Economic News Articles in The Great Recession Blog, week of 05/06/2012
The news of the week centered on Europe where no one knows how to clean up the Greece stain that smears the euro image. Greece ironically elected Nazis to fight German austerity last week. France joined in the fight with a hard left-wing punch to Sarkozy, knocking him flat on his French derriere and replacing him with a socialist.
With the spotlight strongly on Europe throughout last week’s global economic news, the U.S. stock market whip-sawed itself to pieces. During the first two days of the week, European news took the U.S. market down, but then a U.S. jobs report came along that was received as positive by investors and reversed the trend. This was kind of silly because the decrease in claims for unemployment benefits was a mere 1,000, and statistical error could gobble up all of that paltry number.
Readers of The Great Recession Blog may have been more inclined than other market investors to take the job news with a grain of salt, especially since the drop in unemployment claims was the size of a grain of salt. Note that one of the articles about this slight dip in unemployment reported that half a million people have dropped out of the labor force since February. Since unemployment figures do not count people who are not considered to be in the labor force, the drop was likely due to people giving up on finding a job, rather than due to fewer people needing a job. The devil is in the details.
The news for Europe was a downhill slog all the way last week with all indications being that the European economy is going to largely define the global economy this year. China, for example, saw a drop in orders at its export fair, and its export growth for April was only half of what economists had expected. The growth rate of Chinese imports also fell off a cliff — not because Chinese consumers were buying less but because China was importing far fewer of the raw materials from which it manufactures its exports.
Don’t worry about China, though. As I said in my earlier article ( Hard Landing For China’s Economy Not in the Tea Leaves ), China has a bankrolled surplus long enough to string yuan paper cuttings around the world many times. If the depressed world stops buying from China, China can create projects at home from its bunkers of money. This is what smart countries do: they make sure they are running a surplus budget during good economic times so that, when bad economic times come, they have a vast reserve they can tap for stimulus without having to rack up debt. The United States missed that wise opportunity decades ago and has chosen to continue missing it every year since the Clinton administration ended.
Of course, a New York Times reporter was quick to stress, “there are increasing signs that the Chinese economy may be running into trouble.” While people muse in America about China’s possible hard landing, most nations wish they could have China’s trouble. Take care to notice, if you read the article, that all China has seen is the growth in its exports come in at half of what economists had expected. It is not as if China’s exports are receding. They are merely not growing at the rocket pace they once were because China has fewer rich foreigners to sell to. As a matter of fact, China’s exports grew 5% last month. Many countries would be glad to see their exports grow that much in a year. In fact, China is growing faster during the Great Recession than the U.S. did during the best of times.
Continue to bear in mind, also, that China tried for months last year to slow down growth in order to curb inflation. China also has a lot of room to stimulate its economy whenever it wishes because it has done none of the quantitative easing stunts of the U.S. or Europe, and it has a lot of head room to reduce bank interest rates or lower bank reserve requirements to ease credit, while the U.S. and Europe have all but exhausted their capacity to use such stimulus tools.
One interesting little breakout in the economic scene happened quietly last week when the U.S. began to cruise down the road of selling its banks to China.
Other evidence of wistful stock market thinking came as investors found hope that Greece would form a government. Investors would have been safer to fear that Greece would never get a government together that would support the massive spending cutbacks required under the German-pushed austerity pact. The story of the Greek crisis from day one has followed the course I’ve said it would: no sooner is an agreement reached than the agreement falls apart. That’s what happens when you try nailing horse shoes onto a horse with no hooves. That horse ain’t gonna run and ain’t gonna thank you for the horse shoes.
Once again, Greece is a mess, and no one knows how to clean up the Greece stain that smears the euro image. Even the Greek neo-Nazis won parliament seats for the first time in forty years. Their motto? “The time for fear has come.” Nice. This is the government Greece chooses? Is it any wonder Greece is a disaster on steroids?
