Economic News Articles Tracked Daily in The Great Recession Blog, Week of 08/05/2012
The headwinds for the economy look formidable as you read the economic news during these dog days of summer. Israel is pushing harder every day for an attack on Iran that would drive up oil prices just as food prices are already on the rise due to the most severe U.S. drought in my lifetime. News has just come out that Iran appears to have made more efforts in the direction of weaponizing its enriched Uranium than the U.S. previously knew about. Israel this week, is now handing out huge numbers of gas masks and running drills with its citizens for missile attacks.
Economists by and in large had forecast 2-3% economic growth for the U.S. in 2012. (I, of course, strongly disagreed with the majority opinion at the beginning of the year when my view was unpopular.) We now know that the first half of the year came in at about half the growth economists had forecast.
While there are currently a few positive signs in auto sales, housing and jobs for the remainder of the year, a deeper look at jobs data shows the information is not as uplifting as some have found it to be, and housing news is as mixed with negative as positive. The upper end of the housing market has been taking a dive all year.
Growth is falling off in China and Japan. The stock market is now running on the fumes of quantitative easing (free money for banks) so that it goes up whenever bad news increases … as if the financial world has turned upside down. Gasoline prices are on the rise, even before a conflict with Iran, at a time when they usually would be declining. Again, as if the world has turned upside down. Is it any wonder consumer sentiment is falling quickly just as it did at this time last year?
This year, in fact, is looking like an instant replay of last year, but this year’s clouds on the horizon are as ominous as the superstorm that blew through New York City in July. We now stand on a fiscal cliff that looks a lot like the bluff we fell off of last August when the stock market plunged due to the brinkmanship between Republicans and Democrats over the national debt ceiling and due to the Greek debt crisis and the slow European responses to that crisis.
Only this year the brinksmanship is over the even worse “fiscal cliff.” The problems with Greece have returned darker this year than we saw last year, too, while Spain and Italy stand closer to the brink of disaster, not further. Last year no leader in Europe wanted to even breathe out the possibility of a Greek exit (Grexit) from the euro. This year, many European leaders are talking openly about Grexit is a recoverable likelihood, as though they have resigned themselves to the inevitability of such thing and are seeking to put the best face on it they can.
All the while, Europe is moving as slowly as ever in overcoming its problems. In part, it must work slowly because the obstacles to rapid change in a crisis are built into the euro system (which is half the reason the euro is doomed), but Europe doesn’t have to work this slowly. Its leader needn’t take a vacation while the euro burns. They operate just as they did last year … under the delusion that markets will follow their actions, not precede them.
Come to think of it, that’s exactly how the Republicans and Democrats are acting with response to the fiscal cliff.
In short, nothing is better about our situation this summer, other than those phantom glimmers in the housing market. We face all of the worst issues we faced last year, but they are now in even worse condition, and we have added new issues (like Iran and China) to them. The economic news reads like “deja vu all over again,” but it is deja vu on steroids.
Recap of economic news articles on The Great Recession Blog last week
(The current week’s news is posted in the right sidebar each day.)
China syndrome — following economic news of the Great Recession to the Great Wall
08/09 China export and import growth slows sharply in July China’s export and import growth slowed for the second straight month in July, raising fears about the the world’s second-largest economy. Exports rose by 1% from a year earlier, down from 11.3% growth in June, amid slowing demand from key markets.
08/10 China’s slowing economy could complicate relationship with U.S. China is turning to policies that benefit its economy at the expense of the U.S. It surprised observers by allowing its currency to lose value against the dollar, making its exports cheaper. Calls inside China are heard to lower the renminbi more.
Economic indicators and stock market responses in the news of the week
08/05 Wait, the U.S. economy actually lost 1.2 million jobs in July? The U.S. economy lost 1.2 million jobs between June and July. But that’s not how it got reported. When the Bureau of Labor Statistics released its jobs figures for July, it said the economy gained 163,000 jobs. So what gives?
08/06 Bank Loans at Post-Recession Peak Support US Growth Borrowing by consumers and businesses rose in the week ending July 25 to $7.1 trillion, within 2.9 percent of its October 2008 peak, according to Federal Reserve data. New lending for autos jumped to $134.3 billion in the first four months of the year.
08/06 Economic week ahead: Craving bad news? Analysts expect plenty of negative data this week, but will be watching to see just how grim things appear. Will they be just bad enough to prompt Eurozone and central bank policy responses? Speculation about that will be as important as the data.
