Economic News Articles in the Great Recession — Archive for the week of 04/08/2012

Pessimism is creeping back into the U.S. business world, and even the Fed is now warning, as I did earlier, that student loans are in danger of becoming another economic crisis. This is the climate where desert dwellers like me thrive.

According to the Federal Reserve last week, nearly one third of all student loans are now delinquent. I guessed ahead of these statistics that it would be a large percentage of student loans now in default, and it turns out that it is. That’s a third of a trillion dollars in delinquent debt that has little chance of repayment because the student’s are leaving college to find no jobs. If they do find a job, it pays far below what they anticipated getting in good faith when they took on all the debt. I posted a blog entry about this student loan bubble last week, which was an article I actually began about a month ago. I had to get back to the article in a hurry because I’d left it half done, and my predictions were coming true before I could get the article finished.

Meanwhile, a key rating agency downgraded U.S. credit for the second time in its history (both the agency’s history and the U.S. government’s history). This was a side-note that most of the press passed over without comment. I say this is a key agency because it was the first agency on earth bold enough to downgrade U.S. credit last summer — a month before the more infamous downgrade by Standard and Poor’s. This agency may be a bellwether.

U.S. stocks were up in a “rally,” then plunged, then edged up and then dived again to close the week as the worst week of the year for the stock market. What caused all this lurching? After some preliminary good news on corporate profits, unemployment claims went back on the rise in the U.S., and interest on Spanish debt went back to rising in Europe. With this, began the fulfillment of another prediction I’ve made a few times since the beginning of the year: Spain will become a eur0-zone problem this spring that will make the Greek crisis look like a minor tragedy.

While Spain and Greece have problems, the U.S. — which tends to think of itself as too big to fail — now has more sovereign debt than all the euro-zone countries combined plus the U.K. People investing in the stock market weren’t too smart because their concerns over the euro crisis eased last week (raising the market midweek); but, by the end of the week, Spain slid into the orange zone for catastrophic collapse. (And today Spain hit the red zone.) So, don’t look for some kind of collective wisdom from Wall Street’s investors. It isn’t there.

Never mind. Those making money in the stock market do so by gambling in the Wall Street Casino on where others will put their money in the week ahead, not on where the economy is headed longterm and not by buying ownership in businesses they think will succeed in the long run. The stock market has devolved to mostly short-term speculation about how other people will cast their bets. Some make a lot of money even in a bad economy just by speculating well as to what the other lemmings will do.

The mainstream press saw reports of new mortgage apps on the rise at major banks last quarter and called this a sign that housing is “on the mend.” In doing so, most news reporters missed the obvious again, which is that mortgage interest hit the lowest level it has seen in fifty years last quarter, prompting numerous homeowners to refinance and creating a mini-burst in housing purchases as well. That will not be sustained any longer than the record-low interest rates, which quickly shot back up. I have a strong feeling, however, rates will dip back down into that zone again soon.

Reporting this as a housing market on the mend is more than looking at the bright side; it’s staring at the sun and going sun blind. It ignores the fact that another half a million foreclosures are already working their way down the pipeline now that that the foreclosure fraud case was settled, paving the way for another summer quarter like last one.

If you want the low-down on where the economy is going in the near future, check The Great Recession Blog tomorrow or the next day. Things are happening along the path that I have anticipated so quickly, that I’ll be posting another update on my predictions in the next day or two. For now, here’s the recap of last week’s news as summarized above:

China syndrome — following the Great Recession to the Great Wall

•  04/14 China puts final nail in lid of coffin for rumors of a hard landing China’s recent move with its currency indicates that its downturn was planned and manageable.

