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Economic News Articles in The Great Recession Blog, week of 06/17/2012

Greece came together and fell apart in the same week; Spain went into free-fall; Germany’s Merkel dithered as if she owns time, itself … all while U.S. politicians did nothing but complain and campaign. While politicians all over the world could not agree on solutions, many of the world’s largest banks were substantially downgraded.

 

Economic news articles about the China Syndrome were in short supply

Economic news about China have been relatively sparse in the headlines over the past few weeks. That is partly because the rapid rise and fall of the European empire has dominated the news — especially last week after the election of a Greek government committed to tearing apart the Eurozone’s Greek bailout agreement, which took months of faltering meetings to come together in the first place.

I’d like to point out, though, that this short supply of headlines made in China is because China is not the critical news story that some hand-wringers have claimed it to be. To illustrate that, I need only point out the two headlines about China that did cross my radar last week. They underscore what I’ve said about China as a response to those who fear its fall.

One headline noted what everyone should be saying, which is that China intentionally put the brakes on its economy to get its runaway housing inflation in check. Apparently, the memory banks of economists run out of juice when they try to access anything further back than a few months because many of them have forgotten entirely that the slowdown of the Chinese economy was, I quote, a “desired effect.”

This time last year, news on China’s economy abounded with talk about China’s plan to slow down its economy in order to keep skyrocketing housing prices from going any higher — a completely opposite problem to what the Western world faces where all leaders are trying to prop housing prices up, rather than let the market correct itself to sane prices that no longer exceed one’s ability to pay off within a lifetime. Even with this planned slowdown now proving effective, the Chinese economy continues to cruise at a speed the U.S. government would have envied any time in the past fifty years.

Well, that is IF you believe Chinese government statistics, which I have always doubted. For as long as China has been paraded around as the economic wunderkind, I have said that all statistics about the growth of the Chinese economy are probably inflated. I mean, why would anyone trust a dictatorial communist government in anything it says to the world at large about its economy?

I have always felt that business leaders were absurdly enamored with China. Already, many who moved factories there for cheap labor are moving them back out. What fools to make such major (and socially upsetting) moves for such short terms.

An article last week mentioned a number of Chinese business executives who are now reporting that they are told to keep double sets of books in order to give inflated figures to the government for statistical purposes. Shocking! They say that is because the government wishes to keep the Great Recession from appearing so bad. Really??? (Hand over mouth in feigned shock.) Of course that is true!  Double books have been the standard business practice throughout China for generations! Shame on anyone who found that story to be news!

 

The rise and fall and rise and fall of Europe in last week’s economic news articles

Stock markets breathed a heavy sigh of relief upon last week’s opening when they learned that Greece had finally put a new government in place, then they went right back to worrying because the new Greek government made it abundantly clear that it is determined to renegotiate the Greek bailout agreement. In other words, it turns out nothing was settled in the meetings that finally settled the current plan. It’s back up for grabs.

The agreement fell apart, even though the most bailout friendly party was elected and even though Greece gets 70% of its debt wiped off the balance sheet on the present agreement. Germany, as Europe’s apparent loan (and lone) task-master, made it clear that it will not budge on the required austerity measures and will not offer any other forms of desired help that other European nations are asking for. It is clear that Angela Merkel wears the pants in Europe. Nothing the Eurzone needs happens without her consent, and no one in Europe has been strong enough to wring that consent from her hands.

As a result of last week, everyone from George Soros to Italy’s prime minister is saying that Europe has only one week (the current one) to get its house in order. That falls on deaf ears with Merkel who continues to talk about five and ten-year plans as if the Eurozone will continue to exist that far out if she does not agree to a plan right away. She apparently believes that time is on the side of the righteous as she seeks to get people to live within their means as every good German knows people should do. Her noble plans require establishing all the right checks and balances and political structures to make sure that Germany has control over European finances if German funds going to be used to save the Eurozone. That will take years of ammending the treaties that create the Eurozone and the EU, itself, into a more homogenous structure, as such agreements must be voted on by every nation.

