Economic News Articles Tracked Daily in The Great Recession Blog, Week of 07/15/2012
Economic news of the past week reported that the U.S. drought was upgraded to being the worst in half a century • Obama isn’t going to be able to fix that in time for the election • The eurozone continued falling apart at the seams • The Persian Gulf looks more and more like its moving toward a war footing on all sides • Iran gets feistier in the face of tougher sanctions.
U.S. drought captures economic news headlines and guarantees some inflation in the months ahead
Economic news articles began straming in fast this last week about the U.S. sliding, perhaps unstoppably toward recession. Several of the largest banks reported significantly falling profits. This did not have a deleterious effect on the stock market because analysts had already assumed as much or worse. So, the bad news was already priced into stocks, but it confirmed the slide analysts have finally joined me in predicting. Even the former heavyweight, Microsoft, reported its first quarterly loss. G.E. also reported a 20% decline.
Perhaps that explains why the economic news displayed an upward trend in negative predictions last week. Now that economist can see the economy is going the way I’ve said it would turn all year, they are scrambling to to update their economic predictions. (Not, of course, that they are scrambling to keep up with me, as they’ve never even heard of me and couldn’t care less what I say.)
The economy has a new headwind blowing against it — the very kind of thing that can tip the balance when an economy is so weak in the first place — the drought. Over the past week, the U.S. drought was upgraded to being called the worst drought in fifty years. It may within a week or two become the worst since the Dust Bowl. Just what the U.S. (and the rest of the world that will be effected by rising prices) needed to make the Great Recession look all the more like the Great Depression.
As a few of the economic news articles below pointed out, the rise in the price of corn means an eventual rise in other products that do not directly contain corn, such as beef and pork, since cows and pigs eat corn. From there, cheese and butter and mile, since high-cost dining cows produce those. Ranchers have begun slaughtering their beef early in anticipation that they will not be able to afford to feed the cattle. This could mean a temporary drop in prices of beef as more beef hits the market soon, but will mean a rise later because of a shortage of cows. (Stock the freezer now, I guess, in order to freeze that price dip in for yourself IF you see prices of beef and pork take a dip.)
The rise in the price of corn also means a rise in the price of fuel, now that bio-fuels, as a part of the market, will be going up. When one fuel goes up, it shifts demand towards others, so they go up some, too. Likewise, as the price of corn oil goes up, the rise is moderated by people shifting toward safflower oil or something else, so the price of safflower oil goes up. In other words, there is some averaging that happens, which keeps the price of corn products from going up quite as much as they would because people shift to alternatives, but pushes the price of alternatives up a little.
Unfortunately for Obama, there isn’t a thing he can do about that one. It exemplifies why people should not think minute economic gains in the early part of the year mean a lot. If the economy is gaining so slowly, it doesn’t take much to stomp it down, and every year has something that is more than ready to stomp. Last year, it was the Japanese Tohoku earthquake and tsunami. This year it is a drought that is hitting the U.S., India and Norther Africa hard, but it is the U.S. that is the world’s breadbasket, so all the world will feel this one. U.S. consumers with their comparative wealth will have enough because their ability to pay more will keep resources here. It is U.S. exports that will fall short in supply.
(If only it was U.S. experts — as in economic experts — that were in short supply. Well, the real ones are, but there are far too many who are wrong more often than weather forecasters. They are not worth the corn it takes to feed them.)
The corn, that looked like it would be a bumper crop early in the year continues to be a sad metaphor of the entire U.S. economy. As the early-spring hopes stirred in farmers wither away, so does the U.S. economy: Jobs went down further last week; unemployment went up far more than economists had predicted. (Away with their corn! Let them eat cake.) Fewer U.S. companies reported they have any plans to hire because the euro crisis is taking a large bite out of their sales. Retail sales, likewise, dwindled away for a third straight month.
U.S. builders broke more ground on new homes than they have since 2008 (up 6%), and that was touted as “recovery,” but then, “oops,” the next report out said that used home sales had dropped by 5%. Looks like sales shifted from one kind of home to another. The jury is still out on what the housing market will do, but just remember … those post-fraud foreclosures are only starting to come out the pipeline as they take a long time to process.
