Tag Archives: Global economy

Shock! IMF cuts global economic forecast.. for third time this year

chart-imf-620xaTuesday, the IMF updated it’s World Economic Outlook downgrading three-out-of-four of the world’s most powerful economies.

While the Eurozone was given an outlook putting them more into reverse, the U.S. and China are now expected to grow even more slowly than the previous projections. Only Japan was given an improved outlook.

News reports have spun the three consecutive downgrades as showing the global economy “in nuetral”, but declining expectations and now U.S. small business sentiment dropping in June paints a much more bleak picture – the recovery that has been heralded seems not to be materializing.

There are approximately 9 million fewer jobs in the U.S. economy than when the recession started. With only 47% of adults holding full-time jobs, things are not likely to improve soon as government programs pull more money out of the economy through fees and taxation and leave less capital for growth and investment.

The latest Bureau of Labor statistics report echoes the IMF’s report. The report showed that job growth was mainly in part-time jobs and that a large portion of the American workforce remains unemployed which gives no reason to doubt the recent IMF downgrade.

Emerging markets took a hit as well. Brazil had it’s growth prediction dropped from 3% to 2.5%.

Economic indicators drop – global economy to slow

The Organization for Economic Cooperation and Development released a report today showing that the economy will slow in coming months for all but two of its developed member nations.

34 nations are included in the OECD membership and all but the U.K. and Brazil are showing signs of economic slowdown. The OECDs lead indicator dropped to 100.2 in July from a June number of 100.3 – an indicator that has proven very reliable in the past.

While the EU was the prime focus of the OECD, the economies of the U.S. and Japan also showed signs of continued slowing.

The OECD indicators show early signals to changes in economic activity.

Italy showed the largest decline in economic output while the U.K. showed the greatest increase.

Worst of Global Slowdown Occurring Now, According to BNY Mellon’s Hoey

NEW YORK and LONDON, Aug. 15, 2012 — BNY Mellon Chief Economist Richard Hoey said the worst of the global slowdown is occurring right now and he continues to expect a global growth recession in 2012 with global GDP to grow at three percent.  Hoey also expects a moderate strengthening of global economic indicators in late 2012 and 2013, according to his most recent Economic Update.

Hoey states that European policymakers do recognize that it is cheaper to support the basic integrity of the euro than to absorb the severe losses which would be generated by its sudden dissolution.  “For that reason, we do expect the euro to survive,” says Hoey.  “The euro should continue to include most of its current members.”

While Hoey expects the euro to survive, he believes it is too late to avoid the European recession.

“We believe that Europe is currently in the worst phase of the European recession and the stronger countries can exit recession in late 2012 or early 2013,” Hoey concludes.  “We disagree with the disaster scenarios for Europe. However, even after the current European recession ends, we expect a multiyear period of sluggish economic activity, given unfavorable demographics, competitiveness challenges and legacy debt issues.”

US Energy Policy: Why It Failed & How To Fix It

THE FACTS ABOUT UNITED STATES ENERGY 

One of the biggest drains on the American economy is, undoubtedly the importation of energy.  In the early 1970’s the United States was the world’s largest producer of Oil and Natural Gas.  If we still remain near the top of the world’s list of producers – #3 according to the CIA Fact Book – how is this a problem?  The problem is that we are the world’s #1 Importer of oil at 10.27 Million BBL/Day – which is 4.541 Million barrels per day higher than China, who stands as the #2 importer.

What about natural gas?  Surely we recover the losses, right?  Not so fast.  The US is still the world’s #1 producer of Natural gas.  But here’s he problem –  we are also the worlds #1 consumer AND importer of Natural Gas.  Once again, we are in an upside-down scenario in regards to energy.

US Oil Production, by year

How can a country, much less an economy, expect to sustain stability, strength or longevity with such a huge disparity when it comes to such a valuable and important commodity?

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WHERE GOVERNMENT FAILED

It is my firm belief that our current economic tensions with the Middle East and OPEC began with the “oil policy” of President Jimmy Carter when he signed Presidential Directive 63 on January 15th, 1981.  PD63 stated that the US will protect its interests in the Middle East “by any means necessary, including military force.”