Economic indicators seen in the news this week

• 04/09 Stocks fall in reaction to disappointing employment report Stock-market softness that began last week accelerated Monday as investors finally got a chance to react to Friday’s disappointing employment report. Selling put the Dow on track for its second triple-digit loss in the last three trading days.
• 04/09 US credit rating downgraded, again A small credit ratings agency downgraded the United States’ credit rating for a second time, arguing the country was no closer to solving its runaway debt problem.
• 04/10 Small Business Confidence Drops as Pessimism Spreads U.S. small business confidence dropped in March for the first time in six months amid widespread pessimism, suggesting that economic growth slowed in the first quarter. “It looks like a replay of 2011, a few months look good early on, then it fades.”
• 04/10 Student loan debt becoming financial crisis Student loan debt, in figures calculated last year, is over $1 trillion. The Fed says nearly a third of student borrowers are delinquent on their payments. And it’s not just the young: Americans 60 and older still owe $36 billion for their student loans.
• 04/10 U.S. stocks fall sharply, extending selloff U.S. stocks deepened their streak of declines over concerns about rising borrowing costs for European countries. “We were priced for perfection and it’s a lot less than perfect out there. If earnings start to be disappointing, it’s a perfect storm.
• 04/11 America’s Debt Is Greater than Entire Eurozone’s (and U.K.’s) Combined Debt This chart shows America’s debt is 20% greater than the combined debts of Eurozone countries (France, Germany, Greece, Italy, Spain, the U.K., and others). The Eurozone is larger than the U.S., so America’s debt per capita also exceeds the Eurozone’s.
• 04/11 Stocks rebound after string of losses U.S. stocks rose Wednesday, bouncing back from a string of down days, as concerns about Europe eased and hopes for a better-than-expected earnings season rose.
• 04/12 U.S. Stocks — Wall St up on euro zone yields U.S. stocks edged higher in early trading on Thursday as concerns about rising yields in some euro zone countries eased and on bets corporate America will beat a lowered bar of earnings expectations.
• 04/12 US jobless claims rise to highest since January While the largest rise in jobless claims this year casts doubt over the strength of the recovery in the jobs market, it does not stop yesteryear’s economists from finding reasons to ignore reality and stay with their rosy outlook.
• 04/13 Reports from two major banks suggest housing market is on the mend Earnings reports from two major banks Friday painted a picture of a healing housing market, with more Americans taking out mortgages, paying them on time and taking advantage of low interest rates to refinance.
• 04/13 Stocks: Worst week of the year, S&P 500 sinks 2% U.S. stocks stumbled Friday, following a two-day rally, closing lower for a second straight week with worst declines of the year.

Economic predictions / forecasts that made news headlines

•  buy zolpidem online canada will clamp down on proprietary trading. “Regardless of how the final rule turns out, it will be a shock to the financial system.”” href=”http://www.moneynews.com/StreetTalk/Coming-Shock-Volcker-Rule/2012/04/13/id/435788″ target=”_blank”>04/13 Coming ‘Shock’ From Volcker Rule? For Wall Street, the fork in the road is dead ahead: In July, the Volcker Rule will clamp down on proprietary trading. “Regardless of how the final rule turns out, it will be a shock to the financial system.”
• 04/13 Treasury predicts all federal bailouts likely will turn profit Good news on Friday the 13th? The Obama administration expects to recoup all bailout money spent on banking, insurance, auto companies, mortgage companies and struggling homeowners from 2008 to the end of the Great Recession — and even turn a profit.

Euro crisis updates as the Great Recession goes viral

• 04/10 French Economy Grinds to Halt With No First-Quarter Growth France’s economy posted no growth in the first quarter and there are no signs of a strong recovery in activity in the coming months Read more: French Economy Grinds to Halt With No First-Quarter Growth
• 04/10 Spain Is on the Bleeding Edge of a New European Crisis Things are unraveling in Europe at a startling pace. Spain is in the greatest danger and could become the fourth euro-zone nation to require a bailout. Its 709 billion euros of debt is roughly twice the size of all previous bailout nations combined.
• 04/10 Spain’s economy minister all but admits the country is in recession Borrowing costs edge towards 6pc. The country’s central bank says it is “not likely” to see recovery soon. Further weak signals on the economy will turn up the heat, and suddenly a tipping point could be reached with yields suddenly soaring toward 7%.
• 04/11 Europe’s banks beached as ECB stimulus runs dry “The banks are deeply underwater. This is turning into a disaster for the eurozone periphery now that the liquidity tap has been turned off. But given the opposition in Germany, the ECB can’t easily do another [stimulus package] until … a major crisis.”
• 04/11 Fall in safe haven assets threatens global financial stability, warns IMF Demand for “safe-haven” assets has been rising. However, supply of safe assets is dwindling because of the fall in the number of AAA-rated countries. The IMF said supply of assets qualified as safe will plunge by $9 trillion.
• 04/14 Euro crisis again — Spain to test investors’ nerves again The euro zone crisis is flaring up and debt auctions by safe-haven Germany and current bad boy Spain in the coming week will provide a gauge how far investor sentiment has changed since the shock and awe of recent ECB liquidity injections has worn thin.
• 04/14 Suicides due to economic crisis on the rise in Europe The economic downturn that has shaken Europe for the last three years has also swept away the foundations of once-sturdy lives, leading to an alarming spike in suicide rates, especially in the most fragile nations like Greece, Ireland and Italy.

Federal Reserve actions tracked in the economic headlines

• 04/12 Brazil president blasts Western QE as ‘monetary tsunami’ Brazil’s president Dilma Rousseff has attacked Western governments for creating a “monetary tsunami” as they pursue quantitative easing (QE) policies in an effort to revive their economies.
• 04/12 Gold crash on Fed tightening and euro salvation looks premature “The game has changed,” says Gartman, apostle of the long rally who now scornfully tells gold bugs that he is just a “mercenary,” not a member of their cult. “They genuflect in gold’s direction; we merely acknowledge that it exists as a trading vehicle.”