And I’ve finally attracted a majority of people to my view: eighty percent of U.S. consumers now believe the recession will last, at least, three more years. (Now, if only I could make readers out of them.) It’s not often I’m on the side of the majority, so let me revel in it for a few seconds while it lasts…
…O.K. back on track:
The China syndrome is back in the economic news today
If you’ve been following me, you know I don’t go along with what appears to be a small majority of economists and analysts who believe China will have a hard landing. It looks to me as though it is landing exactly as it said it planned to a year ago when it deliberately slowed its economy to prevent its own housing bubble.
Well, it may be a hard landing in the sense that this recession with its intensified drought is going to be hard on everyone, but China’s landing is not likely to be as hard as the U.S. landing or as hard as Europe’s because they were smart in the bumper years where we were not. They salted away a vast fortune in reserves; while we piled up vast amounts of debt — enough to fill several bubbles. Of course, they have one major problem with that equation: their reserves are mostly invested in the U.S.! So, good luck saving yourself with those reserves if the U.S. goes down. Still, for the time being, they have something with which to operate.
I’m sure it is in recognition of this conundrum that the wise Chinese have now become the world’s largest buyer of gold. Gold bullion imports from Hong Kong to mainland China increased 600% over the course of a year. China imported 300 TONS of gold from Hong Kong in a year’s time. And that’s just the purchases made from Hong Kong! Sounds to me like they are doing a lot of the right things … and not hurting for cash. If I had their money, that’s what I’d do with it, too. I’d rather hold gold for ten years than a U.S. bond with a payout of 1.5% interest! Oh, and China also has been gobbling up gold mines all over the world. It’s estimated that China has pulled another 390 tons of gold out of its own ground. (China doesn’t export gold. It’s against the law.) Got a mine you want to sell? Call Beijing to hear the Ka-ching!
The Eurozone is a crackup!
You may recall some of my earlier observations and predictions about the Eurozone back when the stock markets were all rising because the Euro leaders had finally come to realize they need serious structural reform. I was not so impressed:
- In the short term, pressure on Spain and Italy will be reduced, but not that much.
- The big catch to all of this is that all the leaders are still talking in terms of hope that this can be finalized by the end of the year! As we have seen with every European summit plan along the way, the problem will be so much worse than the present containment envisions that the solution will fall short by the time the deal becomes law.
- [The European debt crisis] will not unfold as in “come about.” It will unfold as in “unravel,” for it still has many hurdles to face…. Markets will not wait for it to become law before they continue downgrading banks and nations.
- Money will continue to exit Europe.
- The Eurozone doesn’t have until the end of the year, even though its leaders operate as if they have that much time.
- Oddly, Greece fell out of the news completely during the summit debates. That’s quite surprising, given that Greece’s new intent of renegotiating its deal after its elections a week ago made Greece the star-attraction fight going into the summit…. The press, being quick to euphoria, didn’t notice that the summit glossed over the Greek problem entirely. It’ll take a couple days (as in over this weekend) for the markets to realize nothing has changed with respect to Greece That fear will quickly raise its head as the euphoria of a eurozone deal fades faster than paint can dry.
- Greece needs to zero everything through bankruptcy and get it over with, and then Europe will have to pick up the pieces with a hole where Greece used to be. The longer they put off this failure, the more the whole of Europe gets sucked into it. With bankruptcy, the Greek people could begin again while living within their means … if they’ve learned anything. That leaves a mathematically dictated prediction here: Greece WILL leave the Euro.
Well, that all came true this past week. Here it is in last week’s economic news articles:
- “Pressure on member states and on the European Union itself to get their house in order will continue for a long time.” “Spain’s borrowing costs rose above 7% again after its heavily indebted Valencia region called for aid, increasing investor fears that the Spanish government is moving toward a full-blown bailout.”
