Links: 2013-01-15

North America

Canada’s dirty economic secret: we’re as indebted as the rest of you | Colin Horgan | Comment is free |

“The country touted as an example to Europe isn’t in great shape. When it comes to mortgage debt, we’re little better than Spain”

4 Ways to Avert the Debt Ceiling (And the Most Likely Option Is the Scariest) – Matthew O’Brien – The Atlantic

“Refuse to negotiate, and blame the Republicans for any economic damage. Welcome to everybody’s favorite game, debt ceiling chicken! Here’s how it works. Obama says there’s nothing he can do to lift the debt ceiling on his own; that’s it up to Republicans to pay the country’s bills; and that if they don’t, they will get blamed for Social Security checks not going out. It’s the strategy former Treasury Secretary Robert Rubin used back in the mid-90s when then-Speaker Newt Gingrich threatened to hold the debt ceiling hostage, and it’s the strategy Obama seems to be using now.”

Obama warns Republicans on debt limit –

““It is possible that we would shut down the government to make sure President Obama understands that we’re serious,” said House Republican Conference chairwoman Cathy McMorris Rodgers, of Washington state.
“We always talk about whether or not we’re going to kick the can down the road. I think the mood is that we’ve come to the end of the road.””

Goldman: The Sequester Is A Matter Of When, Not If – Business Insider

“Goldman’s Alec Phillips writes in a note that the automatic spending cuts required by the so-called “Sequester” (the spending caps imposed by the 2011 debt ceiling deal) are now a matter of “when” and not “if.”
He examines the sequester as part of the broader fiscal triple threat that we’re seeing right now: Debt ceiling + ongoing budget resolution + sequester.
While the debt ceiling has the potential to do the most damage, from a probabilistic standpoint (because the debt ceiling is unlikely to be breached) the sequester has the most potential to do real harm.”

Obama Escalates Debt-Limit Fight –

“Mr. Obama’s tone suggested that battle lines already have hardened ahead of the next budget fight. Republicans showed no signs of backing away from their push to reduce the federal deficit. “The president and his allies need to get serious about spending, and the debt-limit debate is the perfect time for it,” said Senate Republican Leader Mitch McConnell (R., Ky.).

on March 27, appropriations for most of the federal government run out, threatening a partial government shutdown if new funding isn’t approved.”

Double trouble: House GOP eyes default, shutdown – Print View

“The truth is Boehner is at the mercy of a Republican Conference that is far more resistant to compromise than he is. Boehner was embarrassed when he had to pull his plan for raising taxes — and then watched as three-quarters of his members opposed him on the final tax increase bill after Christmas. He might be the weakest speaker of his generation right now — and there is a fair amount of back-biting about who to blame for the recent debacles.

To pacify conservatives, he made two promises to his members that will greatly restrict his ability to craft a compromise in the spending fights ahead. The first promise was to bring to the floor only legislation a majority of his members support and do it through the committee process. The second was to increase the debt limit only in exchange for a dollar-for-dollar decrease in spending in the time period covered by that debt increase.”

Here’s Why Republican Talk About Default And Shutdown Is Not An Empty Threat | Stan Collender’s Capital Gains and Games

“The GOP’s base’s two biggest economic issues are tax and spending cuts. Therefore, taking a hard line in all budget debates is what makes the most sense politically and makes it most likely that Republicans will be in power for years to come.”   

Number of working poor families grows as wealth gap widens | Reuters

“The number of U.S. families struggling with poverty despite parents being employed continued to grow in 2011 as more people returned to work but mostly at lower-paying service jobs, an analysis released on Tuesday shows.

More working parents have taken jobs as cashiers, maids, waiters and other low-wage jobs in fast growing sectors that offer fewer hours and benefits, according to The Working Poor Project, a privately funded effort aimed at improving economic security for low-income families.”


Draghi’s Bond Rally Masks Debt Doom Loop Trapping Spain – Bloomberg

“Spain’s budget deficit probably exceeded 9 percent for a fourth year in 2012 as Europe’s highest unemployment rate, a third recession in four years and the cost of bailing out its banks offset almost all of the government’s 62 billion euros ($83 billion) of spending cuts and tax increases, according to economists at Societe Generale SA (GLE), Lombard Street Research and the Madrid-based Applied Economic Research Foundation.
Total debt will reach 97 percent of gross domestic product this year, the International Monetary Fund forecasts.
“This is a classic example of the doom loop,” Societe Generale’s London-based chief European economist, James Nixon, said in a Jan. 10 telephone interview. “They just aren’t making any progress.””