08/06 U.K. House prices stable says Halifax, though market is falling Its latest monthly survey shows that prices fell by 0.6% in July compared with June. Halifax said: “The underlying trend in house prices was flat in the three months to July compared with the previous three months.”
08/06 Wall Street closes at 3-month high on hopes for Europe US stocks closed at three-month highs for the second day in a row on Monday, extending last week’s rally on the hope for more assistance for the troubled euro zone. Spanish bond yields fell to 3.42 per cent on Monday, half of a late July high over 7%.
08/07 Employers post the most job openings in four years The Labor Department said Tuesday that job openings rose to a seasonally adjusted 3.8 million in June, from 3.7 million in May — the most since July 2008. Layoffs also fell. The data follow Friday’s report that said employers in July added 163,000 jobs.
08/07 San Bernardino, California, files for bankruptcy with over $1 billion in debts San Bernardino recently became the third California city to seek protection from creditors. The three cities will be major test cases of whether cities in financial trouble can be allowed to renege on their bond debt and pension obligations.
08/08 Fannie Mae, Freddie Mac gains show housing market may be turning corner Fannie and Freddie, which were taken over by the government in 2008 and received the largest bailout of the financial crisis, are at the center of a heated debate over whether the government should continue to subsidize homeownership.
08/09 Experts: Gasoline Prices Poised to Keep Soaring in Blow to Obama The national average of a gallon of regular unleaded gasoline has risen by more than 27 cents in a month, which doesn’t bode well for President Barack Obama. Pipeline leaks, refinery fires and growing fears of a European collapse are to blame.
08/09 Long Road to US Housing Recovery Because of Tighter Supply Many homeowners remain saddled with properties worth less than the amount they owe banks. This means they cannot afford to sell their houses, even if they wanted to. “There is plenty of demand out there, but not much supply.” So, sales value remains low.
08/09 U.S. Jobless Claims Unexpectedly Fall as Labor Market Mends Six-thousand fewer Americans filed for unemployment benefits last week, a sign the labor market may keep improving after employment picked up in July. Fewer firings mean employers are seeing enough demand to retain staff, indicating “sustained recovery.”
08/10 Asian shares pause as markets’ policy hopes grow stale Investors took stock of a four-day rally driven by optimism that authorities will soon take steps to ease the euro crisis — optimism yet to be borne out by action. “Stocks are overheating and profit-takers will cool things down in the mean time.”
08/10 Fed Forecasters Cut Growth Targets as High Unemployment to Linger The Philadelphia Federal Reserve’s third-quarter survey of 48 forecasters showed economists expect gross domestic product to grow at an annual rate of 1.6 percent this quarter, down from May’s estimate of 2.5 percent.
08/10 US gas prices spike; refinery problems cited Production outages in South Sudan and the North Sea, Western sanctions that have cut the flow of Iranian oil, Iran’s threat to block tankers , and fears that the violence in Syria could escalate into a wider regional conflict have driven up oil prices.
08/11 CNN Survey: More Americans Think Economic Conditions Are Worsening The portion of those who believe the economy is starting to recover dropped from 24 percent to 19 percent, and those who think the economy is still getting worse increased from 33 percent to 39 percent.
08/11 Home Prices Rise In 75% Of U.S. Cities In Second Quarter Prices of single-family homes climbed in three-quarters of U.S. cities as values nationally jumped the most since 2006. Median sales price increased in the second quarter from a year earlier in 110 of 147 metropolitan areas measured.
Economic predictions / forecasts that made news headlines
08/11 Author Harry Dent: Fed Tactics Won’t Save US From Unavoidable Recession “We have this epic battle: the economy wants to slow, debt wants to deleverage and consumers want to save and get back into balance and governments are saying ‘No, we have to keep the bubble going….’ They are going to fail and we say it’s inevitable.”
08/11 WSJ’s Wessel: ‘Fiscal Cliff’ Will Permanently Damage Investor Confidence Any decision by lawmakers to address a fast-approaching combination of tax hikes and spending cuts retroactively after elections won’t repair the damage the so-called fiscal cliff will inflict on the country’s confidence, said a Pulitzer winner.
Euro crisis updates as the Great Recession goes viral
08/06 Euro down vs most major currencies on doubts about ECB plan Doubts resurfaced among investors about the potential effectiveness of measures pledged by European policymakers to resolve the euro zone debt crisis. Many see more pain for the euro zone before a resolution to the crisis is reached.
