What happened to all of the doom and gloom economic threads?

Today might be one of those days, but be very careful. Europe has hit the point of no return I am afraid. Debt ratings in some countries went to junk yesterday. Italy paid record highs in their latest auction. Tell me, how is Italy not junk?

The only countries in Europe that aren’t junk are probably France and Germany. However, without knowing the true exposure of their government finances to the rest of the EU, it’s hard to know if they can maintain their status or not. As rates continue to steepen in weekly European Union debt auctions, the entire continent speeds it’s collision course with stagflation.

The only way out of their financial mess is print money or grow. They aren’t going to grow given their current economic policies. Watch the near term months in the Eurodollar ($GE_F) contract. If they start to break hard, EU banks and governments are having funding problems.

As we mark time to the eventual day of reckoning, December 1 seems like the next big data point to me. It’s the date of the next French OAT auction. Spreads between French and German debt are at all time highs. As the PIIGS careen upwards to 8%, I don’t see how the French can keep their debt costs from spiraling higher as well.

It’s just too risky to hold these securities. Investors have to demand a huge premium. No doubt the resolution will be haircuts if you hold the security, and devaluation of the currency they are denominated in.

I don’t see any white knight coming in and changing things. The Europeans have made their bed, now they have to lie in it.

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This event in and of itself really isn't funny at all (although thankfully nobody was hurt), but, given President Obama's relentless penchant for heralding China as the world leader in infrastructure--and constantly admonishing us that we need to spend and grow our goverenment and 'invest' more taxpayer money in 'projects of the future' even more--I must admit... I'm having a rather hearty laugh at the President's expense right now.

Substandard construction work was blamed Thursday after wind blew parts of the roof off a $2.8 billion terminal at the world's second-busiest airport.

One of the architects behind Beijing Terminal 3, which opened in time for the 2008 Olympics, told the Associated Press that inadequate materials or installation — not design flaws — were to blame for Tuesday's structural failure.

The airport is the result of a frenetic Chinese building boom that has produced numerous architectural marvels, though some of the iconic new projects have been hit by quality and safety problems.

"Though I stood pretty far away, I could see a part of the roof was torn open. The white foam composite was everywhere, even on the runway," a passenger surnamed Li told state newspaper China Daily, which had pictures of the damage.

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Whew, that was a knee-slapper. Our President really needs to get over his "we should be more like China" kick. The CCP is all about keeping up appearances, and they don't care how much deception they have to use to do it. Much of China's infrastructure, just like pretty much everything the CCP organizes, is a farce--I've heard first-hand accounts of the many facades that were put over buildings before the 2008 Olympics, and the government treats its billion people like a bunch of sheep. Not to mention, all their subsidizing and central planning is going to catch up with them eventually; their upcoming financial problems are going to make the United States' fiscal fiasco look amateurish.

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koalabear said:

DOW 11,266.94 +9.39


http://data.moneycentral.msn.com/scripts/chrtsrv.dll?Symbol=$us:INDU&width=300&height=200&E1=0&D4=1&Legend=0&AF=2&Banner=5&palette=2&C1=3&E8=1

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JohnnySavage said:

Those of us without access to the interwebs (or a wife to give us our opinions) thank you for that entire page of worthless cut and pastes. You are doing a yeoman's job here!

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IrezumiKiss said:

http://img.chan4chan.com/img/2009-03-25/1238021399666.jpg

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4est_4est_Gump said:

During the time of Bush all we used to hear was, "Socialism WORKS in Europe! It will work here..."

No Doom and Gloom there!

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4est_4est_Gump said:

During the time of Bush all we used to hear was, "Socialism WORKS in Europe! It will work here..."

No Doom and Gloom there!

Remember how when Obama was elected a certain segment of Lit went crazy over the death of Capitalism and the rise of Socialism!

HOPE & CHANGE!

TRANSFORMATIVE CHANGE!

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4est_4est_Gump said:

Remember how when Obama was elected a certain segment of Lit went crazy over the death of Capitalism and the rise of Socialism!