- “The euro zone will have to get powers to limit the debt issuance of its members, intervene in national budgets and change national policies to build a deeper economic union, ECB Executive Board Member Joerg Asmussen said, but that may take ten years.”
- “Moody’s downgrades 13 More Italian banks.”
- “US money funds invested in euro zone fell faster in June US money market funds pulled money out of the euro zone at a faster pace in June as concerns about the region’s debt crisis accelerated, with banks that contributed to the Libor scandal among the hardest hit.”
- “Greek leaders push back decision on austerity cuts Greek coalition leaders agreed to meet next week to hammer out almost 12 billion euros worth of austerity cuts demanded by the near-bankrupt country’s lenders after a agreement proved elusive at an initial round of talks on Wednesday.”
No, the paint didn’t dry on that deal before it all began to burn off under the blistering heat of the financial markets. The current week’s economic news (which I’ll recap at the beginning of next week) is even worse for Spain and Greece. In short, we find that the International Monetary Fund and Germany are both willing to let Greece go, refusing to give it any more funds, but I’ll save that for next Monday’s recap. So, #6 (Greek bankruptcy), is looking more likely than ever.
The Iranium reaction continues to heat up
My anticipation of an Iran war in 2012 are looking more likely every day. Since this article is running long, I’ll sum up the past week’s significant developments quickly:
- Iran’s parliament does not pressure the regime to change its nuclear ways but, instead, defends its leaders and initiates a bill to close the Straight of Hormuz (bill still in process as of this writing).
- President moves more hardware into the Gulf — lots more!
- As a result of shoulders rubbing a little close with all that hardware there, the U.S. fires on a small boat that comes to close, showing how tensions could spark a greater conflagration.
- Clinton’s language toughens toward a more militaristic tone as she visits Israel, and U.S. and Israeli leaders all sound as if they are standing pretty tight right now. Netanyahu is no longer putting on public pressure, perhaps indicating he knows the U.S. is gearing toward action.
- Iran talks are at an impasse at the moment.
- Rather than backing away from conflict, Iran appears to be retaliating against sanctions by bombing a bus full of Israelis. Both U.S. intelligence and Israeli intelligence agree on who did this, and Ahmadinejad gloatingly implies the same conclusion.
Recap of economic news articles on The Great Recession Blog last week
(Current week’s news is posted in the right sidebar each day.)
China syndrome — following the Great Recession to the Great Wall
07/15 Asian shares extend rally on China relief, Bernanke next focus Asian shares extended their rally on Monday as fears of an economic hard landing in China subsided, with Premier Wen Jiabao raising the prospect of more policy stimulus if needed.
07/15 China’s Cabinet Meets as Premier Warns on Economy China’s Premier warned that the nation’s recovery has no momentum, fueling speculation that extra economic supports may be announced after this week’s cabinet meeting. Expansion is within the targeted range and stabilizing measures are “bearing fruit.”
07/16 China to Become World’s Biggest Buyer of Gold in 2012 Gold bullion imports from Hong Kong into mainland China increased 600% in May 2012 compared to 2011! China imported over 300 tons of gold from Hong Kong. This year’s number alone would make China the 17th largest holder of gold bullion in the world.
07/20 Major Chinese State Companies Profits Down Total profit for China’s biggest state-owned companies fell by 16.4% in the first half from a year earlier as the economic slowdown deepened. These politically favored companies benefit from monopolies and low-cost loans, highlighting the extent of the slowdown in China.
Economic indicators and stock market responses in the news of the week
07/16 Citigroup profits fall 12% in the second quarter Revenues were down 10% on the same period last year. Retail banking revenues, however, grew by 32% as a result of higher mortgage revenues, and its net credit losses fell 29%, as more of its customers were able to pay back money they had borrowed.
07/16 Experts See ‘Worsening Economic Conditions’ as Early 2012 Gains Wither Like Corn Economists say the sales and profit gains of early this year are disappearing, and they are increasingly pessimistic about short-term growth. “The rising sales and profit margins experienced earlier in the year may have been short-lived.”