This illustrates what I (and apparently the wiser leaders of the United Kingdom) have said all along. The Eurozone is destined for self-destruction precisely because it does lack the complete integration of societies that is necessary for them to all operate off a common currency. It is only natural that Germans are unwilling to put their entire economic security at risk to bail out the profligate Greek government that lied in order to gain entrance in the E.U. in the first place. It is only natural that German people are unwilling to stake Spanish banks that are certainly failing because Spanish people took out so many home loans they couldn’t afford while German people apparently lived within their means. It is only natural that they do not want to go down together for each other’s sins. That has been the obvious flaw in the euro from day one.

At the end of the day European nationalism is far greater than euro-centrism. If it comes down to be a European or being a German, Germans will pick being German. Greeks will not.

 

The rise and fall and rise and fall of global stock markets in economic news articles of the week

The U.S. stock market runs on laughing gas because no real economy fuels it. Instead, the stock market is fueled by speculative fiat money created out of thin air by the Fed. In other words, the U.S. stock market now runs on the fumes money. It is nitrous oxide injected. That is why it is so volatile. Purchases are not being made by long-term traders who base their decisions on the long-term health of companies to grow in a stable economy. They are made on the basis of guesses about what folly the Fed will try next or what nation will be next to print more money … or whether Greeks will choose to act like Greeks or like Germans.

Stock markets have become a game of guessing about government intervetions. There has always been some of that, but now that’s all that’s left — fumes. When investors foolishly thought over the past couple of weeks that the Fed would juice the economy, they bid the market up into a rally, but the rally faltered in just a few days because the Fed announced it has nothing new up its sleeve and is going to do as little as possible. The entire rally was about nothing more than baseless hopes that superman would save the day. Since the market gets its fuel now days from the Fed’s funny money, it rises or falls on the Fed’s word.

In the markets of this world that actually do matter, U.S. manufacturing was down, jobs were solidly down, CEOs announced diminishing profit expectations due to Europe, the largest banks in the nation were significantly downgraded (seriously compounding their troubles), and used housing purchases were down as were new home starts, but new permits were up. I expect housing to continue to rock up and down on the waves because prices want to fall more, and there are many foreclosures to come, but the economic dinosaurs of this world are doing all they can to re-inflate the old housing bubble with record-low loan rates.

 

In short, the U.S. economy entered the summer doldrums exactly with the timing I have been predicting all year long, and Europe appears right on the cusp of the summer from hell as no one believes its summit this week is likely to bring a significant enough change to turn around the rapidly disintegrating European financial crisis. All of this bad news has pushed consumer confidence down to a minus eleven in Bloomberg’s poll. The doldrums are here.

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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

06/18 China property prices drop further raising growth fears Property prices in China fell further in May, indicating that government policies put in place to curb speculation are having the desired effect.

06/23 Chinese Data Mask Depth of Slowdown, Executives Say Prominent corporate executives in China and Western economists say there is evidence that local and provincial officials are falsifying economic statistics to disguise the true depth of China’s troubles.

 

Economic indicators and stock market responses in the news of the week

06/18 Market Rally Fades As Investors Turn Attention From Greece To Spain It hasn’t taken long for financial markets to heave sighs of relief about Sunday’s vote in Greece and then get back to worrying: “An early risk asset rally has faltered as traders turn their attention away from Greece and to rising Spanish bond yields.”

06/18 Oil off day’s high above $99 as Greek relief ebbs “The market is going to digest the Greek elections and once the initial euphoria dies down, we will see the market rebalancing and turning their attention to Italy and Spain,” said Jim Ritterbusch, president of trading consultancy Ritterbusch & Assoc.

06/18 Wall Street to open lower as Greek vote euphoria fades US stocks were poised for a lower open on Monday as initial enthusiasm over a victory for pro-bailout parties in Greek elections was overshadowed by rising Spanish and Italian bond yields.

06/19 Building permits at 4-year high, single-family housing starts up Builders broke ground on fewer homes in May, due mostly to plummeting apartment construction, but requested the most permits since September ’08. Housing starts last month dropped 4.8%. However, compared with May 2011, new construction is up 28.5%.

06/19 Employers Post Fewer Job Openings in Sign Hiring Will Remain Sluggish Employers in April posted the fewest job openings in five months, suggesting hiring will remain sluggish. Job openings can take one to three months to fill. The decline in openings coincided with a major plunge in hiring for both April and May.

