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Tuesday, March 04, 2008


It is fun and sometimes quite comforting for we in the US to pretend that we are the stupidest idiots around and that the rest of the world (which is, btw, an economic line item that shows up in GDP releases) will keep growing while we resolve our financial excesses. Unfortunately this is not so.

European GDP shows the same regrettable trends as ours. This Bloomberg article has a good summary of Q4 2007. Total GDP growth of 0.4, following a quarter of 0.7. Consumer spending declined 0.1, after having grown 0.5 previously. The EC cut its forecast for 2008 GDP to 1.8 from 2.2. That is still over-optimistic based on trends. For comparison, equivalent GDP growth for the US was 0.2 for Q4 following 1.2 for Q3. (These numbers aren't annualized.)

What's even more perturbing is that most EU growth has been in the economies with the worst fundamentals, and those are still the ones showing more growth. For example, Germany's GDP increased only 0.3 in Q4 after having grown 0.7 in Q3.

European consumer spending is declining faster than ours, possibly because we are picking up some of it due to currency advantage. Inflation is a dominant concern for consumer spending globally. I touched on Japan's economic situation in the previous post.

The US, Japan and the EU make up the top three global economies no matter how you look at the figures, and they are all slowing. I think China's problems are deeper than conceded in this article. The world is quite economically coupled. Our yoke, if anything, seems to have gotten tighter.

I pay a lot of attention to Japanese heavy orders for equipment, because those numbers lead manufacturing investment. We'll see if they can pick back up in 2008 Q2.

This has no particular economic signficance, but I found it very funny for reasons I can't explain well. Greece's central bank has gone on strike. Really:
Greece closed its stock and bond markets after central bank employees went on strike for a second straight day, joining subway and utility workers in national protests against pension reform.

The Athens Stock Exchange said it canceled trading because the walkout at the Bank of Greece is holding up settlements.
Karamanlis on Feb. 15, two days after the last general strike, vowed to press ahead, saying without the reform ``pressure on state finances would be unbearable in the next five to 10 years.'' Greek central bank governor Nicholas Garganas has predicted pension spending could triple the country's debt, the second highest in the European Union, to more than three times the size of the economy by 2050.
The pension issue is a problem for most developed countries. I believe Japan's public debt is now about 170% of GDP. In comparison US public debt is less than 75%. (There are different ways to figure it.)

Finally, I could not quite believe my eyes when I read that McCain repudiated his own Social Security plan posted on his campaign website in an interview. If Hillary did that, the press would be all over her campaign's incompetence. I'm just sayin'. I have read that the Street isn't very happy about Obama's candidacy, but I think this would not be a reassuring commentary on McCain's grasp of economics.

I can understand why economists are a bit worried about Obama, since I cannot figure out how Obama intends to make ends meet by cutting taxes for all retirees with incomes of less than $50,000. That is above the median US income, and the number of retirees is of course going to grow rapidly over the next few years. This makes no sense to me. Are you going to raise taxes on some couple with two kids with a $48,000 income to pay for it? Or are you going to raise taxes very high on the couples who make $100,000 and up? Either will have very strong economic ramifications.


I think it would be a blessing if the U.S. Congress went on strike. Less of a bad thing is a good thing.

As much as I hate to watch Congress investigate the Patriots cheating and Steroids in the MLB, it sure beats the alternative.
Yes, it does. They are a pretty dysfunctional lot.

I find it amazing that we've got Bernanke urging banks to write down mortgages and Congress getting all skittish about bankruptcy cramdowns. That is the least damaging solution.
Stagflation is here.

So, when do we dump the outdated paradigm of so-called free enterprise and slap fees on Lexus, S. Korean tech products, etc. so products can be made here and the monies here?

U.S. is too large for this old model of governance. We must get more business like and away from these old style blustering hot air jackass attorneys( & recording their every noise out of their orifices...and archiving it and paying for it all).

Think the power to spend should be taken away from them and given to the Executive. Any Bill restricted to x no. of pages and bold print spending to be okayed by the Non-Partisan Auditor sitting there and then pass on to Executive branch. Ok'd then considered passed.

There is no way theses govt. entities can pay off these pension promises.

Vallejo situation pointed out that the employee benefits & obligations were @80% of its Budget.
They actually think that they settled their messy pension situation? Should have sliced away past, present, and future to basic Soc. Sec. levels. Never should have gone beyond that as a stable job with some basic decent health benef. is a plus in life.

