Daily Digest

Daily Digest 11/8 - Gold Standard Debate, Global Borrowing, Ending Malaise, Solar Costs

Monday, November 8, 2010, 10:50 AM
  • Germany Attacks US Economic Policy
  • World Bank Chief Sparks Gold Standard Debate
  • Irish Debt Woes Revive Concern About Europe
  • Number of the Week: $10.2 Trillion in Global Borrowing
  • China Newspaper Warns of Disaster Over Fed Move
  • The New Malaise and How to End It
  • Even Greenspan Admits that Moral Hazard and Fraud are the Main Problems
  • Shining Light on the Cost of Solar Energy

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Germany Attacks US Economic Policy (johan)

On Friday, Mr Schäuble described US policy as “clueless”. In a Der Spiegel magazine interview, to be published on Monday, he expanded his criticism further, saying decisions taken by the Fed “increase the insecurity in the world economy”. “ They make a reasonable balance between industrial and developing countries more difficult and they undermine the credibility of the US in finance policymaking.” Mr Schäuble added: “It is not consistent when the Americans accuse the Chinese of exchange rate manipulation and then steer the dollar exchange rate artificially lower with the help of their [central bank’s] printing press.”

World Bank Chief Sparks Gold Standard Debate (jeff)

Mr Zoellick, a former US Treasury official, calls for a system that “is likely to need to involve the dollar, the euro, the yen, the pound and a renminbi that moves towards internationalization and then an open capital account”. He adds: “The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values.” His views reflect disquiet with the international system, where persistent Chinese intervention to hold down the renminbi is blamed by the US and others for contributing to global current account imbalances and creating capital markets distortions.

Irish Debt Woes Revive Concern About Europe (jeff)

An Irish bond market already in free fall plunged further after Ireland announced on Thursday that it planned to nearly double its package of spending cuts and tax increases to try to rein in its huge deficit. Investors took it not as a sign of resolve but rather of Ireland’s desperation and uncertainty about the true extent of its problems.

Number of the Week: $10.2 Trillion in Global Borrowing (will)

Next year, fifteen major developed-country governments, including the U.S., Japan, the U.K., Spain and Greece, will have to raise some $10.2 trillion to repay maturing bonds and finance their budget deficits, according to estimates from the International Monetary Fund. That’s up 7% from this year, and equals 27% of their combined annual economic output.

Aside from Japan, which has a huge debt hangover from decades of anemic growth, the U.S. is the most extreme case. Next year, the U.S. government will have to find $4.2 trillion. That’s 27.8% of its annual economic output, up from 26.5% this year. By comparison, crisis-addled Greece needs $69 billion, or 23.8% of its annual GDP.

China Newspaper Warns of Disaster Over Fed Move (john)

The United States last week announced it would inject an extra $600 billion into its banking system in its latest effort to boost a fragile economic recovery, prompting criticism from a number of countries, notably China and Germany. The overseas edition of Communist Party mouthpiece the People's Daily said in a front page commentary that this quantitative easing was bad for China and bad for the world.

The New Malaise and How to End It

The prevailing theory has it that U.S. policy makers should not deny our foregone fate. We should accept smaller improvements in output and employment and productivity. We should resign ourselves to the new normal and conduct policy accordingly. That is the last best hope, they argue, to preserve the remaining vestiges of a golden age that is no more.

I reject this view. I consider this emerging ethos to be dangerous and defeatist and debunked by America's own exceptional economic history. Our citizens are not unwitting victims of some unavoidable fate. The current period of subpar growth and high unemployment is real, but it need not persist. We should not lower our expectations. We should improve our policies.

Even Greenspan Admits that Moral Hazard and Fraud are the Main Problems

Even Alan Greenspan is confirming what William Black, James Galbraith, Joseph Stiglitz, George Akerlof and many other economists and financial experts have been saying for a long time: the economy cannot recover if fraud is not prosecuted and if the big banks know that government will bail them out every time they get in trouble.


Shining Light on the Cost of Solar Energy 

A decade ago, fewer than 25,000 solar cells and modules were shipped in the United States every year. In 2008, that number had skyrocketed to more than 500,000. But that is still a drop in the bucket. Only about one-tenth of 1 percent of the energy consumed in the United States came from solar sources in 2008. In Germany, a country with a much more robust government incentive program, solar’s share is much larger, but still only 1.1 percent of that nation’s electricity.

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."


saxplayer00o1's picture
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Re: Daily Digest 11/8 - Gold Standard Debate, Global ...

"PARIS (Dow Jones)--The global monetary system needs to be rethought in order to reduce the size of fluctuations, and the dollar can no longer be the only reserve currency, French Finance Minister Christine Lagarde said in an interview published Monday in French regional daily Sud Ouest.

"Monetary problems will be at the center of France's presidency of the G-20," Lagarde is quoted as saying. "The dollar can no longer be the only reserve currency."

Lagarde also said Chinese President Hu Jintao told France on a state visit last week that he is ready to contribute to global monetary stability, the paper says.

In the coming years, China will also increase the weight of domestic consumer demand compared with exports, Lagarde is cited as saying.

"But these changes can't happen from one day to another," she is quoted as saying."

"HONG KONG (MarketWatch) –- The president of the World Bank said in a newspaper editorial Monday that the Group of 20 leading economies should consider adopting a global reserve currency based on gold as part of structural reforms to the world’s foreign-exchange regime.

World Bank chief Robert Zoellick said in an article the Financial Times that leading economies should consider “employing gold as an international reference point of market expectations about inflation, deflation and future currency values.”

Zoellick made the proposal as part of reforms to be considered at this week’s G-20 meeting in Seoul.

“Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today,” said Zoellick. "

"BEIJING: The US Federal Reserve's decision to pour more money into the economy is a form of indirect currency manipulation that could spark a global collapse, a Chinese state-run newspaper said on Monday.

The Fed last week announced it would spend another 600 billion dollars buying government bonds to kickstart the US recovery, in a radical policy approach known as "quantitative easing". "

.................3A) China newspaper warns of disaster over Fed move

"(Reuters) - Washington's latest move to print more money is a form of indirect currency manipulation that could lead to a new round of currency wars and even global economic collapse, a leading Chinese newspaper warned on Monday."

...............3B) Germany Govt Says Fed's QE2 Is Indirect Currency Manipulation

"BERLIN (MNI) - German government members over the weekend renewed their attacks on the U.S. Federal Reserve for its new round of quantitative easing, arguing that it was an indirect manipulation of the dollar's foreign exchange rate.

"The expansive monetary policy of the US is worrying me because an excessive increase of money supply is also an indirect manipulation of the dollar rate," German Economics Minister Rainer Bruederle said in an interview with German weekly Welt am Sonntag.

German Finance Minister Wolfgang Schaeuble told German weekly Der Spiegel that "it doesn't fit together when the US is accusing China of foreign exchange rate manipulation and afterwards artificially pushes down the dollar rate by printing money." "

"California's fund for paying unemployment insurance is broke.

With one in every eight workers out of a job, the state is borrowing billions of dollars from the federal government to pay benefits at the rate of $40 million a day.

The debt, now at $8.6 billion, is expected to reach $10.3 billion for the year, two-thirds greater than last year. Worse, the deficit is projected to hit $13.4 billion by the end of next year and $16 billion in 2012, according to the California Employment Development Department, which runs the program.

Interest on that debt will soon start piling up, forcing the state to come up with a $362-million payment to Washington by the end of next September.

That's money that otherwise would go into the state's general fund, where it could be spent to hire new teachers, provide healthcare to children and beef up law enforcement."

"Reuters) - President Barack Obama defended the Federal Reserve's policy of printing dollars on Monday after China and Russia stepped up criticism ahead of this week's Group of 20 meeting.

The G20 summit has been pitched as a chance for leaders of the countries that account for 85 percent of world output to prevent a currency row escalating into a rush to protectionism that could imperil the global recovery.

But there is little sign of consensus.

The summit has been overshadowed by disagreements over the U.S. Federal Reserve's quantitative easing (QE) policy under which it will print money to buy $600 billion of government bonds, a move that could depress the dollar and cause a potentially destabilizing flow of money into emerging economies.

"I will say that the Fed's mandate, my mandate, is to grow our economy. And that's not just good for the United States, that's good for the world as a whole," Obama said during a trip to India.

"And the worst thing that could happen to the world economy, not just ours, is if we end up being stuck with no growth or very limited growth," he said."

  • Other news, headlines and opinion:

China Says Fed Easing May Flood World Economy With 'Hot Money'

Irish Default Swaps Surge to Record on Bank Bailout Cost Woes

Ireland's 'Dr. Doom' Says Nation Will Need EU Bailout

Fed's Warsh Says Asset Buying Deliberately Limited

Interview With German Finance Minister Schäuble ("The US Has Lived on Borrowed Money for Too Long")

BOJ Yamaguchi Warns of Economic Risks, Hints at Easing

State Budget Shortfall Could Hit Cities Hard (Texas)

Jobless Britons may be told to do unpaid work

Departing Medicare Advantage plans leave 40000 seniors seeking coverage (Washington)

Trichet Says Fed's Move Wasn't Aimed at Weakening the Dollar

Geithner Seeks Yuan Gains, Says It's `Overwhelmingly' in China's Interest

Owners Stay Home During Housing Depression

Rare earth prices to rise again? (Reuters video)

Sticker Shock for Travelers as Airfares Climb



..................................Fed's Jekyll Island Forum Considers Lessons of History for Monetary Policy (Bloomberg...A must read)

cmartenson's picture
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Re: Daily Digest 11/8 - Gold Standard Debate, Global ...

Numbers 1 through 3b, above, are where most of my attention is focussed right now.  These sorts of ideological shifts are what give rise to transformations.

Thank you Saxplayer, you are right on target with your 'finds.'

rjs's picture
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Re: Daily Digest 11/8 - Gold Standard Debate, Global ...

yves smith explaining linda beale's post explaining the legal implications of yves smith's coverage of the mortgage securitization mess:

“The Mortgage Loan Foreclosure Mess: the Banks’ Gluttony; Problems with MERS and Sloppy Securitizations”
ao's picture
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idoctor's picture
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Re: Daily Digest 11/8 - Gold Standard Debate, Global ...

Jim Rickards part 2


hmcgov's picture
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Re: Daily Digest 11/8 - Gold Standard Debate, Global ...

With all the excitement over gold, it's nice to see a bit on energy today. It's amazing how many people get excited about solar. Maybe it's human nature to prefer spending money on something "shiny" like solar panels rather than something that you can't even see, like insulation.

I met a well-respected architect who has a "green" spec house (designed in California) that they were selling into Connecticut. Using software to evaluate the home's energy demand, they found that moving the solar panels from the south to the north side of the house (away from the sun) and adding big windows on the south side of the house (towards the sun), was more energy efficient. The solar gain (heating) created by the suns rays passing thru windows in the winter lowered the home's overall energy load more than giving that "real estate" to solar panels to generate electricity.

The fact that they went ahead with solar panels on the north side of the house, rather than spending that money elsewhere, speaks volumes.

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