06/19 Foreclosure activity remains muted in U.S. Few signs of any looming foreclosure wave emerged in May, although filings edged up 9% from a month earlier, but were down 4% from May 2011, the 20th consecutive month of year-over-year decreases. “It’s going to be a bumpy ride,” said RealtyTrac’s CEO.

06/19 U.S. Stocks Advance to One-Month High U.S. stocks advanced, sending the Standard & Poor’s 500 Index to the highest level in more than a month, as the Federal Reserve begins a two-day meeting to decide whether more monetary stimulus is needed to boost the economy.

06/19 Why stocks may be even riskier than you think There’s nothing to worry about if you ask Wall Street analysts who give advice on which stocks to buy. This famously cheery group says earnings, which appear at a standstill today, will start growing this summer, then leap 15%. [They’re dreaming.]

06/20 Oil Extends Decline As Inventories Reach Most Since 1990 Oil fell after the Energy Department said U.S. crude stockpiles rose to the highest level in almost 22 years and as investors awaited a Federal Reserve announcement on whether it will act to bolster the economy.

06/20 Public Workers Face New Rash of Layoffs, Hurting Recovery Since its peak in April 2009, the public sector has shrunk by more than half a million jobs. The losses appeared to be tapering off earlier this year, but have accelerated for the last three months, creating the biggest drag on recovery in many areas.

06/21 Big-name Profit Warnings Worsen Earnings Outlook Many bellwether companies, including two components of the Dow Jones Industrial Average, have come out in recent days with profit warnings, and the slowing in Europe has been cited as a major factor for those outlooks.

06/21 Bloomberg Poll: Americans’ Economic View Dims The fewest Americans in five months said the economy was improving in June, signaling the slowdown in employment is seeping into consumer psychology and pushing the Bloomberg monthly expectations gauge to minus 11 from minus 1 in May.

06/21 Home Resales Decline Sales of previously owned homes in the U.S. fell in May, suggesting that economic headwinds and a lack of available lower-priced properties may be holding back housing market’s recovery.

06/21 Manufacturing, Jobs Reports Add Up to More Bad News U.S manufacturing grew in June at its slowest pace in 11 months and hiring in the sector slowed as overseas demand for U.S. products waned. The number of Americans filing new claims for unemployment benefits was also little changed last week.

06/21 Mortgage Rates in U.S. Fall With 30-Year at a Record-Low 3.66% U.S. mortgage rates for 30-year fixed loans declined to a record low to an average rate of 3.66 percent from 3.71 percent last week. Low borrowing costs are combining with decreased home prices to lift demand and prompt builders to take on new projects.

can i order ambien online route of the year as bad news piled up. Economic readings in the U.S., Europe and China triggered a bearish recommendation from Goldman Sachs. “The news has been horrible out there.”” href=”https://www.idahopress.com/news/national/stocks-plunge-after-weak-manufacturing-reports/article_7c45d4cb-2ca9-5f04-b3e2-484f95f7db1c.html” target=”_blank”>06/21 U.S. Stocks plunge after weak manufacturing reports and Goldman call A quiet start on Wall Street quickly turned into the second-worst route of the year as bad news piled up. Economic readings in the U.S., Europe and China triggered a bearish recommendation from Goldman Sachs. “The news has been horrible out there.”

06/21 Why did home sales cool during key spring season? News delivered by the National Association of Realtors means the housing market was not as robust during the important spring season as forecasters had predicted. Sales of previously owned homes fell by 1.5%. Foreclosures have just begun to rise again.

06/22 Oil, U.S. stocks bounce back from Thursday’s losses Oil bounced from 18-month lows on Friday as investors shifted their focus to efforts to resolve Europe’s debt crisis, while U.S. stocks rebounded from the second-worst decline of the year.

 

Economic predictions / forecasts that made news headlines

06/23 Bad news: World is sliding into a new recession Many nations have struggled to emerge from the Great Recession of 2008-09; yet the world is slipping into a new recession. No global authority has dared say so, but the writing is on the wall. Today’s commodities crash is a classic indicator.