European countries let things get out of hand toward socialism.
They'd best get back to basics or...

As an added comment: Think we should have 7 hr. work days. Get off the corp. created hamster wheels. (for many reasons)
Govt. employees can get holiday time off, but no pay.

Smart Independent
Thank you MoM,I don't particularly care for the term "coupling",it invites too many bad jokes about being SIV positive,or worse.Bernanke's comment on writing down principal were interesting,to say the least,but difficult to interpret...the beltway is an alternate universe and trying to figure out the implications is difficult.As far as Mccain,it is painful to watch...we really need at least one more political party,and preferably two more,call one the labor and the other the fascist.
It's interesting to see how politics is viewed these days. Way back, it was understood that politicians cut bipartisan deals to get things done. That was just what you had to do to get the legislation that you wanted passed. Now, we seem to have moved to politics as religion. Those who disagree with you are demonized. It's become a sin to break with the party line at all.

One of two people is going to be elected president, regardless of how "pure" he or she is. Obama seems to be channeling Jimmy Carter, given that he has Zbignew and Volcker as advisers. I am far less concerned with the stance on certain issues than I am with whether or not the candidate is capable of doing the job. I still haven't seen anything that convinces me that Obama is. He certainly doesn't seem to have been able to "unite" Congress into passing legislation. That might be a useful skill, for someone seeking to be president.
Just made my first trip through the housing bubble blogs in a couple months. Either I logged into South Park without realizing it or I was reading Left Behind on a bad batch of Owsley acid -- all Armageddon/Second Great Depression/The End Is Nigh schadenfreude, from the one (whose name I can't remember) whose entire blog was bragging about his stash of GOLD! GOLD! GOLD! GOLD! GOLD! to one called "Housing Fear" who tried to get me to Accept Ron Paul As My Personal LORD And Savior. (My parents tried to do the same with Ross Perot in '92. Been there, done that, somehow survived.)

Should have my place completely paid off next month, so I should be able to ride it out. Unless all the gleeful predictions of "Weimar Republic Hyperinflation" and food riots start coming due.
Yeah, I have to remind myself that there is a reason for all the doom and gloom. I'm sure it's tough in some parts of the country. I still talk to people who've managed to sell or buy a house. The only doom and gloom I see is when I check gas prices ;0 (and I laugh at the price of eggs. good thing no one told my chickens what they are worth!)
Teri, I certainly do agree about how politics are treated as a religion by all too many nowadays.

Politics are really a means of reaching compromises. Things change - economically, demographically, and in a host of ways, so those compromises are never perfect.

What bothers me the most is that a lot of voters seem to have adopted the idea that if something goes wrong, it's the government's fault. A lot of times, there are no perfect solutions. I think the politics-as-religion-utopia-available-today
meme is very harmful.

I think Obama's success in the primaries as a person who is very inexperienced is a testimony to the worries individuals have about what Hillary Clinton's record shows. She's not that great a candidate. She has clear ethical problems, she hasn't racked up a personal record of achievement or successes, and her policy prescriptions tend toward the rigid and draconian.

Her rigidity alone makes me worry about her fitness for the presidency at this time. Regardless of who winds up in office, the curveballs will be flying over the presidential plate with some regularity. A candidate whose natural tendency is to make things better rather than impose some draconian solution might be a much better choice REGARDLESS of any other factor.

When I look at Obama, I see the lack of experience, but I also see some of the flexibility that I seek. Hillary Clinton might be a much better president under other circumstances, but I suspect her temperament in these times would make her unsuccessful.

McCain tends to be somewhat more pragmatic in his approach. He is also a bit temperamental (although I believe not more temperamental than Clinton). But the aspect of his character that infuriates many conservatives - that he is not hidebound to the Laws of Conservatism - might be a huge asset to him as a president.
I disagree about Obama and flexibility. Take a look at his record. He has one of the most consistently liberal voting records around. That doesn't show flexibility to me. That shows someone so completely bound to a viewpoint that they can't even consider the other side. And there's the issue of forcing troop withdrawal immediately from Iraq. That does not make us look good to the rest of the world and actually confirms what Osama originally said. We simply don't have the willpower for long term commitments in the world.
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