Here's my summary of the key news overnight in 90 seconds at 9 am, including news German business confidence slumped unexpectedly in September to a two and a half year low.
The IFO index of confidence of firms in Europe's largest economy fell for the fifth month in a row as concerns grew about slowing economies in Southern Europe, Britain, China and America. See more here at Bloomberg.
European stocks fell around 0.7% and US stocks were down for most of the trading day, although they closed broadly flat. See more here at Reuters.
Markets took a 'risk off' stance, sending gold and oil prices modestly lower and driving the New Zealand dollar down to around 82.2 USc from nearer 83 USc yesterday. See more here at Reuters on lower oil prices.
Also in Europe, German politicians again called on Spain to ask for a bailout and agree to austerity conditions, which is necessary to trigger the 'Big Bazooka' of unlimited bond buying by the European Central Bank. See more here at Bloomberg.
Spain, however, remains reluctant to ask for a bailout, particularly given the announcement of the 'Big Bazooka' was enough to push bond yields down, at least for a short period.
Anti-austerity pressures are growing in Spain with youth unemployment well over 50% and many state governments, including the restive area of Catalan, out of money. See more here on the Catalan protests at the New York Times.
Over 1.5 million Catalans marched in Barcalona on September 11 calling for independence and the Catalan independence song was sung loudly by the entire Camp Nou stadium at the Barcelona match over the weekend.
Also over the weekend, Portugal (which has already agreed to a bailout and an austerity plan) was forced to cancel plans for a big social security tax increase after a series of popular revolts.
Meanwhile in China, business confidence fell in August and September from June and July, indicating a further deceleration in growth to its slowest rate in 22 years. See more here at Bloomberg.
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33 Comments
Some valuable information about Greece:
http://www.keeptalkinggreece.com/
It seems riots in several European countries caused by economic issues are just a matter of time – USA/ UK/ / Asia/ China/ Japan ??
Brent crude has dropped to 109.8 at present.
The Russian economic service update says there is around 1.2mbbl of surplus in the market at present and is budgeting on DEC prices in the mid 90,s
The 2013 forecast has US domestic production both as new build coming onstream andGulf production back to pre isaac level.
The decrease in european demand (around 400000bbl per day at present) is expected to decrease further. The RES suggests 85 for first portion of 2013.
Patience snaps in Portugal
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100020306/p…
Ambrose
"Sadly, there seems to be almost nobody in public life in Portugal
willing to tell the people that membership of the euro is the elemental
cause of their current suffering."
Unfortunately it is worse than that Ambrose - the majority of Portuguese would vote in favour of continued use of the DM (Euro)
The conclusion of this tragedy is self inflicted social breakdown with a Fascist / Marxist dictatorship seen as the only route to social stability.
The Portuguese, like every other demos in EMU, from top to bottom, are willingly pointed in entirely the wrong direction.
In Britain we should be preparing to face tyranny again in Europe.
Jonathan
Thanks Andrewj. Charles Hugh Smith is on to it. Liked the intro to his new book.
http://www.oftwominds.com/RRL-intro.html
"Those benefitting from our sociopathological, neofeudal Status Quo (as well as those who have been persuaded that their participation benefits them) will see no need for revolution. Indeed, they will view any transformation as a threat to their personal share of the Status Quo perquisites. But fundamental transformation is no longer a choice, whether you believe the Status Quo serves your self-interest or not. The unsustainable will crumble and another arrangement will take its place.
We cannot know when the Central State and financial system will destabilize, we only know they will destabilize. We cannot know which of the State’s fast-rising debts and obligations will be renounced or written down; we only know the debts and obligations will be renounced in one fashion or another....
The key social control myth is that the system serves your self-interest. If you believe this, then you will defend an oppressive, exploitive, parasitical Status Quo in the misplaced belief it serves your personal interests....
Another key social control myth is that individuals are powerless in the vast systems that dominate our society and economy. This is a very useful myth to the Status Quo, as it leads individuals to surrender their autonomy and liberty without coercion.
In the myth of top-down revolution, nothing can possibly change until the leadership has been replaced and vast, impersonal systems far beyond our individual influence have been reworked at the top of the pyramid.
In terms of directly influencing the centralized political and financial structures that dominate our lives, we are debt-serfs gazing upon the aristocracy’s distant, inaccessible castle. But our remoteness from concentrations of wealth and power does not render us powerless.
The truth is that revolution and liberation are within our reach; when we liberate our minds from pathological illusions of self-interest, we have already achieved the first key step of liberation. We can do so without the permission of the aristocracy or the centralized State they control.