6/23 Target: 2015 Get ready for 2-1/2 more years of slog – and that’s the optimistic view. That’s the message in increasingly definitive tones from central bankers, politicians, and economists. It won’t be until 2015 – if then – that the world emerges from the long slump.

 

Euro crisis updates as the Great Recession goes viral

06/18 Economic week ahead: Postponing the reckoning Markets breathed a collective sigh of relief on Sunday as Greece’s pro-austerity New Democracy Party placed first in parliamentary elections — likely to reassure markets now, but does little to change the fundamental problems confronting the eurozone.

06/18 European banking stocks fall despite Greek vote result Bank stocks fell sharply all across Europe, despite the victory of the pro-bailout New Democracy party in Greece’s elections on Sunday, and Spanish bond yields remained volatile, rising through the 7% danger level.

06/18 Greece’s New Democracy seeks bailout coalition Greece’s conservatives are close to forming a new coalition government following a narrow election victory, a party official said on Monday, after their leader promised to soften the country’s punishing austerity program despite German opposition.

06/18 Hollande’s socialists storm French Parliament Francois Hollande’s party has won an absolute majority in Parliament, giving him a free hand to implement a socialist solution to France’s woes. The left now holds a historic concentration of power as it controls both the assembly and the senate.

06/18 Pro-euro Greek right tries, again, to form government Antonis Samaras has three days to cobble together a government after parliamentary elections Sunday put his party in first place. The party that came in second, the radical left group Syriza, said Monday it would not back him.

06/19 EU Will Renegotiate Bailout Terms With Greece, Official Says The Greek debt deal is back on the table for renegotiation by all parties because circumstances have changed greatly, though German Chancellor Angela Merkel has said loosening Greece’s promises would be unacceptable. Proof the Greek deal is never done.

06/19 Germany Resists Concessions To Greek Bailout Terms At the G-20 summit, German Chancellor Angela Merkel reiterated her tough line that bailout terms for Greece are not negotiable. After the summit, Merkel returns to a German electorate that is now fed up with a debt crisis that only seems to grow worse.

06/19 Spanish borrowing costs jump at debt auction While Madrid raised its intended 3.04bn euros, the interest rate payable rose from 3% at a similar debt sale of 12 and 18-month bonds on 14 May to 5.1%. Spain also announced Spanish bank audit reports will be delayed in their release by 2-3 months.

06/20 Europe muddle thickens as leaders fail to step up “I think [Merkel] will remain an incrementalist: we have not yet reached the point where it is obvious … we are hanging over the precipice…. What is going to come out is going to temporarily pacify markets until it is clear that it is not … sufficient.”

06/20 Greece clinches coalition deal to battle bailout Conservative leader Antonis Samaras was sworn in Wednesday as prime minister of a new Greek coalition, taking up the challenge of trying to revise the Eurozone’s unpopular bailout deal. His coalitions partner pledges to “carry out a major battle.”

06/20 Spain Sees No Need for Bailout as Rates Ease a Bit Spain’s Finance Minister says Spain “does not need to be rescued.” However, after years of insisting its banks were among the healthiest in Europe, Spain recently acknowledged it will need a rescue package to protect banks from a property boom that went bust.

06/21 Debt crisis: EU leaders set to announce €750bn Spain and Italy bailout deal Pan-European Government funds may buy Spanish and Italian bonds. “We must show a much faster capacity for action,” Mr Hollande said. Under the proposed deal, two European rescue funds will be able to buy bonds issued by beleaguered European countries.

06/21 Fragile Dutch economy at mercy of euro crisis The Dutch economy, struggling to escape recession, will face years in the doldrums if Europe’s political leaders fail to put together a package of measures to contain the region’s debt crisis, a government advisory body said on Thursday.

06/21 New Greek government aims to revise bailout Having campaigned as the best leader to reassure European partners that Greece would be a reliable partner, Prime Minister Antonis Samaras has spent the days since Sunday’s election promising to revise a bailout deal painfully hammered out in March.

06/21 Spain’s long-term borrowing costs eased, giving short-lived rise to Euro stocks Euro stocks spent most of the day in positive after Spain succeeded in selling 2.2 billion euros of various maturities, exceeding its target range of €1 billion to €2 billion. Yields on 10-year Spanish bonds dropped 21 basis points to 6.52.

