Daily Digest - Feb 3
- The Economic State of Play in Washington - NYTimes (Video)
- Is the US heading for a depression?
- Data from 1930s
- I have fallen into recession's web of fear
- ShadowStats Interview on C-Span (Video) Unemployment (Hat Tip SC Student)
- Macy's To Cut 7,000, And That May Not Be The End
- Another half million jobs lost, survey says
- Global Unemployment (Chart)
- Bernanke says crisis ‘no comparison' to Great Depression
- Retail Breaks Support (Chart)
- Zimbabwe dollar sheds 12 zeros
- China puts police and military on alert
- Time for a new world order: PM
- "Top Talent": What Does That Mean?
- Downturn causes 20m job losses in China
- Global financial crisis sparks unrest
- Global Food Prices are Rising Fast (Hat Tip Christopher Peters)
- Hyperinflation will begin in China and destroy the dollar (HatTip Christopher Peters)
- Peston's daily Davos round-up: Day3 (Video) No Coordinated Action
- In time of crisis, looking to U.S. with wariness and hope
- Premier Wen makes "trip of Confidence" to Europe (Hat Tip PineCarr)
- Fed Monetizes Debt, Investors Buy Gold
- Population: The elephant in the room (Hat Tip Futuo)
The sharp contraction of the US economy accelerated in the last three months of 2008, with official figures showing GDP shrinking at an annualised rate of 3.8%.
With forecasters already predicting the worst US recession since World War II, how big a danger is there that the US economy will slip into a depression similar to the 1930s?
The latest figures paint a gloomy picture of the US economy.
Consumer spending, which makes up two-thirds of the economy, fell for the second quarter in a row, by 3.5%.
This drop was led by a 22% drop in spending on durable goods like automobiles and washing machines. The decline in motor vehicle production was so great that it alone contributed 2% to the fall in GDP.
In the middle of last week I tipped over from a state of mild fearfulness about the global economy to one of wild panic over what is to become of us.
On Wednesday, I became host to all sorts of crazy worries - big, unmanageable ones as well as little, stupid ones. I worried about there being anarchy on the streets of London - while at the same time fretting over whether I should have painted the boxroom cream rather than white.
This is the sort of mixed-up mental state I am familiar with from bouts of wakefulness at three in the morning. Never before have I known it at three in the afternoon.
The thing that tipped me over was tiny and distant and concerned a woman I have never met, who lives 3,000 miles away. There were plenty of other bigger things that happened to me last week, but none of them really moved me.
On Monday, I stayed at the InterContinental Hotel in Cologne - a vast temple to the god of business travel - and found myself in a ghost hotel. The miles of corridor I walked to my room were deserted and the breakfast buffet bar offered a bounty of cheese and ham but there were no takers.
On Tuesday, I met a perpetually cheerful friend who runs a hitherto successful advertising agency who was grimly preparing to fire large numbers of her capable staff. And later that day I made a nasty discovery that my own financial cushion was considerably less comfortable than I had thought it was. All of this was dismal, but not unbalancing.
Instead, I tripped and fell at a moment when I should have been safe from economic harm. I was sitting in the rare books room at the British Library surrounded by scholars in scuffed shoes for whom the recession is not even of academic interest.
Macy's (M) will cut 7,000 workers, about 4% of its work force. The company says it will also slash its dividend.
Macy's same-store sales were off 4% in December. Many analysts believe that retailers which aim at middle class buyers will have an especially hard year. Some estimates put the total number of retail locations that will close in the US in the first half of this year at 72,000.
Macy's has over 850 stores and 182,000 employees.
WASHINGTON (MarketWatch) - The axe fell on an expected half million jobs last month, economists say, and the only reason the job losses weren't larger is that weak hiring for temporary jobs in November and December meant fewer people were laid off in January.
The Labor Department will report on the January employment report on Friday, the cap of another busy week for economic data, most of which are expected to be gloomy, if not doomy.
The data calendar includes January purchasing-managers surveys from the Institute for Supply Management; January auto sales; December data on consumer spending, consumer credit, factory orders and construction spending; and the latest weekly figures on jobless claims. The Federal Reserve is also likely to report on its quarterly survey of lending conditions at banks.
The news is expected to be universally grim. The jobs report is the big one, however.
"Rapid reductions in head count likely continued in January" because of the "cratering of economic activity," said economists for Credit Suisse in a weekly report to clients. "Layoffs are still on the rise."
The economy lost 1.5 million jobs in just the final three months of the year, bringing the losses for the entire year to 2.6 million, the worst since 1945.
"Well, you hear a lot of loose talk, but let me just ... say, as a scholar of the Great Depression - and I've written books about the Depression and been very interested in this since I was in graduate school, there's no comparison," Bernanke said in a question period after an address in Austin, Texas
Zimbabwe is revaluing its dollar again, removing twelve zeros from the currency with immediate effect.