HOPE & CHANGE!

TRANSFORMATIVE CHANGE!

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IrezumiKiss said:

repeating for shitstain in post #11881

Q: Has President Obama taken more vacation time than his predecessors?

A: According to one count, Presidents Ronald Reagan, George H.W. Bush and George W. Bush spent more time on "vacation" during their first year than President Obama did.

http://www.factcheck.org/2010/01/president-obamas-vacation-days/

Gey cocken oyf der vant, putznasher.

http://img.chan4chan.com/img/2009-03-25/1238021399666.jpg

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patrick1 said:

I don't remember that, no. Send me some actual quotes from actual people who said that, and maybe my memory will improve.

Patrick

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busybody said:

I did

BUT

Guess what LAWN JOCKEY

Your NIGGER IS A LOSER and PLAYS FUCKING GOLF ALL THE TIME

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patrick1 said:

Racism and untruths are obviously always welcome.

Patrick

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JohnnySavage said:

Those of us without access to the interwebs (or a wife to give us our opinions) thank you for that entire page of worthless cut and pastes. You are doing a yeoman's job here!

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4est_4est_Gump said:

Someone should tell him, never, ever eat a hot dog in public...

First off, it's terribly gay and second off, Michelle, the food NAZI, is setting right next to you!

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HAL_9000 said:

No, not Europe. Scandinavia.

Which is technically a part of Europe, but anyway.

Sweden had a crisis in the 90's and fixed their system:

"A banking system in crisis after the collapse of a housing bubble. An economy hemorrhaging jobs. A market-oriented government struggling to stem the panic. Sound familiar?"

http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html


The Swedish model for Europe’s bail-out

By Anders Borg and Carl Bildt
"The writers are Sweden’s minister of finance and minister of foreign affairs respectively":

http://www.ft.com/cms/s/0/e172baf6-f414-11e0-8694-00144feab49a.html

----

Sweden had the exact same problems the US and Europe are facing, and fixed them.

But certain special interests involved here (financial sector) won't allow a real solution.

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4est_4est_Gump said:

Yes, but, one compares apples to oranges.

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rosco rathbone said:

Baltic Dry Index 1807.

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MANY of the world’s financial and economic woes since 2008 began with the bursting of the biggest bubble in history. Never before had house prices risen so fast, for so long, in so many countries. Yet the bust has been much less widespread than the boom. Home prices tumbled by 34% in America from 2006 to their low point earlier this year; in Ireland they plunged by an even more painful 45% from their peak in 2007; and prices have fallen by around 15% in Spain and Denmark. But in most other countries they have dipped by less than 10%, as in Britain and Italy. In some countries, such as Australia, Canada and Sweden, prices wobbled but then surged to new highs. As a result, many property markets are still looking uncomfortably overvalued.

The latest update of The Economist’s global house-price indicators shows that prices are now falling in eight of the 16 countries in the table, compared with five in late 2010. (For house prices from more countries see our website). To assess the risks of a further slump, we track two measures of valuation. The first is the price-to-income ratio, a gauge of affordability. The second is the price-to-rent ratio, which is a bit like the price-to-earnings ratio used to value companies. Just as the value of a share should reflect future profits that a company is expected to earn, house prices should reflect the expected benefits from home ownership: namely the rents earned by property investors (or those saved by owner-occupiers). If both of these measures are well above their long-term average, which we have calculated since 1975 for most countries, this could signal that property is overvalued.

Based on the average of the two measures, home prices are overvalued by about 25% or more in Australia, Belgium, Canada, France, New Zealand, Britain, the Netherlands, Spain and Sweden (see table). Indeed, in the first four of those countries housing looks more overvalued than it was in America at the peak of its bubble. Despite their collapse, Irish home prices are still slightly above “fair” value—partly because they were incredibly overvalued at their peak, and partly because incomes and rents have fallen sharply. In contrast, homes in America, Japan and Germany are all significantly undervalued. In the late 1990s the average house price in Germany was twice that in France; now it is 20% cheaper.

