Analysis of the global economy
Jamila Trindle: Regulators should push derivatives out of federally backed banks and tighten the Volcker rule, former Federal Deposit Insurance Corp. Chairman Sheila Bair said Thursday.
“Don’t let insured deposits fund that activity,” Ms. Bair said at a roundtable on the Volcker rule held by staff of the Commodity Futures Trading Commission.
Andy Xie, an independent economist in China, said European countries without a competitive advantage must simply work harder or spend less. Alternatively, if they want to keep living it up, they will have to accept wrenching labor reforms and deregulation.
Xie saw no popular consent for either course of action. Nor did he detect that Europe was tightening its belt as urgently as Asia did after its 1997/98 financial crisis. “While eurozone economies have contracted a bit, people seem to be bent on enjoying life as usual,” Xie wrote in New Century weekly, a Chinese publication. “China cannot save Europe. No one can. Only Europeans can, through increasing work relative to leisure.”
Thom Hartmann is joined by Nobel Prize winning economist Dr. Paul Krugman, professor of economics and current affairs at Princeton University and columnist on the New York Times. His new book is titled: End This Depression Now. Europe is in crisis mode. The United States could be headed off a fiscal cliff at the end of the year.
Part 2:
Comment:~ Paul Krugman believes in big government and big unions and dismisses the alternative as “voodoo economics”. The issues are more complicated than this. John Maynard Keynes was right in some areas — austerity does not restore confidence in a shrinking economy — but over-simplistic in others. If governments do run deficits — I believe this is a necessary evil during a financial crisis — increasing government spending on welfare payments and non-productive assets simply carries the country to the next crisis — ballooning public debt. The only way to avoid this is to channel fiscal deficits into productive investment which will enhance GDP growth and help to repay the debt incurred.
Spain’s economy showed fresh strain as retail sales fell at a record pace in April, showing the government’s austerity program is strangling consumption and suggesting deepening recession. Data Tuesday from the National Statistics Institute, or INE, showed seasonally adjusted retail sales fell 9.8% on the year in April, compared with a 3.8% drop in March. The decline was the sharpest since INE started collecting the data in January 2004. Household spending is dropping as unemployment approaches 25% of the work force.
Nick Gardner: In 2008, private debt in the US grew $4.1 trillion but in 2010 shrunk $2.85 trillion as banks decreased their lending as a result of the housing crash. When subtracted from GDP, this fall in debt equated to a 38 per cent reduction in aggregate demand, leading directly to the “great recession” and unemployment hitting its highest level in almost 30 years. “This is what people find so confusing,” says Keen. “When you look at GDP numbers in the US, they’re not bad. At the beginning of 2008, US GDP was $14.25 trillion and today it has GDP of $14.75 trillion. That’s stagnant growth but doesn’t explain the enormous depths of the US downturn. It only begins to makes sense when you look at the fall in aggregate demand.”
via Keen to be heard.
Reuters video: Nicholas Zhu, ANZ Bank head of macro-economic data Asia, examines iron ore stockpiles at Qingdao port.
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Hat tip to Houses and Holes
Former Senator Alan Simpson, Co-Chair of President Obama’s Fiscal Commission, doesn’t believe the national debt can be solved without a financial or political crisis. He speaks with WSJ’s Alan Murray at the latest Wall Street Journal Viewpoints panel.
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FedEx CEO Frederick W. Smith talks about how exports to China remain stagnant given China’s recent protectionist policies and its focus on “indigenous innovation.” He speaks with WSJ’s Alan Murray at Viewpoints West.
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FedEx CEO Frederick W. Smith talks about how capital investment and lowering corporate tax rates are the main solutions to creating U.S. jobs. He speaks with WSJ’s Alan Murray at Viewpoints West.
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David Weidner: A return to Glass-Steagall in the U.S. would effectively force the world to separate traditional banking from casino banking.
That system would be attractive to both sides. The banking system that holds our loans, our deposits, debts and assets would be separate from a Wild West free market unfettered by bank regulators and their constant worries about risk.
So why can’t the big financial institutions get behind this one? Simple. They want to gamble your money in the casino.
via Dimon may be ‘stupid,’ but he’s right on banks – David Weidner’s Writing on the Wall – MarketWatch.