The country's central bank is introducing seven new notes in an effort to stave off economic collapse.
The country is in the grip of world-record hyperinflation. The most recent estimate in July 2008 put it at 231m%.
Only last month, a Z$100 trillion note was introduced and the government moved to allow people to use foreign currencies alongside Zimbabwe's dollar.
The announcement will see Z$1 trillion reduced to Z$1.
The denominations of the new notes are Z$1, Z$5, Z$10, Z$20, Z$50, Z$100 and Z$500.
The governor of the Reserve Bank of Zimbabwe, Gideon Gono, said: "Yesterday's trillionaires, I am sorry, will not be able to buy their favourite drink today," according to the AFP news agency.
The specter of millions more unemployed clearly has the Chinese government worried. The government has not released annual figures on social unrest - what it terms "mass incidents" - for several years, but foreign media reports suggest growing protests as unemployment spreads. A January article in Outlook Weekly, a magazine published by the government news agency Xinhua, predicted a record year for mass protests. "It is fair to say that the Chinese government takes very seriously the issue of employment of migrant workers," said Chen Xiwen, a senior rural planning official who released the joblessness estimate at Monday's briefing. "Guaranteeing employment and livelihood is to guarantee social stability," he said.
Mr. Chen advised government officials to actively intervene to head off protests, rather than "shy away from coming out and let public security departments and police go to the front lines." The military called upon its forces Sunday to exercise strict obedience to command in the face of challenges to social stability.
KEVIN RUDD has denounced the unfettered capitalism of the past three decades and called for a new era of "social capitalism" in which government intervention and regulation feature heavily.
In an essay to be published next week, the Prime Minister is scathing of the neo-liberals who began refashioning the market system in the 1970s, and ultimately brought about the global financial crisis.
"The time has come, off the back of the current crisis, to proclaim that the great neo-liberal experiment of the past 30 years has failed, that the emperor has no clothes," he writes of those who placed their faith in the corrective powers of the market.
"Neo-liberalism and the free-market fundamentalism it has produced has been revealed as little more than personal greed dressed up as an economic philosophy. And, ironically, it now falls to social democracy to prevent liberal capitalism from cannibalising itself."
Mr Rudd writes in The Monthly that just as Franklin Roosevelt rebuilt US capitalism after the Great Depression, modern-day "social democrats" such as himself and the US President, Barack Obama, must do the same again. But he argues that "minor tweakings of long-established orthodoxies will not do" and advocates a new system that reaches beyond the 70-year-old interventionist principles of John Maynard Keynes.
"A system of open markets, unambiguously regulated by an activist state, and one in which the state intervenes to reduce the greater inequalities that competitive markets will inevitably generate," he writes.
He urges "a new contract for the future that eschews the extremism of both the left and right".
He mocks neo-liberals "who now find themselves tied in ideological knots in being forced to rely on the state they fundamentally despise to save financial markets from collapse".
I keep hearing that if compensation schemes change at Wall Street firms that took TARP money that "top talent" will leave. They keep saying that if bonuses are cut that "top talent" will leave. Excuse me? Who the hell is this "top talent"? Are these the brokers and bankers paid millions to sell people into failed long only and buy and hold strategies for the last three decades? At the end of the day if the "top Wall Street talent" can't show exactly how they make money for clients, well, let's stop calling them "top talent". For many of these people their only talent was to be part of a bull market, and now that the bull has slowed we are going to find out that many of these folks have no talent. Harsh? Yes. Deserving? Yes.
More than 20m rural migrant workers in China have lost their jobs and returned to their home villages or towns as a result of the global economic crisis, government figures revealed on Monday.
By the start of the Chinese new year festival on January 25, 15.3 per cent of China's 130m migrant workers had lost their jobs and left coastal manufacturing centres to return home, said officials quoting a survey from the agriculture ministry.
-- Hundreds of thousands of strikers marched in French cities on Thursday to demand pay rises and job protection. Some protesters clashed with police, but no major violence was reported.
-- The one-day strike failed to paralyse the country and support from private sector workers appeared limited. Labour leaders hailed the action, which marked the first time France's eight union federations had joined forces against the government since President Nicolas Sarkozy took office in 2007.
-- Thousands of opposition supporters rallied in Moscow and the far east port of Vladivostok on Saturday in a national day of protests over hardships caused by the financial crisis. On Sunday hundreds of demonstrators in Moscow called for Russia's leaders to resign.
-- Street rallies were held in almost every major city over the weekend. The pro-Kremlin United Russia party also drew thousands to rallies in support of government anti-crisis measures.
-- About 100 protesters were arrested in Vladivostok last month during protests against hikes in second hand car import duties aimed at protecting jobs in the domestic car industry.
-- More than 100 people were killed in civil unrest in Madagascar last week, according to the U.S. ambassador. Police previously confirmed 44 deaths, with most of those in a store burned during looting when an anti-government protest degenerated into violence.