España cerró 2012 con la mayor reducción del déficit desde 1987 – CincoDí

Spain ended 2012 with the largest reduction in its fiscal deficit since 1987 and one of the most drastic in the last 160 years. That tells you how contractionary Spain’s economic policy has been because that means that Spain’s addition of private sector net financial assets has changed toward the negative at more than almost any time in the last 160 years. With private debt the problem, that clearly is going make things more difficult.. 

Jahreswirtschaftsbericht: Bundesregierung kürzt Wachstumsprognose – SPIEGEL ONLINE

This German-language article says that Germany has cut its official 2013 growth estimates. I told you I expect this to happen.

BBC News – Volkswagen sales hit record high in 2012

“The German carmaker sold 9.07 million cars last year, up 11% from 2011.
Sales in North America and Asia-Pacific rose 26.2% and 23.3% respectively, helping to offset a 6.5% drop in sales in Western Europe, excluding Germany where sales were up 1.9%”

Friends of Helmut Kohl Say He is a Virtual Prisoner in His Own Home – SPIEGEL ONLINE

“Helmut Kohl can barely speak anymore. Now others are talking for him and claiming influence over the historical legacy of the father of German unification and one of the architects of the euro. They include his feuding family, former political allies and a journalist who possesses a treasure trove of recordings and transcripts of interviews with the former chancellor.”

Prices fuel fears of German housing bubble –

“Berlin is at the forefront of one of the surprising consequences of the eurozone crisis: Germany’s property price boom. Long an outlier in Europe for its relatively low levels of home ownership and sleepy housing market, Germany has caught the property bug to the extent that price rises in some locations point to a potential bubble, according to some property professionals.
Tracking price rises is difficult but F+B, a research company, says average sale prices in Berlin are up 23 per cent in the past five years. Jones Lang LaSalle, a property consultancy, estimates that median prices in Berlin have risen even more sharply: 20 per cent in the 12 months to June, and 37.5 per cent since 2009.”

German Renters Pinched by Rising Costs and Decreasing Supply – SPIEGEL ONLINE

“The exploding costs and dwindling supply of urban housing are slowly pushing Germans of average means out of the cities. As September’s national election approaches, politicians are jockeying to find viable solutions to a problem they helped create.”

German economy slows sharply –

“the slowdown in investment at a time of very cheap financing, low domestic unemployment and solid consumption highlighted the chilling economic effects of the sovereign debt crisis on companies in a country that accounts for 28 per cent of the bloc’s combined GDP.
Company investment in plant and machinery fell 4.1 per cent over the course of the year, the statistics office said, compared with a 7.3 per cent rise the previous year.” 

Staatsüberschuss : Deutschland mit erstem Haushaltsplus seit 2007 – Nachrichten Wirtschaft – DIE WELT

Germany achieved its first fiscal surplus sine 2007, the year the financial crisis began. I suspect this will be a main talking point for the CDU during the upcoming German general election

Germany’s export model faces reality check | Business |

“Take away exports and investment and there is not a lot to sustain German growth. The price of making German industry ultra-competitive in world markets has been a prolonged period of low wage settlements, keeping a firm lid on consumer spending. Reforms to the labour market and to the welfare state have also ensured that little of the gain from Germany’s productivity improvements over the past decade have trickled down to the workers in the form of higher living standards. Unemployment, on the other hand, has come down.

So what happens next? In the short term, the deep slump across much of southern Europe means Germany is at risk of a double-dip recession. For 2013 as a whole, growth is unlikely to be much above 1% and could be lower if the euro crisis persists and the haggling over the budget in Washington continues to cast a shadow over the global economy”

Goldreserven: Bundesbank holt Gold nach Deutschland – SPIEGEL ONLINE

I will follow up on this German-language story because it strikes me as just rumour right now, but according to Spiegel here the Bundesbank wants the gold it keeps with the United States back under its own possession in Germany. More to folow when I get details.

