Over at the Blog of Dr. Constantine Gurdgiev I have just read his excellent analyses on the current situtiation regarding the latest budget from our hapless gombeens in the Government. I do hasten to add that I do not agree with everything he says but it is never the less an excellent piece!
Recent events have led to a significant reframing of the Budget 2014. With these, the Government is now actively signaling a more accommodative stance on next year’s cuts. Alas, the good news end there and the bad news begin. Any easing on austerity in 2014 will be unlikely to produce a material improvement in household budgets. In return, the Government will be placing huge hopes on robust growth returning in 2014. If this fails to materialise, lower austerity today will spell more pain in 2015. Like a dysfunctional alcoholic, unable to stop binging at closing time, we ignore tomorrow’s hangover.
full article at source:http://trueeconomics.blogspot.ie/
Forget about a government shutdown. The quibbling over concessions to keep the government funded distracts from what might be the most predictable economic crisis. We have problems that may affect everything from the value of the U.S. dollar to investors’ savings, but also to national security.
In a presentation earlier this year, Erskine Bowles (of the Simpson-Bowles commission) explains why he travels around the country to drum up support for fiscal reform:
- We are doing this (traveling around the country to drum up support for fiscal reform) not for our grandkids, not even for our kids, but for us.
- If we don’t get elected officials to pull together, we face the most predictable economic crisis in history. The most predictable, but avoidable crisis.
Mr. Bowles is 68 years old; when someone his age says we need to get fiscal reform done for his generation, we should take note. The good news is that we see awareness increase. The bad news is that policy makers have an amazing ability to kick the can down the road. Former Bundesbank President Axel Weber has said policy makers choose the cost of acting versus the cost of not acting. We fully agree and would like to add that the bond market may be the one force powerful enough to get policy makers to make the tough but necessary choices. Unlike the Eurozone, however, we have a current account deficit in the U.S. which means that should the bond market apply pressure on policy makers, the U.S. dollar might come under far more pressure than the Euro has ever been.
full article at source: http://www.marketoracle.co.uk/Article42502.html
By Finfacts Team
The Central Bank said today that its expects weak growth this year with a
continuation of the gradual recovery in the overall level of economic activity,
though at a slightly slower pace than previously expected
In its Q4 2013 bulletin [pdf],
the Bank says its latest forecasts for GDP (gross domestic product) growth for
2013 and 2014 are marginally lower than those published in the last bulletin.
GDP growth of 0.5% is now projected for this year, with growth of 2.0% forecast
for 2014, representing a downward revision of 0.2 and 0.1%, respectively, to the
previous forecasts for 2013 and 2014. The forecast for GNP (gross national
product), mainly excluding the profits of the multinational sectors has also
been revised down in a similar fashion and is now projected to grow by 0.1% this
year, and by 1.2% next year.
full article at source: http://www.finfacts.ie/irishfinancenews/article_1026631.shtml
Imagine a huge, stinking mountain of debt, which represents all of the debt in the world… now look at this chart of student loan debt. Notice anything about this chart of student loan debt owed to the Federal government? Direct Federal loans to students have exploded higher, from $93 billion in 2007 to $560 billion in early 2013. This gargantuan sum exceeds the gross domestic product (GDP) of entire nations—for example, Sweden ($538 billion) and Iran ($521 billion). Non-Federal student loans total another $500 billion, bringing the total to over $1 trillion. Does this look remotely sustainable? Does it look remotely healthy for students, society, taxpayers now on the hook for a half-trillion dollars in potential defaults or the U.S. economy?
Frequent contributor Jeff W. explains the underlying dynamics of this wholesale shift of student-loan debt to Uncle Sam:
Why did Uncle Sam take over the student loan business? I don’t know for sure, of course. But I surmise that it has to do with the nature of debt money. As debt money is being created, it stimulates aggregate demand and circulates in the economy creating (false) prosperity. As long as the government and central banks can keep pumping new debt money into the economy, the economy runs well enough to keep the sheeple satisfied, e.g., housing bubble debt creation years, especially 1992-2006. The banks also profit enormously from the creation of trillions of dollars of new debt money.
Problems develop, however, when there are defaults. Note carefully that when a borrower defaults on a loan, the debt money he and the bank created continues to circulate. It is only when debts are paid back that the debt money disappears from circulation. Thus a condition of debt saturation or debt revulsion (where the people are sick of debt and want to pay off existing debt and refuse to take on more debt) is fatal to a debt money regime.