The model of positive change I propose here is a synthesis of both internal and external liberation. In my view, political liberation is impossible if the mind and spirit are shackled by pathological conceptions of self-interest, and spiritual liberation is limited by the oppression and predation of corrupting, exploitive political-financial systems."
wtf - I had a read back in this guy's earlier posts, this was Charles Hugh Smith back in 2005:
"Interestingly enough, those bottoms of financial panics or depressions seem to operate on about 40-year cycles. If there is indeed a pattern there, we should get a humdinger of a depression around 2012."
Prescient prediction way back then. Very smart guy. See his freaky chart of the "Kondratieff Wave" of debt build up and busts, link below.
Wonderful explaination by Hypertiger
"It's like going to the future and robbing yourself and then going back to the past to spend what you took...works great until you get to the point were you robbed yourself.
That is basically what credit systems do...take from the future to blow now.
Until you get to the future and there is nothing left to take.
Then the whole thing caves in."
no, no, then you go to the future, rob your children twice, once to keep going and the second time to payback what you robbed off yourself today. There wont be a third time as you will be dead and buried.
Just to make sure you discount the theft claiming your children will be much better off so able to pay it back easily, so you dont care.
You just keep doing it for 30 years....simple, welcome to voodoo economics 101.
regards
Hypertiger said, in the same post-
"There is a secret in economics that all that haven't been told can't discover until they figure out how to stop trying not to".
which facinates me. Steven, was it you who first linked us to Hypertiger about a week ago? I am slowly reading all of his posts from the last few years.
It wouldnt have been me usually directly linking I suspect as its a site generally I find very austrian. More like I counter argued on a link to it from someone else....cant recall the actual item in Q.
Quite often though such sites are good in exposing the data and trends. I just ignore the "bye gold, bye gold" ie blinkered solution bit at the end.
regards
Learn to Social - currency control and money printing is what is termed the 4th form of trade protectionism. According to this link it is not commonly taught in economics.
http://useconomy.about.com/od/glossary/g/Trade-Protectionism.htm
I think it was Andrewj who posted links to Hypertiger.
I wonder if such rules as these were put in front of the voter whether morally they's still carry on.
Intersting "formula"
http://en.wikipedia.org/wiki/Okun's_law
The magnitude of the decrease seems to be declining over time in the United States. According to Andrew Abel and Ben Bernanke, estimates based on data from more recent years give about a 2% decrease in output for every 1% increase in unemployment (Abel and Bernanke, 2005).
So if we said oil declines at 8% which gives 12% decrease in GDP that implies 6% job losses every year as well.....
So carry that forward for debt....I would suppose that the extra debt per year has artificially kept un-employment down, when you go to pay it back, you lose that artificial % plus a % depending on the GDP removed to pay down debt....a double whammy probably on your kids.
regards
Double whammy is what I have been saying for a while. The natural end of the cycle for a fiat currency (it is actually the interest component that really kills it) means the debts accrued can't and won't be repaid. Then the resource limits being hit at the same time. Of course my reasoning is that a fiat currency, or a disconnect of money from real assets, was a logical step in the face of resource limits. Perfectly predictable really and the same thinking that created it will likely continue, meaning pushing it to collapse rather than addressing the underlying issues.
What happens with Okun's law when output is actually falling, but GDP continues to rise solely based on the price component?
There was comment that the old number was 3% and 1% where its now 2% and 1%.
Jobless recoveries were where instead of real GDP we get voodoo GDP (growth) based on financial instruments or mass destruction....
Interesting thing is Nicole Foss pretty much says the same thing as you in terms of time span....one long 30~40 ponzi scheme. I suspect its the same result just a different perspective...
The confusion of some is thats when we came off the gold standard so going back on it will fix everything according to them.....it wont it will crash it very very fast.
Perfectly predictable, yes for 40 years yet either no one has looked atthe problem and voiced it or no one has voiced it after they looked.
Funny when you look at all the kooky conspiracy theories etc that have no or little basis on reality yet get voiced that something so rooted in reality, maths etc gets ignored...
regards
The problem I see with analysis of money supplies, gold or otherwise, is that they are restricted to the empires associated with the industrial revolution. I haven't read widely in this aspect, but it seems that credit and interest were integral with all of them. In a world of declinding resources they really have no relevance. Since interest requires growth, it has no place going forward. I have sait it before, that we don't have any experience in economics of decline :-)
I see gold as a store of value is a completely separate argument.
I think we can look at previous "empires" like the romans, the human aspect should be the same.
