Economic Outlook: On firm footing, for now

All is quiet, or a heck of a lot quieter, on the economic front in August as a holding pattern has emerged among top U.S. economic policy makers.

Billions have been doled out to banks and automakers. A huge $787 billion stimulus plan is in place. The U.S. Federal Reserve Bank's key lending rate is at zero to 0.25 percent and has nowhere to go but up -- a move few suspect will happen soon.

In recent months, pivotal economic leaders in Europe and the United States have made cautionary remarks about retreating from recovery plans that, in better times, have inflation written all over them. But the word of the day is "stabilization." A few tweaks here and there are in discussion, such as an extension to the popular "Cash for Clunkers" car trade-in program that ran out of cash, but not clunkers, in one week. Otherwise, it's assessment time at the moment.

The clunker program offers consumers up to $4,500 to take an old gas guzzler off the road and buy a new more fuel-efficient vehicle.

Compared to the past year, stabilization is a luxury. But, it still feels like watching a waiter on roller skates arrive with a tray full of drinks held over his head. Nobody wants to make a sudden move while the drinks are arriving or, put another way, while stocks are headed up.

In editorial cartoon fashion, one of those drinks held over the waiter's head could be labeled the 9.5 percent unemployment rate. Another could be the escalating price of oil. Another could be the growing government debt. Another depressed home prices and foreclosures.

However, "six months ago, the economy was in a nose dive, people were talking about the possibility of another depression, the statistics all suggested a vertical decline. None of that is the situation right now," said White House economic adviser Lawrence Summers Sunday.

Another key White House adviser, Christina Romer, chairman of the Council of Economic Advisers, expressed confidence in the stimulus package that has yet to arrest the rising unemployment rate, but is designed to pump money into projects through 2010. "We absolutely do feel it is working," she said, a clear indication that increased stimulus action is not under consideration.

Some economists worry that stimulus efforts will be diluted by an emerging pattern of saving among U.S. consumers, The New York Times reported Monday.

Saving, which had all but vanished prior to the recession, has risen to 5.2 percent of income and could grow as high as 8 percent, pulling discretionary income out of general circulation. In that case, "the consumer would be a big retardant to the recovery," said Princeton University economics Professor Alan Blinder.

"Predicting consumer behavior over the next year or two is beyond hazardous. There is nothing in the historical record like the boom and bust in house prices that we've just experienced," he said.

In Asia, stocks turned mostly higher Monday. The Nikkei 225 in Japan fell slightly, down 0.04 percent. The Hang Seng index in Hong Kong rose 1.14 percent, while the Singapore Straits Times rose 0.64 percent. The S&P/ASX index in Australia rose 0.46 percent.

In midday trading in Europe, the FTSE 100 in Britain rose 1.48 percent. The DAX 30 in Germany rose 1.63 percent. In France, the CAC 40 gained 1.46 percent, while the broader DJStoxx index rose 1.54 percent.