2012 February 21 | timiacono.com

Will Rising Gas Prices Sink the Economy?

After a recent return to our collective “borrow and spend” ways, everyone’s now worried about rising gasoline prices and whether they’ll take the wind out of the American consumers’ sails as has happened so many times before, leading to a recession. With images like the one below from this LA Times story, somebody better do something fast.

Of course, Bill O’Reilly and Lou Dobbs have been looking into this in recent days and provide this explanation – we’re shipping refined products overseas where they can be sold at a higher price and this pushes supply down (and prices up) here in the good ‘ol USA.

[Note: I don't necessarily agree with the O'Reilly/Dobbs view - I'm simply passing it along.]

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Greek Economy Now Poised for … Something

In this commentary at the Telegraph today, Ambrose Evans Pritchard seems none too optimistic about the chances of an austerity-fueled economic revival in Greece, citing the rather shocking comparison to the U.S. below about recent job losses.

In November alone 126,000 Greeks lost their jobs in a country of 11 million, equivalent to three and a half million Americans in a single month. The unemployment rate jumped from 18.2pc to 20.9pc.

This has not yet fed through into social breakdown. Greeks receive unemployment support for an average of thirty weeks, with a ceiling of €454 a month, according to Professor Manos Matsaganis of Athens University. Those with civil service tenure are placed on labour reserve for two years at half their basic pay, or a third their actual pay.

Once these cushions are exhausted, Greeks are on their own. The monthly ratchet effect will then become painfully evident. It is why the Orthodox primate Hieronymos II warned in a letter to the prime minister that ever further doses of the same “deadly medicine” is becoming dangerous.

“The voices of the desperate, the voices of Greeks are being provocatively ignored. Fear is giving way to rage and the risk of a social explosion can no longer be ignored by those who give orders and those who execute their lethal recipes,” he said.

Anyone looking for alternative solutions to what ails Greece should consider a recent comment by Jeremy Grantham about central bank policy: “Well, I wouldn’t start from here”.

When the government accounts for 40 percent or more of a nation’s GDP, you’ve basically purchased yourself a one-way ticket to a much lower standard of living and, if you haven’t already done so, have a look at last week’s New York Times story – The Way Greeks Live Now. I finally got around to reading it the other day and it’s well worth a look.

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The Greek Debt Deal is Done … For Now

There’s no telling how long it will be before this latest deal goes awry due to the Greeks not holding up their end of the austerity bargain, but, for the time being at least, there are lots of sore arms in Brussels from everyone slapping each other on the back for a job well done.

It’s almost comical when you think about it… They’ve been haggling over the level of Greek debt-to-GDP eight years from now after the deals and promises that they previously agreed to over the last two years have all proved to not be worth the paper they were written on.

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Tuesday Morning Links

The Greek crisis: The end of the marathon? – Economist
Europe seals new Greek bailout to avert default – Reuters
S&P: Funding is tight for Eurozone banks despite ECB loans – Reuters
Greek Bond Holders to Take Losses ‘North of 70%’: Dallara – CNBC
Draghi Maintains His Silence on ECB’s Role in Greek Bailout – Bloomberg
Stop the Second Bailout Package! EU Should Admit Greece is Bankrupt – Spiegel
Can a return to the drachma save Greece as unemployment soars? – Telegraph
Iran’s Bid for New Crude Buyers Falls Short in Southeast Asia – CNBC
Are US taxpayers bailing out big banks again? – MoneyWatch
The Real Reason Greece Matters – BullionVault
Ominous Numbers for Obama – Barron’s
Ben Graham’s Curse on Gold – FXStreet

Oil prices mixed after Greece bailout – AFP
Gold rises after Greek deal, euro boost – Reuters
Don’t sell a dull stock market short – MarketWatch
Equities in ‘Goldilocks Scenario’: Strategist – CNBC
Is the Bank of China really gold’s mystery buyer? – Mineweb
Tax free Gold- Singapore’s new investment attraction – Commodity Online
Indian Gold Imports to Drop From Record, Making China Top Consumer – Bloomberg
WGC: China to be the biggest gold market in 2012 – Commodity Online
Unusual Drawdown Risk – Hussman Funds
Leveraged Populists – aucontrarian

Surging gas prices threaten to derail recovery – LA Times
Home Depot shines as warm winter helps sales – Reuters
Is It Time to Start Worrying About Inflation Again? – Time
Canadian Economy Suffers From Dollar Parity – Bloomberg
Eurozone’s shocking prescription for Greece – Telegraph
‘Restructuring Greece Within the Euro is Illusory’ – Spiegel
Inflation hits people’s pockets – China Daily
Foreclosure auction buyer confession – Patrick.net
Some Doubt a Settlement Will End Mortgage Ills – NY Times
The “Robo-Signing” Settlement: Seeds of Recovery, Or Chaos? – Forbes
Insight: Fed housing blueprint lost in din of politics – Reuters
Ben Bernanke: Washington’s Quiet Hero – Newsweek

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