France Unveils New Budget Savings as Growth Slows

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May as well call it the Sarcophagus plan.

It’s all they know how to do.
And again, like the carpenter said of his piece of wood,
no matter how many times I cut it it’s still too short.

France Unveils New Budget Savings as Growth Slows

By Alexandria Sagr

November 7 (Reuters) — France will announce about 8 billion euros of budget cuts and tax hikes for 2012 on Monday, imposing more pain on voters to protect its credit rating and curb its deficit in a gamble for President Nicolas Sarkozy six months from an election.

Sarkozy’s center-right government says extra savings are urgently needed to keep France’s finances from going off the rails, since it cut its growth forecast for next year to 1 percent from 1.75 percent last week.

The announcements could be make-or-break for Sarkozy as he tries to reassure financial markets and ratings agencies without costing him his re-election chances with French voters.

The measures, to be unveiled by Prime Minister Francois Fillon, come on top of 12 billion euros in savings announced just three months ago.

Le Monde newspaper said he would flag cuts totaling up to 17 billion euros by 2016.

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Forbes – Property Prices Collapse in China. Is This a Crash?

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Reads like the inflation problem was worse then most thought, and that a hard landing might still actually be happening. No way to actually tell in real time.

With China a first half/second half story, as previously discussed, January will bring a fresh slug of new govt. lending/spending that should at least moderate any fall that’s in progress.

However, if the anti inflation fiscal policies continue, and spending/lending is materially down from last year, the weakness should persist and potentially get a lot worse.

Property Prices Collapse in China. Is This a Crash?

By Gordon Chang

November 6 (Forbes) — Residential property prices are in freefall in China as developers race to meet revenue targets for the year in a quickly deteriorating market. The country’s largest builders began discounting homes in Shanghai, Beijing, and Shenzhen in recent weeks, and the trend has now spread to second- and third-tier cities such as Hangzhou, Hefei, and Chongqing. In Chongqing, for instance, Hong Kong-based Hutchison Whampoa cut asking prices 32% at its Cape Coral project. “The price war has begun,” said Alan Chiang Sheung-lai of property consultant DTZ to the South China Morning Post.

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Credit spillovers from Eur banks to EM

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Makes sense.

I always wondered how that loan demand was accommodated.
Never looked like the kind of lending US regulators would sanction.


Karim writes:

Interesting table from JPM.
Much larger dependence on credit from Eur banks for LATAM economies than from U.S. banks.
Poland/Russia not as surprising but still large!
Overall, domestic bank lending surveys in EM have also been moving towards a net tightening of lending standards.

Could be more severe credit contraction in those economies as a result of ongoing strains in Europe.

Euro area and US bank claims on EM
As of 2Q11
EUR Banks
US Banks
$ bn
% of dom cred
$ bn
% of dom cred
EM
1980.7
12.4
811.3
5.1
EM Asia
406.7
3.2
472.0
3.8
China
90.6
1.0
81.7
0.9
Korea
68.4
6.3
95.1
8.8
Latam
618.1
38.7
248.5
15.6
Brazil
285.0
23.1
97.6
7.9
Russia
113.5
16.1
23.8
3.4
Poland
249.0
95.6
14.4
5.5


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Most of the unemployed no longer receive benefits – CNBC

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There is a silver bullet.
The right amount of aggregate demand keeps labor the scarce resource it actually is.

Most of the unemployed no longer receive benefits

November 5 (CNBC) —The jobs crisis has left so many people out of work for so long that most of America’s unemployed are no longer receiving unemployment benefits.

Early last year, 75 percent were receiving checks. The figure is now 48 percent — a shift that points to a growing crisis of long-term unemployment. Nearly one-third of America’s 14 million unemployed have had no job for a year or more.

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Payrolls and a Fed rant

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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

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Noda Makes Consumption Tax Hike Pledge At G-20 Summit

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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.

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Blog Comment on Italy

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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.”

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President Obama entering the fray

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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

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