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Economic News Articles in The Great Recession Blog, week of 06/03/2012

Has anyone noticed the silence? Week after week the news screeches like relentless train wheels about the scurrying of European leaders in and out of meetings to resolve the latest failure of their efforts to round up their endless troubles. Yet, every week, at the same time,  you hear no sound of U.S. leaders scurrying to do anything to resolve U.S. troubles. It is an almost scary quiet.

There has, of course, been campaign talk and lots of it, but that’s all dry wind. There has been almost none of the real talk of people hammering out deals or announcing grand visions that could stir the heart. There has been nothing like what you see in Europe, fruitless as all their urgent talk over there has been.

Because silence in one area is hard to notice amid a lot of noise from another, I did not take note of just how inactive U.S. leaders have been myself until I sat to write this recap. It became evident to me as I was working with the template for this weekly round-up of last week’s economic news. When I set up the template, I created a subhead titled “U.S. government moves (and blunders) in articles about the economy.” As I deleted that subhead once again, I realized that I delete it almost every week. There has rarely been news in any week since the unemployment insurance was dealt with about the U.S. government taking serious action to resolve U.S. troubles. Yet the U.S. faces “Taxmageddon” at the close of 2012.

Oh, there are articles about the Federal Reserve doing things, but the Federal Reserve is not government. It’s a government-sanctified coalition of bankers and economists, who have been granted nearly unbridled authority over the U.S. monetary system. In actual truth it is a coalition of bankers. Forget the economists, for the professional bankers in charge outnumber the professional economists in every vote.

This means the U.S. government is running through the Great Recession with only one plan for recovery — leave everything to the Fed to solve while politicians campaign and play golf. The only activity in recent months by the government to help the economy has been the occasional talk of banking regulation and minor murmurs of taking someone to court or instances of government officials telling Europe how to solve its problems. Precious time is rapidly disappearing.

That is why the one unique bit of news last week was of Federal Reserve Chairman Ben Bernanke and the European Central Bank joining to say, “Politicians, the rest is up to you.” With that, a briefly swelling market ducked back under the waves because the Fed has been their only champion. The fact is Bernanke’s band doesn’t have any more tricks to pull, and their old tricks have slid far down the curve of diminishing returns. Thus, the news last week also contained opinions that more quantitative easing would not even accomplish a single week of stimulating the stock market because the market, dependent on that drug as it is, has also built up considerable tolerance to it. The U.S. monetary system is awash with more money than we’ve ever seen, yet, no one seems to have any to spend. Likewise, the big rescue plans cooked up by Europe’s leaders for Spain had a market stimulus last week that could be measured in minutes this time before the air went out of the plan’s tires.

Taxmageddon cometh while our politicians do nothing but fiddle. Well, hey, at least they’re not fiddling with the economy where they could do actual harm! Maybe that is how to look at it from a positive angle.

Overall, the global economy lost a fair amount of steam last week as realization began to settle in that maybe no one really has an answer to the world’s economic malaise — at least, no one in charge. Stocks fell, churned upward briefly, and then fell again. Housing prices settled to stay in line with declining employment. Factory orders slumped … again. Both imports and exports are in decline, and even the mighty China’s engines have faded to far less than a factory roar as the big bird coasts down for a soft landing. So, it is no wonder the news seemed unusually full of people in high places starting, at last, to cast negative predictions about the economy for the remaining year and for 2013.

Everything is in a lull, waiting to see what happens in Greece, as European hopes are fading into the summer haze. European credit ratings can be heard falling everywhere like sand and pebbles down the dry sides of a canyon. Can you feel the economic doldrums that are settling in as the world waits to see what will happen in Greece … to see if Europeans can even solve their smallest problem? If Greece goes bad, the world is ready to run.

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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

06/03 Tokyo stocks hits 28-year low amid global rout Asian shares tumbled on Monday, pushing the broader Tokyo market to a 28-year low, as investors extended a rout of global stocks and worried about a nightmare scenario of euro-zone breakup, U.S. economic relapse and a sharp slowdown in China.

06/07 China’s sovereign wealth fund “scales back exposure to Europe” Chairman Lou Jiwei said, “There is a risk that the eurozone may fall apart, and that risk is rising.” Mr Lou also scotched speculation that China might buy eurobonds if and when they are launched. “The risk is too big, and the return too low.”

06/07 Stocks gain as China stimulates economy U.S. stocks rose Thursday after a surprise rate cut by China’s central bank and a successful bond auction by Spain cheered investors around the globe.

06/07 When the Chinese Cut Rates It’s Time to Worry “As the first rate cut since Dec 2008, the surprise move sends a strong signal that the government will be more active in supporting demand and stabilizing growth. We see this as a shift [that will increase] the chance for the economy to … rebound in Q3.”

06/08 COMMODITIES-Fed letdown, China data fears fuel slide Commodities fell on Friday, disappointed by the U.S. Federal Reserve’s reticence to jump in and stimulate the world’s largest economy amid worries that a surprise Chinese rate cut suggested its economy was performing even worse than expected.