There is one thing different about the Greek problem this time. The news this week is that many of the bankers and euro leaders are starting to say, “Go ahead and leave then.” That’s a clear sign they’re giving up on finding a solution.
While the Greeks ironically voted in Nazis to fight Germany, the Italians took a left swing at their government in order to knock down the parties that supported the German-imposed austerity measures. France joined in the fight against Germany with a hard left-wing punch to Sarkozy, knocking him on his derriere and replacing him with a socialist. It was all quite a tumble.
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Recap of economic news 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
- 05/07 Weak Response at China Export Fair a Troubling Sign The Canton Fair disclosed during the weekend that contracts signed at its spring session totaled $36 billion, a drop of 2.3 percent in dollar terms from the spring session last year and a decline of 4.8 percent from the session last autumn.
- 05/08 China’s Gold Imports Jump as Country May Become Biggest User China’s gold imports through Hong Kong surged more than sixfold in the first quarter. Demand has climbed in China as rising incomes and curbs on property speculation boosted purchases. The purchases may signal that the mainland is accumulating reserves.
- 05/10 Data Signal Economic Trouble in China China announced Thursday that growth in imports had unexpectedly come to a screeching halt in April — rising just 0.3 percent from the same period a year earlier, compared with expectations for an 11 percent increase.
- 05/10 Fed clears China’s first US bank takeover The U.S. has just opened its banking market to ICBC, China’s biggest bank, for the first time clearing a takeover of a US bank by a Chinese state-controlled company. The Fed board also approved a Chicago branch for Bank of China, China’s third-largest bank.
Economic indicators and stock market responses seen in the news this week
- 05/07 Airbus and Boeing hit by plane cancellations Airlines have cancelled a total of 32 orders for planes so far this year, according to data from the world’s two major plane makers. The cancellations reflect the difficult travel market and weak global economy.
- 05/07 Economy Keeping Investors Out of the Market Investors are turning their fear of the economy into an aversion to stocks, and a preference for bonds. While the market has seen some bounceback, headlines like Friday’s weak jobs report and worries about the European debt crisis have kept many sidelined
- 05/08 Wall St tumbles on euro zone uncertainty U.S. stocks tumbled to the lowest level in two months on Tuesday as new questions emerged over Europe’s ability to fend off a deeper crisis. Elections in Greece and France added to concern about economic growth in the United States and China.
- 05/09 GLOBAL MARKETS – Stocks fall, bonds gain on Greek fears Global shares slid for a sixth day while safe-haven U.S. and German government debt rose on Wednesday as rising fears about the fragility of Spanish banks and a political impasse in Greece worsened fears about the euro zone debt crisis.
- 05/09 Wall Street slides 1 percent on Europe fears US stocks fell sharply on Wednesday as political uncertainty in Greece and the frail state of Spanish banks fueled fears that the region’s debt crisis would worsen.
- 05/10 Stocks Push Higher; Dow Looks To Snap Six-Session Losing Streak Stocks advanced after a slightly better-than-expected jobs report and as investors watched Greece’s 3rd attempt to form a government. Investors expressed some optimism that Greece would resolve its political situation. Spain eased banking worries.
- 05/10 Weekly Claims For Jobless Benefits Drop The number of people applying for U.S. unemployment benefits ticked down last week after dropping sharply the previous week, evidence hiring could pick up this month. However, More than 500,000 Americans have left the work force since February.
- 05/10 Gold continues its south-ward journey, silver recovers In New York, gold dropped on strong dollar amidst political worries over Greece and Spain that stoke fears on the euro-zone debt crisis. Gold for June delivery dipped by $ 10.30 to $ 1,594.20 an ounce on the Comex.
- 05/10 How the stock indexes fared on Thursday The Dow had been on its longest losing streak since August before gaining almost 20 points on Thursday. Stocks got a boost from a drop in new unemployment applications, as well as Spain’s move to take over a debt-laden bank.
