The lead article in today’s links is from Seumas Milne in the Guardian on George Osborne’s failure to deliver on his promises as UK Chancellor of the Exchequer. If you recall, the platform that Osborne championed was one of voluntary cuts to reduce government spending in order to bring down public debts and deficits in the UK. The rationale given at the time for why this would work was “confidence” i.e. lower bond yields and greater capital investment would follow the UK government’s decision to cut deficits because private businesses would be spurred on by confidence in the more well-considered fiscal stance.
Things have not worked out that way. Deficits are still high, borrowing has increased, and the UK is in recession. Osborne has been a disaster. As I said long ago about Austerity in the UK:
In the UK the budget deficit was a massive 11.4% of GDP in the last fiscal year. In the U.S., the federal deficit for the fiscal year ended September 2010 was $1.294 trillion or 8.9% of GDP, down from FY 2009′s 10%. Both countries have their own national currencies and central banks that have engaged in quantitative easing to support the economy. And both countries have very low interest rates despite massive deficits, unlike deficit spenders in the Eurozone without national currencies where national solvency is a gripping concern.
In many ways, this budget-busting spending makes sense due to the huge shortfall in private sector demand as the private sector contracted and tens of millions were thrown out of work. If government had countered this contraction in the private sector with one of its own, a Great Depression was sure to come. An appreciation of the financial sector balances makes this clear. That’s what I was talking about in October of 2009 with “Barack Obama: “if we keep on adding to the debt… that could actually lead to a double-dip”. “
But since that time, the US has resisted austerity while the UK has embraced it. In my mind, this is the best real-time economic experiment we can have on what does and doesn’t happen as a result of government spending.
The experiment reveals expansionary fiscal consolidation to be the voodoo economics I have been telling you it is. Austerity is not about confidence and should never be sold as such. If you advocate austerity, you do so despite the negative impact on the short-term.
Will it get worse? I hope not. Things in the UK actually look better than they did a few months ago but the global macro outlook will be a drag on UK growth, especially given strong ties to the euro zone.
“The message of Osborne’s humiliation couldn’t have been clearer. The switching around of Hunts and Graylings would count for nothing. The minister the public most want to see the back of is the man who has driven the economy into the first fullblown double-dip recession since the 1970s, while cutting taxes for the rich”
Drought in credit to small businesses ‘is worsening’ | Business | The Guardian
“Firms have lost confidence in lenders, report finds, with a third of loan and a fifth of overdraft applications turned down”
United States
Food-Stamp Use Climbs to Record, Reviving Campaign Issue – Bloomberg
“Food-stamp spending, which more than doubled in four years to a record $75.7 billion in the fiscal year ended Sept. 30, 2011, is the U.S. Department of Agriculture’s biggest annual expense. Republicans in Congress have criticized the cost of the program, and the House budget plan approved in April sponsored by Representative Paul Ryan of Wisconsin, the party’s vice- presidential nominee, would cut expenses by $33 billion over 10 years.”
U.S. Manufacturing Contracted in August – WSJ.com
“A closely watched gauge of the factory sector, released Tuesday by the Institute for Supply Management, showed manufacturing activity slipped to 49.6 from 49.8 in July. It was the third consecutive month in which activity fell. Readings below 50 indicate contraction.”
“The realtor for the house is grateful that the neighbor caught wind of the party before it happened, as the short sale of this property is set to close in the next week.”
Profit Growth Has Become a Market Millstone – MarketBeat – WSJ
“Profit growth in the second-quarter was a razor-thin 0.85%, according to S&P Capital IQ, the lowest figure since the third-quarter of 2009. Expectations for the upcoming third-quarter are worse: the consensus as of now is that profits will fall by 1.9%; last October, the consensus was for growth of 15%.”
Romney Gets No Bounce From Last Week’s GOP Convention
“Mitt Romney received no bounce from last week’s Republican National Convention, as the 46% of registered voters who supported him in Aug. 31-Sept. 3 Daily tracking is essentially the same as the 47% who preferred him in Aug. 24-27 tracking, the four days preceding the convention.”
Federal government push to collect on student loans amid bad… | www.palmbeachpost.com
“Nearly 30 years after graduating from the University of South Florida, William Milner Jr. this year got an unwelcome memento from his college years: the bill.