-- The mayor of Antananarivo, Andry Rajoelina, galvanised popular frustrations to spearhead demonstrations and strikes against President Marc Ravalomanana's government. The violence came amid an oil and minerals exploration boom in Madagascar.
NEW DELHI: Costlier food items and a marginal increase in prices of decontrolled fuels pushed up inflation for the second week running even as economists stuck to their estimate of near zero inflation by the middle of 2009.
Government data showed inflation for the week ended January 17 at 5.64% against 5.6% in the previous week. The annual rate of year-on-year inflation was 4.45% in the corresponding week last year.
RBC News reports the same story in Russia, as inflation creeps up .
Russia's inflation amounted to 0.8 percent between January 20 and 26, 2009, and 2 percent for the year to date (compared to 2.2 percent for the same period of January 2008), the Federal State Statistics Service (Rosstat) reported today. In January 2008 as a whole, the inflation rate stood at 2.3 percent.
The conventional wisdom on China is dead wrong. Specifically, there is a widespread belief, as expressed by Goldman Sachs, that "China will keep the yuan trading within a narrow range in 2009 due concerns about exporters." Worse still, others are even predicting that China will devalue its currency! The sheer wishful thinking is astounding! The idea that "China will keep the dollar peg to help its exporters" ranks all the way up there with "Housing prices always go up" and "You can spend your way to prosperity".
THERE ARE NO FREE LUNCHES
If you have learned nothing else in the last year and a half, you should have learned that if something sounds too good to be true, that is because it IS too good to be true. The media overwhelmingly presents China's dollar peg as a win-win situation: Americans get cheap imports and low interest rates while China gets a strong manufacturing sector. While commentators do sometimes debates whether China will keep lending us money forever, they never talk about the REAL problem with the dollar peg.
DAVOS, Switzerland: This was supposed to be the year the United States came in from the cold at the annual gathering of world leaders here. But instead of receiving a warm embrace, American policies were rebuked again and again in rhetoric that recalled the anger of the Bush years - except the ire this time was mostly directed at Washington's economic failings, rather than its diplomatic ones.
There is a deep reservoir of good will for President Barack Obama personally and the change in direction he represents. But his administration is about to discover that the rest of the world does not seem to be in a hurry to forgive and forget - and that it sees a new threat in the form of U.S. protectionism.
Despite the pledges to encourage international trade and economic cooperation that accompanied the closing sessions of the gathering, the World Economic Forum, on Sunday, there were clear signs that deep divisions between the United States and the rest of the world remained.
"There is such a level of concern, despair and anxiety that as welcome as the new president is, no one is inclined to cut the U.S. much slack," said Richard Haas, president of the Council on Foreign Relations.
Or as Niall Ferguson, the Harvard historian, put it, "If GM got a new CEO, does that mean people would suddenly want to buy their cars?"
China, Switzerland agree to begin feasibility study on FTZ
BERN - China and Switzerland decided Tuesday to begin a joint feasibility study in the second half of this year on creating a bilateral free trade zone in preparation for formally launching negotiations on the issue. [Switzerland is a slow moving country, so something like this is a bigger deal than it sounds]
During talks in the Swiss capital, visiting Chinese Premier Wen Jiabao and President of the Swiss Confederation Hans-Rudolf Merz exchanged views on the current international financial and economic situation and briefed each other on the policies and measures China and Switzerland have taken regarding the international financial crisis.
The two leaders agreed that it is an urgent task for the two countries to work more closely together to tide over the difficulties against the backdrop of the financial crisis.
The feasibility study on a free trade zone is one of the measures the two nations agreed to take in order to jointly tackle the challenges brought about by the international financial crisis.
Other measures include deepening financial cooperation, expanding trade and investment, opposing trade protectionism, and promoting reform of the international financial system.
China and Switzerland will also boost joint work in technology, energy, environmental protection, as well as in the medical and cultural sectors.
In January gold rose significantly against all major world currencies. In most currencies except in the US dollar and the Japanese yen, gold actually made an all-time-high.
Uncontrolled population growth threatens to undermine efforts to save the planet, warns John Feeney. In this week's Green Room, he calls on the environmental movement to stop running scared of this controversial topic.
Our inability to live as we do, at our current numbers, without causing pervasive environmental degradation is the very definition of carrying capacity overshoot It's the great taboo of environmentalism: the size and growth of the human population.
It has a profound impact on all life on Earth, yet for decades it has been conspicuously absent from public debate.
Most natural scientists agree our growing numbers and our unchecked impact on the natural environment move us inexorably toward global calamities of unthinkable severity.
They agree the need to address population has become desperate.
Yet many environmentalists avoid the subject, a few objecting strongly to any focus on our numbers.
Some activists insist acting to influence population growth infringes on human rights; they maintain that it is best to leave the problem alone.
Let's dispense with this confused notion right now.