For instance from what Ive read there they locked peasant farmers into the land and made sure they couldnt leave and then taxed them to death.
Here maybe we'll make the chains debt rather than the sword, to start with anyway.
regards
Yes. Back then they had 90% or more of the population on the land, whereas now it is 90% in the cities. What useful purpose will urban folk with their virtual skills serve? Ten weeks training and then cannon fodder? Perhaps not here, but the other issue is the demographic imbalance.
Reality dawns - as good a summation as you could read:
http://www.bloomberg.com/news/2012-09-23/how-high-oil-prices-will-perma…
Jeff Rubin....one worth reading.
"The countries guzzling the most oil are taking the biggest hits to potential economic growth. That’s sobering news for the U.S."
That should also be sobering for NZ and OZ which I beleieve are similar.
"These policies (low interest rates, printing) cannot be long-term substitutes for cheap oil because an economy can’t grow if it can no longer afford to burn the fuel on which it runs. The end of growth means governments will need to radically change how economies are managed"
Whats interesting is the comment,
"Worse, when oil prices go up, so does inflation. And when inflation goes up, central banks respond by raising interest rates to keep prices in check. From 2004 to 2006, U.S. energy inflation ran at 35 percent, according to the Consumer Price Index. In turn, overall inflation, as measured by the CPI, accelerated from 1 percent to almost 6 percent. What happened next was a fivefold bump in interest rates that devastated the massively leveraged U.S. housing market. Higher rates popped the speculative housing bubble, which brought down the global economy."
So ppl here asking for our rates to go up becaus eits not fair should take heed.
regards
It may be dawning on the Germans that they cannot have it both ways. If they insist on austerity from the countries they used to loan money to, to buy stuff from them; then clearly those countries will buy considerably less stuff from Germany. So either they start consuming a lot more of their own and everyone else's stuff; or they take their foot off the throats of the rest of Europe; or they will lose in a big way, along with everyone else.
The current bet has to be on the latter "everyone loses" solution unfortunately; although at least they may well agree to a version of the Draghi plan in their own self interest.
The most intractable global problem does seem to me that most current account surplus countries are addicted to their surpluses. See Germany, Switzerland, China, Japan as the main offenders. (The petro guys I have more sympathy for; they need to squirrel a few nuts away before they run out). The imbalances that these countries' surpluses have created, in capital flows and cheap money to the rest of the world, have been a key cause of asset bubbles and toxic debt; while unwinding the debts and ownership transfer issues will take decades, unless those countries start consuming. Everyone else has hit their credit limit.
Yes indeed...Steven L ...The Germans for all their clever posturing while grinding out the profits of exporting to the rest of Europe, now find themselves in one of those ugly co-dependant relationships....wise council would say it's unhealthy, they are becoming more miserable while entrenched.....and yet , there they are, if they leave the relationship, they lose so much of the investment, if they stay they are committed to years of nurchering their sick ,spend happy partners back to health.
They lack the sheer size of China to internalise some of the problem.....
Ah, when will it ever end ...eh, ten years from now they might wished they'd cut their losses and took on a little forced austerity (being the byproduct of quitting) themselves.
"...or they take their foot off the throats of the rest of Europe; or they will lose in a big way, along with everyone else. ...."
Now spot the 1 letter difference.
....or they take their foot off the throats of the rest of Europe; or they will lose in a big war, along with everyone else.....
Deja vu all over again.
KH, undoubtedly many borrowers have been far less than prudent. Any loan though has two parties; a willing lender, and a willing borrower. Because the surplus countries were(and remain) determined to have surpluses build on surpluses, they frankly threw money at anything. Sub prime in the US would not have happened if there were not very indiscriminating European banks looking for anywhere to park their surplus funds. So in that case I don't have that much sympathy for them. The Greeks have also been the architects of their own misfortune, but the Germans among others knew they cooked the books years earlier.
A more sinister effect of these surpluses is that they become self perpetuating through exchange rate management; and this has been one of NZ's biggest problems.
The surplus countries wish to keep having surpluses, so they invest in deficit countries (like NZ), forcing their own currencies down, and ours up. This means the relative competitiveness continues to favour them; except that one day, either the money they have loaned to the deficit countries becomes unpayable at even really low interest rates; and/or there are no more assets in the deficit countries that realistically can be bought. (The current crisis is largely because the world is pretty much at that point). In the meantime any transferable productive capability is transferred to the surplus countries, such that the deficit countries are only left holding (but not owning) what cannot be transferred- farms, mines, tourism, property generally.
