Our Weekly Trip Around the Economic World – We’re All Back & Bailing Out European Banks!

February 18, 2012
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America is back! Ummm…..maybe not! Despite Captain Obama’s claim that we are at cruising altitude, I think the plane is off course, maybe even in a death spiral. The world seems to be on the brink of financial ruin and military disaster looms as Iran mobilizes its dream of bringing the 12th Mahdi to earth and Al Qaeda moves into Syria.

In terms of the U.S., the housing picture might not be so rosy. The banks, now that they’ve settled most of their grievances for alleged corruption are free to foreclose on the backlog of homes. It might be necessary in the short term, but it is still a bad case scenario.

Then we find out the taxpayers is subsidizing the bank mortgage corruption deal.

FT reports that U.S. taxpayers will subsidize the $40 billion settlement owed by five leading banks over robocalling and improper home seizures. The deal reduces monthly payments and loan balances for U.S. borrowers in trouble but there is a clause in the provisional agreement that allows banks to count future loan modifications towards their restructuring obligations for the new settlement. The home affordable modification program provides taxpayer funds to arrange the loan modifications.

Then there is the massive inflationary practices of the feds. Just look at our great balance sheets coming out of the Feds on the graphs below, just don’t look too closely as what is making it look so “fat.” Unfortunately, we did not suddenly become wealthy.

The feds use junk fillers, printing presses, and unbacked funds to bolster their alleged assets.

The following graphs show a history of the Fed. As you’ll surely glean from the charts below — the Fed has degenerated from a by-and-large passive institution (dealing only in high-quality self-liquidating commercial paper and gold) to an active pursuer of junk, an enabler of wars, a ‘benevolent’ combatant of the depressions of its own creation, a central planner of employment & prices and of course a forgiving friend to inconvenient market follies.

Fear not our unemployment numbers from the Bureau of Labor Lies paints a rosy picture. -we’re baaack!

We’re so not back!

…Another White House problem comes from this in the CBO report: “The share of unemployed people looking for work for more than six months — referred to as the long-term unemployed — topped 40% in December 2009 for the first time since 1948, when such data began to be collected; it has remained above that level ever since.”

The CBO data aren’t isolated. Gallup reports that its unemployment rate based on weekly surveys stands at 9%, while underemployment is at a hefty 19%.

Also threatening Obama’s re-election offensive is the nation’s shrinking labor force (see chart). Many laid-off workers, frustrated by grim prospects, have stopped looking for jobs and are no longer in the labor pool…Read here: Investors.com

This isn’t just our problem – the world is doing it. The world’s banks are massively printing money.

Marc Faber has said that governments around the world will print massively. Markets live on bad news. The worse the news gets, the more the U.S. and the European Central Bank and China will print money. Then the average person’s economy will go downhill but stocks and corporate profits will go uphill… - in Barron’s 2012 Roundtable

Europe is a shambles. Moody’s is downgrading them partly because they are not following through on reforms:

- Austria: outlook on Aaa rating changed to negative

- France: outlook on Aaa rating changed to negative

- Italy: downgraded to A3 from A2, negative outlook

- Malta: downgraded to A3 from A2, negative outlook

- Portugal: downgraded to Ba3 from Ba2, negative outlook

- Slovakia: downgraded to A2 from A1, negative outlook

- Slovenia: downgraded to A2 from A1, negative outlook

- Spain: downgraded to A3 from A1, negative outlook

- United Kingdom: outlook on Aaa rating changed to negative Read more: Moodys

Greece  especially is back – no, seriously, not even close and it changes daily -

…The neoclassical building that housed the Attikon cinema was one of the most beautiful in Athens, among the very few that reminded us of what our city could have become if we had respected its past, if we cared about its present and its future. Perhaps it was a fitting sacrifice – a symbol of our rush to destroy because we cannot create, an expression of our need to abandon memories and pass into the future, blackened with ashes and rage…Nikos Konstandaras

Fire At Attikon Cinema

Optimism is expressed by Euro leaders combined with statements of their being a long way away from a solution. That was a VERY tempered optimism.

European leaders expressed optimism on Friday that Greece would secure a new rescue package worth 130 billion euros ($171 billion) though policymakers admitted urgent work was still needed to get its debt-cutting program back on track.

Luxembourg’s Jean-Claude Juncker, who will chair a crunch meeting of euro zone finance ministers on Monday, said efforts to slash Greece’s debt from 160 percent of output to a target of 120 percent by 2020 were still “far away” from fruition. Read here; Reuters

The Greeks are worried about their self-image but should be more concerned about ceding their liberties and sovereignty for an entitlement check. The citizens do not make the decisions and the people running the Greek government were not even elected by the Greek people. Wouldn’t they rather be bankrupt than slaves?

…Athens needs the aid in order to prevent a default. But it has also created a dilemma for the Greek government. On the one hand, it must introduce radical austerity measures in order to get its finances under control. At the same time, these savings programs are also strangling economic growth, and the country’s economic prospects continue to deteriorate. Some economists are already forecasting that the slump will be twice as bad as the figures predicted by the troika. Composed of the European Commission, the International Monetary Fund (IMF) and the European Central Bank, the troika is responsible for assessing whether Athens has met the requirements for receiving its second bailout…

Germany’s DekaBank is predicting that Greece’s gross domestic product will shrink by 7.5 percent in 2012, an even further fall than that seen in 2011 and 2010, according to a report in Thursday’s edition of the Financial Times Deutschland newspaper. Again, the bad news syndrome making matters worse.

Sunk into a violent depression, Greece is being bled dry by an “incompetent” EU and its “callous” Economic and Monetary Affairs Commissioner Olli Rehn, accuses Peter Oborne, in a vehement broadside.

But then it happened! The miracle everyone waited for. Days before the final dissolution, the ECB blessed $639 billion USD down (in the form of a loan of course) on the 523 begger banks in Europe. Oh what is $639 billion USD when the alternative was for the governments to do the right thing and stop their downward spiral. 

The world beyond the U.S. and Europe -

Japan is doing well – as can be expected – since, like us, they continue to implement the same failed practices that didn’t work from the beginning. They are developing their assets out of air with a $130 billion QE program, 1% of inflation target. Their 4th Quarter GDP unexpectedly contracted 2.3%. Lawmakers are threatening to take over the monetary police (might be a good idea).

China is fine – scratch that – it’s a mess

…On October 11, 2011, China’s Central Huijin Investment firm (a state-owned entity) purchased shares in four major state-owned banks… China’s first bank bailout. Following the bailout, Chanos commented on Bloomberg television, “The fact that people are even talking about the government stepping in to shore up the banks, when two months ago people thought there was nothing wrong with the Chinese banks, should tell you just how seriously this situation is deteriorating.” Read here: S & A Digest

At least India is doing well. Actually, not really.

…The global economic crisis affects India. The third Asian economy is expected to grow only by 6.9% in 2011-12. That will be the slowest pace of expansion in tree years. In 2006 the growth was at the highest peak of 9.6%…Read more: Asia News Their food prices are still quite high.

And that’s it for our quick little jaunt around the world.

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