08/06 Euro Falls From Three-Week High Versus Yen on Euro-Bloc Threat The euro fell from its strongest level in three weeks after Italy’s P.M. said divisions within the bloc are threatening the Union’s future. The U.K. pound fell to a one-month low against the euro after U.K. reports showed weakness in the housing market.
08/06 Italy’s Monti warns Europe of ‘psychological break-up’ Italy’s Prime Minister Mario Monti warned of a “psychological break-up” of Europe that must be contained, saying the Eurozone crisis was creating national resentments that could damage the EU. Meanwhile, negotiations with Greece made “good progress.”
08/07 Greece’s new pledges will take epic battle to implement Greece’s latest fiscal and reform pledges may be enough to convince international lenders, weary after years of broken promises, to keep Athens hooked to a 130 billion euro lifeline, but the national battle to implement those pledges will be epic.
08/07 Italian economy contracts 0.7% in second quarter Italy’s economy shrank 0.7% in the second quarter as government austerity measures continue to create decline in everything from factory activity to consumer spending.
08/07 More talk of Greek exit from Eurozone: Grexit would be manageable “The way things look now, it would be a manageable process,” said the Eurozone finance ministers’ group chief Jean-Claude Juncker. “That’s not to say it would be a desirable occurrence because it would be linked to considerable risks.”
08/08 Bank of England to slash growth forecasts to near zero The Bank of England is expected to slash UK growth forecasts to close to zero from the 0.8pc predicted in May when it releases its quarterly inflation report later today. U.K. debt has spiked upward enormously at the same time unemployment has grown.
08/08 France to fall back into recession says central bank France’s economy will fall back into recession this quarter, the country’s central bank has predicted. The Bank of France estimates that the economy will contract by 0.1% in July to September. It has already predicted the same for April to June.
08/08 Germany and Italy near blows over euro Relations between Germany and Italy hit the lowest ebb since WWII, with Italy publishing a front-page picture of Chancellor Merkel under the headline “Fourth Reich” and Germans saying “We Germans will not shut down our democracy to pay Italian debts.”
08/08 Germany’s buy levitra online exports decline in June on eurozone woes Germany’s exports fell 1.5% in June over May, especially those going to fellow eurozone countries, as sovereign debt woes in Greece and other nations continued to have a negative impact. Germany’s own consumption has also dropped.
08/08 Greece unlikely to get bailout funds before October Creditors remain at odds with Greece’s attempt to back away from austerity measures. As a result, their auditors will remain in Greece through September, delaying the next bailout payment, making it near impossible for Greece to pay its bills now.
08/08 Greeks withdraw savings in national “bank jog” Economists have dubbed the collected effect of worried Greeks taking money out of savings accounts a “bank jog,” not quite a run but still a deliberate trend in the same direction.. Few Greeks have the stomach to stick with the euro much longer.
08/09 European investors bank on third ECB cash boost Eight-two percent of European investors think the outlook for European banks is deteriorating and a large majority expect them to need another major cash transfusion from the European Central Bank, Fitch Ratings said on Thursday.
08/09 Pimco: Flow of Investor Money Out of Europe Signals ‘Another Storm’ Coming “There are growing signs that the crisis of confidence in the euro zone has assumed a new dimension…. Whereas initially investors fled to the safety of the euro zone’s core, now they are taking their capital out of the eurozone altogether.”
08/10 Euro founder admits some nations may be forced to leave Otmar Issing, a former European Central Bank chief economist, warned that the eurozone could be heading towards fracture. “How many countries will be able to be part of it in the long term remains to be seen.”
Federal Reserve actions tracked in economic news headlines
08/06 Bernanke Says Economic Data May Mask Individual Suffering “Even though some key aggregate metrics … have moved in the direction of recovery, it is clear that many individuals and households continue to struggle with difficult economic and financial conditions.” Bernanke suggested more attention to microdata.
08/06 Bill Gross: “Normal” Economic Growth Impossible Now The “King of Bonds” said investors will flat-out lose money if they continue with past “buy and hold” strategies. “Financial repression, QEs of all sorts and sizes” and low interest rates will “dominate the timescape” for decades.
The Iranium Reaction as it makes and shakes the news
08/06 Former Israeli spymaster: Iran should be worried A former Israeli spymaster cautioned Iran not to dismiss Israel’s talk about possibly attacking Iranian nuclear facilities. The next 12 weeks will be “very critical” to Israel’s decision. “Israel’s threats sound serious and credible to me.”
08/06 Syria moves missiles to Lebanese border The Syrian army has moved new surface-to-air missile batteries to the Lebanese border where Hezbollah is located. Israel warned it will strike Syria’s chemical facilities if President Bashar Assad transfers his chemical stockpile to Hezbollah.
