The Coming Economic Armageddon: Real Unemployment at 19% In US, Japan GDP halved, IMF chief warns perils of fiscal cliff, China’s export unexpectedly contracted, ECB’s bond plan is a devout wish, The Baltic Dry Shipping Index is heading to ZERO!
Mortimer Zuckerman: We are experiencing, in effect, a modern-day depression and those jobless numbers are even worse than they look
Still above 8%—and closer to 19% in a truer accounting. Here’s a plan for improvement.
Don’t be fooled by the headline unemployment number of 8.1% announced on Friday. The reason the number dropped to 8.1% from 8.3% in July was not because more jobs were created, but because more people quit looking for work.
The number for August reflects only people who have actively applied for a job in the past four weeks, either by interview or by filling an application form. But when the average period of unemployment is nearly 40 weeks, it is unrealistic to expect everyone who needs a job to keep seeking work consistently for months on end. You don’t have to be lazy to recoil from the heartbreaking futility of knocking, week after week, on closed doors.
We are experiencing, in effect, a modern-day depression. Consider two indicators: First, food stamps: More than 45 million Americans are in the program! An almost incredible record. It’s 15% of the population compared with the 7.9% participation from 1970-2000. Food-stamp enrollment has been rising at a rate of 400,000 per month over the past four years.
Second, Social Security disability—another record. More than 11 million Americans are collecting federal disability checks. Half of these beneficiaries have signed on since President Obama took office more than three years ago.
These dependent millions are the invisible counterparts of the soup kitchens and bread lines of the 1930s, invisible because they get their checks in the mail. But it doesn’t take away from the fact that millions of people who had good private-sector jobs now have to rely on welfare for life support.
Gross domestic product grew an annualized 0.7 percent in the three months through June, the Cabinet Office said in Tokyo today, less than a preliminary calculation of 1.4 percent. The median forecast of 26 economists surveyed by Bloomberg News was for a revised 1 percent gain. In nominal terms, the economy shrank 1 percent.
Italy’s gross domestic product contracted more than initially reported in the second quarter, indicating the country’s fourth recession since 2001 is deepening.
GDP contracted 0.8 percent from the previous three months, more than the 0.7 percent first reported by the National Statistics Institute. From a year earlier economic activity shrank 2.6 percent, more than the 2.5 percent first reported on Aug. 7, Rome-based Istat said today in its final report on second-quarter GDP.
Christine Lagarde has said the “US fiscal cliff” is one of the greatest threats to the global economy.
Speaking at the Asia-Pacific Economic Co-operation Summit in Vladivostok, Russia, the head of the International Monetary Fund said the US tax increases and spending cuts that come into effect in the new year, were one of the largest risks to the global economy.
She also named the eurozone crisis and medium-term public financing, as the two other greatest risk factors.
hina posted a wider-than-expected trade surplus in August as imports unexpectedly contracted from the year-ago period, suggesting anemic domestic demand, according to data released Monday.
Exports exceeded imports by $26.7 billion during the month, beating expectations for a $17.2 billion surplus in a Dow Jones Newswires survey of economists.
Monthly exports rose 2.7% from a year earlier, indicating relatively weak overseas demand, with the gain missing a 3% projection from a Reuters poll of economists.
But imports surprised by dropping 2.6% from August 2011, failing expectations for a 3.4% increase from the Dow Jones Newswires survey and a 3.5% forecast gain in the Reuters survey.
The cold douche begins. Markets will now learn that the European Central Bank’s bond plan is a devout wish, not a done deal. Europe’s political minefield lies ahead.
Nothing can happen until Spain and then Italy request a rescue from the EU bail-out funds (EFSF/ESM), and sign away their sovereignty. Nothing further can happen until an angry Bundestag approves the terms and signs away its money.
Germany has a 27pc voting weight and can veto any rescue.
Even less can happen if the German constitutional court issues a preliminary ruling on Wednesday blocking activation of the €500bn ESM fund. Morgan Stanley’s team – mostly Germans as in happens – put a 40pc likelihood on this happening.