But this was no ordinary invoice. It was a lawsuit filed by the U.S. government, demanding that the 57-year-old Delray Beach resident repay decades-old student loans. And the government doesn’t just want back the $1,660 Milner borrowed. With interest and attorney fees, Milner’s debt now stands at $7,746.”
Sober Look: Alarming parallels between current Middle East tensions and events leading up to WWI
“JPMorgan’s commodities analysts draw some frightening parallels between the current Israel – Iran tensions (discussed here) and the events leading up to World War I. They first point out that since the tensions have not escalated into a military conflict so far, in spite of numerous predictions, the public has lost “interest” and the markets moved on to other issues. The web search interest for the phrase “iran war” has dropped off significantly since the peak of early 2012.”
“Not only do we have rapidly rising student loan balances but we are also looking at an unprecedented spike in delinquencies – the highest increase on record.”
At Jackson Hole, a growing fear for Fed independence | Reuters
Bernanke at Jackson Hole – Tim Duy’s Fed Watch
Bernanke on the defensive | Felix Salmon
“The overall tone here, then, is defensive: Bernanke’s on the back foot, trying to justify past and future actions against critics on all sides. And when an institution is in a defensive crouch, it’s not going to do anything bold.
Bernanke Leaves Little Doubt He’s Gearing Up to Do More – WSJ.com
“Mr. Bernanke said, he sees three factors hamstringing growth: the hobbled housing market; strains in credit and financial markets, particularly due to the European debt crisis; and uncertainty about future U.S. government budget policies. He didn’t say whether he thought Fed policy would address these problems, but lower interest rates do tend to boost housing activity and financial markets.
He did acknowledge that the Fed alone can’t fix the economy, saying other government policy makers should act as well. The Fed “cannot achieve by itself what a broader and more balanced set of economic policies might achieve…it cannot neutralize the fiscal and financial risks that the country faces,” Mr. Bernanke said.”
Everyone Is Ignoring A Sign Of US Economic Decline We Haven’t Seen In 60 Years – Business Insider
“the U.S. capital stock is in decline. This is the first time post-war we’ve ever seen it. We don’t know what the repercussions are because we have nothing in history to look back on and say, “Hey, last time it did this, this is what followed on it.”
I would submit to you, though, that it’s probably nothing good.”
Bain Capital and other firms subpoenaed in New York tax probe | World news | guardian.co.uk
Fed’s Plosser says no point in launching risky QE3 | Reuters
“”My current assessment both of the economy and the effectiveness of QE is that I don’t think it really beats the cost-benefit test right now,” Philadelphia Federal Reserve President Charles Plosser said on CNBC.”
Technology
“Apple has been taking steps to phase out developer access to the UDID due to privacy concerns. In August 2011, the company announced that with iOS 5, it would deprecate the UDID. (UDIDs are alphanumeric strings that are unique to each Apple device).”
Galaxy S III passes Apple’s iPhone 4S, becomes top selling US smartphone
“For the first time since it launched last October, Apple’s iPhone 4S was not the top selling smartphone in the U.S., as the newly released Samsung Galaxy S III took the top spot in the month of August.”
‘iPhone 5’ sales could reach 10 million this quarter
“Following the news that invitations for an event next Wednesday had been sent out by Apple, analyst Gene Munster with Piper Jaffray issued a note to investors in which he said a September launch window could have iPhone sales for the current quarter exceed Wall Street expectations.
Market watchers generally expect that Apple will report sales of between 22 million and 23 million iPhones in the September quarter. But a launch of the next iPhone this month could push total sales as high as 28 million, Munster said.
Apple’s iPad now definitively replacing PC sales in education
“Charlie Wolf with Needham & Company said in a note to investors on Tuesday that PC education shipments fell by 265,000 units, or 13.9 percent, from the June quarter a year ago. Apple, meanwhile, sold nearly a million iPads in the K-12 market in June, which he said is “definitive evidence” that the iPad has been “cannibalizing” PC sales in the U.S. education market.”