The Iranium Reaction as it makes and shakes the news

• 04/09 Israel ‘satisfied’ with Iran’s rejection of West’s demands State officials glad to see Tehran exposed its true face by rejecting Obama’s reported demands, estimate US president will now be forced to toughen sanctions
• 04/09 U.S. Defines Its Demands for New Round of Talks With Iran The Obama administration and its allies plan to open new negotiations with Iran by demanding the immediate closing and ultimate dismantling of a recently completed nuclear facility deep under a mountain, according to American and European diplomats.
• 04/10 Ahmadinejad: Iran can withstand oil embargo ‘for years’ Iranian President Mahmoud Ahmadinejad said Iran has enough funds to withstand a total embargo on its oil sales for several years.
• 04/10 Barack Obama ratchets up pressure on Iran as he tightens oil sanctions In a move that risks infuriating China and Russia and punishing even friendly countries that buy oil from Iran, such as Turkey and India, President Obama said he would move to exclude Iran’s trading partners from the US financial system.
• 04/10 Israel ‘would not be able to destroy Iran’s nuclear programme with pre-emptive air strike’ Israel “would not be able to destroy Iran’s nuclear programme with pre-emptive air strike.” “This is not going to be one strike and they are out, not like Syria or Iraq where facilities were not underground, it is much harder than that.”
• 04/10 U.S. deploys aircraft carrier in Gulf, as West prepares for Iran nuclear talks The U.S.­ Navy has deployed a second aircraft carrier to the Persian Gulf amid rising tensions with Iran over its nuclear program, marking only the fourth time in a decade that the U.S. has had two aircraft carriers in the region at the same time.
• 04/11 Iran-fueled oil price spike biggest threat to economy An oil price spike due to confrontation with Iran is now seen as the biggest threat to the economy according to nine out of 18 economists, who now say rising oil prices outweigh the European debt crisis, gridlock over the budget and a slowdown in China.
• 04/12 Voice of America Says Israel Likely To Target Iran’s Nuclear Program Before June The outcome of talks set to begin Saturday between world powers and Iran over its disputed nuclear program could be a determining factor in whether Israel carries out threatened airstrikes against Iranian nuclear facilities. Western patience with Iran is

U.S. banking / financial crisis as it shapes the economic news of our times

• 04/11 What meltdown? Broker bidding wars are back Bonuses to bank brokers are reaching their loftiest levels. Banks such as Morgan Stanley, UBS AG, Wells Fargo & Co. and Bank of America are offering high-end U.S. brokers two to three times the commissions and fees they received in the previous year.
• 04/12 U.S. Foreclosure Activity Near 5-Year Low, but… Though foreclosure overall activity fell, the number of homes that received first-time foreclosure notices rose 7 percent in March. More homes are entering the process, setting the stage for a surge in properties repossessed by lenders this year.
• 04/13 Goldman Sachs slashes chief Lloyd Blankfein’s pay by 35pc to $12.4m It’s Friday the 13th, Bad Friday in the news for Lloyd Blankfein whose pay is cut by a third, but that’s not as much as his bank’s profits fell.

U.S. government moves (and blunders) in articles about the economy

• 04/09 GOP lawmaker calls for change to how government measures unemployment Rep. Duncan D. Hunter (R-Calif.) intends to press GOP leaders to move his bill to include the number of individuals who gave up looking for work in the percentage of jobless claims. [Long overdue if we want to be realists.]
• 04/11 Obama, flanked by millionaires, renews push for Buffett Rule Obama pressed for tax fairness and the need for the “Buffet rule,” which would see million-dollar households taxed at 30 percent. “One survey found that two-thirds of millionaires support this idea. So do nearly half of all Republicans,” Obama said.
• 04/13 Beware the Coming ‘Taxmageddon’ after 2012 U.S. citizens may be hit with a tax hike the likes of which they’ve never seen. The Washington Post aptly called the unprecedented $494 billion tax hike “Taxmageddon,” and Federal Reserve Chairman Ben Bernanke described it as a “massive fiscal cliff.”

Other economic updates / miscellaneous economic news articles

• 04/12 Iceland volcano: and you thought the last eruption was bad… Iceland is facing further volcanic havoc, warns volcanologist. Eyjafjallajökull left millions stranded across Europe and cost airlines an estimated €150 million a day for six days, but the next volcano likely to erupt is typically 5x bigger.
• 04/12 Where Does America Get Oil? You May Be Surprised People have tended to exaggerate how much oil we imported from the Middle East. In the long term, it may look like a historical anomaly that the U.S. became so involved in the Persian Gulf.

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April 16, 2012 @ 6:59 pm

Economic Predictions

economic news articles, the Great Recession