The Mess That Greenspan Made - Part 416

Tuesday Morning Links

Chronic Pain for the Euro – NY Times
The ECB Fear Factor – Project Syndicate
Spain yields still high, Belgium drops – Reuters
Europe borrowing costs continue to rise – Washington Post
Fed likely to stay on sidelines at policy meeting – Reuters
Gingrich would end Fed’s emphasis on jobs, focus only on inflation – Yahoo!
ECRI Renews U.S. Recession Call Clashing with Wall Street – Zero Hedge
Europe’s Top Bank Regulator: ‘The Crisis Has Reached a Systemic Level’ – Spiegel
The IMF as the ECB’s unsecured borrower of last resort – FT Alphaville
The End of Old Europe: Why Merkel’s Triumph Will Come at a High Price – Spiegel
U.S. federal budget deficit reaches $137 bln in November – xinhuanet
Lessons of the 1930s: There could be trouble ahead – Economist
What Is Rich and Poor In America? – Real Clear Markets

Oil prices falling on Europe and China – Nasdaq
Gold lifts off lows, vulnerable to Europe anxiety – Reuters
Crude Edges Up Even As OPEC, IEA Trim Forecast – RTT News
Hedge fund redemptions surge after losses – Reuters
India gold sales jump 30% since September – Commodity Online
EU Banks Selling ‘Crown Jewels’ for Cash – Bloomberg
How to play gold and silver? – Commodity Online
Debasing The Dollar, Not – Krugman, NY Times

Unwanted Homes, Unwanted Workers – NY Times
2012 forecast for the economy: Cautiously optimistic – Fortune
Jobs needed to reach 8% jobless rate by November 2012 – Calculated Risk
U.K. Inflation Slows on Food, Transport Costs – Bloomberg
No, the Bundesbank has not reached its limit – voxeu
Switzerland cuts economic growth forecast – BBC
Officials Hold Planning Session on China Housing Slowdown – Bloomberg
China’s housing bubble is now losing air quickly – LA Times
1st fall for O.C. property index in 2 years – O.C. Register
Principal reduction outpaces short sales under HAMP – Housing Wire
Housing Bust to Look Worse With Sales Revised – WSJ
Central bank secrecy datapoint of the day – Salmon, Reuters
Fed May Revise Zero-Rate Vow as Bond-Buying Need Fades – Bloomberg


Not Redefining Rich

The first part of this Gallup survey addresses the level of annual income Americans would need to consider themselves “rich”, a question that, at least by most definitions of the word (i.e., relating to wealth, not income), doesn’t make sense. But, the second poll asking what net worth would be required to qualify as “rich” had more interesting results:

A surprising 74 percent of those polled think that, if you’ve reached the one million dollar mark you are “rich” and, even more surprisingly, this hasn’t changed in seven years since the last time this survey was conducted.

It strikes me that, either one of these polls was somehow flawed or people really don’t understand what has been happening to their money – even using the government’s dubious inflation statistics, $1 million in 2003 is now worth almost $1.25 million today, meaning that there should have been a sizeable shift upward in the survey results.

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Achuthan Unbowed

Apparently ECRI’s Lakshman Achuthan was on Bloomberg late last week to talk about his U.S. recession call from last month and,  in his weekly commentary today, John Hussman brings us the sad news that the recession hasn’t been canceled – it’s just been delayed.

As noted last week, we continue to estimate a very high probability of oncoming recession.

That view is clearly shared by the Economic Cycle Research Institute, where Lakshman Achuthan noted on Bloomberg last week that “forward looking data since two months ago has remained weak, it’s getting weaker, it’s not turning up. So, to my fellow forecasters out there, I’d say they’re roughly in two camps. There are those who say that the economy is firming and will continue to firm into next year. We reject that. There’s nothing there that suggests that at all. I think there’s a larger camp that says we’re going to muddle through; we’re going to get this kind of slow growth, ‘I’m not terribly optimistic, but we’re going to muddle through.’ I would point out that that’s never happened. We never muddle through. A market economy does not want to have a static state. It either accelerates or it decelerates, and these forward looking indicators say decelerate.”

Achuthan also noted that “the other half of the GDP report,” gross domestic income or GDI (which tends to be the more accurate measure of GDP) was up just 0.3% in the most recent quarter. The Federal Reserve has observed that when GDP and GDI differ, the GDP figure tends to be revised toward GDI, not the other way around. Achuthan warned that the GDI figures are “a big red recession signal.” In response to the question “You had a recession call, what happened?,” Achuthan simply answered “It’s happening.”

Those preferring the “glass half full” version might want to have a look at this Bloomberg article today U.S. Economic Data Surprising Forecasters, where, right off the bat you learn that “U.S. economic data are outperforming expectations by the most in nine months” and, later on, a plethora of other economic indicators are at their highest levels in nearly a year.

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Ambrose Covers the Debt Crisis

Ambrose Evans-Pritchard of the Telegraph has been writing some of the most colorful, alarming, and (as far as I can tell) prescient commentary on the latest developments in the two-year old, credit market saga better known as the European sovereign debt crisis.

Last week’s Better a horrible end for Euroland, or endless horror? offered the imagery shown to the right when it appeared at his blog where, presumably, there are less strict rules on decorum than in the newspaper.

That’s Ambrose on the left.

Friday’s blog entry Europe’s blithering idiots and their flim-flam treaty attracted nearly 2,000 comments, so, clearly, as far as generating discussion, he’s doing a very good job and an opening line such as “What remarkable petulance and stupidity” does little to make readers think that they’ll be disappointed upon reading further.

Three entries yesterday for the print edition of the paper are more reserved, but not much:

Links to all his work appears at this page at the Telegraph and it provides a good diversion from the coverage provided by the mainstream media that rarely includes any pictures from Lord of the Rings, though I’m guessing that Balrog (as Germany) would be a better metaphor for what’s been going in Europe lately.

[BTW - if the image above is not from Lord of the Rings (which I wasn't able to verify), try not to let that distract from the significance (and light humor) of the Balrog comment.]

Ron Paul’s Greatest Hits from Saturday Night

Not having seen any of the GOP Presidential debate on Saturday night and failing to spot any coverage of Rep. Ron Paul’s comments on a brief sampling of Sunday morning talk shows yesterday, it was nice to see this compilation of his comments beginning with a discussion of why the economy is in the condition it’s in.

Of course, the idea that the excessive credit and debt that led to the recent malinvestment (a.k.a. the housing bubble) have to be liquidated before economic growth can resume continues to fall on deaf ears, as does the notion that we could save trillions of dollars in short order by relinquishing our role as the world’s policeman.

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