Also under the Carter Administration, the US Department Of Energy was created (in 1977).  Since then, Congress has passed a swath of energy-focused legislation that was supposed to make our nation more energy efficient, independent, and strong.  A very small sampling of legislation are as follows:

  • 1978 – Power Plant and Industrial Fuel Use Act – Restricted new power plants using oil or natural gas. Repealed in 1987.
  • 1978 – Public Utilities Regulatory Policies Act – Opened electric markets to alternate power producers
  • 1978 – Energy Tax Act – Taxed gas-guzzlers, gave income tax credits for alternate fuel use
  • 1980 – Geothermal Energy Act – Created Synthetic Fuels Corporation to market fossil fuel alternatives
  • 1980 – Ocean Thermal Energy Conversion Act – Provided loan guarantees for biomass and alcohol fuels projects
  • 1992 – Energy Policy Act – Required alternative fuel vehicle use in some private/government fleets
  • 2005 – Energy Policy Act – Provided tax incentives for conservation and use of alternative fuels
  • 2007 – America COMPETES Act  – Increased fuel economy requirements, phased out incandescent light bulbs, encouraged biofuel development
  • 2009 – The American Recovery and Reinvestment Act of 2009 – Renewable energy tax cuts

Furthermore, the federal government has spent Billions of dollars – if not Trillions – over the last three decades fighting wars in the Middle East to “protect our interests” in their oil.  Imagine the infrastructure that could have been built in America for alternative fuels, solar energy, hydroelectric power, bio-fuels, and more.  Perhaps American energy independence wouldn’t be a mere policy and plan – but instead a reality.

As time progresses, it is becoming more and more apparent that Congress continues to extend the present energy crisis (yes, crisis) in this country.  In doing so, they are also expanding our National Debt with the growing protection of and importation of foreign fuel sources.  Let’s not forget how much influence has been bought with money from the oil industry.  Oil & gas companies have donated huge sums of money to politicians to maintain the energy status quo:

oil and gas companies have donated $238.7 million to candidates and parties since the 1990 election cycle

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The question still remains: How Do We Solve This Problem?

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THE SOLUTION – Look South

The answer to many problems is often right under your nose – American Energy is no different.  We must look South to Brazil.  The Brazilian model for energy independence is showing gigantic signs of success.  Brazil is producing more energy than it consumes, and, according to one Brazilian energy mogul, 48% of Brazil’s current energy comes from renewable sources.

The following charts show clear evidence that the Brazilian model is working:

Click for larger view

WHAT SHOULD THE US GOVERNMENT DO?

The first step in reversing our current failed energy policy is to eliminate and remove ALL subsidies for corn-based ethanol production.  The use of corn-based ethanol has an effect on food prices, not just in the US, but globally.  Corn is a valuable commodity as a food product, and should remain a staple in that regard.

One suitable alternative to corn is sugarcane – as Brazil is showing – but there are many more options available including bagasse, miscanthus, sugar beet, sorghum, grain, switchgrass, barley, hemp, kenaf, potatoes, sweet potatoes, cassava, sunflower, fruit, molasses, corn, stover, grain, wheat, straw, cotton, and more.  Surely with the variety of crops from which ethanol can be derived, corn can be replaced, subsidies eliminated or reduced, and the United States can begin to produce vast amounts of Ethanol to ease our dependence on foreign oil.

Even another alternative to crop-based ethanol is Algae.  It is being shown that Algae can produce ethanol with a greater yield and efficiency over corn and even sugar cane:

Algae produces more Ethanol per acre than Corn or Sugar Cane

Algenol’s process is very different in that the algae are not cultivated. Instead, algae produce ethanol in gas form that is siphoned off from the bioreactor tubes and condensed to a liquid, Woods explained.

He claimed that the system can produce 6,000 gallons of ethanol per acre per year, far more than corn’s rate of 370 gallons per acre per year or sugar cane’s at 890 gallons per acre per year.

The Mexican site is located a few miles away from a power generation station. By pumping carbon dioxide from the station into the algae bioreactors, the saltwater algae farm can boost production to 10,000 gallons of ethanol per acre per year, he said.

