Daily Digest 1/2 - Gold and Silver Stocks in New Year, Australian Debt, China Manufacturing

• Adviser: Debt ceiling must be raised

"Washington (CNN) -- If Congress does not raise the debt ceiling, the result could be "catastrophic" for the American economy, Austan Goolsbee, chairman of the Council for Economic Advisers, said Sunday.

Speaking on ABC's "This Week," Goolsbee said that the debt ceiling was not something to toy with for political ends.

"If we hit the debt ceiling, that's essentially defaulting on our obligations, which is totally unprecedented in American history," he said. "The impact on the economy would be catastrophic. I mean, that would be a worse financial economic crisis than anything we saw in 2008."

The debt ceiling is one of the biggest budget fights facing the new Congress that convenes this week.

Currently, the debt limit stands at more than $14 trillion. The last time it was raised was in February 2010.

If the ceiling were ever breached, the country would effectively be in default. That would slam bonds, the dollar and creditors' portfolios.

Fiscally conservative lawmakers signaled they would use the opportunity of the upcoming debt ceiling vote to demand spending cuts in exchange for their support."

How does increasing the debt ceiling preclude financial default?
This article confused me.

It seems as if they're saying "financial meltdown" if we don't raise it, but raising it is just allowing us to accrue more debt, right? Isn't that just allowing pressure to build, so to speak?

Cheers,

Aaron 

Hopefully a nearby library is still funded.

Just goes to show just how clueless TPTB are.....  all they want to do is fix the symptoms rather than the disease.  How can anyone wonder why we are in so much deep doo doos!

Mike

Some interesting articles on China which i think fits in with the current theme.

Andy Xie, Caixin Online - http://english.caing.com/2010-12-23/100210360.html

China know they are in the race

China has an opportunity to gain immunity against the next crisis.

The last crisis started in the U.S. If China hadn't reformed a decade ago, it could have started in China. An economic crisis in China would have prolonged the U.S.'s economic cycle by bringing down oil and other commodity prices, which would have improved the U.S.'s cash flow.

The most likely candidates to trigger the next global crisis are the U.S.'s sovereign debt or China's inflation. When one goes down first, the other can prolong its economic cycle. China may have won the last race. To win the next one, China must tackle its inflation problem, which is ultimately a political and structural issue, in 2011. If China does, the U.S. will again be the cause for the next global crisis. China will suffer from declining exports but benefit from lower oil prices.

On the other hand, if China has a hard landing, the U.S.'s trade deficit can drop dramatically, maybe by 50 percent, due to lower import prices. It would boost the dollar's value and bring down the U.S.'s treasury yield. The U.S. can have lower financing costs and lower expenditures. The combination allows the U.S. to enjoy a period of good growth.

One could describe the global economy as a race between the U.S. and China, to see who goes down first.

This coming year is China's opportunity.

and also understand the competition

I have argued several times before why the U.S.'s stimulus won't bring lasting growth. I'm not sure that the stimulus advocates in the U.S. believe what they say. The real intention for the new Obama tax cut is to get him re-elected in 2012. The mid-term election this year shows that, unless the U.S.'s unemployment rate drops significantly, he will lose his re-election bid then.

Yu Yongding, China Dailey - http://www.chinadaily.com.cn/opinion/2010-12/23/content_11742757.htm

China's progress over the past three decades is a successful variation on the East Asian growth model that stems from the initial conditions created by a planned socialist economy. That growth pattern has now almost exhausted its potential. So China has reached a crucial juncture: without painful structural adjustments, the momentum of its economic growth could suddenly be lost.

Michael Pettis - Chinese Growth in 2011 - http://mpettis.com/2010/12/chinese-growth-in-2011/

It is proving very difficult to keep growth up in China except with massive increases in bank-driven investment, even though this year China got a lot of help from the surge in the trade surplus.  Next year I suspect it will be much more difficult to count on a surging trade surplus to generate domestic growth, and consumption is not going to kick in, so we are pretty much left with growing investment if policymakers want to keep growth rates in the 9-10% range, which they almost certainly do.