07/16 Fewer U.S. companies planning to hire; Europe looms American companies are scaling back plans to hire workers and a rising share of firms feel the European debt crisis is taking a bite out of their sales. Hiring by U.S. companies had already slowed dramatically in recent months, and may now slow even more.
07/16 Global food crisis looms as grain prices soar What looks to be the worst U.S. drought in a quarter of a century has given rise to an old-fashioned commodity rally on world markets, with key grain prices soar 40%, which caused food crises in vulnerable parts of the globe last time around.
07/16 IMF Predicts Slower Economic Growth For World, US The IMF slightly lowered its outlook for global growth over the next two years, warning that Europe’s financial crisis and slower expansion in China and India have weakened the world economy. “Clearly, downside risks continue to loom large,” the fund said.
07/16 US declares drought area, largest natural disaster area ever The USDA has declared natural disaster areas in more than 1,000 counties and 26 drought-stricken states, making it the largest natural disaster in America ever … [well, for as long as the U.S.D.A. has been making such evaluations]. The declaration gives farmers and ranchers access to federal aid. [Just as Republicans are debating cutting farmer aid.]
07/16 US economy appears weaker as retail sales slump The outlook for the U.S. economy appeared dimmer Monday after a report that Americans spent less at retail businesses for a third straight month in June. Many economists now think the economy grew even less than in the first quarter of the year.
07/17 U.S. drought biggest since 1956 The center said 55% of the country was in moderate to extreme drought in June for the first time since December 1956, when 58% of the country was in similar drought. June ranked as the third-driest month in 118 years. 71% of the U.S. is “abnormally dry.”
07/18 US builders broke ground on the most new homes in nearly 4 years, a sign of housing recovery The Commerce Department said Wednesday that housing starts rose 6.9 percent in June from May. That’s the highest since October 2008. Single-family housing starts accounted for more than 70 percent of new construction. New permits, however, fell.
07/18 USDA expected to worsen crop ratings due to prolonged drought The drought has devastated crops at a time when a bumper corn harvest was needed to bolster three years of razor-thin stocks in the United States which are eating into profit margins for meat companies and ethanol producers.
07/19 Americans Hold Dimmest Economic Outlook Since January The most Americans in six months said the economy in July is getting worse, indicating the slowdown is dimming moods as the 3rd quarter begins. Households viewing the U.S. as heading in the wrong direction rose to 36%, up three points from June.
07/19 Corn, soybean prices shoot up as drought worsens Dry, scorching heat has pushed up corn prices more than 50% over the past five weeks. Rainfall all year has been about one-tenth the normal amount. “Everyday we have dryness, extreme heat above 100 degrees, and wind. That’s a deadly combination.”
07/19 Data shows economy mired in weakness Mid-Atlantic factories contracted in July for a third straight month. “The data confirm that the economy has cooled off pretty considerably late in the second quarter and early in the third quarter from the pace we saw earlier in the year.”
07/19 January’s Looming Automatic Cuts Starting to Chill Congress to the Bone The Fiscal cliff: 700,000 children and pregnant or nursing mothers lose nutrition assistance; 25,000 teachers and school aides laid off; 100,000 kids don’t enter pre-school programs; 700 fewer medical grants ; and $55B less for the military.
07/19 Microsoft reports its first loss EVER The former king of the computing world, Microsoft, reported its first quarterly loss in 26 years after it wrote off some of its online advertising business. That led to a $492M loss compared with a profit of $5.9B a year ago. Shares went up 1.6%.
07/19 Morgan Stanley, Way Down, Reports Plan to Cut Crew The latest bank to sound gloomy news, Morgan Stanley just reported a 24% decline in second-quarter revenue and said it expects to reduce payroll by 1,000 employees by the end of the year as it prepares for weak economic growth globally.
07/19 Oops! Existing Home Sales Fall Just when you thought it was safe to go back into the water, the National Association of Realtors reports that sales of previously owned homes fell 5.4 percent in June to an eight-month low, interrupting a string of favorable reports on the housing market
07/19 Personal loan defaults drain $37 billion from 401(k)s each year A large number of Americans are taking out loans against their 401(k)s to cover emergency expenses and pay other debt and are having a hard time paying the loans back.