 

Economic indicators and stock market responses in the news this week

06/03 Investors Brace for Slowdown The U.S. and China show fresh signs of slowing as troubles in Europe flare anew. Investors across financial markets have reacted with increasing alarm at the drumbeat of bad news from all corners of the world. Asian stocks were sharply down early Monday.

06/04 US factory orders decline again in April New orders at US factories fell for the second month in a row, adding to evidence that the world’s largest economy is weakening. Economists had expected a 0.1% rise.

06/04 Wall Street slips on economic, Europe worries Stocks fell modestly on Monday as investors reacted to the latest signs of economic slowdown and looked ahead to events this week that could ease Europe’s debt crisis. The decline extended Friday’s steep drop that wiped out the Dow’s gain for the year.

06/05 US Data: State Economies Grew Considerably Slower in 2011 Economies at the state level grew sharply slower in 2011 compared with 2010, mirroring the economic trend at the national level. Real gross domestic product at the state level grew 1.5% in 2011, only half the rate of 2010.

06/05 US stocks lose steam, even after upbeat services data US stocks traded flat on Tuesday, losing steam after stronger-than-expected growth data in the nation’s crucial services sector was eclipsed by Europe’s long-running financial crisis.

06/06 Asking Home Prices May Be Softening in Line with Employment Asking home prices may be softening in line with the country’s deteriorating jobs market, according to a new report. “Asking prices and employment both stagnated in May, yet one more reminder that the housing recovery depends on job growth.”

06/06 Dow Leaps 286 Points in Best Day of the Year The charge turned the Dow positive for 2012 and erased the biggest loss of the year less than a week after it happened: the 275-point plunge set off by a dismal U.S. jobs report on Friday. The big jump follows weeks of losses.

06/06 Fed survey finds US growth, hiring mostly steady The mostly upbeat survey offered a hopeful sign after last week’s more dismal data on hiring and manufacturing. Those reports sketched a picture of an economy that is slumping after a promising winter.

06/07 Initial Jobless Claims In U.S. Fell Last Week To 377,000 Fewer Americans applied for unemployment payments last week, indicating limited progress in the labor market after a two-month slowdown in hiring. First-time claims for benefits fell by 12,000. Half of the drop was due to revision of last week’s figure.

06/07 Wall Street Trims Early Gains After Bernanke Dashes Easing Hopes On Wednesday the stock market had its biggest gain of the year on hopes that more economic stimulus might be on the way in the U.S. and Europe, but the rally faded this morning after the Fed gave no signal of immediate action to prop up the U.S. economy.

06/08 Global Stall Speed? Imports, Exports Both Post Declines Both imports and exports dropping from record high levels set in March, a government report showed on Friday.

06/08 Stocks fall as Fed chief disappoints on stimulus Global stocks dropped Friday after the U.S. Federal Reserve’s chairman indicated there were no immediate plans to boost growth in the world’s largest economy, wiping out gains made on China’s surprise interest rate cut.

06/08 US cities struggle with blighted foreclosed homes In some areas half of bank-owned homes are in a blighted state.

 

Economic predictions / forecasts that made news headlines

06/04 Experts: Massive Summer Stock-Market Plunge Coming Again! Even if the U.S. does avoid a downturn, the possibilities are growing, which will send equities plunging. “There’s no question the economy is still struggling and still struggling a lot … I’m starting to fear summer,” says Diane Swonk, a chief economist.

06/04 World Bank President: World May Be Headed for Repeat of 2008 Financial Collapse Global financial systems will be doomed to repeat the 2008 financial crisis if policymakers fail to tackle the European debt crisis now, says Robert Zoellick, outgoing president of the World Bank. Greek exit contagion impossible to predict.

06/06 U.S. economy heading straight for the cliff Taxmageddon is coming while congress fiddles, avoiding action because of election politics. Credit-rating agencies, however, may lose patience before lawmakers stop putting themselves ahead of the nation … as they did during last summer’s brinksmanship.

06/07 BlackRock’s Fink: Good Chance Fed Will ‘Juice’ Economy but it Won’t Help Much The problem with monetary stimulus, Fink tells CNBC, is that rates are already low and banks awash in liquidity thanks to two past easing rounds. A third round would just lead to diminishing returns.

 

Euro crisis updates as the Great Recession goes viral

06/05 Europe’s Fade Becomes Drag on Sales for U.S. Companies As the Euro crisis intensifies, more companies in the United States are warning investors that sales in the region are slowing and could get much worse. President Obama reflected that Europe’s economy is “starting to cast a shadow on our own as well.”

06/05 Germany Is Open to Pooling Euro Debt, With Conditions Pressed by market turmoil, Germany indicated it is prepared to accept a grand bargain that would provide greater support for its most indebted euro zone partners in exchange for more centralized control. Changes on this scale could take years.

06/06 Act fast or break euro, Spain tells EU Spain’s prime minister is pleading for a direct eurozone rescue of the country’s banks to avoid the humiliation of a national bailout. Spain is warning that the euro will unravel unless leaders decide within weeks to centralize budget and tax policies.

