Mercury Rising 鳯女

Politics, life, and other things that matter

Posts Tagged ‘economy’

Look out below, Tokyo edition

Posted by Charles II on February 9, 2016

The problem seems to be that people are afraid that oil companies can’t pay their bonds, and that banks, especially European banks, will fail. In any event…

 

Nikkei-plunge

(Image from CNBC ca. 1:30 AM Eastern).

Dax looks to  down 3%, S&P -0.8%.

Expect an ugly start to the day–and the Year of the Fire Monkey– unless the ECB issues some guarantees. One source says:

 

Monkey is a smart, naughty, wily and vigilant animal. If you want to have good return for your money investment, then you need to outsmart the Monkey.

 

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The shrinking middle class: due to rising and stagnant incomes

Posted by Charles II on December 10, 2015

Pew has an important study on the declining middle class. I question its validity, because it shows a ca. 50% rise in median family income and I suspect this may be artifact (is the scaling to 3 person household the right way to do it? what is the contribution of two spouses working? Is this really a monetization of “women’s work”? etc.).

But let others dissect it. If you want to see a cool graphic showing the flattening of the Bell Curve, check <a href=”http://www.ft.com/intl/cms/s/0/98ce14ee-99a6-11e5-95c7-d47aa298f769.html”>the FT</a>.

[crossposted with edits from Eschaton]

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Slowing job, wage growth may signal a top

Posted by Charles II on December 4, 2015

New Deal Democrat:

November jobs report: truly a mixed report, but enough for the Fed

This was actually a mixed report, with some good positives and some nasty negatives.
The positives, in addition to the headline jobs number, included substantial upward revisions in hours and jobs to last month.
The negatives were first and foremost, wages, which after inflation, probably declined in November…..My biggest fear is that in the next recession, this will actually go negative, i.e., there will be outright wage deflation. … The YoY change in job growth continues to decelerate from its peak a year ago, continuing to signal that we are later in the economic expansion.

This will presumably be enough for the Fed to raise rates, the lack of wage-push inflation be damned.  Hopefully they won’t drive the economy into a new recession next year. .

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The next financial crisis?

Posted by Charles II on December 2, 2015

Ciara Linnane, Marketwatch:

The oil and gas and metals and mining sectors are facing a spike in defaults and downgrades in 2016 and investors that have piled into their bonds in the hunt for yield are facing major losses, Moody’s warned Wednesday.

Companies in those two sectors have issued nearly $2 trillion in bonds globally since 2010, according to the rating agency, many of them in the high-yield — or “junk bond” — category. Now prices of a range of commodities, from oil, to copper, iron ore, gold and coal are at multiyear lows, battered by weak demand and oversupply.

“The sheer volume of commodity-related debt poses challenges because it means that credit losses from commodity investments will be substantial for many investors,” said Mariarosa Verde, Moody’s group credit officer and lead author of a report published Wednesday on the credit hazard posed by the current stress in commodity markets.

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China Property Bubble Pops, Dooming Keystone XL Pipeline. Here’s How.

Posted by Phoenix Woman on January 22, 2012

Lost in all the hubbub over whether Obama is siding with the oil barons or the environmentalists on the plan to pipe Athabascan tar sands muck down to Houston is the economic fact that the window of profitability for the stuff is rapidly shrinking.

As most informed persons know, the muck’s eventual destination was never American gas tanks, but foreign — especially Chinese — ones. However, the stuff is too expensive to extract for it to be profitably shipped overseas in anything less than supertanker loads, and Canada’s western coast has no ports capable of docking supertankers. Even if it did, the First Nations peoples won’t let anyone hack through their lands and forests to get a pipeline — which is the only way the stuff can be profitably transported on land — to the British Columbia ports. That’s why crossing the border to get to Houston, with its supertanker-capable ports, is key.

But for this whole scheme to stay profitable, oil prices have to stay above $90 a barrel. As this oil price tracker shows, the price per barrel crashed well below that point when the US real estate and banking bubble’s popping took the US (and world) economy down with it in September of 2008, and prices stayed well below $90 a barrel until March of 2011. Only after oil prices consistently topped $90 a barrel did the TransCanada folks start talking heavily to the US mass media about Keystone XL.

Now we have word that the Chinese real estate bubble is popping:

The mainland property market is in meltdown and the damage is spreading, not only to consumers but across the mainland’s economy and, perhaps, internationally as well.