...

Another concern is that Australia, Britain, Canada, the Netherlands, New Zealand, Spain and Sweden all have even higher household-debt burdens in relation to income than America did at the peak of its bubble. Overvalued prices and large debts leave households vulnerable to a rise in unemployment or higher mortgage rates. A credit crunch or recession could cause house prices to tumble in many more countries.

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Buried in an ostensible jobs bill signed by President Obama last year is a little-noticed job-destroying government regulation that threatens to trigger a massive outflow of capital from the American economy.

The U.S. economy is in bad shape. Many want the federal government to fix it -- to end the deficits, create jobs, and get America back onto the track of growth and stability. President Obama came to Washington with great promises: to restore international respect for the United States and to bring back the jobs. When signing the HIRE Act of 2010 on March 18, 2010, President Obama said:

A consensus is forming that, partly because of the necessary -- and often unpopular -- measures we took over the past year, our economy is now growing again and we may soon be adding jobs instead of losing them. The jobs bill I'm signing today is intended to help accelerate that process.

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Now the HIRE Act of 2010 contains a time bomb called FATCA (Foreign Account Tax Compliance Act), which has indeed accelerated a process. Unfortunately that process is not job-generation, but job-destruction caused by an exodus of capital from the United States. Investment means jobs; a departure of investment capital means job losses. Thus, the HIRE Act is really the "FIRE Act."

FATCA (Foreign Account Tax Compliance Act) is the brood of FBAR (Foreign Bank Account Report). FBAR requires that U.S. persons divulge foreign accounts to the Treasury Department, but few knew about or ever complied with it (see "When Government turns Predator"). To stanch the bleeding of U.S. capital into secret bank jurisdictions like the Cayman Islands and Switzerland, Congress introduced FATCA into law as part of the HIRE Act. FATCA requires that foreign financial institutions (FFIs) reveal the accounts of U.S. persons to the IRS. The FFIs will then have to collect tax withholdings for the IRS from these clients. If by January 1, 2014 the FFI is unwilling to reveal its U.S. clients' accounts, the IRS will impose a punitive 30% withholding on all payments to the FFIs, on dividends, interest, and gross sales of stocks, bonds, and financial derivatives.

Let's suppose that a foreign investor trades stocks on a U.S. exchange, but his broker is FATCA non-compliant. One day he buys 10,000 shares of XYZ at $25 per share, and the next day, he takes advantage of a nice uptick of $1.00 in XYZ and sells at $26 per share. He makes a tidy profit of $10,000. But because his broker is non-compliant, the IRS now withholds 30% -- not of the profit, but of the gross proceeds of the sale! So the client now receives the sum of $260,000 minus 30%. The foreign investor is unhappy because his $250,000 investment has become $182,000. If he wants his money back, he must file a U.S. tax return.

No investor would accept such conditions. Hence, an FFI must either comply with the invasive regulations of FATCA or simply abandon the U.S. markets.

After some study, FFIs have warned that the costs of FATCA compliance will be in the hundreds of millions and likely in excess of whatever taxes that the IRS could gather through its enforcement (not that the IRS cares about that!). It is likely that many FFIs will simply choose to leave the United States, taking their clients' money with them. In an open letter, "Farewell America," Wegelin & Co., a private Swiss bank, cited their reasons for leaving the United States: excessive regulations, tax issues, and above all, the insolvency of U.S. government. Now add the expense of FATCA, and many other FFIs are going to follow Wegelin's lead. American Citizens Abroad has cited Japanese and European FFIs as indicating a strong likelihood that they would pull out of the United States.

FFIs could also face privacy lawsuits from affected customers. Canada's privacy laws, for example, may not permit banks to divulge clients' account information, for compliance is voluntary. Thus, Canada and several other countries would probably require a change in their privacy laws before their FFIs could lawfully comply with FATCA.

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