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Looks to me like the world hit a ‘soft spot’ in July, maybe due to the winding down of China’s suspected ‘inventory building.’
CPI’s continue to fall in the Eurozone indicating continuing domestic demand weakness.
Strong productivity gains are not being matched with fiscal adjustments to sustain output and employment, as evidenced by a continuing rise in unemployment and a widening of the output gap.
I like the term Zombie economy as the world continues to unknowingly rely on ‘automatic stabilizers’ for a very ugly means of fiscal adjustment.
Meanwhile, as unemployment continues to rise, they wait, with blind certainty for the mythical ‘kicking in of billions’ by Central Banks to somehow take effect, and be so powerful, that they are spending their time debating irrelevant ‘exit strategies’ from this non event for aggregate demand.
Right now there is no hope for further US fiscal adjustment, barring a major economic setback. President Obama has pledged not to sign a health care bill that is not ‘revenue neutral’ and it’s all but certain marginal tax rates will rise next year.
And the increased expenditures for ‘shovel ready’ projects, merits of the projects aside, are being offset by forced cut backs by States that continue to face revenue shortages due to the fall in GDP.
Banks that have been sustained by wide net interest margins that offset lingering loan losses are now seeing portfolios run off, as those with positive cash flow (corporations with flat sales and consumers in foxholes still worried about job losses) are paying down debt and net new lending languishes.
- European Industrial Production Unexpectedly Declines
- Liikanen Says Next Months Will Show If Euro Area Through Worst
- French Consumer Prices Fall for Third Month on Energy, Retail
- European Government Bonds Extend Gain After BOE Inflation Report