Economic News Articles in the Great Recession — Archive for the week of 04/22/2012
Splintering sounds ruptured the euro zone as it, again, became the big leader in economic news last week. The prior week emitted a couple of loud cracks when Spanish bonds sailed to unsustainable heights. This past week the austerity pact, which was intended to stabilize those bond prices, became the new threat. Political instability broke out on the weekend and resulted in a rough start for European stock markets on Monday with £122 billion lost in corporate values.
The stalwart Germans saw two of the strongest national supporters of their austerity rules begin to bust apart: France’s president lost his first election round in the French counterpart to the U.S. primaries, and the Dutch prime minister resigned over his own country’s inability to live within the austerity agreement. While Germany intended the austerity pact as a way to restore financial stability, it clearly has caused countervailing political instability.
Even the nations most in favor of the austerity pact have failed to meet its mandates. And, while the European Commission demanded budgetary austerity from all of its member nations, it increased its own budget almost 7% last week. Greece in particular rumbled with more talk of splitting away, as its own economic expderts said Greece will be worse off for decades if it stays in the euro zone than if it drops out of the E.U.
While the euro zone creaked under pressure, three European nations announced they had slipped solidly into the long-feared double-dip of the Great Recession. That means lower tax revenues, and that means the likelihood of meeting austerity-pact goals becomes worse than ever. Even Germany’s economy shrank at the fastest rate it’s declined since 2009 when the economic crisis that originated in the U.S. first washed up on Europe’s shores.
On this side of the sea, two different measures of the U.S. housing market indicated that housing is falling into a second recessionary dip, too. I’ve been saying it would, contrary to the voices of far more popular economic experts. The illusion that had appeared to these soon-to-be-disappointed optimists as a recovery during the first quarter of the year disintegrated last week. Reports revealed that home sales dropped all over the nation. Prices, due to foreclosures, also hit a low they have not seen in a decade.
Orders for durable goods took a big drop, too. Yet, the sweet taste of Apple’s earnings report, lifted the U.S. stock market out of fears that had caused it to stagger backward earlier in the week when it heard the rumblings in Europe.
This past week also reinforced the popular but unwarranted fears that China will have a hard landing in the months ahead. I’m sticking with my recent prediction that China will have a smooth landing, precisely as it has planned … at least for this year.
I have finally found one U.S. official (or former official) who agrees with my statements that the Fed is causing a stock market bubble. A former FDIC chair that the wild ebullience of the stock market in recent months is nothing but a bubble created from fastest free money ever clicked into existence on a computer screen. Obviously, the Fed loves creating bubbles because it has been in the bubble business several times in the past.
Iran did exactly as I predicted it would during negotiations and indicated last week that it may halt nuclear expansion! Whoohooo! (What I said will happen is that Iran will try to make it look as if negotiations have hope of succeeding … to the fullest extent it can while remaining strong in appearance against the U.S.. The Russians gave them that chance last week with a proposal that would halt enrichment. The proposal afforded the opportunity for Iran to appear to be acting in good faith as a gracious and diplomatic act toward their Russian allies without looking weak to the U.S. The press, of course, also did as I said it would and heralded this as a “possible breakthrough.” They should stay with publishing funny papers. All Iran really said of the Russian proposal that would curb their nuclear expansion was, “We need to study this proposal and to establish on what basis it has been made.”
Of course that is what they said: 1) Russia has provided the bulk of Iran’s nuclear technology; so Iran cannot simply dismiss what its nuclear partner says without thinking through a careful response; 2) The obvious ploy that the press missed entirely is that studying the proposal takes time, which is another way of saying that it buys the time Iran needs to continue its development of nuclear weapons. For as long as Iran can cause negotiations to continue, it can continue its clandestine nuclear enrichment. Yet the press, which now seems to drink the same dope as our flamboyant economists, proclaims this ruse a “possible breakthrough!”
That wasn’t the only news that edged in the direction of my earlier warnings: Fifty percent of last year’s college graduates are either unemployed or underemployed. What happens to a trillion dollars in student loans when half of all graduates cannot find a job that is capable of making payments on those loans?
For the past two weeks now, several things have started to track exactly as I’ve said they would every month this year. I’ve maintained all along that I did not expect these things to start going the way I was predicting until spring. As in the past, I’m one of the few people who has been saying that there is no sustainable recovery and that the appearance of one in the beginning of the year was an illusion. Those who speak of “the recovery” live in illusion.
