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Social Breakdown From Continued Economic Issues Threatens European Stability

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Photo Credit: Reuters

Unemployment has reached a new high in the euro zone and inflation remains well below the European Central Bank’s target, stepping up pressure on EU leaders and the ECB for action to revive the bloc’s sickly economy.

Joblessness in the 17-nation currency area rose to 12.2 percent in April, EU statistics office Eurostat said on Friday, marking a new record since the data series began in 1995.

With the euro zone in its longest recession since its creation in 1999 … the deepening unemployment crisis is a threat to the social fabric of the euro zone. Almost two-thirds of young Greeks are unable to find work, exemplifying southern Europe’s ‘lost generation’.

Economists and policymakers including Germany’s finance minister, Wolfgang Schaeuble, have said the greatest menace to the unity of the euro zone is now social breakdown from the crisis, rather than market-driven factors.

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China Seeks Foothold in Arctic Group As Competition Heats Up for Region’s Resources

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Photo Credit: State DepartmentChina is one of several countries hoping to obtain a foothold in a grouping of nations with territory lying within the Arctic Circle, a resource-rich area of fast-growing economic and strategic significance.

Beijing’s application for observer status at the Arctic Council, which meets in northern Sweden on Wednesday, requires the approval of all eight current members of the intergovernmental body, and some analysts are urging the United States to block it, pointing to China’s territorial disputes with neighboring countries and some of its policies at home.

The rising importance of the Arctic lies in its huge oil and gas potential, and experts predict virtually ice-free summers in the coming decades, making the region more accessible and navigable, and triggering concerns about potential harm to sensitive ecosystems.

A much-cited U.S. Geological Survey study in 2008 found that “the Arctic accounts for about 13 percent of the undiscovered oil, 30 percent of the undiscovered natural gas, and 20 percent of the undiscovered natural gas liquids in the world.”

Geopolitical competition among Arctic nations has been heating up in recent years, and a Russian security strategy released in 2009 warned of the possibility of military conflict over the region’s resources.

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Report: Obama Spent Twice as Much Time on Vacation/Golf as Economy

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Photo Credit: Breitbart According to a new report by the nonpartisan Government Accountability Institute (GAI), President Barack Obama has spent over twice as many hours on vacation and golf (976 hours) as he has in economic meetings of any kind (474.4 hours)…

GAI’s findings may actually understate Obama’s recreational hours.

Last year, Obama told CBS News that playing golf is “the only time that for six hours, I’m outside.” But instead of six hours, GAI counted a round of golf as taking just four hours. Likewise, for presidential vacation hours, researchers attributed just six hours of any day of vacation to leisure activity.

“Like most people, presidents still do work while on vacation,” said GAI President Peter Schweizer. “So we really went out of our way to fairly and accurately reflect how the president spends his time.”

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China ‘To Overtake America By 2016’

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Photo Credit: EPA

China’s economy expanded last year at 7.8pc – its slowest pace in more than a decade – and recent data has fuelled concerns that any rebound in the country’s growth is losing steam.

However, the OECD was upbeat, predicting in a new survey of China’s prospects that the country’s economy could expand by 8.5pc this year and by 8.9pc in 2014.

While the OECD noted the slowdown in China’s aggressive expansion, it nonetheless predicted that growth should average 8pc in this decade at current rates of investment and reform.

After allowing for price differences, it forecast that China could become the world’s largest economy, overtaking America, around 2016.

Fuelling the OECD’s positive prediction was an optimistic outlook for investment spending in the world’s second-biggest economy. It pointed to substantial deficits in rail and road capacity relative to other major economies at similar stages of development, as well as to sub-standard housing as offering scope for more profitable spending on infrastructure.

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Finally, Some Good News: US Household Debt Burden Hits Record Low

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A measure of the burden of U.S. household debt sank to a record low in the fourth quarter, offering more evidence of improving household finances that should lend support to consumer spending and the economy.
The household debt-service ratio – an estimate of the share of debt payments to disposable personal income – fell to 10.38 percent, the Federal Reserve said on Wednesday.

That was the lowest since the series started in 1980. In comparison, the ratio, which takes into account outstanding mortgage and consumer debt, was 10.56 percent in the third quarter. It peaked in the third quarter of 2007, shortly before the U.S. economy fell into recession.

“Household balance sheets are improving and that lays the foundation for more spending, which in turn can lead to a virtuous cycle of more business investment and hopefully more jobs,” said Dana Saporta, director of U.S. economics research at Credit Suisse in New York.

U.S. households built up a massive debt load as the housing bubble expanded. Efforts to pay down those debts have been a restraint on spending and the economy’s recovery.

Now, it appears that process of deleveraging may have run its course. Data from the Fed last week showed household debt rose at a 2.5 percent annual rate in the fourth quarter, the fastest since early 2008, while a report last month from the New York Federal Reserve Bank said consumer debt rose in the last three months of 2012 for the first time in four years.

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Fed Preparing For Future PR Nightmare

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photo credit: medill dcEveryone wants the Federal Reserve to say how it will unwind the $3 trillion balance sheet amassed from years of quantitative easing.

Indeed, this was something of a hot topic in Fed Chairman Ben Bernanke’s testimony before Congress last week.

One of the big issues the central bank faces is the inevitable loss it will have to take when interest rates rise and the value of the Fed’s bond portfolio declines.