Since last year, Beijing has sought to burst what it saw as a dangerous bubble, which was pushing home prices beyond the reach of the middle class. It did so by initiating a series of tough measures to restrict bank lending and a crackdown on speculation.

As a result, sales have slumped by as much as 70 per cent, triggering a mainland-wide price war among major developers desperate to raise cash amid a credit crunch. Many are not expected to survive the shakeout.

This is having ripple effects throughout the Chinese economy. Steel suppliers in and out of China are adversely affected, since new construction accounts for 29% of China’s steel output and 15% of the world’s total steel output. Concrete, copper, and other construction-connected businesses in and out of China are also affected.

Municipalities and other local governments, which typically depend on land sales for a good chunk of their revenue, have sustained a hard blow just as they were struggling out of the long recession. Angry home and property owners suddenly find themselves “underwater”, or with negative equity, just as many if not most US homeowners have over the past five years.

The effects of the bubble’s popping will be to markedly slow the Chinese economy, if not stop it outright. That means that there will be less demand for oil, just as there was less demand during 2009 in the depths of the recession. That means that world oil prices will soon be dropping again.

And that means there won’t be any way to sell the tar sands muck to anyone and make a profit on it.

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Is Austerity Killing Europe’s Recovery? Well, Duh.

Posted by Phoenix Woman on September 2, 2011

The WaPo’s Howard Schneider (or his headline writer) asks “Is austerity killing Europe’s recovery?”

He then proceeds to answer his own question:

The campaign to reduce government deficits has come in response to a European debt crisis that could endanger the global banking system. And the budget cutting has been coupled with a reluctance by the the European Central Bank to stimulate economic growth like the Federal Reserve has in the United States; the ECB has instead raised interest rates twice this year to contain inflation.

Those steps have sucked hundreds of billions of dollars out of a European economy that may be edging towards recession.

Such a downturn, by choking off government revenues and increasing the demand for public services, could put struggling countries such as Spain and Italy at risk of missing the very deficit-reduction targets that budget cuts and other austerity measures were meant to achieve.

You don’t have to look at Spain and Italy for proof that austerity kills economies — just look at the UK. Their recovery ground to a halt once Nick Clegg fell for the extortion of the BNP Paribas ratings agency, which threatened to downgrade the UK’s credit rating if Clegg didn’t form a government with the austerity-jonesing Tories.

I’ve been seeing more pro-Keynesian rumblings lately. Could it be that some of the elites realize that they may be slowly smothering their own golden geese and need to back off from the neoliberal plan to destroy public social services worldwide?

Posted in 'starving the beast', (Rich) Taxpayers League | Tagged: , , , , , , | 1 Comment »

More Proof GOP Wants US to Fail: Eric Cantor Shorts T-Bills

Posted by Phoenix Woman on June 27, 2011

Led by their Majority Leader Eric Cantor, Congressional Republicans staged a temper tantrum last week — rather like the one Minnesota Congressional Republicans staged today by bailing on state budget talks — when they walked out of budget negotiations in order to please their corporate/Bircher tax-hating Southern Strategist base. This has renewed the decades-long debate, which was most famously fueled in recent times by Rush Limbaugh’s comments in April of 2009, concerning whether Republicans want America to fail so they could profit from its failure, either in votes or in cold hard cash.

And now we have more evidence that the Republicans who have the most influence over whether America lives or dies are in fact betting on its failure:

The Wall Street Journal reported the other day (here it is, but it’s behind a paywall) that as of his last disclosure form, House Republican Majority Leader Eric Cantor owned shares in a mutual fund that is short long-dated U.S. Treasury bonds. He is, in other words, betting that interest rates will rise, and hoping to make money off the fall in prices that would cause. (For my ancient primer on why bond prices fall when interest rates rise, see here .)

Per the WSJ, Cantor had up to $15,000 worth of shares in this fund.

That’s right: Eric Cantor, a man who has more control than all but a handful of other similarly-powerful men over whether the U.S. defaults on its debts by blocking an increase in the debt ceiling, would profit from this personally as interest rates would spike and prices would drop drastically. Even feeding the fear that this might occur could cause milder panics — and in fact has contributed to the recent huge losses the stock market has sustained.

How can this be legal? At all? Or is it, once again, perfectly okay so long as you’re a Republican?

(Crossposted to Renaissance Post.)

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