Exploring these alternatives are the first step in eliminating our dependence on oil imports.  The second step is domestic Oil Production.  Yes, that old saying “Drill, baby drill!” is coming back.  The United States has 20.68 BILLION barrels of proven oil reserves.  We also have 7.716 Trillion Cubic Meters of Natural Gas reserves under our boots.

With our proven energy reserves, and the massive potential for ethanol, hydroelectric, and other renewable sources – what logical reason is there for the US to NOT be energy independent by 2020?  Diversifying our energy sources is not only good for National Security, it is sound economics and it will create JOBS for Americans.  Couple this energy policy with real, logical tax reform (I personally support The Fair Tax), and the United States would lure back manufacturing and other sectors in massive droves.  This would lead to the USA becoming the economic hub of the world once again.

 

Bottom line:  A sound policy geared towards Energy Independence will affect the entire US Economy.  A strong economy makes a strong country.  So in 2012, let’s elect members of Congress who will seriously approach US Energy Policy.  Vote for prosperity, not party.

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Is this the week the world economy bites it?

Ok, I know.. I haven’t written an honest-to-goodness analysis piece in awhile – but now.. the world is ending and I’ve noticed that no one else was writing about it.. well not just this moment ..

We’ve been hearing that EU is going to crash any day now, that Americans are over-leveraged and as Conservatives we know all about the looming debt crisis.

Today, Greek Prime Minister Lucas Papademos will be asking for new legislation that would impose losses on anyone who had been foolish enough to invest in the country. This provision would be triggered if no agreement could be reached in debt negotiations that will start on Wednesday. Papademos said, “The talks are not straightforward, because they aim at a voluntary restructuring of public debt, and to achieve a number of objectives simultaneously, objectives that involve trade-offs”

Of course that doesn’t mean the collapse of the Greek banking system (yet) which would lead to the fall of the EU (but not now) and then an eventual collapse of the global economy and life as we know it (if it were really happening). Nope, not that – not just this minute.

What about that middle east and Asia thing? @Zerohedge announced that the Oil Minister of India (one of the hottest new economies in the world) is now preparing for “all eventualities over Iran oil supplies”. And now, somehow, a middle-eastern country is about to run out of .. petroleum products. Nothing to see here, please move along.

The international community has its issues and apparently the United States is also on the precipice of catastrophe. The New York Times reminds us that “Few Cities Have regained Lost Jobs“, Reddit is going on strike, Palin would vote for Gingrich (in South Carolina), the unemployment rate is only getting better because more people have decided to quit looking for work and Colbert is being taken seriously by a major news outlet – you get the point.

So the world sucks, it’s 2012 so the whole Mayan calendar thing is coming, and we’re faced with the prospect of another 4 years of Barack Obama – who wouldn’t build a bunker, trim the hedges to create clear lines of fire and stock up a 50 year supply of that crappy astronaut ice cream  to weather the storm? Who?!

There is an economic storm brewing. The mainstream media needs you to keep trucking along so they can keep a steady stream of viable sponsors paying their bills. The politicians in power need you to believe things are stable so you’ll re-elect them and banks need you to think that it’s just fine to keep borrowing and spending your way to happiness. So don’t worry, be happy.

So who do you believe? Is Greece finally on the edge, will Iran prove a tipping point for Asian and European markets, will America’s debt-to-GDP ratio finally render the world’s largest economy defunct – or as Obama has told us, are things improving? Perhaps you should make sure your food store is stocked, you have cash, gold, chickens or whatever because after all, Rocks from Mars are Falling on Morocco – and if that’s not a indicator of the apocalypse.. what is?

Fed's Bernanke Props Up EU With Loan-sharking Scheme

U.S. Federal Reserve Chairman Ben Bernanke has reached out to Europe in what is being mischaracterized across America as just another European bailout. Bernanke realizes the U.S. Congress would never allow the Federal Reserve to put the U.S. Economy at further risk by directly bailing out the European Socialists, in which we are already exposed to the tune of owning 20% of the IMF debt-fund, which is basically bankrupt. The EU announced that they would be increasing the cash flow to prevent several countries from going insolvent a short while back, in hinting that China and Japan would agree to buy up more European debt. The only problem there,  is that China refused to buy into that scheme without seeing solid austerity measures put into place, which the EU refused, or was incapable of doing.  Simply put,  Europe was a very bad credit risk, and China turned them down which was very embarrassing to the EU grand banking manipulators, who had already announced more cash was on the way.  

