Saturday, August 6, 2011

Links 8/6/2011: Eyes on Growth

US employment saw a modest monthly increase which should only take a little over 74 years to get unemployment down to 5%.  Basically, the July report showed a decline in the working population which is translating itself into a decline in unemployment.

The employment report
Part time workers and duration of unemployment
Employment to population ratio has fallen to 1953 levels
as jobless benefits end, recession looms
still mystified over unemployment (Menzie Chinn)

study: unions decline increases wage inequality

Jobs report means FED will announce next week they will think about it for awhile (Tim Duy)

Inflation, what US inflation?(Paul Krugman)

Study: tax flight by businesses is a myth

James Galbraith on why economist's will not discuss fraud in financial sector

another explanation of why debt-to-GDP ratio is mathematically incorrect

Unofficial US problem bank list down to 988 banks
The Bank of America deathwatch
Bank of America has no clue what its mortgage losses will be

RBS losses on Greek writedowns
How different European banks treat Greek bonds
Dexia losses most in history

Balanced budget amendment in US would defeat economic purpose of government (Simon Johnson)
Austerity defeats the purpose of government which is to serve the people (Bill Mitchell)

Top ten misconceptions of eurozone crisis (take this with a critical grain of salt -- some people do not have the courage to default correctly if they prefer to be indentured servants for generations)

The contagion of bad ideas (austerity & protecting financial companies rather than citizens) since the Global Financial Crisis is destructive of economic fundamentals (Joseph Stiglitz)

Is the eurozone lost in the depth of structural reforms and the growth destruction of austerity (apply critical analysis to this piece)   (Daniel Gros)

Will wage cuts with debt reduction decrease prices and make Greece more competitive in time to survive?  Oh! the pain, the pain!

the liquidity problems of the eurozone without a central bank acting as lender of last resort = inevitable failure (Edward Harrison)

The argument for eurobonds issued by ECB, which has no authority to issue bonds (Yanis Varoufakis): why is the EIB not being considered as Rob Parenteau has suggested? Is it because the EIB is an investment bank run by investment bankers who do not understand a societal role?

Germany is in denial that it is a member of a monetary union

Meanwhile, Ireland tries to manipulate the price of distressed property owned by NAMA

The FED and the ECB  are both behind the learning curve of debt deflation (Tim Duy)

Italian and Spanish growth slow as austerity pinches
sluggish growth threatens recovery

Why Italy? Why Spain? The EFSF will fail as long as the toxic debt-to-GDP ratio lives in its heart (Yanis Varoufakis)

Portugal's austerity fails to reduce bond yields (does the market understand it is hard to make interest payments if growth is impaired by austerity?)

Europe's plan will not cut Greek debt

Austerity and public safety in Athens

Spain cancels August 18th bond auction

Greece cannot recover on innovation because research, education, and innovation require spending

The Parade of the EU and ECB in the celebration of a Failure of Political Will as demonstrated this past week:

Trichet's purchase of Portuguese and Irish bonds fails to help Italy and Spain
ECB's shock-and-awe wimps into whimper
temporarily throws Italy and Spain to the wolves
the international markets react impatiently
Barroso constructively suggests reconsideration of EFSF and receives anger in return
Italy must cut services to people as condition for ECB to help
Italy will accelerate austerity and balance budget in 2013 (want to bet on the plunge in growth into recession?) to get ECB help
ECB agrees to buy Italian and Spanish bonds next Monday

Economically knowledgeable people internationally have been urging  to buy Spanish and Italian bonds to constrain the market and provide support to their ability to make their debt payments in the future since they have no ability to exercise the normal sovereign nation's escape valves through fiat currency depreciation, because they use a foreign currency (euro) of a monetary union with no fiscal transfer mechanism to correct current account imbalances resulting from trade lack of competitiveness within in a currency union.

But these very same economically knowledgeable people also know this is only a very necessary stop gap and very temporary if the eurozone will not start acting as if all of its citizens are members of a single union:

We have seen this before (Cullen Roche).
It is incredibly difficult to stabilize finances in a debt-deflation spiral (Tim Duy) if they cannot print their own currencies.

S&P downgrades United States to from AAA to AA+ despite $2 trillion S&P error is their analysis.  Economically, this is meaningless.  You only have to look at the low yields on Japanese bonds after losing their triple A credit rating almost ten years ago.  Is the S&P engaged in a political agenda contrary to its regulatory constraints?

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