Berlusconi insisted that Italy’s economy was broadly prospering.
“The restaurants and vacation spots are always full, nobody thinks there is a crisis,” he said.
Monthly Archives: November 2011
Payrolls and a Fed rant
Utter failure of policy.
The Fed was certain it knew what Japan had done wrong and wasn’t going to make THOSE mistakes.
So it
Cut rates much more aggressively.
Said it would do whatever it takes.
Figured out how to do its job as liquidity provider after only 6 months of alphabet soup programs.
Did heaps of Quantitative Easing.
Did the twist.
And now, realizing its done about all it can do, says monetary policy can’t do it all.
And still fails to recognize publicly the actual problem is the budget deficit is way too small.
And doesn’t directly inform Congress that
there is no such thing as a solvency problem,
the Fed controls government interest rates, and not the market,
there is no long term deficit problem with regards to finance,
the only thing we owe China is a bank statement,
Quantitative Easing and rate cuts remove interest income from the economy, which allows the deficit to be that much larger,
etc.
as we continue to go the way of Japan.
Karim writes:
Some improvement around the edges but the larger narrative is employment rising only at a rate fast enough to keep the unemployment rate stable (not higher or lower)
- NFP 80k with net revisions 102k
- Unemp rate down to 9% from 9.1%
- Average hourly earnings 0.2% and aggregate hours 0.1% barely ok for labor income once adjusted for inflation
- Weather may have played a small role as construction employment turned from +27k to -20k
- Diffusion index improved from 56.7 to 60.7; while encouraging in that the majority of industries are adding jobs, doesn’t say or mean they are necessarily adding jobs at an increasing rate
- Other positives are median duration of unemployment falling from 22.2 weeks to 20.8 weeks and U6 measure falling from 16.5% to 16.2%
- Don’t think this would have a big impact on the new Fed forecasts we saw the other day
Noda Makes Consumption Tax Hike Pledge At G-20 Summit
The world’s poster child for losing decades looks to stay a step ahead:
(Nikkei)–Prime Minister Yoshihiko Noda vowed Thursday to gradually raise the nation’s consumption tax to 10% by mid the 2010s during a summit meeting of the Group of 20 leading economies in Cannes, France.
The announcement at the summit has effectively made the tax hike an international pledge, and is expected to be included in an action program due out Friday.
Noda stressed the importance of rebuilding debt-ridden Japanese finances and told G-20 leaders that fiscal consolidation is a must “for Japan to be put back on a sound economic growth path, regardless of the debt crisis in the euro zone.”
He also spoke to reporters that a Diet dissolution should be carried out before implementing the tax hike. “If we go to the people in a general election (to seek a mandate on the consumption tax hike), we should do so after passing related bills but before implementing them,” he said.
As to Japan’s participation in the Trans-Pacific Partnership free trade pact, Noda told reporters he will accelerate efforts to iron out differences within the Democratic Party of Japan, which he leads. “We have to close ranks and shouldn’t be split,” he said.
Noda showed his flexibility in making concessions to a controversial redemption period of reconstruction bonds aimed at funding rebuilding efforts of the March 11 disaster, in hopes of enlisting support from the Liberal Democratic Party and New Komeito, the main opposition parties.
“Our policy chief said that we envisage a 15-year period (for the redemption of reconstruction bonds), but there’s room for concessions,” he said.
Blog Comment on Italy
This was recently posted by a reader:
I’m from Italy so I can answer your question. The general and most accepted ideas in Italy are:
- “The problem is president Berlusconi.”
- “We need structural reforms!” (In every pub people love to say that, to feel themselves intelligent, the same that are in precarious financial conditions.)
- “We are not credible.”
- “We live beyond our means.”
And the best:
- “Without the Euro it would be a catastrophe, fortunately, we have a strong currency.”
DJ Italy Will Pledge To G-20 To Start Cutting Debt Ratio
We’re all saved!!!
*DJ Italy Will Pledge To G-20 To Start Cutting Debt Ratio In 2012
*DJ Italy Will Pledge “Rapidly Declining” Debt/GDP Ratio To G-20
President Obama entering the fray
More of the blind leading the blind. The one thing they all agree on, at great expense to global well being, is the budget deficits are all too large and the need for shared sacrifice and all that.
No chance for anything constructive to come out of any of this.
And these masters of their money machines don’t even know how to inflate, as they all desperately try to inflate with their versions of quantitative easing, which, functionally, is just another demand draining tax.
*DJ Merkel, Obama Discussed How To Boost EFSF Firepower Without ECB
*DJ Obama To Merkel: We Are Totally Invested In Your Success – Source
*DJ Geithner, Schaeuble May Meet To Discuss IMF Role In Euro Crisis -Source
The Euro Zone Race to the Bottom
While the symptoms get continuous attention as they get threatening enough, the underlying cause-the austerity- does not.
The euro zone, like most of the world, is failing to meet its further economic objectives because of a lack of aggregate demand.
And in the euro zone, the fundamental problem is that the member nations, as credit sensitive ‘currency users’ are necessarily pro cyclical in a downturn, much like the US states, and therefore incapable of independently meeting their further economic objectives.
So even as the euro zone struggles to address it’s solvency crisis that threatens the union itself as well as at least part of what remains of the global financial architecture, the underlying shortage of euro net financial assets continues to undermine output and employment, with GDP growth now forecast to fall to 0 with a chance of going negative in the current quarter.
What this means is that without adopting an alternative to the current policy of applying enhanced austerity as the means of addressing the solvency issue, it all remains in a very ugly downward spiral with social collapse far less than impossible.
So yes, the solvency issue can continue to be managed by the ECB, the issuer of the euro, continuing to buy national government debt as needed. But that doesn’t add net euro financial assets to the economy. It merely shifts financial assets held by the economy from the debt of the national governments to deposits at the ECB. So it does nothing with regards to output, employment, inflation, etc. as recent history has shown.
In fact, nothing the world’s central banks do adds net financial assets to their economies. And much of what they do actually removes net financial assets from their economies, making things worse. Note that last year the Fed turned over some $79 billion in profits to the Treasury. Those profits came from the economy, having been removed from the economy by the Fed’s policy of quantitative easing, which the old text books rightly used to call a tax.
And meanwhile, the imposed austerity that accompanies the bond purchases does directly alter output and employment- for the worse.
Additionally, for all practical purposes, there is universal global support for austerity as the means supporting global output and employment.
So even if the euro zone gets the solvency issue right, with the ECB writing the check to remove all funding constraints, the ongoing austerity will continue to depress the real economies.
Valance Weekly Report 11.2.2011
(To download PDF, right click link and select save link as)
Highlights
US – Consumer Confidence contrasting moderate growth
EU – Data and inadequate political solutions presenting a scary picture
JN – Jobless Data improves, Industrial Production & Retail Sales decline
UK – Uncertain Q3 GDP Estimate
CA – GDP continues to expand
AU – RBA finally eased
NZ – RBNZ not clear about tightening
Macro Curve Considerations
By the end of QE2 the curve had adjusted to the Fed having taken out pretty much all of the new supply out to 10 years.
After QE2 the supply out to 10 years started to be replenished auction by auction.
This was quickly followed by twist which began working to remove supply from the long end and add it to the short end.
The net is an ongoing multi trillion shift taking supply out of the long end and adding it to the short end that will continue to be a major influence on spreads.
Additionally, the Fed is seeing no material evidence of any monetary derived inflation, credit expansion, escalating inflation expectations (not that they actually matter), etc. and they are also seeing the global economy gradually slowing, and the euro zone imploding. So higher rates from the Fed remain a highly unlikely scenario.
