is the largest employer in the country. Expect the looming cutbacks to throw gas on the unemployment fire.

For the employees that remain in their jobs will come pay cuts or wage stagnation.

Then there is the inflation problem.

Food, energy, clothing and health care costs continue to rise, with no sign of abating.

Forget the Producer (PPI) and consumer (CPI) price indexes. These government numbers, while rising at their fastest pace in years, aren’t even close.

Ask yourself. Is the economy really getting better?