Thursday, June 14, 2012

The latest economic news

Here's a selection of economic headlines for those who'd like to keep informed.  Follow the links for more detail.

1.  Debt crisis: ECB last hope as dam breaks in Spain

Spain's borrowing costs have surged to record highs and are perilously close to the point of no return, threatening a full-blown sovereign crisis unless the European Central Bank comes to the rescue.

2.  Central Bank Money-Printing: $6 Trillion . . . and Counting

... electronic money creation to date - whether directly through bond buying in the United States or Britain or in a more oblique form of cheap long-term lending by the ECB - is not even replacing what commercial banks are removing by shoring up their own balance sheets and winding down loan books.

Global investors appear convinced more [Quantitative Easing] is in the pipe.

Never before in the history of the world have such mind-bogglingly vast numbers been so casually bandied about.  Since this crisis began, central banks (including our own Federal Reserve) have 'created' - i.e. generated as digits in a computer system - over $6 trillion in 'fiat money' . . . 'money' that has no assets backing it whatsoever, and doesn't even physically exist as printed pieces of paper.  I can't even begin to comprehend the size, the import, of that figure . . . and neither can the central banks.  We're in uncharted waters.  No-one knows what this will mean further down the road.  No-one's ever been down this road before.  We'll be the first to find out what lies ahead - and I fear there are honking great big economic dragons awaiting us . . .

3.  The 'Big Reset' Is Coming: Here Is What To Do

A week ago, Zero Hedge first presented the now viral presentation by Raoul Pal titled "The End Game." We dubbed the presentation scary because it was: in very frank terms it laid out the reality of the current absolutely unsustainable situation while pulling no punches. Yet some may have misread the underlying narrative: Pal did not predict armageddon. Far from it: he forecast the end of the current broken economic, monetary, and fiat system... which following its collapse will be replaced with something different, something stable. Which, incidentally, is why the presentation was called a big "reset", not the big "end." But what does that mean, and how does one protect from such an event? Luckily, we have another presentation to share with readers, this time from Eidesis Capital, given at the Grant's April 11 conference, which picks up where Pal left off. Because if the Big Reset told us what is coming, Eidesis tells us how to get from there to the other side...

4.  Twilight of the West

In the twilight of the West, America and Europe are still different but only to this extent: They’ve wound up taking separate paths to the same destination ... in 2012 the advanced Western social-democratic citizen looks pretty similar, whether viewed from Greece or Germany, California or Quebec.

That’s to say, the unsustainable “bubble” is not student debt or subprime mortgages or anything else. The bubble is us, and the assumptions of entitlement. Too many citizens of advanced Western democracies live a life they have not earned, and are not willing to earn.

5.  Taxes and fiscal responsibility

Christine Lagarde, Managing Director of the International Monetary Fund, got into all sorts of hot water in May when she 'warned that Greece can expect little sympathy from the International Monetary Fund on its bail-out terms, and called for its citizens to "help themselves" out of the financial crisis by "paying their tax".'  She was pilloried for her 'insensitivity' and/or 'lack of compassion' by many commentators (particularly - surprise, surprise! - Greek politicians).

However, Nikos Lekkas, the head of Greece's tax inspectorate, has just spoken out in support of her claims.

"Tax evasion in Greece has reached 12 to 15 per cent of the gross national product," he told Germany's Die Welt newspaper. "That is €40 to €45bn [US $50.4-$56.7 billion] per year. If we could recover even half of that, Greece would have solved the problem. Our politicians have begun to understand that."
. . .

The tax inspector has warned the government that if the Greek elite remains unpunished for tax evasion amid the "systemic corruption that permeates the whole of society" then "there will be a social explosion."

6.  A Global Recession? The Warning Signs Are Everywhere

7.  Counting on an Inheritance? Count Again

For years now, there's been a lot of talk about boomers getting tremendous windfalls as their parents pass on. Many boomers, in fact, have been lagging behind in their savings, betting on — hoping for — big bequests, especially since many of them suffered big losses in 2008.

But for a growing number of boomers, things aren't going according to plan. The postwar generation is living longer — and many are spending their savings along the way. And, of course, many of them also took a hit in 2008.

The result is that, as a group, boomers likely won't be getting as much of an inheritance as they hoped. Even worse, far from receiving a bequest, a growing number are tapping some of their own savings to help their cash-strapped parents make ends meet.

For families, the result is often a lot of scrambling, dashed dreams, and conflict and angst as parents and children try to come to grips with the lean new reality — and divide up a smaller pie.

8. The Genius of Mutual Indebtedness

A speech by UK Independence Party leader and Member of the European Parliament, Nigel Farage, on June 13th, 2012.  It's short, pithy and well worth the listening.

9.  Just to prove there is a way out of this mess . . .

Estonia has demonstrated that through fiscal discipline and austerity programs, a nation can deal with its debt problems and find a way back to financial stability.  Now, if only the rest of the Eurozone (not to mention the USA!) would follow its example . . .

Hang in there, friends.  Do your best to prepare your own families for hard times, and work together with like-minded relatives and friends to minimize your exposure to risk.  We're all in this together, whether we like it or not.  I'll continue to try to bring you economic information of importance . . . without depressing you too much, I hope!



tweell said...

That inheritance issue is definitely true with me. I spent a big chunk of savings on shingles and such when I re-roofed my parents house last year. Dad passed away two months ago, his final illness took most of the rest of my stash. Mom is barely treading water financially (and needing lots of help otherwise). To top it off, an uncle has had to move in with me as well as two of my adult children. I'm a widower, what am I doing sleeping on the couch?

perlhaqr said...

I do so like Nigel Farage.