Although not an economic problem — as “losses” for a central bank are pretty meaningless — there could be a PR problem when the Fed stops making payments to the Treasury from the interest income it receives on its bond portfolio.

Deutsche Bank strategist Stephen Abrahams recently explained why this could be such a nightmare:

The possibility of suspending remittances and carrying unrealized losses could complicate the Fed’s relationships with the rest of Washington and the public. While remittances help the federal government pay down debt, any shortfall in operating income leading to a suspension of remittances would require the Fed to borrow from Treasury.

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Wall Street Legend Warns: A ‘Storm’ Is Coming

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Photo Credit: BloombergNoted hedge fund manager Stan Druckenmiller, 59, on Friday warned that the U.S. economy is headed for a “storm” that could prove to be far worse than the financial meltdown of 2008.

But first, if you’re not familiar with his name, here’s what you need to know: He’s one of the most respected and successful hedge fund managers in the past 30 years.

Obviously, you don’t achieve that type of success (or notoriety) on Wall Street by running your mouth. That being said, if Druckenmiller, a former partner of billionaire liberal philanthropist George Soros, is predicting serious economic trouble for the U.S., perhaps we should listen.

“I see a storm coming, maybe bigger than the storm we had in 2008, 2010. And really, the reason could happen without people looking as for a lot of similar reasons that we could get into,” he said during an interview with Bloomberg TV’s Stephanie Ruhle.

“But the basic the basic story is, the demographic bubble I was looking at way back in ’94 that started in 2011, we are right at the first ramp-up of this thing that is about to hit,” he added.

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Palin: Washington Buying Bullets For Us

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Photo Credit: WNDImagine the worst-case scenario if the sequester goes through. The market nosedives. The economy implodes. Empty shelves. Riots. The feds hit the streets in force to restore order in a “national emergency.”

Sounds like something in a Third World country or Greece. It could never happen here, right? Think again, says Sarah Palin.

The former Alaska governor and Republican vice-presidential nominee believes the federal government is “stockpiling bullets in case of civil unrest.” Palin says the feds are afraid of what might happen if the sequester goes into effect.

She writes on her Facebook page: “If we are going to wet our proverbial pants over 0.3% in annual spending cuts when we’re running up trillion dollar annual deficits, then we’re done. Put a fork in us. We’re finished. We’re going to default eventually and that’s why the feds are stockpiling bullets in case of civil unrest.”

The sequester will trigger $85 billion in immediate cuts to federal funding and $1.2 over 10 years unless lawmakers reach a deal by Friday.

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Video: Biden- Americans ‘No Longer Worried’ About Economy

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Photo Credit: marcn In remarks today at the White House, Vice President Joe Biden said that Americans don’t have the same economic worries they did when President Barack Obama came into office:

“The are no longer traumatized by what was a traumatizing event, the great collapse of 2008,” said Biden.

“They are no longer worried, I think, about our economy being overwhelmed either by Europe writ large, the EU, or China somehow swallowing up every bit of innovation that exists in the world.”

See video:

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George Will: The Manufactured Crisis of Sequester

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Photo Credit: Washington PostEven during this desultory economic recovery, one industry thrives — the manufacture of synthetic hysteria. It is, however, inaccurate to accuse the Hysteric in Chief of crying “Wolf!” about spending cuts under the sequester. He is actually crying “Hamster!”

As in: Batten down the hatches — the sequester will cut $85 billion from this year’s $3.6 trillion budget! Or: Head for the storm cellar — spending will be cut 2.3 percent! Or: Washington chain-saw massacre — we must scrape by on 97.7 percent of current spending! Or: Chaos is coming because the sequester will cut a sum $25 billion larger than was just shoveled out the door (supposedly, but not actually) for victims of Hurricane Sandy! Or: Heaven forfend, the sequester will cut 47 percent as much as was spent on the AIG bailout! Or: Famine, pestilence and locusts will come when the sequester causes federal spending over 10 years to plummet from $46 trillion all the way down to $44.8 trillion! Or: Grass will grow in the streets of America’s cities if the domestic agencies whose budgets have increased 17 percent under President Obama must endure a 5 percent cut!

The sequester has forced liberals to clarify their conviction that whatever the government’s size is at any moment, it is the bare minimum necessary to forestall intolerable suffering. At his unintentionally hilarious hysteria session Tuesday, Obama said: The sequester’s “meat-cleaver approach” of “severe,” “arbitrary” and “brutal” cuts will “eviscerate” education, energy and medical research spending. “And already, the threat of these cuts has forced the Navy to delay an aircraft carrier that was supposed to deploy to the Persian Gulf.”

“Forced”? The Navy did indeed cite the sequester when delaying deployment of the USS Truman. In the high-stakes pressure campaign against Iran’s nuclear weapons program, U.S. policy has been to have two carriers in nearby waters. Yet the Navy is saying it cannot find cuts to programs or deployments less essential than the Truman deployment. The Navy’s participation in the political campaign to pressure Congress into unraveling the sequester is crude, obvious and shameful, and it should earn the Navy’s budget especially skeptical scrutiny by Congress.

The Defense Department’s civilian employment has grown 17 percent since 2002. In 2012, defense spending on civilian personnel was 21 percent higher than in 2002. And the Truman must stay in Norfolk? This is, strictly speaking, unbelievable.

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