This is not to belittle the ECB plan for “unlimited” bond purchases. The Jesuit-trained Mario Draghi has pulled off a masterstroke, securing the assent of every northern ECB governor except the Bundesbank’s Jens Weidmann, and crucially the assent of Germany’s board member Jorg Asmussen, and indeed Chancellor Angela Merkel herself.
Italy’s premier Mario Monti – a fellow `Jesuit’ – more or less confessed that this minor revolution could not have happened without the defeat of French leader Nicolas Sarkozy in May. The election upset broke the Franco-German axis and reordered the strategic landscape of Europe.
From Spiegel: “A survey shows that the majority of Germans hope that the judges in Karlsruhe reject the permanent rescue fund ESM. 54% want a reversal of the Bundestag decisions on the ESM and Fiscal Pact, which should be legally halted. Only 25% believe that the court should dismiss the urgent appeals of the Euro-skeptics.”
When the ECB announced its new plan to buy peripheral government debt in Europe (for the purpose of reducing yields) there was some concern over the fact that the purchases were going to be “sterilized.”
In theory what this means is that if, say, the ECB goes out and buys 50 billion EUR worth of sovereign debt, then somewhere else it will remove 50 billion EUR from the system so as to avoid inflation (and placate the Germans).
Some people wondered: What assets will the ECB sell in order to finance these purchases.
But the market was clearly not worried about this sterilization news, as evidenced by the big market surge on Thursday and Friday, as investors realized that “sterilization” is mostly for show, with little real impact on the amount of money in the system.
In a note from last December, JPM’s Greg Fuzesi explained how the ECB engaged in bond sterilization (this was in reference to the old SMP program, but the gist is the same.
Dante would be proud; the Baltic Dry Shipping Index has now plunged through at least eight levels of hell on its way to record lows as it drops to 666 today. This is the lowest since Feb 2012’s Chinese New Year lows and is a stunning 55 percentage points lower than the normal seasonal shift in the global aggregate trade indicator (and down 69% from its Oct 2011 swing high). Whether its over-supply, under-demand, or too many Chinese New Years, it is unarguably the next level of hell for the global economy – that will surely bring all the bottom-callers out as this time is different.
and if you thought it was just the Baltic Dry… here are the Cape, Banamex, and Supramax Indices… noneof which receovered at all from the 2008/9 crush in global trade…
The U.S. economy has already slid into a recession and stock markets are poised to enter an “Ice Age” marked by little activity and movement, said Societe Generale strategist Albert Edwards.
Hopes that the Federal Reserve will stimulate the U.S. economy via a third round of quantitative easing have pushed stock prices up in the recent past, and not…
Greece’s foreign lenders have rejected parts of a €12bn (£9bn) austerity package prepared by the government, Greek officials said on Sunday as the two sides resumed talks after a month-long hiatus.
The so-called “troika” of inspectors from the European Commission, the European Central Bank and the International Monetary Fund returned to Athens on Friday to conclude a report on Greece’s progress in meeting the terms of its latest bailout, Reuters reported.
The inspectors, who held talks with Greece’s finance minister on Sunday, must approve the plan to trim roughly €12bn from the state budget over the next two years if Athens is to get a green light for the bailout money it needs to avoid bankruptcy.
OFFICIAL QE3 IS IMMINENT- THOSE WHO DON’T UNDERSTAND CURRENCY DEBASEMENT WILL BE SLAUGHTERED LIKE PIGS!
Greg Mannarino discusses his expectations of an official QE3 announcement by The Fed on Thursday to hold serve with the ECB’s announcement last week of unlimited ‘sterilized’ bond purchasing, and the implications new ‘official’ QE will have on Treasuries, the dollar, stocks, and gold and silver.
Mannarino states that the vast majority of investors who don’t understand how the Fed’s money game works are going to get slaughtered like pigs, and WILL LOSE EVERYTHING!!!
Mannarino closes by stating investors must BECOME THEIR OWN CENTRAL BANK, AND DO IT NOW!