06/21 Spain’s medium-term borrowing costs soar as EU ponders bank aid Spain’s medium-term borrowing costs spiraled to a euro-era record at an auction on Thursday, hours before an independent audit was due to reveal how big a capital hole in Spanish banks needs to be filled by a euro zone bailout. 5-year paper rose to 6.07%.

06/22 Germany Continues to Hold Back on Euro Rescue Italy, Spain and France made no progress at pushing Germany’s Merkel toward mutualizing sovereign debts of the Eurozone nations or even toward using bailout resources more flexibly. France’s president voiced impatience with Berlin’s reluctance.

06/22 Italian PM: we have a week to save the eurozone Mario Monti warned about the risk of indecisive results at next week’s summit of EU leaders. Faced with creeping economic paralysis, “the frustration of the public towards Europe would grow,” creating a vicious circle inside and outside the EU.

06/23 Germany’s Merkel Parries Push for Euro Debt Plan It’s Germany first, euro second for Merkel who won’t boost Spanish banks with German funds. She won’t agree to common Euro bonds where Eurozone nations pool their debt. She resisted using the bloc’s bailout funds to buy bonds of struggling nations.

06/23 Greece seeks to extend austerity measures deadline by two years Greece wants tax cuts, help for the poor and unemployed, a freeze on lay-offs and more time to cut its deficit under a plan likely to stir strong opposition at the European Union summit. The plan would undo many of Greece’s agreed austerity measures.

 

Federal Reserve actions tracked in the economic headlines

06/21 Fed Expands Operation Twist by $267 Billion Through 2012 The central bank will prolong the program through the end of the year, selling $267 billion of shorter-term securities and buying the same amount of longer-term debt in a bid to reduce borrowing costs and spur the economy.

06/21 Fed takes path of least resistance with new stimulus plan Rather than doing nothing, the Fed decided to do as little as it possibly could. Bernanke said the large number new developments since the Fed’s last meeting were “disappointing,” and he offered assurance that quantitative easing is still on the table.

06/22 Bernanke’s Twist Sharpens Year-End Anxiety Over Stimulus Federal Reserve Chairman Ben S. Bernanke has repeatedly warned lawmakers that a fiscal cliff threatens the economy a the end of 2012. Now he’s created a precipice of his own by timing Operation Twist to end at the same time as “Taxmageddon.”

06/22 Opinion: Fed Easing Doomed to Failure “How it ends is anybody’s guess. But just in simple terms, I think by avoiding the ability to clear [asset] prices at a normal low level as has happened in the past, the Fed is trying to step in and manage risk assets to too great a degree.”

 

The Iranium Reaction as it makes and shakes the news

06/18 Iran nuclear talks “intense” with no breakthrough Experts said a breakthrough was unlikely, with the US, China, Russia, France, Britain and Germany wary of concessions that would let Tehran to gain time to develop nuclear weapons capability. “The environment is not positive at all.”

06/19 Iran slams world powers’ plan for limiting its nuclear program Iran on Monday offered up a blistering critique of a proposal by six world powers to rein in Tehran’s nuclear program, marking another setback in efforts to find a diplomatic solution. Both sides are now weighing whether further talks make sense.

06/21 As Iran nuke talks fail, stage set for tougher sanctions EU foreign policy chief Catherine Ashton announced an indefinite pause in talks with Iran, saying talks should only be resumed if a low-level meeting in July finds enough common ground to warrant more. Officials acknowledged huge differences.

06/22 ‘Iran could have enough material for bomb within 4 months’ If Iran decided to produce an atomic weapon, “it would take them 35 to 106 days to actually have the fissile material for a weapon.” The enrichment rate is now “three times the rate of production prior to the Stuxnet virus.”

06/22 Ahmadinejad calls for ‘new world order’ without nuclear monopoly Ahmadinejad seemed to confuse talking about the right to nuclear energy with talk about the right to nuclear arms.

06/22 Israel says clock ticking after Iran talks failWith diplomacy at an impasse, Israeli leaders are satisfied by with the tough line taken by the West. “By the third meeting, you know whether the other party intends to reach an agreement or, alternatively, whether he is trying to play for time.”