- 05/11 Gas prices keep inflation tame, push confidence to four-year high Falling energy and gas prices helped keep inflation in check last month and also pushed consumer confidence to a four-year high. The good news mitigated a stock market slump after investors reacted to JPMorgan Chase & Co.’s $2 billion trading loss.
Euro crisis updates as the Great Recession goes viral
- 05/07 Be afraid, exultant Greek neo-Nazis warn rivals Greek neo-Nazi party Golden Dawn warned rivals Sunday that “the time for fear has come” after exit polls showed they secured entry in parliament for the first time in 40 years. “The time for fear has come for those who betrayed this homeland.”
- can i buy ambien at cvs billion bailout that is keeping the country from bankruptcy.” href=”https://www.washingtonpost.com/world/greece-at-new-risk-of-being-pushed-off-euro/2012/05/07/gIQAD9z18T_story.html” target=”_blank”>05/07 Greece at new risk of being pushed off euro Infuriated by demands for harsh spending cuts that could exacerbate a crippling recession, Greek voters on Sunday overwhelmingly rejected politicians who had supported the $171 billion bailout that is keeping the country from bankruptcy.
- 05/07 Greek election impasse heralds lengthy instability Greece faces weeks of financial turmoil after voters angry at austerity measures punished mainstream politicians and let a far-right extremist group into Parties backing the draconian international rescue package lost their majority in parliament.
- 05/07 Italians Show Austerity Anger in Local Elections Left-wing and protest parties made strong gains in local elections on Monday and the center-right party of former Prime Minister Silvio Berlusconi saw heavy losses as Italian voters joined other Europeans in venting anger over austerity policies.
- 05/07 Sarkozy’s exit could transform France’s world role Hollande’s defeat of French President Sarkozy may greatly affect European politics and the future of the euro, but the first French Socialist president since ’95 could also dramatically alter France’s role in the world at a sensitive time.
- 05/07 Spain to Spend Billions on Bank Rescue In an abrupt reversal of policy, Spain, which had insisted no more state money would be needed to clean up its banking sector, confirmed it will bail-out Bankia with the injection of billions of euros of public money into the troubled lender.
- 05/07 What Hollande’s victory means for Europe’s economy In recent weeks, the European landscape has changed profoundly. Twelve European countries are now in recession, and the leaders of Italy and Spain have asked for balancing fiscal consolidation with growth measures. Now France has a socialist leader.
- 05/08 European election waves could cause ripples in US presidential race If Europe’s left turn over the weekend means they are unwilling to balance their finances, that could rattle the global markets, reverberate across the Atlantic and hit home for the U.S. economy. Jittery markets would be bad news for the U.S.
- 05/08 Eurozone at risk from anti-austerity revolt European Union leaders are to hold an emergency summit as a popular anti-austerity backlash threatens to break the eurozone apart and cause a deep rift between France and Germany.
- 05/08 German industrial production surges in March Total volume of output from Germany’s factories, power stations and building sites rose a seasonally-adjusted 2.8% in the month, well ahead of economists’ expectations for a 0.8% rise. Rising demand for consumer goods lay behind the strong result.
- 05/08 Greek leftist leader lays out radical agenda Greek leftist leader Alexis Tsipras said Greece voted to reject the international austerity pact. His radical agenda includes cancellation of the pact and nationalization of banks that “remain in the hands of the managers who bankrupted the system.”
- 05/08 In Europe, a storied way of life comes under threat as economic gloom deepens The Great Recession is bringing serious changes to European culture — reducing the welfare state, lengthening the work week, even getting the Irish out of their pubs.
- 05/09 German Patience With Greece on the Euro Wears Thin Just weeks ago, the idea that Greece would leave the euro zone was almost unthinkable. Now, with Greece’s newly empowered political parties refusing to abide by the euro pact and Europe’s leaders talking tough, that outcome looks increasingly likely.
- 05/09 Greece’s newly elected socialist leader pledges to rip up euro deal The leader of a Left-wing coalition in Greece pledged to form a government committed to tearing up the terms of his country’s “barbaric” 130 billion euro bail-out deal, as political paralysis threatened to grip the country.