Understanding Bernanke’s Loan-Sharking Scheme

Bernanke then decided to play the role of loan-shark king, in lowering interest rates for dollar swap lines to the ECB (European Central Bank) along with cooperation from four other major central banks (Canada, England, Japan, and Switzerland). Bernanke is attaching the European debt crisis exposure to the banking systems of the other 4 country’s mentioned above in a move to cloud the fact that he is lending more money ( and collecting lower interest rates) to the European Socialists Union, which should actually have been declared bankrupt over a year ago. Does anyone believe for one minute that Canada, Japan, Switzerland, and England are going to put their economies at risk by buying into the debt-disaster of the EU, the IMF, the ECB and the EFSF? Of course not. The EFSF, or the European Financial Stability Fund ( boy is that an oxymoron if ever there was one) has yet to explain just what their role will play in all of this.

Yet globalists paint this scheme in a rosy hue by declaring that the European Central Bank, which has been reluctant to intervene to stop the growing crisis on its own continent, was joined in the decision by the Federal Reserve, the Bank of England and the central banks of Canada, Japan and Switzerland. Central banks will make it cheaper for commercial banks in their countries to borrow dollars, the dominant currency of trade. Just what effects will this have on the value of the U.S. dollar, long-term? But while it should ease borrowing for banks, it does little to solve the underlying problem of mountains of government debt in Europe, leaving markets still waiting for a permanent fix. What is that term Obama and Congress love to toss at the American public so often today? That’s right, they use the “We can’t continue to kick the can down the road” analogy constantly, yet this is exactly what the EU and Bernanke are condoning with this latest move.  Where do Germany and France stand on all of this?

The stock markets rallied upon Bernanke’s announcement of the Fed lowering its dollar-swap interest rate, and China’s easing of it’s monetary policy for the first time in several years by reducing bank reserve requirements by 50 basis points. This may be the first of several Chinese easing moves, and it certainly added to the stock surge. Again, take note that China is not willing to buy into the EU debt-disaster, but instead slightly lowers their bank reserve mandates. Also missing from this equation are the two biggest economic elephants in the middle of the EU, France and Germany. Simply put, after Deutshe Bank of Germany received massive bailout funds from the IMF, EFSF, and the ECB schemes that prevented them from suffering massive losses due to the previous buying of EU debt , and they now refuse to take the risks to provide any funding to bailout Greece, Italy or anyone else in the EU, including the newly exposed and problematic French debt-crisis.

The bottom line here is that this is all just another batch of phony solutions to a rapidly-expanding European debt-crisis that was created by the Euro-Zone Globalists, and which is heavily rooted in anti-capitalistic, utopian Socialism and the ever-present denial of the realities of their irresponsible actions.  Nothing has been solved here, much to the dismay of Ben Bernanke, who actually believes that this latest loan-sharking scheme will fool Congress into somehow thinking that Bernanke waved his magic wand and thus prevented the European insolvency that China now sees as inevitable. ( as is proven in their refusal to further buy into the European Socialists massive debt problem nightmare)  Are we to believe that the ECB can just write a trillion dollar check to further prop up the EU’s fast-growing number of bankrupt countries? On top of that, how can the IMF expect to be allowed to borrow another $800 billion from the ECB to give those same bankrupt countries even more money? The bottom line is that they can’t, simply because the money just isn’t there, especially with Germany and France now refusing to participate in any further bailouts without the creation of a New EU treaty. Merkel and Sarkozy have made Europe into a Communist collective that was built on the Socialistic catch-phrase of  denying protectionism, or the rights of European countries to control their own economies through implementing sound fiscal policies. Now they want out of the communist collectivism that they have created to protect their own countries from falling off of the debt-cliff that Italy, Greece, Spain, and other EU infected countries are now on the edge of.  For the proof of Merkel and Sarkozy’s stealth demand for German and French “protectionism” from the European debt-crisis they helped to create,  check out this article neatly titled,  EU Planning a New Treaty. Oh what a tangled web we weave, when first, we practice to deceive.  Sir Walter Scott, 1771 – 1832.