07/19 Weekly Unemployment Claims Back on the Rise; Jobs Market Still in Doldrums The number of Americans filing new claims for unemployment benefits rebounded last week, pushing them back to levels consistent with slow job growth after a seasonal quirk caused a sharp drop the prior period. Claims increased 34,000 to 386,000 total. Economists predicted way too low at 365,000.
07/19 Worst US drought driving up food prices globally U.S. drought driving up prices of palm oil, meat, wheat, and dairy products globally due, in part, to collateral damage: price of corn going up raises price of meat; price of soy beans going up causes markets to switch toward palm oil, creating higher priced palm oil.
07/20 80% of Consumers Believe Recession Will Last Three More Years The U.S. economy remains mired in a recession that will last another three years, says one retail pollster. The recession officially ended in 2009, though many say the economy is bumping along a bottom. Shoppers agree, and they constitute 70% of the U.S. economy.
07/20 Drought expands to cover 64% of U.S. Trees dropping their leaves and going dormant months early. The U.S.D.A. said that 38% of the nation’s corn crop is in poor to very poor condition, compared to 30% a week ago. This graphic lets you compare the 2012 drought to the 1934 “Dust Bowl” drought.
07/20 G.E. Reports net income drop of 20% US industrial giant General Electric (GE) has reported net income of $3.1B (£2B) for the second quarter of 2012, down from $3.7B the same time in 2011.
07/20 Milk, Cheese to Lead Food-Price Spike as Drought Intensifies Rising prices at the grocery store will stress households plagued with joblessness, stagnant wages and economic uncertainty. Furthermore, the entire agricultural sector will be affected. Expect milk and cheese to rise first. Price rise expected to be mild.
07/20 US Automakers, suppliers to add U.S. jobs, expand plants Despite worries about declining demand in Europe , U.S. auto executives surveyed by advisory firm KPMG are bullish, expecting pent-up demand for vehicles in the U.S. to carry over for years because the average age of U.S. autos has reached an all-time high.
Economic predictions / forecasts that made news headlines
07/16 The Next Big Move In Stocks Will Be Down David Bianco, typically one of Wall Street’s most bullish strategists, is not too optimistic on stocks at the moment.
07/17 Economy on Election Day Will Look Just Like Today “If you added those people in, those who have left the labor force, you’ve got an unemployment rate right now of a little over 12 percent. This is intolerable. This is the just worst economic period I have seen in my life and I lived through Jimmy Carter.”
07/17 Fiscal Crisis for Individual States Will Last Beyond Slump The fiscal crisis for states will persist long after the economy rebounds as states confront financial problems that include rising health care costs, underfunded pensions, ignored infrastructure needs, eroding revenues and expected federal budget cuts.
07/17 Roubini: “US headed to stall speed even before cliff” The U.S. gross domestic product rate grew a lackluster 1.9 percent in the first quarter of this year, and will probably grow 1.2 percent in the second quarter before dipping below 1 percent in the third quarter. Retail sales have dropped for three months.
07/18 Roubini sticks to 2013 ‘perfect storm’ prediction Economist Nouriel Roubini is standing by his prediction for a global “perfect storm” next year as economies the world over slow down or shudder to a complete halt, geopolitical risk grows, the Eurozone’s debt crisis accelerates, and Iran heats up.
07/20 Roubini: Falling Stock Prices Will End The US Growth ‘Fairy Tale’ The rise in U.S. stocks is mainly due to the Federal Reserve’s moves to stimulate the economy. The Fed may move again to prop up the country and stave off recession, but results will be weak and stock prices will plummet when the monetary sugar rush ends.
Euro crisis updates as the Great Recession goes viral
07/16 EIB head: euro zone crisis will not end within two years “The pressure on member states and on the European Union itself to get their house in order will continue for a long time,” said the head of the European Investment Bank.