Big Apple Dwarfs Entire Regions – Asia Business News – CNBC
“Apple became the world’s most valuable-ever company two weeks ago. It is worth $624 billion, more than all the listed companies in Portugal, Ireland, Greece and Spain together. “
How Secure Are You Online: The Checklist
“Not all computer security is about tin foil hats and anonymous browsing. Everyone who uses a computer has a horse in the security race. For the purpose of this post, we’re breaking down online security into four essential parts: passwords, browsers, at-home Wi-Fi and networking, and browsing on public Wi-Fi. Within those categories we’ll give you a checklist of everything you should do, from the bare minimum to the tin-foil-hat best.”
How Google Went From Search Engine To Content Destination
“How did we get from Google being a search engine that pointed to things, like travel guides or gift cards sold by other companies, to being a content company? It’s a position that more than ever before makes it hard for Google to assure other companies that it won’t play favorites with its search listings.”
Apple adds Samsung’s flagship Galaxy S III, Galaxy Note to amended ‘Galaxy Nexus’ complaint
How To Be a Genius: This Is Apple’s Secret Employee Training Manual
“The point of this bootcamp is to fill you up with Genius Actions and Characteristics, listed conveniently on a “What” and “How” list on page seven of the manual. What does a Genius do? Educates. How? “Gracefully.” He also “Takes Ownership” “Empathetically,” “Recommends” “Persuasively,” and “Gets to ‘Yes'” “Respectfully.” The basic idea here, despite all the verbiage, is simple: Become strong while appearing compassionate; persuade while seeming passive, and empathize your way to a sale.”
Europe
Two of three Austrians oppose more help to Greece: poll | Reuters
“The Karmasin poll of 500 people for the Heute newspaper found 39 percent were entirely against more aid while 26 percent tended to oppose the idea. Only 12 percent were absolutely in favor and 19 percent tended to support more EU help.”
Money and People Leave Spain as Economic Gloom Deepens – NYTimes.com
“After working six years as a senior executive for a multinational payroll-processing company in Barcelona, Spain, Mr. Vildosola is cutting his professional and financial ties with his troubled homeland. He has moved his family to a village near Cambridge, England, where he will take the reins at a small software company, and he has transferred his savings from Spanish banks to British banks.”
FT Alphaville » Eurozone PMIs: from still bad to worse
Improvements in Spain, France and Germany. Ireland still above 50 and Italy and Greece worsening.
Portugal PM defiant on austerity success | Reuters
Rajoy says Spain already meets conditions for aid | Reuters
Slovenia Should Focus on Fixing Banks Before Bailout Plea – Bloomberg
Eurozone crisis: thinktank urges ECB to resume bond rescue | Business | The Guardian
German economy minister supports Weidmann in bond buy opposition | Reuters
Dutch embrace radical left as European dream sours | World news | The Observer
How to protect EU taxpayers against bank failures – FT.com
“The key lesson of the crisis, one sadly confirmed by the recent Libor scandal, is that self-regulation and light-touch supervision just do not work in the financial sector. Without adequate rules and careful policing, the interests of individuals and those of the system will invariably diverge. Left to its own devices, the market will self-destruct.”
ECB’s Asmussen: IMF must be involved in conditions for new bond buys | Reuters
“The European Central Bank should buy sovereign bonds of troubled euro zone states only if the International Monetary Fund is involved in setting the economic reform programs that should be a condition for the intervention, a top ECB policymaker said.”
ECB to oversee all euro zone banks: report | Reuters
“The European Commission, the executive arm of the European Union, plans to give the European Central Bank oversight of all banks in the euro zone, German paper Sueddeutsche Zeitung reported, citing EU Commissioner Michel Barnier.”
Other Links
Why Organic Food May Not Be Healthier For You : The Salt : NPR
“if you’re thinking that organic produce will help you stay healthier, a new finding may come as a surprise. A new study published in the Annals of Internal Medicine finds scant evidence of health benefits from organic foods.”
The era of cheap food may be over | Business | guardian.co.uk
South Africa drops miners’ murder charges – for now | World news | guardian.co.uk
China official services PMI rises to 56.3 in August | Reuters
China HSBC PMI drops to 47.6, worst since March 2009 | Reuters
China Manufacturing Unexpectedly Contracts as Orders Drop – Bloomberg