Fitch Ratings - "Stress Test" - Impact of a China Slowdown.

http://asianbondsonline.adb.org/publications/external/2010/The_Impact_of_a_China_Slowdown_on_Global_Credit_Quality_FR_30_Nov2010.pdf

http://www.shanghaidaily.com/article/?id=460278&type=Opinion

Chinese property on verge of bursting.

BHP the largest iron ore producer in the world is trying to diversify their business in agriculture and enrgy aligned business. Failed to aquire the Canadian company Potash Corp and now "rumoured" to be bidding for US energy compoany Anadarko.

http://www.theaustralian.com.au/business/city-beat/anadarko-gains-as-bhp-rumour-returns/story-fn4xq4cj-1225979264045

With China heading toward a new normal of slower growth, this will slow the purchase of commodities, commodity driven countries and their currencies.

China news growing in the Australian mainstream media and very lively in Australian blog sites. For good reason.

Think i over did it.

Mike

I say, forget National Geographic, or read it at the library for free. Why help pay for corporate media just because they do some cool reporting occasionally and make some pretty maps? They helped cover up 9/11 (and no, let's not debate that, in case you don't understand by now).

Here's a few other objections, straight from Wikipedia, another unreliable source, but these quotes and judgments are, in my opinion,  accurate:

Linda Steet in her book Veils and Daggers: A Century of National Geographic's Representation of the Arab World criticizes National Geographic for its

masculinist rhetoric, the one-directionality of its cross-cultural contact, its claim of objectivity and representations that build layers of a.. world hierarchy.^[6]

Lutz and Collins in their book Reading National Geographic argue that National Geographic is intimately tied to the American establishment and "cultivates ties to government officials and corporate interests".^[7] Rothenberg suggests that National Geographic, as a part of mainstream popular culture, has historically helped to articulate a particularly American identity in opposition to "both old Europe and primitive non-Western regions... an identity of civic and technological superiority but yet, a distinctly benign and friendly identity".^[8]

The book Reading National Geographic notes how photos are sometimes electronically manipulated.^[9] In one photo of bare-breasted Polynesian women, the skin color was darkened.^[9] Women with light skin have not appeared topless in the magazine.^[9] The book also documents how NG photographers have encouraged their subjects to change costumes when their clothing was seen as "too drab" for the magazine.^[9] Summarizing an analysis of NG photographs from 1950-1986, the authors argue the following themes: "The people of the third and fourth worlds are portrayed as exotic; they are idealized; they are naturalized and taken out of all but a single historical narrative; and they are sexualized. Several of these themes wax and wane in importance through the postwar period, but none is ever absent."^[10]

First off, incoming NY gov Cuomo is talking tough about pensions, etc. (echoes of NJ gov Christie):

http://www.nytimes.com/2011/01/03/nyregion/03cuomo.html?_r=1&ref=us

http://www.nytimes.com/2011/01/02/nyregion/02inaugural.html?ref=andrewmc...

Replace "Europe's" with "America's" and you have a story relevant to us Yanks (and, I hardly doubt, young people all over):

http://www.nytimes.com/2011/01/02/world/europe/02youth.html?src=me&ref=g...

And lastly, echoing Dr. Chris' thoughts about how China is out in the world making friends/influencing people and buying up everything in sight (with, presumably, US dollars):

http://www.nytimes.com/2011/01/03/world/asia/03china.html?ref=business

New Gerald Celente video

http://vinceseconomicblog.wordpress.com/2011/01/03/gerald-celente-whats-...

mrobinson, thanks for all the links to international news sites!  -It's good to be able to see things from others' perspectives as well as our own!

Sager, isn't the news in NYS just sad?  i guess on another hand maybe it is good that measures are at least being taken to try to deal with its problems...