So the deficit countries in the end have to take a hit to their consumption of foreign goods. Either the surplus countries lift theirs, or world consumption has to tank. There is no alternative. The surplus countries are not yet really showing any signs of culturally lifting their consumption. The Germans are not even trying; in fact they are tightening their belts.
May seem counter intuitive; but am confident the above stands scrutiny.
Challenge it by all means.
Yes Stephen. There is elements of co-dependency. And certainly unwise lending. But that's different from a nation (germans) at fault.
The unwise lending come to us via the financial services sector. Probably an issue of financiers spending other peoples money. What do they care and it if goes tits up, still not their problem.
Co -dependency. Well if the borrowers didn't borrow - then the lenders would not be lenders. Those surpluses you regard as toxic would have to find another home.
As for our own nations deficit. We can't control the foreign countries - the only tool we have is here in our own household. Only thing we can do is get rid of the deficit. And the debt. Quite possible although quite challenging. But essential.
Personally - there have been past times when I had large debt. But for a purpose and with a plan not to be in debt. If, like nations do, I had simply borrowed on a continuous basis for consumption, that would have been a game that came to a sticky end many years ago.
Think we need to seperate the average German and Greek from their financial elites and banks. The average German has seen little to no benefit from the big surpluses apart from keeping their job. Wages have been kept suppressed as part of a social compact between business and unions. The profits have gone to the shareholders and banks. But who will bear the brunt of either bailing out their own banks or continueing to subsidise their European neighbours? The average taxpayer.
In Greece, yes the average Greek was encouraged to borrow and spend, just like the average Kiwi. You can argue they weren't forced to but given all the pressure to consume and the speculative get rich mentality that now prevails everywhere, that's expecting an awful lot of people. Who really got wealthy in Greece? The same people as in Germany. The banks and the financial/political elites. Who will bear the brunt of paying for the austerity measures and repaying the money lent to them recklessly by German banks and their own financial elite(who have taken their profits and fled) The average taxpayer.
German and Greek elites 2, German and Greek citizens 0
Well said wtf; I especially like the following:
You can argue they weren't forced to but given all the pressure to consume and the speculative get rich mentality that now prevails everywhere, that's expecting an awful lot of people.
This is one reason I believe exchange rate management, or other controls, are essential for the NZ macro economy. Individuals will reasonably follow price and marketing signals.
By the by, I did not mean to demonise the German people; or even really their government, who I think have always had a priority being high employment in productive sectors. Everything else is a result. If they wish to keep those priorities going forward, they either need to forgive the debts of their debtors; or start spending a lot more themselves.
http://www.telegraph.co.uk/finance/comment/jeremy-warner/9563737/Smash-…
moraymint
"This constant chipping away at the income and wealth of the aspirational threatens not just our economic future, but ultimately also the bedrock of middle-class support for our social and political system ..."
Mrs Moraymint and I represent that 'bedrock of middle-class support for our social and political system' to which you refer, Mr Warner.
More to the point perhaps, Mrs Moraymint and I have spent the past 5 years of our lives ... since the Global Financial Crisis emerged and it quickly became clear that we were at war ... taking steps to extricate ourselves from the traditional workings of the UK economomy. We've done this whilst simultaneously distancing ourselves from the UK's increasingly dysfunctional society (it's unfettered immigration, stupid) and doing everything we can also to distance ourselves from mainstream political parties (which are now a single, mainstream political party hell bent on leading the country to rack and ruin).
"What war?", I hear you say?
Well, the war that was declared by the British political class on the British people when it became clear that the Global Financial Crisis was (a) intractable and (b) meant that henceforth politicians would no longer be able to make unaffordable promises to the electorate to buy votes.
So, now, we find politicians - who are pathologically incapable of cutting state spending and of cutting the costs that they themselves incur on taxpayers - telling us, the middle-classes, to brace ourselves whilst they, the political class, prepare to shove the mother-of-all taxation broom handles up our backsides. And they expect us to roll over and take this treatment?
Like I said, there's a war being waged here: between the government and the governed. Or more accurately between the political class and the middle-class.
I say more fool any fellow member of the middle-class who allows this to go on for much longer. Our politicians seem to be heading ever further away with the fairies the more I read about the debt crisis and, indeed, the unmitigated shambles that is the European Union.
Pray tell me, which planet does our political class inhabit these days? Perhaps Andrew Mitchell's foul-mouthed tirade at police officers assigned to ensure his personal safety offers a clue, not to mention the Liberals calculating that earning £50,000 per year somehow makes one "rich".
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