Mainstream Media | - Part 4

Christina Romer Sums It Up

Appearing on Real Time with Bill Maher on Friday, shortly after the announcement that Standard & Poor’s had downgraded the U.S. credit rating, Christina Romer, former chair of the White House Council of Economic Advisers, reflected on our current condition.

I suppose this would just be funny rather than both funny and disturbing had Romer not uttered the line with a giggle in her belly and a twinkle in her eye. As it was, viewers were left with the impression that: a) she’s quite happy to be thousands of miles away from Washington, and b) we really are ‘Pretty Darn F**ked’.

Tent City, New Jersey

The series of high-resolution pictures that accompany this Mail Online story (from the U.K.) about a growing tent city in New Jersey are, unfortunately, a sign of things to come as aid from the government slows in the months and years ahead.

In scenes reminiscent of the Great Depression, these are the ramshackle homes of the desperate and destitute U.S. families who have set up their own ‘Tent City’ only an hour from Manhattan.

More than 50 homeless people have joined the community within New Jersey’s forests as the economic crisis has wrecked their American dream.

And as politicians in Washington trade blows over their country’s £8.8 trillion debt, the prospect of more souls joining this rag tag group grows by the day.

Building their own tarpaulin tents, Native American teepees and makeshift balsa wood homes, every one of the Tent City residents has lost their job.

These people have been reduced to living on handouts from the local church and friendly restaurants and the community is a sad look at troubles caused as the world’s most powerful country struggles with its finances.

Based on the interviews, they are a surprisingly upbeat group given their circumstances, a renewed sense of community fostered by common financial difficulties apparently making a very unpleasant situation a bit more tolerable.

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The Fed Enters a Cul-de-sac

The U.S. economy and financial markets at “a tipping point” was the headline generated by this Bloomberg interview with Pimco’s Bill Gross yesterday, but the comments about Federal Reserve policy in a rapidly changing environment were important as well. That discussion starts at about the six minute mark.

Gross sees the next round of quantitative easing taking the form of extended period language for zero short-term interest rates and the setting of caps for long-term rates.

A related story by Neil Irwin in the Washington Post neatly summarized the situation:

With the U.S. economy flatlining and at risk of falling into a new recession, the Federal Reserve lacks good tools to do much of anything about it — though that won’t necessarily stop the central bank from trying.

With a whiff of deflation in yesterday’s report on personal income and spending (see this related story in the New York Times), it would appear that sufficient cover may be developing for the central bank to again crank up the printing press this fall.

Buy Japan!

Stock market mavens have been yelling “Buy Japan!” at the top of their lungs for about the last week, ever since the earthquake and tsunami struck and the Nikkei Index tumbled 20 percent (it’s already gained about half that back). In this story at Reuters, billionaire investor Warren Buffett  talks about how recent events have created a buying opportunity.

If not for the growing headwinds facing the global economy and Japan – rising food prices, rising energy prices, rising debt troubles, and the possibility of widespread contamination due to the nuclear crisis to name just a few – buying Japanese stocks “with both hands” would seem to make a good deal of sense.

But, with those concerns casting a pall over markets this spring, I’m not so sure…

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Two stories in the news today would be oddly out of place (and quite unbelievable) during just about any other period in world history, but, here in 2011, they just seem to be more evidence of what is heard more and more these days – “we live in interesting times”.

First, from Detroit, this CNN/Money story tells how the local government has taken another step toward finding a long-term solution for a decades long decline in population and a more recent development – a growing budget deficit.

Michigan approves plan to close half of Detroit schools

In an effort to close a yawning budget deficit, Michigan has approved a proposal to drastically shrink Detroit’s troubled school system over the next few years.

The plan calls for the closure of 70 schools, which would cut the number of schools in the district in half by 2014, leaving only 72 public schools in Detroit. The closures would be on top of the 59 that were shuttered last year. As a result, high school class sizes would jump to 60 students each over the next few years.

And, in Saudi Arabia, the AP reports that the royal family is about to spend billions of dollars in the hope that what is now happening in Libya never happens in their desert kingdom.

Saudi opens its wallet to stave off protests

As Saudi Arabia’s 86-year-old monarch returned home from back surgery, his government tried to get ahead of potential unrest in the oil-rich country Wednesday by announcing an unprecedented economic package that will provide Saudis interest-free home loans, unemployment assistance and sweeping debt forgiveness.

The total cost was estimated at 135 billion Saudi riyals ($36 billion), but this was not largesse. Saudi Arabia clearly wants no part of the revolts and bloodshed sweeping the already unsettled Arab world.

Once again, “you don’t know whether to laugh or cry” after reading things like this – another phrase that seems to roll easily off of the tongues of a lot of people these days.

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