- 05/09 Greek Euro-Exit Talk Seeps Into Public as Officials Air Doubts Policy makers are beginning to air doubts that Greece can stay in the euro. The tumult in Athens has put a Greek exit on the planning agenda. EU President Van Rompuy called this an “important moment in European Union history, a moment of crisis.”
- 05/09 Greek Exit and Spain bank worries roil bondsMounting concerns over Spanish banks and fears Greece’s political vacuum could lead to an exit from the euro zone provided the recipe for fresh turmoil in European credit markets Wednesday, causing Spanish bond yields to spike above 6%.
- 05/09 Roubini: Europe Is a ‘Slow-Motion Train Wreck’eaving the eurozone, says New York University economist Nouriel Roubini. “”Europe will be lucky if it ends up in stagnation.”
- 05/10 Eurozone crisis in graphics Chart shows state budget data for all of the countries that officially use the euro as well as the UK.
- 05/10 Spanish lender Bankia is partly nationalised The state will emerge with a 45% stake in the bank. Earlier, Spanish stocks fell by 3% and government bond yields rose above 6%, a level seen as unsustainable. Bankia has the industry’s largest exposure to the property market, which burst spectacularly.
- 05/10 What ails the Spanish economy? The gov’t ran a surplus budget, but everyone else behaved recklessly. With low interest rates, banks, property developers and ordinary home-buyers fueled an enormous property bubble. The bubble broke spectacularly, yet prices have a lot further to go.
- 05/11 Dow Drops Most in 2012 as Europe Concern Resurfaces U.S. stocks fell for a second straight week, driving the Dow to the biggest loss of 2012, as political tension in Greece heightened concern about Europe’s debt crisis and JPMorgan Chase & Co. $2 billion trading loss weighed on shares of banks.
- 05/11 Opinion: Euro Will Have to Be Devalued to Save EU Faced with a stubborn sovereign debt crisis that won’t go away, the European Central Bank will be forced into currency devaluation, Wharton finance professor Jeremy Siegel said. The ECB’s efforts to end problems have not assuaged market concerns.
- 05/11 Pressures intensify on European leaders Confidence is already in short supply in financial marketsand could evaporate further in the coming week if investors judge that Europe’s often fractious political leaders aren’t mapping out a sustainable path through the current crisis.
- 05/12 EU central bankers ponder Greece euro exit Europe central bankers have openly expressed the possibility of Greece leaving the eurozone. Germany’s top banker said it was up to the Greeks to decide, but if they did not keep to their bailout commitments, they would receive no new aid.
The Iranium Reaction as it makes and shakes the news
- 05/09 Video: Egyptian Cleric Vows Caliphate With Jerusalem as its Capital I found this video interesting because of the sheer size and intensity of the crowd in Egypt that is chanting for a march against Jerusalem. Reminded me of videos of Hitler rallies, perhaps not to be taken lightly for exactly that reason.
- 05/10 Arab newspapers interpret Israel’s political shuffle as preamble for war “Netanyahu is forming a war government,” al-Quds al-Arabi’s headline cried. The headline in Saudi Arabia’s al-Madina paper read: “Israel prepares for war.” The paper said Netanyahu “wants to be remembered as the leader who destroyed the Iranian nuclear program.
- 05/10 Rivals back Benjamin Netanyahu in deal that could mandate strike on Iran Benjamin Netanyahu, Israel’s Prime Minister, cancelled snap elections and formed a national unity government with his opposition in a dramatic deal that would give the hawkish premier a commanding mandate should he choose to strike against Iran.
- 05/11 U.S. Concerned Netanyahu, Mofaz May Attack IranThe United States is worried that Shaul Mofaz and his Kadima party’s joining a unity government with Prime Minister Binyamin Netanyahu could result in an attack on Iran’s nuclear facilities at any given moment.
