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Daily Digest 8/3 - Bank Spiral Warns Of Meltdown, The Extinction Of The Middle Class

Friday, August 3, 2012, 11:42 AM


Spiral of banks warns of financial meltdown (David B.)

To test DebtRank, Stefano Battiston of the Swiss Federal Institute in Zurich used previously confidential data on the 2008 crisis gathered by the US Federal Reserve. The analysis identifies a number of firms that were particularly precarious: had just one of those defaulted on its obligations, it could have resulted in the depletion of more than 70 per cent of the wealth in the entire network. During the crisis, coordinated – and very expensive – intervention prevented such an outcome.

A Hint From Draghi on the Euro? (Thomas C.)

One way to achieve the competitiveness that Draghi seeks, is to further punish the Spanish economy, and push unemployment higher (it’s now 24%) in a desperate attempt to push unit labor costs down. That would be an insane approach. Spain is already on its knees. Pushing the economy further into depression is not going to help at all. Also, a process like this would take years before the pain is converted into some gain.

Ludicrous Times Op-Ed Forgets Entire Year of Wall Street History (Thomas C.)

The interview became an instant YouTube classic. The very funniest part, I thought, was the response of Squawk Box host Andrew Ross Sorkin, the single most credulously slobbering financial reporter on the planet this side of Maria Bartiromo. Even he was so shocked by Weill’s comments that he lost his voice – "I’m speechless," he said.

Unintended Consequences Of Well-Intended Policies (David B.)

Working independently in the late 1960s, economists Milton Friedman and Edmund Phelps, who would both eventually be awarded the Nobel Prize in economics, had determined that while the Phillips Curve was observable over the short run, this was not the case over the long run. While the economics profession debated the Friedman/Phelps research, the US had to learn its findings the hard way.

Extinction Of The Middle Class (Alan W.)

There can be no discrimination when it comes to the painful measures that are being taken or the ones that are bound to follow. Nevertheless, it is obvious that the people who are coming under the biggest pressure, who are being squeezed to the point of extinction, are members of the middle class who fought their entire life in order to succeed and did so by respecting the country’s institutions and abiding by its laws. It is from these people that the state is holding back the kinds of incentives that would allow them to become even more productive.

Resigning as Envoy to Syria, Annan Casts Wide Blame (jdargis)

The announcement was coupled with an opinion article Mr. Annan wrote that was posted Thursday on the Web site of The Financial Times and headlined “My Departing Advice on How to Save Syria.” In the article, he castigated all parties in the conflict but appeared to reserve particular criticism for the Syrian government, which he described as “40 years of dictatorship.”

Can the Big Shift in Energy bring a Return of Industrial Demand? (James S.)

The report says the US should not expect mass-produced commodities like electronics to be uprooted and rebuilt in North America. That infrastructure is sunk, demand is expected to grow fast in Asian markets and the purpose of the capital invested was to build an exports-driven industrial base to fuel domestic economic growth. There is even good news in this continued Asian export market growth for North America. The revival back here at home is taking place in high value-added final assembly such as automobiles and in feedstock driven industries in chemicals, pharma and their research units.

Reduce Animal Unemployment: Hire A Goat (Nick)

Whether you take on the job yourself or pay a professional landscaper to do it, keeping a lawn neatly trimmed and free of weeds is a daunting prospect. Gas-powered mowers are loud, cumbersome, and useless against weeds. There is, however, a natural solution that is gaining traction, particularly thanks to growing interest in the homesteading movement.

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