07/17 European Central Bank Member Says Eurozone Must Share Sovereignty in Deeper Union The euro zone will have to get powers to limit the debt issuance of its members, intervene in national budgets and change national policies to build a deeper economic union, ECB Executive Board Member Joerg Asmussen said, but that may take ten years.
07/17 Moody’s downgrades 13 More Italian banks Moody’s said last week’s sovereign credit downgrade means Italy is less able to rescue its banks if needed. Furthermore, Italian banks have substantial exposure to the same domestic economy and “high direct exposure” to sovereign debt.
07/17 US money funds invested in euro zone fell faster in June US money market funds pulled money out of the euro zone at a faster pace in June as concerns about the region’s debt crisis accelerated, with banks that contributed to the Libor scandal among the hardest hit.
07/18 Greek leaders push back decision on austerity cuts Greek coalition leaders agreed to meet next week to hammer out almost 12 billion euros worth of austerity cuts demanded by the near-bankrupt country’s lenders after a agreement proved elusive at an initial round of talks on Wednesday.
07/18 IMF: Eurozone in danger, ECB should ride to the rescue The eurozone is in “critical” danger but can restore credibility if urgent action is taken to create a banking union, with some form of eurobonds, and if the European Central Bank ramps up cash injections, the International Monetary Fund said.
07/18 Investors pay to lend Germany money Investors are paying for the privilege to lend Germany money as they look for a haven from the financial and economic crisis hitting the rest of Europe.
07/20 Global Shares, euro fall on Spanish region’s aid request U.S. and European stocks slid on Friday as Spain’s borrowing costs rose above 7% again after its heavily indebted Valencia region called for aid, increasing investor fears that the Spanish government is moving toward a full-blown bailout.
07/20 Spanish police battle anti-austerity protesters Police fired rubber bullets to disperse crowds on Thursday as tens of thousands of angry Spaniards protested in 80 cities against the government’s latest austerity package. Riot police manned barricades in front of the legislature.
07/21 Europe Debt Woes Cast Shadow on Earnings—and Market With Europe’s debt woes casting a long shadow, stocks in the coming week could be vulnerable. Earnings from a quarter of the S&P 500 and second-quarter GDP could be key for the market, which benefited in the past week from the idea of more Fed easing.
07/21 Spanish protests swell as jobless march hundreds of miles to Madrid Hundreds of unemployed Spaniards who had travelled hundreds of kilometres (miles) on foot to Madrid joined protests on Saturday against Prime Minister Mariano Rajoy’s government and its handling of an economic crisis in the EU country.
Federal Reserve actions tracked in the economic headlines
07/17 Bernanke: Gloomy on economy, not much hint of QE3 Europe’s debt crisis and the U.S. fiscal cliff are the two biggest risks threatening the U.S. recovery, Federal Reserve Chairman Ben Bernanke told Senators Thursday. Bernanke said improvement in the job market is likely to remain “frustratingly slow.”
07/17 Bernanke tells congress to get off their butts and do something [O.K., he didn't quite put it in terms as strong as I would, but he said it as pointedly as Bernanke ever gets:] “The most effective way that the Congress could help to support the economy right now would be to WORK to address the nation’s fiscal challenges in a way that takes into account both the need for long-run sustainability and the fragility of the recovery.”
07/17 Schumer Pushes Fed Toward QE3, Tells Bernanke ‘Get To Work Mr. Chairman’ [And Congress with equal bluntness knocked the ball back to Bernanke to do the work.] Democrat Chuck Schumer told Fed chief that Congress will not be able to get its act together until it’s too late to avoid the fiscal cliff. Schumer urged Bernanke to take whatever action is necessary. “Get to work, Mr. Chairman,” the senator said.
07/18 Fed’s Bernanke: ‘We Don’t See a Double-Dip Recession’ “It is very important for fiscal stability, for financial stability, for Congress to provide a credible plan for stabilizing our long-term fiscal situation as soon as possible.”
The Iranium Reaction as it makes and shakes the news
07/16 Iran renews Hormuz closure threats Iran’s parliament still considering a bill calling for the strait to be closed. While the assembly has little control over national defense or foreign policy, the bill would show the legislature’s support behind a leadership decision to close the straight.