German economy shrinks 0.5pc as euro crisis weighs – Telegraph

“The German economy contracted by a larger-than-expected 0.5 percent in the final quarter of 2012, a preliminary estimate from the Federal Statistics office showed on Tuesday, as the euro zone crisis weighed on exports and corporate investment.”

Nicolas Sarkozy to be investigated on corruption charges over ‘Karachi Affair’ arms deals to Pakistan | Mail Online

“Nicolas Sarkozy was plunged into yet another corruption scandal today following allegations that he tried to interfere in an arms sales enquiry while president of France.

The 57-year-old is said to have violated a confidentiality law when dealing with the so-called ‘Karachi Affair’.

It involves a 2002 terrorist bombing in the Pakistani city that killed 11 French engineers – allegedly because kickbacks over submarine sales by France to Pakistan had not been paid.”

France is in a mild recession, says central bank – Telegraph

“The French central bank repeated its estimate that France fell into a mild recession at the end of 2012, putting contraction in the fourth quarter at 0.1pc after equivalent estimated shrinkage in the third quarter.”

Erste Group schreibt 300 Mio. Euro ab – KURIER.AT

This Austrian bank has finally taken the 300 million euro hit to its balance sheet from uncollectable debts in Eastern Europe, via its Romanian subsidiary BCR



China Export Surge Spurs Data Skepticism at Goldman, UBS – Bloomberg

“The 14.1 percent jump from a year earlier was the biggest positive surprise since March 2011, according to data compiled by Bloomberg. The increase didn’t match goods movements through ports and imports by trading partners according to UBS, while Goldman Sachs and Mizuho Securities Asia Ltd. cited a divergence from overseas orders in a manufacturing index.”

Chinese companies retreat as US scrutiny mounts | South China Morning Post

“Chinese companies are deserting US stock markets in record numbers as regulatory scrutiny mounts and the advantages of a US listing slip away.

US government investigations of suspect financial reports and battered share prices have for many Chinese companies wrecked the chances of raising new money in the United States and given them little reason so stay, China experts said.”

BBC News – Japan’s Nikkei hits highest level since April 2010

“Japan’s stock market has closed at its highest level in almost three years after the head of the Bank of Japan said he would take further action to help boost economic growth.”



Dell in talks to go private, shares surge | Reuters

“Dell Inc is in talks with private equity firms on a potential buyout, two sources familiar with the matter told Reuters, confirming reports that sent shares in the world’s No. 3 PC maker soaring 13 percent to nearly a eight-month high.”


Behind Lance Armstrong’s Decision to Talk –

“Last month, Lance Armstrong boarded a plane for Denver to do something several of his lawyers had advised against: sitting down for a private conversation with the head of the U.S. Anti-Doping Agency.

Travis Tygart had given the star cyclist no reason to believe that USADA would soften the lifetime ban from elite competition for what the agency called the “most sophisticated doping program on the planet.” But Mr. Armstrong hoped he could change that.

At the meeting near the Denver airport, Mr. Armstrong talked openly about doping, arguing that cheating was rampant in all pro sports, including the National Football League, according to someone familiar with the meeting. He complained that he was being singled out for punishment. As the discussion wound down without Mr. Tygart budging, the seven-time Tour de France winner seemed ready to walk out.”

Lance Armstrong admits doping to Oprah – CBS News

“The admission — made in an interview to be broadcast in two separtae installments starting Thursday on Winfrey’s network — was confirmed by CBS News Monday. Winfrey appeared on “CBS This Morning” on Tuesday to talk about the Armstrong interview, saying that both parties had agreed not to speak publicly about it until the interview aired, but “by the time I left Austin and landed in Chicago you all had already confirmed it.””

Tras subir 2,1% en diciembre, la inflación de 2012 llegó a 25,6%, según el índice Congreso – 15.01.2013 –

Inflation in 2012 registered 25.6%, second only to Venezuela in Latin America. This is just one step short of hyperinflation, folks. Any economist defending this economic policy is basically saying that 25% inflation is OK. I think it could get worse.

 The Incredible Shrinking HBOS Fraud « naked capitalism

“there’s quite a discrepancy, then, between what the ‘sources’ think about the size of the fraud (“billions”), and the scope of the charges (£35 million). How did that happen? The Telegraph’s way of pointing this out is intriguingly muted. What else do they know?”

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