The popular economists who are all over the news have been saying the exact opposite of what I have been saying all year. So, I write contrary all the time to the most influential voices in America. These beleaguered optimists were, again, surprised by the changes that have come in the last two weeks (which reflects yet another failing on their part to do their jobs).
Among the following stories are a few of the surprises that came their way last week:
China syndrome — following the Great Recession to the Great Wall
- 04/24 China’s manufacturing may contract for sixth month running China’s manufacturing may shrink for a sixth month in April, maintaining pressure on officials to adopt more policies to stimulate economic growth, a survey of companies showed.
Economic indicators seen in the news this week
-  04/23 U.S. Stocks drop 1% on China, Europe fears “Events over the weekend re-ignited concerns that the European community is going to have trouble working out a coordinated plan.†Investors have focused on the Dutch prime minister resignation’s and France’s possible government shakeup.
- 04/24 Home prices lowest since 2002Â The home price index of 20 cities recorded a decline of 3.5% from a year earlier. Home prices have not been this low since November 2002. The main challenge for housing continues to be foreclosures and other distressed property sales.
- 04/24 New Home Sales Drop After Big Revision The Commerce Department said Tuesday that sales dropped 7.1 percent in March to a seasonally adjusted annual rate of 328,000 units. That followed a 7.3 percent increase in sales in February.
- 04/24 Strong earnings from AT&T, 3M lift US stocks Solid U.S. corporate earnings and higher spirits in Europe propelled the Dow Jones industrial average to a triple-digit gain Tuesday.
- 04/25 Apple blowout quarter stokes Wall Street US stocks advanced on Wednesday after a blowout quarter from Apple further lifted optimism in an earnings season that has far outstripped expectations.
- 04/25 Durables orders drop sharply, cast shadow on U.S. recovery Orders for equipment, appliances, aircraft and other so-called durable goods fell 4.2 percent in March from February — the second decline in the past three months and the biggest monthly dip in three years, indicating the economy has gone soft.
Economic predictions / forecasts that made news headlines
- 04/24 Gold may touch $7,000 per ounce before end of uptrend While gold’s latest price gyrations may seem excessive to some investors, Bank of America analyst MacNeil Curry said the volatility was nowhere near extreme enough to convince him the precious metal’s long-term uptrend was nearing the end.
Euro crisis updates as the Great Recession goes viral
-  04/22 IMF urges eurozone to make bold reforms The International Monetary Fund (IMF) has told the eurozone it must make bold reforms to reassure financial markets.
- 04/23 Billions wiped off Europe’s biggest companies as political rebellion rocks eurozone More than £122.3bn was wiped off the value of Europe’s biggest companies on Monday amid fears that the eurozone’s commitment to austerity was being swept away by political rebellion – just as its debts hit record levels.
- 04/23 Dutch Cabinet Collapse Shows Folly of Merkel Fiscal Pact Alarm over Europe is surging again. The EU’s fiscal pact is largely to blame. Germany insisted on this plan to cut public borrowing, and euro-area governments hoped it would restore stability. It’s doing the opposite. The pact is undermining governments.
- 04/23 EU Ministers ponder creation of EU super-president The new supremo would have more power than either Herman Van Rompuy or Jose Manuel Barroso do today but also more “democratic legitimacy†because he or she would be elected by Member of the European Parliament.
- 04/23 European Services, Manufacturing Shrink for Third Month Euro-area services and manufacturing output declined for a third month in April as the economy struggled to rebound from a fourth-quarter contraction. A euro-area composite index based on a survey of purchasing managers in both industries fell to 47.4, a
- 04/23 Greece worse off staying in euro If Greece defaults and exits the EU, they will see a sudden recovery. “Cutting wages and prices to the extent necessary in some southern European countries is impossible, whatever the politicians say. Policy is unable to overcome the laws of economics.â€
- 04/23 Home | Markets Tags: EU | Netherlands | Politics Dutch Government Quits After Austerity Talks Fail The Dutch government, one of the most vocal critics of European countries failing to rein in their budgets, quit Monday after failing to agree on a plan to bring its own deficit in line with EU rules.
- 04/24 Bank of Greece: recession worse than expected Bank of Greece warned that Greece faces worse-than-expected recession in 2012. Economy to shrink 5 per cent. It urged politicians to make a swift return to cost-cutting measures or face “particularly harmful†economic consequences.
- 04/24 German output shrinks at fastest pace since 2009 Germany’s manufacturing sector unexpectedly shrank at the fastest pace in nearly three years in April, denting hopes it can drive growth in the euro zone.