Central bankers carefully guard against deflation because it causes debt revulsion. If a borrower thinks that $1.00 that be borrows today will have to be paid back, after some years of deflation, with a dollar worth $1.10 or $1.20, the borrower will likely refuse to take out a loan. Debt revulsion causes problems for government (reduced tax revenues, unemployment), but even worse problems for the banks, for the same reason that auto revulsion causes problems for the auto industry or aluminum siding revulsion causes problems for the aluminum siding industry
full article at source: http://charleshughsmith.blogspot.de/2013/09/our-huge-stinking-mountain-of-debt.html
The prestigious Paris-based economic think-tank also said it was essential that faster progress is made in tackling mortgage arrears.The Organisation for Economic Co-operation and Development (OECD) forecast growth of 1pc this year in Ireland – less than the 1.3pc projected by the Department of Finance.In its latest report on the global economic outlook, the OECD said Ireland must stick with its austerity budgets if it is to successfully exit the bailout.“Financial market confidence has improved but the bank lending environment for firms and households remains adverse,” the OECD report said “It is essential to make faster progress in dealing with non-performing loans.“Decisive labour-market reforms are also needed to address the prospect of persistent high long-term unemployment, especially among young people, in particular by putting more resources into activation measures and better aligning skills with employers’ needs.”
The Paris body said GDP will be 1pc this year and 1.9pc in 2014. Unemployment will be 14.3pc and fall to 14.1pc next year.
It said that unemployment would decline only slowly, reflecting in part “persistent skill mismatches”.
Global GDP is expected to increase 3.1pc this year and by 4pc in 2014, the report said.
Across OECD countries, GDP is projected to rise by 1.2pc this year and by 2.3pc in 2014, while growth in non-OECD countries will rise by 5.5pc this year and 6.2pc in 2014…
full article at source: http://www.independent.ie/business/irish/oecd-warns-on-irish-unemployment-and-mortgage-arrears-29305917.html
As most of us can remember that Iceland was the first country that went down during the last Global Financial Crisis in 2008. During that time Iceland had done something remarkable and that is during the five years prior to the crisis, managed to transform its economy from a fishing industry to a mega hedge fund country. Many of its citizens left their traditional trade which is fishing to become fund managers and salesman. As a result Iceland’s banking assets (physical assets + Loans + Reserves + Investment securities) grown to more than 10x its GDP of $14 billion. With such high leverage, when the financial crisis struck it is unable to defend its economy and hence its house of cards collapsed.
The purpose of this article is a post-event analysis of the performance of the Icelandic economy that refuses a bailout as compared to Greece which went for a bailout with the injection of funds from Troika. To simplify matters, we shall coin the bail-in and bail-out as (BIBO) for short. Of course in the short term it helped stabilized the Greek economy for a while but we want to know to what extent it had transformed the Greek economy in the long run with the accompanying terms and conditions and austerity measures. In this article we shall compare the performance of both the economies of Iceland and Greece with the economic indicators or metrics below from the year 2002 to the present. We believed we have been fed with too much toxics by the mainstream medias which are also own by them that capitalized on the age old investment axiom of good-to-good……………………..
full article at source: http://www.marketoracle.co.uk/Article39892.html
By John Mauldin
In today’s Outside the Box I bring you two pieces that, at first glance, may not seem to have much to do with each other. First, Bill Gross, PIMCO managing director, runs down the fierce structural headwinds that our hard-pedaling global economy faces over the next decade. I am going to deal at length with not only his GDP projections for the rest of the decade but those of Grantham and others in the last two Thoughts from the Frontline of this year. This is a challenging environment for traditional portfolio construction, but it’s par for the course as we slog through the secular bear market I was first writing about in 1999.
Then Charles Gave instructs us on the distortions in the measurement of risk that have been introduced as the “plain, boring and well-meaning economists working in the entrails of the world central banks” have supplanted the Marxist avant garde in the world’s shift away from “scientific socialism” to “scientific capitalism.”
full article at source: https://mail.google.com/mail/?shva=1#inbox/13ba059014309438
Last weekend, the communities of Ballyhea and Charleville in county Cork held their 80th weekly bank bailout protest, a dignified 15-minute modest display that demonstrates, for some at least in Ireland, they will not go quietly into the night and accept the 40% of GDP cost of the bank bailout being heaped onto the nation’s shoulders……
full article at source:http://namawinelake.wordpress.com/2012/09/12/bank-bailout-protesters-to-descend-on-the-dail-on-first-day-back-after-summer-recess/
By Dr.Constantin Gurdgiev
In my previous postings here, I have suggested that by mid-year, Greece will be back in the market’s crosshairs. Now, time to look beyond that which consumes the media space once again.
The latest data on first-quarter GDP growth shows that the euro area economy has now trifurcated into a slow-growth core (Germany and Finland, plus Estonia and Slovakia), a Titanic-like periphery (Italy, Spain, Greece, Cyprus, Portugal and the Netherlands) and a no-growth pool containing all the other member states. The only uncertainties remaining at this stage are the smaller countries yet to report their figures for the quarter: Ireland (in an official recession since the fourth quarter of 2011); Luxembourg (which was still expanding at the end of 2011), Malta (which registered quarter-over-quarter contraction in the last three months of 2011); and Slovenia (which had a third consecutive quarterly contraction in GDP
full article at source: http://www.theglobeandmail.com/report-on-business/international-news/global-exchange/international-experts/euro-zone-lacks-engine-for-growth/article2433566/