The Mess That Greenspan Made - Part 415

What Will the Fed Do?

After the Republic leadership in Congress sent a letter to Federal Reserve Chairman Ben Bernanke yesterday urging he and his fellow central bankers to refrain from any more monetary stimulus to aid the economy (and, not uncoincidentally, President Obama’s election chances), the Fed’s meeting today has gotten a bit more interesting.

See video link in Links.txt

The letter was signed by Senators Mitch McConnell and Jon Kyl along with Representatives John Boehner and Eric Cantor and, while they do make a few good points, such as, the dismal results of prior money printing efforts and the potential for further intervention to harm the U.S. economy, it was rather unusual (unprecedented?) and bordered on bullying.

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Wednesday Morning Links

Global markets wait for Fed, Greece – AP
Bernanke Has Few Tools to Heal Economy – Bloomberg
Fed looks set to ease policy as U.S. outlook dims – Reuters
Republicans Urge Bernanke to Refrain From Further Stimulus – BusinessWeek
IMF’s prognosis for advanced economies just got a whole lot bleaker – Telegraph
Greece hit by new wave of protests, braces for fresh austerity measures – xinhuanet
The 2007 Bust: How Could They Not Have Known? – Real Clear Markets
Bank of England ready for more money printing – Telegraph
Obama’s Tax Hikes Expected To Have Little Impact On The Rich – HuffPost
Euro Crisis: The General Haig school of crisis management – Economist
Doom! – Krugman, NY Times

Oil hovers near $87 ahead of US Fed policy meeting – AP
Gold edges up in countdown to Fed policy decision – Reuters
PIMCO Launches Fund to Hedge Inflation Risk – AdvisorOne
Investors Must Take ‘Leap of Faith’: BlackRock’s Doll – CNBC
Bullion Vaults Run Out of Space on Gold Rally – Bloomberg
Ready for the annual Christmas rally in gold and silver? – StockHouse
Asian gold demand driven by rising wealth, savings mentality – Kitco
Grantham: ‘No market for young men’ – MarketWatch
Gold Likely to Retest $1,920: Charts – CNBC

A Little Inflation Can Be a Wonderful Thing – Mother Jones
Short-Term Stimulus Won’t Help U.S. in Long Run – Bloomberg
Japan exports rise less than expected on yen surge – BBC
Australia to Europe: Get your act together – Channel News Asia
Australia’s Mortgage Stress Jumps as Costs Rise – Bloomberg
With high inflation and weak currency India not like other BRIC Countries – Economic Times
Record 37% Say Their Home Is Worth Less Than the Mortgage Payments – Rasmussen
$1B foreclosure aid program helps fewer than planned – USA Today
Housing Is to the U.S. What Greece Is to the Euro Zone – WSJ
California Housing Market Sees August Boom – MainStreet
The Twist and Shout Should Be the Fed’s Next Maneuver – Bloomberg
Why Many U.S. Banks Don’t Want Your Money – Time


A Gold Car in India? Why Not?

A few years ago the world learned of Saddam Hussein’s gold toilets and, of course, gold plated AK-47s have been around for some time. Now comes news from Commodity Online in India that Tata Motors has produced a gold-plated car worth a reported $5 million.

Ironically, the vehicle above is Tata Nano, a model designed specifically to bring low cost transportation to the masses in Indian. Now they’ve gone and made it unaffordable again…

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Why Germany Does Not ♥ Greece

There’s a pretty compelling story in the Washington Post today about Germany’s path to prosperity over the last decade or so, one that goes a long way in explaining why the German population is so overwhelmingly opposed to providing more bailout money for Greece, Ireland, Portugal and other spendthrift European nations.

Germany reaps rewards of entitlement cuts

The financial crisis has turned Europe topsy-turvy, with governments freezing pensions, unions voting away privileges and a web of safety nets disappearing one strand at a time.

But as the role of the state is being reexamined, one country stands apart: Germany, where reforms a decade ago made the country less generous than some of its peers but also helped ease the blow when the rest of the world stopped snapping up BMWs and Bosch washing machines.

Now, as its neighbors are being forced to retrench, and the future of the euro appears imperiled, Germany’s social services are running surpluses, helped by taxes that are among the highest in Europe and difficult sacrifices its citizens have made to jump-start their economy.

Many Germans are peering across their borders and wondering why others can’t do the same, putting intense political pressure on Chancellor Angela Merkel not to appear too generous with bailouts.

A decade ago, Germany faced stagnant growth, forecasts of rising joblessness and the spiraling cost of unemployment benefits that paid many workers more than half of their old salary indefinitely. The country was lagging behind many of its neighbors.

Then-Chancellor Gerhard Schroeder staked his political legacy on a painful series of reforms that slashed benefits for people who were unemployed for more than a year, aiming to push them back into jobs. Other reforms privatized portions of the pension system, cutting guaranteed benefits. More recently, the retirement age was pushed to 67, from 65.

That improvement can be measured on balance sheets, as numbers have turned from red to black. In the first quarter of 2011, the latest for which figures are available, the government collected more money for its health insurance programs and unemployment funds than it paid out, running a $140 million surplus for its social programs overall.

There are some pretty amazing statistics in this report (some of which are included in this excellent graphic) and U.S. politician probably just shake their head when they see German unemployment at six percent, average worker tax rates at over 40 percent, with surpluses for both their jobless benefits and medical care programs.

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