- 04/24 Nightmare week for Germany’s Angela Merkel as austerity bloc crumbles Europe’s political centre is starting to crumble, replicating the pattern of the early 1930s as the crisis ground into its third year under a similar mix of fiscal and monetary contraction.
- 04/25 Asking all poorer nations for budget austerity, EU Commission proposes 6.8% budget increase The European Commission called for a 6.8% rise in the EU’s budget for 2013, saying investment is “desperately needed†to revive growth. The Commission will risk accusations of double standards, as it has led calls for budget discipline throughout the EU.
- 04/25 UK economy in double-dip recession The UK economy has returned to recession, after shrinking by 0.2% in the first three months of 2012. A sharp fall in construction output was behind the “surprise†contraction. [No surprise here. Only a surprise to those who don’t want to see the truth.]
Federal Reserve actions tracked in the economic headlines
-  04/23 Former FDIC Chief: Federal Reserve Fueling a Bond Bubble The Federal Reserve is pumping up a bubble in the bond market by keeping benchmark interest rates near zero and doing almost everything it can to ensure overall long-term borrowing costs stay low, says Sheila Bair, former chair of the FDIC.
The Iranium Reaction as it makes and shakes the news
- 04/25 Israel Defense Minister Says “We’re not playing games when we prepare for a possible strike at Iran” Defense Minister Ehud Bark on Monday declared an unmistakeable Israeli readiness to strike at Iran’s nuclear program if sanctions and other non-military measures fail to thwart the Tehran regime’s march to the bomb.
- 04/25 Netanyahu says Iran sanctions ‘better work soon’ While sanctions against Iran are visibly impairing its economy, they have not impacted its continuing nuclear activities, Prime Minister Binyamin Netanyahu told CNN in a Tuesday interview. “If they’re going to work, they’d better work soon!â€
- 04/25 With Sanctions Looming, Iran Mulls Halting Nuclear Expansion In a potential breakthrough in its long-running standoff with the West, Iran is reportedly considering a proposal to halt the expansion of its nuclear program to avoid crippling new sanctions.
Articles of Justice during the Great Recession
- 04/23 Iceland ex-PM Haarde ‘partly’ guilty over 2008 crisis Mr Haarde is thought to be the first world leader to face criminal charges over the financial crisis. Some Icelanders have seen the trial as scapegoating, while others feel public accountability is essential after the country’s financial collapse.
U.S. banking / financial crisis as it shapes the economic news of our times
- 04/25 Goldman Board Hopes Image Overhaul Will Save Blankfein It’s being billed as the biggest salvage job on Wall Street—and it has nothing to do with preventing another meltdown at troubled mega banks Bank of America and Citigroup. Rather, it’s about preserving the job of Goldman Sachs’ CEO, Lloyd Blankfein.
- 04/25 Small banks in US bailout pool under pressure More than 100 smaller banks were able to tap government programs to pay off bailout money they received during the financial crisis but hundreds of others still owing face a perilous future, a federal watchdog said on Wednesday.
Other economic updates / miscellaneous economic news articles
- 04/23 1 in 2 new graduates are jobless or underemployed The college class of 2012 is in for a rude welcome. Young adults with B.A.s are increasingly scraping by in low-wage jobs — waiter/waitress, bartender or receptionist — and that’s confounding their hopes a degree would pay off mounting student loans.
- 04/24 After the Bailout: Few Fans but No Fix for Fannie and Freddie Democrats and Republicans have found a rare point of agreement: they would prefer life without the failed giants Fannie Mae and Freddie Mac. Lawmakers, however, are unlikely to act because they fear alienating the deep-pocketed housing lobby.
- 04/24 Quake Expert: Earth Cracking Up Something is wrong with the earth. Statistically, there should be one big earthquake in Indonesia every 500 years. However, since 2004, there were already three quakes with a magnitude over 8. The high rate of massive quakes is far from normal.
- 04/25 An Odd Problem for Zimbabwe: Using U.S. Dollars, Zimbabwe Finds No Change By virtually wiping out inflation, analysts say, use of the United States dollar saved Zimbabwe from total economic collapse and brought the country back from the brink.
- 04/25 Half of over-50s in UK ‘will have to work beyond state pension age’Â Nearly half of people aged over 50 will have to work and save for an additional 11 years to keep their standard of living. The Pensions Policy Institute said those who were not able to carry on working would be at a big disadvantage.
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