08/06 Syrian prime minister has defected with family and three other ministers Syria’s prime minister defected and fled to neighboring Jordan, a Jordanian official and a rebel spokesman said Monday, evidence that the cracks in President Bashar’s Assad’s regime have reached the highest echelons of government.
08/07 ‘Ahmadinejad anti-Semitic rant a wake up call’ The Iranian president recently said the ultimate goal of world forces must be the annihilation of Israel. The spokesperson for Israel responded that these words should erode any doubts in the world as to the “true character of the Iranian government.”
08/07 Iran sending thousands of fighters to Syria, says rebel leader Col. Abdul-Jabbar Mohammed Aqidi, the commander of rebel forces in Aleppo province, was quoted in Al Arabiya, saying that 3,000 Iranians passed through Damascus International Airport in the last week. Iran’s Defense Minister denied the report.
08/07 Iranians should be ‘very fearful for next 12 weeks,’ says ex-Mossad chief. Israeli threats ‘credible, serious’ The former Mossad chief who said in March there would be “nothing else left” but a resort to force if diplomacy with Iran did not quickly produce a breakthrough, hinted that the moment of truth on Iran’s nuclear drive is now imminent.
08/07 New intelligence reveals Iranian military nuclear program advancing faster than previously thought Western diplomats and Israeli officials say the U.S., Britain, France, Germany and Israel agree that Iran has made greater progress on developing components for its nuclear weapons program than the West had previously realized.
08/07 Saudi invites Iran for extraordinary Muslim summit Saudi King Abdullah invited Iranian President Mahmoud Ahmadinejad for an extraordinary summit of Muslim leaders to be held this month in the holy city of Mecca. Saudi Arabia called for the summit in a bid at “unifying the ranks” of Muslims.
08/07 Syria crisis: Iran pledges support for ‘vital partner’ Iran’s security chief told President Assad that “Iran will not allow the axis of resistance, of which it considers Syria to be an essential part, to be broken in any way.” Iran considers itself, Syria, Hezbollah in Lebanon and Hamas to be “axis” allies.
08/08 Netanyahu: If Iran goes nuclear, it may actually use bomb Netanyahu said that he sees “the regime of the ayatollahs declaring what it has etched on its banner – to destroy us. It is working to destroy us, and is preparing atom bombs to destroy us. As much as it is dependent on me, I will not let that happen.”
08/09 Israel fears UN chief’s visit to Iran will undermine efforts to thwart nuclear program The Secretary General’s office is planning to join an Iran summit in Tehran, which will include meetings with both Iranian President Mahmoud Ahmadinejad, who will serve as chairman of the summit, and possibly with Iran’s Supreme Leader, Ali Khamenei.
08/09 New U.S. intelligence report raises urgency over Iran’s nuclear program Israel’s Defense Minister Barak said that a U.S. intelligence report is “being passed around senior offices,” and that this report has brought the U.S. position over Iran closer to the Israeli position, and made the issue more urgent.
08/09 Obama has made Netanyahu an offer he can’t refuse In spite a great deal of bad mouthing about him, the U.S. president has proven no less committed to Israel’s security than Bush. His promises include a $205-million grant to purchase missile defense systems, and an impressive list of items.
Articles of Justice during the Great Recession
08/07 Wells Fargo’s Potential Legal Losses Increased in Second Quarter Potential losses from legal and mortgage-related issues rose 30% in the second quarter to $1.2 billion –a sign residual trouble from the financial meltdown is easing but not over. [How is a huge rise in legal expenses a sign the meltdown is easing?]
08/09 US Drops Goldman Sachs Financial Crisis Probe The U.S. Justice Department said it will not pursue criminal charges against Goldman Sachs or its employees related to accusations that the firm bet against the same subprime mortgage securities it was selling to clients.
U.S. banking / financial crisis as it shapes the economic news of our times
08/06 Standard Chartered may lose NY license over Iran ties New York State said the bank “schemed” with the Iranian government and hid from law-enforcement officials 60,000 secret transactions and exposed the U.S. banking system to terrorists, drug traffickers and corrupt states.
08/07 Standard Chartered Falls Most in 24 Years on N.Y. Iran Probe London bank Standard Chartered stocks plunged 16% after an analyst estimated it may face costs of $5.5 billion after being accused of violating U.S. money laundering laws in its dealings with Iranian banks. Standard denies it is a bad bank.