07/17 “Mahdi” Computer Virus Attacks Middle East More than 800 hit in cyber espionage, including infrastructure companies, financial services firms and Mideast embassies with majority of hits in Iran by virus written in Persian. The “Mahdi Trojan” steels files remotely, monitors emails, keystrokes and identities. Experts conjecture this may be an Iranian government virus intended to spy on internal Iranian dissidents and on the Middle East in general.
07/17 A U.S. Navy ship opens fire on small boat After repeated warnings, a U.S. Navy ship unleashed a 50-caliber machine gun on a small boat that continued racing toward it Monday near the Gulf city of Dubai, killing one person, injuring three. It is not known why the boat sped toward a military ship.
07/17 Analysis: Clinton slightly changes language on Iran Change in the world’s policies toward Iran’s nuclear aims has been glacially slow. Clinton’s comments may be a part of that glacial change, indicating the Obama administration is getting closer to a military option.
07/17 News you might have missed from the Pentagon’s Iran report There has been plenty of news about Iran, but the most important story earned little attention. Last week, the Pentagon declassified portions of a report to Congress that indicates Iran’s military is rapidly growing its conventional military force.
07/17 Opinion: Why Iran will ignite a regional war, sooner rather than later Sanctions are further crippling the already crumbling Iranian economy. The probable fall of the Assad regime are undermining the axis of survival. Now, with U.S. presence in the Gulf, a military conflict of catastrophic proportions could come from a spark
07/17 Pentagon bulks up defenses in the Gulf The Pentagon is building a missile-defense radar station at a secret site in Qatar and organizing its biggest-ever minesweeping exercises in the Persian Gulf, as preparations accelerate for a possible flare-up with Iran, according to U.S. officials.
07/17 Pentagon sending aircraft carrier to Mideast early The Pentagon wants to make sure two carriers are present in the troubled region at all times. Therefore, the USS John C Stennis is being required to accelerate training and re-equipping so it can be sent to replace a carrier scheduled to leave the gulf.
07/17 The unspoken secret at the heart of US-Israel coordination on Iran The degree of coordination between the US and Israel is extraordinarily high. The goal, of ensuring that Iran does not develop a nuclear weapons capability, is emphatically shared. For Israel, however, waiting means allowing itself to become dependent.
07/18 Iran nuclear talks: Stalemate for now as both sides send military “messages” Progress now will determine whether diplomatic talk eventually resumes at a high level, or whether differences are so great that negotiations fail altogether. The risks of failure were abundantly clear in military “messages” sent by both sides.
07/18 Iranian Poll: Do Iranians Really Support Nuclear Enrichment? State TV removed an online controversial survey when participants said they would ditch the country’s nuclear enrichment for fewer sanctions.
07/20 Gloating Ahmadinejad hints at Iranian responsibility for Burgas terror attack Hours after Israel’s Prime Minister Benjamin Netanyahu publicly blamed the bombing Wednesday at Bulgaria’s Burgas airport on “Hezbollah, directed by Iran,” Ahmadinejad described the attack as “a response” to Israeli “blows against Iran.”
07/20 Pentagon reportedly seeking to avert Israeli strike on Syrian chemical weapon sites Israeli and U.S. officials have expressed fears that the large stockpiles of nonconventional weapons may fall into terrorists’ hands in the chaos following a possible fall of President Bashar Assad’s regime. Assad has not been seen for months.
07/20 U.S. Intelligence panel chair implicates Iran in bombing, says Israel could retaliate The chairman of the House Intelligence Committee, in an interview with Fox News, implicated Iran in the bombing of Israeli tourists in Bulgaria and said the U.S. should take Israel at its word that they will retaliate. Netanyahu has vowed to strike back.
Articles of Justice during the Great Recession
07/16 British Lawmakers Take Aim at Regulators in Libor Scandal Lawmakers accused the British regulator of not moving quickly enough to deal with the manipulation of the London interbank offered rate and at the management style of Robert Diamond, the former CEO of the British bank who resigned because of the scandal.