06/06 Moody’s downgrades credit ratings of six German banks “Today’s rating actions are driven by the increased risk of further shocks emanating from the euro area debt crisis,” Moody’s said. Moody’s believes Germany would be hit if the euro crisis turned into a catastrophe.

06/06 Stimulus hopes spur stock, commodities rally U.S. and Europe shares rallied more than 1%, and the euro gained on Wednesday as European officials urgently explored ways to rescue Spain’s debt-laden banks and expectations grew major central banks would act to bolster a slowing global economy.

06/07 Could austerity be the right cure for Europe’s hangover? We might conclude [when we awaken after a binge] that drinking alcohol does not cause hangovers; stopping drinking alcohol causes hangovers. Sobriety does not work, it seems…. Governments feel no better when they sober up from a financial binge.

06/07 Fitch cuts Spain rating by three notches to “BBB” Fitch also put Spain on a negative outlook, indicating it is prepared to cut the Spanish credit rating even more. Fitch attributed the cut to foreign indebtedness.

06/07 Geithner, Bernanke Worried About Europe Banks U.S. Treasury Secretary Geithner and Federal Reserve Chairman Bernanke “were very worried about what was going on” with European banks, said Finland’s prime minister. “It’s such a difficult issue … I don’t have … a clear picture what should be done.”

06/07 Germany finalizing face-saving aid deal for Spain A deal is in the works that would allow Spain to recapitalize its stricken banks with aid from its European partners but avoid the embarrassment of having to adopt new economic reforms imposed from the outside, German officials say.

06/07 President Of Estonia Slams Paul Krugman: ‘Smug, Overbearing & Patronizing’ The president of Estonia chewed out Paul Krugman on Wednesday, using Twitter to call the Nobel Prize-winning economist “smug, overbearing & patronizing,” in response to a short post that questioned the lauded merits of Estonian austerity.

06/07 Spain bond auction: Borrowing costs break six percent Spain found strong demand for its bonds at an auction on Thursday, which was seen as a key test of the country’s ability to raise funds, but it came at the cost of raising interest to 6.044%, up from the 5.743% paid when bonds were last sold in April.

06/08 GLOBAL MARKETS-Stocks, euro fall on Spain bank worries Global stocks, euro and oil prices tumbled on Friday after hopes for more stimulus from central banks faded and with Spain expected to become the fourth and biggest country to seek assistance since the euro zone’s debt crisis began.

06/08 Greek GDP falls by 6.5 per cent in Q1 of 2012 Greece’s statistics agency says the country’s economy contracted by 6.5 percent in the first three months of the year compared to the same period in 2011, as Athens struggles through a financial crisis that has left it mired in a deep recession.

Federal Reserve actions tracked in the economic headlines

06/07 Bernanke says Fed ready to do more, but nothing imminent Federal Reserve Chairman Ben Bernanke told Congress Thursday that he expects the economy to grow moderately this year despite last week’s disappointing report on May job growth. Bernanke said the European debt crisis poses significant risks.

06/08 Fed and ECB to Politicians: Your Turn to Act After three years of unconventional policies to revive their economies from the recession, the U.S. Federal Reserve and the European Central Bank have shifted the onus to politicians. “He threw it right back at the politicians where it belongs.”

 

The Iranium Reaction as it makes and shakes the news

06/07 Israeli Military Chief: Israel super-ready to attack Iran if needed The IDF chief explained that “in order to be a credible military threat, we must be super-ready – and as far as I’m concerned, we’re super-ready.” He further added that Iran had yet to determine whether to use its nuclear capabilities for weapons.

 

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

06/04 Merrill Losses Before Bank of America Deal Top executives at Bank of America did not tell shareholders prior to the vote on its purchase of Merrill Lynch & Co. that losses were mounting and expected to weigh down earnings for years, papers filed in private shareholder litigation show.

 

Other economic updates / miscellaneous news articles

06/04 Be Safe — Buy Physical Gold and Stash It The risk of another Lehman-style crisis remains a constant threat. “It’s just a matter of time. This financial system is completely unsustainable. The level of interconnectedness, the level of misapplied incentives is again unprecedented in history.”

06/05 Expert Issues a Cyberwar Warning When Eugene Kaspersky, founder of Europe’s largest antivirus company, discovered the Flame virus that is afflicting computers in the Middle East, he recognized that the virus adds weight to his warnings of the grave dangers posed by cyberwarfare.

06/05 In Economic Deluge, a World That Can’t Bail Together By early 2009, financial markets had bottomed out and begun strong recoveries. Economies followed with slow growth last year, spurring hope that the crisis had passed. But within the last few weeks, much of that hope seems to have faded.

06/05 Krugman: This Republican Economy What should be done about the economy? Republicans claim to have the answer: slash spending and cut taxes. What they hope voters won’t notice is that that’s precisely the policy we’ve been following the past couple of years.

06/08 Gold extends sell-off after Fed disappoints Gold fell more than 1 percent on Friday, extending a sell-off from the previous session when the U.S. central bank chief gave no hint on imminent stimulus, disappointing investors and dampening the appeal of gold as a hedge against monetary easing.

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