 

 

 

China to Help Fund Latest EU Bailout Package? No Deal

French President Nicolas Sarkozy placed a phone call to China’s President Hu Jintao after European leaders reached another last-minute deal to increase bailout funding in an attempt to tackle the regions worst debt crisis in over two decades. Apparently, Sarkozy’s pleas for China to contribute upwards of $100 billion (U.S.) to the EU bailout fund fell on deaf ears, as China’s refusal to buy EU bonds was reported early Friday morning, much to the dismay of the Global media that had been reporting that China would be buying upwards of $100 billion dollars worth of the EU’s bonds.

 

 Sarkozy attempted to woo public opinion and apply Global pressure by taking to the media in an interview right after his phone call to China’s President in which he stated:  “If the Chinese, who have 60 percent of global reserves, decide to invest in the euro instead of the dollar, why refuse?”  The answer to that question can be found in China’s state media announcement that Europe must take responsibility for the crisis and not rely on “good Samaritans” to save the continent.  Maybe China simply sees the U.S  as a good investment, and the EU..not so much.  China currently holds approximately $3.2 trillion dollars in foreign exchange reserves and was looking for “attractive, solid, safe investment opportunities according to Claus Regling, the chief executive of the European Financial Stability Fund. (EFSF) Mr. Regling is currently on a world tour talking to governments about how the EFSF might be structured so the EU bonds it sells to make money will look “more attractive” As Communist leaders in China try to deal with soaring housing costs and food prices while exporters are struggling to stay afloat, selling EU bonds to China right now is off the table.

The EFSF has already “announced” an increase of some measures including quadrupling the firepower of the fund to one trillion euros ($1.4 trillion). Now the main problem is just where that cash infusion will come from. As stock markets rallied on the recent news of the EU bailout fund quad-rupling, the EFSF is seen to be scrambling to raise the funds.  Isn’t that akin to be placing a bet on an as yet unfunded entity?  China certainly thinks so.

The EFSF fund was set up in May 2010 and is designed to provide financial assistance to European economies at risk of default, such as Greece, Ireland and Portugal. Here we  some 17 months later, and the crisis is now looming larger than ever. Next up on Regling’s EU bailout begging tour is Japan, whom as also offered “vague promises” ( just like China in the beginning) that Japan might be willing to expand it’s already large contributions to the EU’s bailout fund. We can expect Japan to take the route China has in refusing to bury itself in the EU bailout debacle simply because, as The People’s Daily Communist media outlet in China stated: “The (EFSF) summit did not reach any decision on institutional reform and therefore did not eliminate concerns over the (causes of) the European debt crisis at the root.”

Adding to the fact that the EFSF has apparently promised a $1.4T cash infusion into the EU bailout fund without first securing the actual funding, is that, as is usually the case, China will want to put certain “conditions” on their participation in buying EU bonds to increase the EU bailout fund. Those conditions: Greater market access in Europe and silence on their currency manipulation which most economists say is being unfairly undervalued. That tidbit comes to us from IHS Global Insight analyst Ren Zianfang.  Didn’t the U.S. Senate recently pass legislation calling for sanctions against China for undervaluing their currency? Yes they did, as you can see here.

In another shocking revelation, (sarc) also on Friday, a deputy Chinese finance minister said Beijing needs to learn how the new investment vehicle will work before deciding whether to invest.

China wants details on the amount of bonds issued by Italy and other individual European governments that might be guaranteed by the fund, Zhu Guangyao said at a separate briefing. Oh the nerve of those Chinese, wanting petty “details” before committing another $100T to the EU bailout fund!

So the Global market rallied on the EFSF’s recent announcement that they will quadruple the EU bailout funding. All they need to do now is find the money to put into the fund. What a dysfunctional mess of an organization. This is a grand example of how the EU Global government has become so involved with the European banking system that it has exasperated the European financial crisis tenfold, and instead of helping European countries to pull out of the recession, it now threatens to drag the U.S. and the rest of the world down with it.