07/17 Libor Scandal: Was the petrol price rigged too? Everyone may have paid too much for petrol because banks and other traders are able to manipulate oil prices in the same way they rigged interest rates in what has become the Libor scandal. The Bank of England is being urged by government to investigate.
07/18 New Consumer Watchdog Agency Does its Job: Fines Capital One for Deceptive PracticesThe Consumer Financial Protection Bureau, Wall Street’s newest regulator, accused Capital One of “deceptive marketing tactics.” Capital One must reimburse $140 million to customers. The Office of the Comptroller of the Currency also sanctioned Capital One
U.S. banking / financial crisis as it shapes the economic news of our times
07/16 Head of England’s central bank says banks have become too big “We need to … introduce more competition into our banking sector.” The governor believes that there are not enough banks and that existing ones have “become too big and they dominate the market in a way that’s not desirable.” [Placed here because it could just as well be said as a needed solution for U.S. banks.]
U.S. government moves (and blunders) in articles about the economy
07/16 Congress up to its old accounting tricks Keeping student loan rates low required devilish financial engineering from U.S. lawmakers. The hocus-pocus is tucked away in a transportation bill. To cover the cost of the education subsidy, Washington raided its pension fund and relaxed accounting standards.
07/16 Democrats threaten to go over ‘fiscal cliff’ if GOP fails to raise taxes Democrats are making increasingly explicit threats about their willingness to let nearly $600 billion worth of tax hikes and spending cuts take effect in January unless Republicans drop opposition to higher taxes for the nation’s wealthiest households.
07/17 Democrats Propose Plan to Sidestep G.O.P.-Grover-Nordquist Anti-Tax Pledge Senate Democrats — holding firm against extending tax cuts for the rich — are proposing a novel way to circumvent the Republican pledge not to vote for tax increase: Allow all the tax cuts to expire Jan. 1, then vote on a tax cut for the middle class.
07/20 Treasury Sells $15 Billion of TIPS at Record Low Negative Yield The Treasury sold $15 billion in 10-year inflation-indexed notes at a record negative yield as investors sought a hedge against rising consumer prices amid speculation the Federal Reserve will added more stimulus.
07/20 U.S. Government Takes Aim at Risky Student Loans Congress should consider allowing students to discharge loans in bankruptcy and require schools to do more to protect student borrowers from taking on risky loans. These are two conclusions of the first government study of the $150 billion student loan crisis.
Other economic updates / miscellaneous news articles
07/16 Genetically modified virus kills 17% of chicken flocks across parts of Australia. The creation of the deadly new variant was only possible because the vaccines contained live viruses, even though they were weakened forms. Closely related strains in three different brand vaccines combined after injection to form a more lethal virus.
07/16 Gold May Become Reclassified in the U.S. The central bank in the U.S.—the Federal Reserve—has recently released a memo to possibly change the status of gold bullion in this country. The U.S. is proposing to reclassify gold bullion as a zero-risk asset, as early as January 1, 2013.
07/16 Obama to business owners: “You didn’t build that” President Obama, in a speech to supporters, suggested business owners owe their success to government investment in infrastructure and other projects — saying, “If you’ve got a business, you didn’t build that. You didn’t get there on your own.”
07/17 Philosophical Debate: Debt, Debt And More Debt: Is Democracy To Blame? Plato might have said “Democracy will degenerate into chaos because people will vote for their immediate self interests, not the long-term good.” Will self-governing people always vote in leaders who deliver the goods without the taxes to pay for them?
07/19 Post Office Might Miss Retirees’ Payment The Postal Service repeated on Wednesday that, without congressional action, it will default — a first in its long history, a spokesman said — on a legally required annual $5.5 billion payment, due Aug. 1, into a health-benefits fund for future retirees.
07/19 USDA partnering with Mexico to boost food stamp participation “USDA and the government of Mexico have entered into a partnership to help educate eligible Mexican nationals living in the United States about available nutrition assistance,” the USDA explains. “Mexico will help disseminate this information.”
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