06/22 No light at end of Egyptian tunnel for Israel While not an Iranian situation, Egypt’s political upheaval is creating unease for its neighbor, Israel, who is not waiting for the outcome of Egyptian elections. Desert defenses are being strengthened and strategy revised as a once stable relationship splinters, bringing more potential for conflict to the worlds oil pump.

 

Articles of Justice during the Great Recession

06/19 Complaints Against Banks to Be Published Online The new U.S. consumer watchdog agency is launching a website where the public will be able to view complaints made by credit card customers against specific banks and other lenders.

06/20 Bank of America Largest Source Of New Consumer Bureau’s Complaints BofA accounted for almost 13% of the 13,210 complaints, mostly about credit cards, to the bureau between July 21 and Dec. 31, 2011. JPMorgan and Citigroup each accounted for about 11%. Complaints will be made available to a public website today.

 

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

06/21 Moody’s downgrades a dozen of the biggest names in banking Moody’s Investors Service dealt a fresh blow to the financial sector, downgrading more than a dozen global banks to reflect declining profitability in an industry rocked by soft economic growth, tougher regulations and nervous investors.

06/23 A Sober New Reality in Credit Downgrades for Banks When a consumer’s credit score drops, it is hard to recover financially. Wall Street firms could face the same extended pain. The downgrades of the nation’s largest banks reflect a new sober era for Wall Street. BofA was rated just two levels above junk.

 

U.S. government actions and inactions in articles about the economy

06/21 G20 warns US over deficit amid fears it is the next crisis to hit America was given a rare warning from G20 countries not to botch its own deficit-cutting measures amid fears that the world’s biggest economy could fall off a “fiscal cliff” next year. The rebuke reflects increasing concern over America’s $15trillion debt

06/21 Pimco’s El-Erian: US Falling Behind On Policy Response “In continuing to act on its own, all the Fed will do is buy some time that will again be wasted by the country’s politicians. Meanwhile, collateral damage will mount, making the next policy steps even more excruciating.”

 

Other economic updates / miscellaneous news articles

06/18 Gold dips after pro-bailout parties set to win Greek vote Gold dropped early on Monday, with Greek’s pro-bailout parties on course to win a slim majority at Sunday’s election, calming fears of Athens leaving the euro zone and reducing bullion’s safe-haven appeal.

06/18 U.K.: More people plan to delay their retirement, says Saga Many people in their fifties appear to be planning to work past the current state pension age (SPA) of 65, research suggests.

06/19 Earth may be near tipping point, scientists warn Forty years ago, the Club of Rome caused a stir when it argued that there were limits to world growth. In 1968, Paul Ehrlich warned of the dangers of overpopulation in his book “The Population Bomb.” Where we are today “is what scientists saw in the ’60?s.

06/20 Schiff: I Won’t Apologize to Congress for FHA Comments “Congress wanted to replicate the very dynamic that helped create the bubble in single family housing, which ushered in the financial crisis of 2008, the great recession, and left taxpayers on the hook after the bubble burst,” says Schiff.

06/21 Gold prices fall more than 2.5 pct as Fed disappoints The Fed stopped short of unveiling more quantitative easing, disappointing gold bulls who hoped interest rates on U.S. treasuries would drop if the Fed started printing more money. Gold is on the brink of turning negative for the year.

06/21 Putin worried more about US dollar than euro “If we keep (half of reserves) in dollars … we would like to know what will happen with the dollar after the … presidential elections. [US] debt is 15 trillion! What will happen with the world’s main reserve currency? What should we prepare for?”

06/22 Bailouts Can’t Save Europe, Failures Must Go Bankrupt: Jim Rogers “This is how we got into World War II. Add debt, the situation gets worse, and eventually it just collapses. Then everybody is looking for scapegoats. Politicians blame foreigners, and we’re in World War….” His advice is to let failures go bankrupt.

06/22 Obama’s Approval in Freefall on Stagnant Economy President Obama’s approval ratings on his handling of the economy have taken a dip due to worsening economic conditions. Just 33% of Americans believe the president is doing a “good” or “excellent” job when it comes to the economy, sdown from 41% in May.

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