The Global Economy Took Another Turn For The Worse: While US Is Heading Off A Fiscal Cliff, Spain Continues To Implode, Chinese Credit Growth Plunges, Another Important Economy Has Plunged Into Recession
So both Boehner and Obama have done their post election photo ops. They have spelled out their positions on the looming fiscal cliff. No surprises at all. The Republicans are saying “No” to any increases in tax rates while Obama has said he will outright veto any bill that is presented to him that does not raise taxes on rich folks.
I was surprised by the reaction in the press to the positions set forth by these two. The headlines make it seem like B&O are ready to work together, and achieve the necessary compromises to avoid falling off a cliff. I think the press has it wrong. We’re headed into a bitter fight; in part, because the President has drawn a very dangerous line in the sand.
The President has said that the recent election has shown that the majority of American’s want the rich to pay more in taxes. What is the President insisting on? Is he pushing for something that would make a difference? I don’t think so. More importantly, the Congressional Budget Office does not agree with the President’s position.
The CBO put out a report on this topic last week. It spelled out the consequences of an increase in the tax rate for those making over $250,000 (versus reversing all of the Bush tax cuts). It does not add up to much. READ MORE
Obama’s first order of business following Tuesday’s victory at the polls is to tackle a series of tax hikes and spending cuts that will be triggered in the new year if there is no wide-ranging deal with Congress on a deficit-trimming budget.
If such a deal fails, many experts are predicting the US economy could fall back into recession. But the Republican-controlled House of Representatives has said it will not countenance any tax rises as part of the agreement.
In his new address, Obama said that was not acceptable: “I refuse to accept any approach that isn’t balanced. I will not ask students or seniors or middle-class families to pay down the entire deficit while people making over $250,000 aren’t asked to pay a dime more in taxes.”
Elsewhere in the EU, Spain continues to implode. The mainstream financial media notes that people are now killing themselves when evicted from their homes. However, things are in fact worse than that. My contacts in the country inform me that in some regions the government hasn’t even paid its pharmacies in six months. Indeed, the region of Valencia owes its pharmacies an insane €500 million.
This is nothing short of a societal shut down. Expect the civil unrest and economic implosion to accelerate in the coming weeks and months.
Spain suspends house evictions for two years
Demonstrators have been preventing evictions happening in Spain
Spanish banks are to suspend evictions for the next two years for the most vulnerable people.
An estimated 350,000 families have been evicted from their homes since Spain’s property market crashed in 2008, at the beginning of the economic crisis.
The announcement comes three days after a woman in northern Spain took her own life, just before she was due to be evicted from her home.
It is not clear how they will decide who the most vulnerable people are.
The announcement came from the Spanish banking association, AEB.
A 53-year-old woman jumped out of her fourth-floor flat on Friday as local officials arrived to evict her from her home.
China’s new yuan loans unexpectedly fell in October from a year earlier and money supply rose less than forecast, damping signs the world’s second-biggest economy is recovering after a seven-quarter slowdown.
Banks extended 505.2 billion yuan ($81.1 billion) of local- currency loans, down 14 percent from a year earlier, data from the Beijing-based People’s Bank of China showed today. The median estimate was 590 billion yuan in a Bloomberg News survey. M2, the broadest measure of money supply, increased 14.1 percent, compared with a median forecast of 14.5 percent.
Today’s reports show weaker-than-forecast credit expansion may limit a rebound in economic growth as the ruling Communist Party holds a congress in Beijing to anoint new leaders….
Japan bankrupted even more… Japanese Economy Contracts at Fastest Pace Since Earthquake
From Global Economic Trend Analysis:
The global economy took another turn for the worse as Japan plunged into recession following two consecutive quarters of growth.
Please consider: “Japan’s economy shrinks annualized 3.5%.”
Japan’s economy shrank an annualised 3.5 per cent between July and September, the steepest decline since the earthquake-hit first quarter of 2011, as exporters suffered big falls in shipments to key markets such as China and Europe.
Prime Minister Yoshihiko Noda described the gross domestic product figures as “severe”, while Seiji Maehara, economy minister, said Japan had possibly entered a “recessionary phase”…
… The trick for Japan is how to finance its national debt, now at a majorly unsustainable 235% of GDP.
Japan was able to do so for years on account of its current account surplus, of which trade is typically the largest component.
You can now kiss that surplus goodbye because…
Meanwhile In Greece…
Greek aid will be the biggest item on the agenda at a summit of eurozone finance ministers today. However, late last week it was revealed that the actual decision on disbursement of more funds would be delayed until possibly the end of the month. German finance minister Wolfgang Schaeuble also said over the weekend that the troika report on Greece would likely not be finished today as planned.