08/08 Lawsky’s ‘go it alone’ attack on Standard Chartered angers US regulators Mr Lawsky’s report, full of colourful language alleging “fraud” and a “staggering cover up”, threatens to rewrite the rules on how foreign banks settle such cases. In the past they have been almost choreographed with public shaming kept to a minimum.
08/09 TARP Inspector General: Obama Being Too Soft on Big Banks Today’s regulations designed to curb financial excess, including the Dodd–Frank Wall Street Reform and Consumer Protection Act, are making the same mistakes that TARP made by failing to reduce the size of too-big-to-fail banks.
Other economic updates / miscellaneous economic news articles
08/05 Global crisis forces reverse migration by up to 30 per cent With concerns over the global economic situation and reports on growing unemployment, there is a rise in reverse brain drain by up to 30 per cent, according to experts.
08/05 Opinion: Romney tax plan on table. Debt collapses table. I can describe Mitt Romney’s tax policy promises in two words: “mathematically impossible.” Those are the words of the nonpartisan Tax Policy Center, which has conducted the most comprehensive analysis to date of Romney’s tax plan.
08/05 Is Social Security still a good deal for workers? People retiring today are part of the first generation of workers who have paid more in Social Security taxes during their careers than they will receive in benefits after they retire. It’s a historic shift that will only get worse for future retirees.
08/06 Laid off by NASA, now cutting grass A lack of aerospace jobs led one former NASA worker to take a job cutting grass across from the Kennedy Space Center. What happens economically when government goes out of business?
08/07 Experts cut back 2012 gold price forecast further; silver founders Gold experts have further cut back forecasts for increases in the value of gold this year. The median spot price forecast has been cut to $1,685 an ounce from $1,750 projected in a similar poll earlier. Volatility is attributed to the length of the crisis.
08/07 Nobel Economist Paul Krugman is Still Selling a Fake Alien Invasion as a Boost to the Economy “If you actually look at what took us out of the Great Depression,” the Princeton University professor said, “it was Europe’s entry into World War II and the U.S. buildup that began in advance…. In this video, however, he also makes many good points.
08/07 Why won’t Romney release more tax returns? At a time when finance is the central issue in politics, Romney’s refusal to release tax returns more than two years old, appears to exempt him from the proud tradition of genuine financial candor with the electorate inaugurated by his father 40 years ago.
08/08 July Was Warmest Month On Record For U.S. July was the all-time warmest month on record for the United States in a period of record that dates back to 1895, 3.3 degrees above the 20th-century average. Scientists increasingly agree that these latest heat waves are a result of climate change.”
08/09 Drought tightens grip on top US farm states-climatologists Extreme drought has doubled its grip on Iowa, the top corn state, with no rain relief in sight. Iowa went from 30% of the state in extreme drought to 69% in just one week. 94% of Missouri and 81% of Illinois are in “extreme drought.” Heat is “intense.”
08/09 Gold on track for its worst yearly performance in more than a decade Investors banking on a third round of U.S. money-printing to push gold up are taking a risk. The price of gold is up just 3% in 2012, on track for its worst yearly performance in more than a decade, following a record-breaking 11-year bull run.
08/09 Goldman Leads Corporate Split from Obama, GE Jilts Him, Too. Four years ago, Goldman Sachs employees gave three-fourths of their campaign donations to Democratic candidates and committees, including presidential nominee Barack Obama. This time, they’re showering 70% of their contributions on Republicans.
08/09 Nobel Prize-winning economist blames recession on trickle-down economics that didn’t trickle Joseph Stiglitz fingers Goldman Sachs for breaking society trust, warns about “fetishism” over government debt and argues that a wider income gap leads to a weaker economy. Median wealth fell 40% while the economy wreckers walked off with millions.
08/09 U.S. drought drives up food prices worldwide “This is not some gentle monthly wake-up call, it’s the same global alarm that’s been screaming at us since 2008,” said Colin Roche, noting that the drought could cause food shortages for millions of people worldwide. In July, food prices jumped 6%.
08/10 In Superrich, Clues to What Might Be in Romney’s Returns – No Tax The ultrarich can and do reduce their tax liability to very low levels, even zero. The IRS released data from income tax returns of the top 400 in adjusted gross income. In a first-time startling disclosure six of the 400 paid no federal income tax.
08/10 U.S. Postal Service Posts Big Loss as Cash Runs Low The U.S.P.S. reported a $5.2 billion quarterly loss and said it was nearly out of cash and likely to exhaust its government credit line in coming months. The agency said the loss was its widest since it began releasing quarterly financials in 2007.
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