U.S. banking / financial crisis as it shapes the economic news of our times
- 05/07 Bank of America Offers Principal Reductions to 200,000 Homeowners 200,000 eligible BofA borrowers could get as much as $150,000 knocked off the balance of their mortgages as part of the $25 billion settlement reached this year between federal and state agencies and the nation’s five largest banks.
- 05/09 BofA Chief Moynihan Faces Shareholder Ire as Protests Swirl Moynihan took considerable heat at a contentious gathering as shareholders pressed him on complaints ranging from mortgage practices and foreclosures to bad customer service and political contributions. One attendee even referred to the bank as “a felon.”
- 05/11 J.P. Morgan Draws Criticism Over Trading Loss J.P. Morgan Chase Co.’s $2 billion trading loss reverberated through Washington, and the fallout is likely to spread as policy makers claim the loss is evidence that U.S. megabanks are too big to manage, crippling arguments against regulation.
- 05/11 Opinion: JPMorgan’s Loss Further Proof that More Regulation is Needed Now The JP Morgan episode touches on all the major protections of Dodd-Frank, which at the behest of Wall Street lobbying [particulary by J.P.], will not go into effect for months, if not years, and therefore did not apply to JP Morgan.
- 05/11 Video: J.P. Morgan’s $2B Trading Loss: Too Big to Manage? Bank stocks went off the cliff with J.P. Morgan plunging [9%] in one day due to J.P.’s bad bets. J.P. says it will stay in these failed investments and try to ride them out, but first losses are usually best losses, so staying in may be worse.
- 05/12 JPMorgan Chase faces growing scrutiny US politicians have renewed calls for tighter financial regulation, after JPMorgan Chase bank revealed a trading loss of $2bn on Thursday. “This was a major bet on the direction of the economy, and when those kind of bets are lost, we all pay the price.”
U.S. government moves (and blunders) in articles about the economy
- 05/07 UPDATE: Report Sees $15 Billion Profit From AIG Rescue GAO report says U.S. government may wind up with a profit of more than $15 billion from AIG’s rescue. The report comes on the heels of Treasury decision to sell $5 billion in AIG common stock at $30.50 a share, reducing the government’s stake to 63%.
Other economic updates / miscellaneous news articles
- 05/07 Buffett: Gold Bugs Have Right Idea, Wrong Strategies Gold is trading reasonably stable in wake of European elections that revealed widespread anger at austerity, especially in Greece, where established political parties failed to secure 50 percent of the votes in parliamentary elections.
- 05/07 Warren Who? Gold Bugs Still Think They Have Right Idea “The stock market has gone nowhere in nominal terms in 12 years. It makes sense as a default under the current conditions of negative real interest rates to own something that keeps you afloat, that preserves your purchasing power.”
- 05/07 Market Ignores ‘Taxmageddon’ to Its Peril The Fed’s “Operation Twist” has cleverly engineered another bull rally while engaging gov’t printing presses to pay the debt. It has pushed equity markets to unsustainable levels and once again saved the over-levered crowd from the fate they deserve.
- 05/09 Multitudes of U.S. Millionaires Told by Foreign Banks to Go Away! Bank accounts, investment accounts, mortgages and insurance policies are being refused to American clients, and those with accounts are seeing them closed or have been threatened with closure. Americans have less opportunity to invest or live overseas.
- 05/11 Larry Summers: U.S. Recovery Going ‘Ahead of Schedule’ The U.S. recovery isn’t only going as well as it can, it’s moving ahead of schedule, says the former Treasury Secretary in The Kudlow Report. Recovery is going better than after the Great Depression in the 1930s.
- 05/11 NEVER MIND THE APOCALYPSE: EARLIEST MAYAN CALENDAR FOUND The new discovery of elaborate paintings and etchings, including the oldest Mayan calendar to date, have been uncovered in the ancient Maya city of Xultun, Guatemala. Contrary to popular myth, the Mayan calendar does not foretell doom in 2012.
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