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Other • Falling Incomes, High Unemployment, Rising Taxes and Tight C
Jonathan Miller shows us the above chart (via RealtyTrak) and ask the question: How does flat to falling incomes, high unemployment, rising taxes and tight credit = housing recovery?
The short answer is a combination of record low mortgage rates and held back distressed activity. Following a weak 2011, year-over-year comparisons also look good.
The combination goosed housing sales and prices. The question for the housing bulls is, can it continue?
The answer, at least from this (personally long) housing bear is low rates in 2013 will confront rising foreclosure sales. That battle — plus the state of the consumer as outlined by Jonathan — will determine whether this year’s improvement in housing will continue next year.
http://www.ritholtz.com/blog/2012/12/fa … atrick.net
Statistics: Posted by yoda — Tue Dec 11, 2012 2:20 pm
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American • Pricier food, rent offset falling gas prices
Pricier food, rent offset falling gas prices
By John Waggoner, USA TODAYShare3 CommentFederal Reserve Chairman Ben Bernanke, chief inflation-watcher for the U.S. economy.(Photo: Manuel Balce Ceneta, AP)
Story Highlights
CPI has risen 2.2% in the past 12 months
Food price hikes ‘are an almost perfect offset’ for falling gas prices
November 15. 2012 – As expected, the government said Thursday that rising food costs and higher rents offset a drop in gas prices last month, leaving consumer prices slightly higher in October compared with the previous month.
The Labor Department said the consumer price index rose a seasonally adjusted 0.1% in October, down from sharp gains of 0.6% in each of the previous two months.
In the past 12 months, prices increased 2.2%, just above the Federal Reserve’s inflation target of 2%.
Food prices rose 0.2%, while gas fell 0.6%. Excluding the volatile food and gas categories, core prices increased 0.2% in October.
The cost of shelter, which includes rents, rose 0.3%, the most in more than four years. Clothes and airline fares also rose, while the price of new and used cars fell.
Wall Street seems convinced that inflation is deader than Marley’s ghost in
A Christmas Carol
. Investors could be right.
And bonds will have a merry day Thursday since the government’s latest report on its most-watched gauge of inflation for consumers appears to confirm Marley’s passing.
The CPI covers everything from the apples you eat to the Apple products you use to call and email your friends.
"Increases in food prices are an almost perfect offset for gas prices going down," says Mike Montgomery, senior economist at IHS.
When prices aren’t rising, the inflation-fighting Fed has little reason to raise interest rates. Higher rates are poison for bond investors. Bond prices fall when interest rates rise, making them less valuable and a lower-return investment.
The Fed is engaged in an unprecedented effort to boost economic growth and spur job creation. It is buying $40 billion of asset-backed securities every month, which is helping keep rates low.It’s the Fed’s third effort in as many years to help a subpar economic recovery and a jobless rate that has been stuck near 8% all year.
The Fed’s hope is that lower interest rates will spur consumers and businesses to borrow for homes, factory expansions and other economic activity that kicks up growth.
There’s a lot of money betting that rates will stay low: Investors have poured an estimated $283 billion into bond funds this year, according to the Investment Company Institute, the mutual fund trade group.
Even if the CPI skews higher, economists think the Fed will keep rates low. Sung Won Sohn, a professor of economics at Cal State University, thinks inflation will hit an annual pace of 3.6%. But he doesn’t think the Fed will raise rates.
"Right now, they’re more concerned with deflation than inflation," he says. Why? Even though the Fed’s efforts to help the economy are potentially inflationary, a worldwide slowdown in economic growth, including recessions in parts of Europe and Asia, and the risk of another recession in the U.S. if the "fiscal cliff" isn’t avoided is keeping demand for goods and services in check.
Without demand, prices don’t rise. In fact, the fear is that retailers and wholesalers will cut prices to attract customers. And finding inflation would be like hunting down Marley’s ghost.
http://www.usatoday.com/story/money/per … g/1705575/
Statistics: Posted by yoda — Thu Nov 15, 2012 9:42 am
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The Taxpayer Subsidizes Those Houses Falling into the Sea
Don’t build your home on sand, especially shifting sand.
A little over a year ago I wrote a piece about how the homes of millionaires are subsidized by the American taxpayer through the Federal Flood Insurance program. I made the point that the homes one sees up and down the East Coast of the United States which are built right on top of beach protecting, and erosion reducing sand dunes, would not be there if it was not for lobbying by powerful industries and individuals for such a program.
As someone who has lived much of my life in and around the ocean these homes which stand like sentinels on the shore have always blown my mind. Having watched home after home fall into the sea on the local news, year after year, I often wondered how it was even possible to build a home so close to the ocean. It made no economic sense. These big rental houses sit perched right next to the mighty Atlantic Ocean on a sand bar. Sand bars are not stable. How could people afford to lose these homes, even very wealthy people? Then as an insurance underwriter after college I leaned. The homeowner mitigates almost all of his risk with insurance that is subsidized by you and me.
For those who don’t know much about beaches, they are very dynamic areas. Inlets emerge and then go away. A barrier island which one day could be 1000 feet wide could be gone in a hurricane or a solid nor’ easter. It is sand. It is meant to move. It is not meant to be built on. It is not wise to build any structure which one wants to last on sand, especially sand which is often wet.
But thanks to the Federal government we make it economically viable for people to construct massive buildings on areas of the coastline which should be inhabited by nothing more than pelicans, sandpipers, and ghost crabs. And I am not making an ecological argument here, I’m making an economic one. If it were not for the rest of America backstopping a relative few very wealthy homeowners and developers building on sand dunes would be in no way economical and our beaches would be much more healthy to boot. Yet President Obama and Congress don’t see things as I do as Reason reports.
(From Reason.com)
“Four months before Hurricane Sandy hit the East Coast, President Obama quietly signed legislation expanding the federal program that offers taxpayer-subsidized flood insurance to ocean-front homeowners.
The law extended the National Flood Insurance Program for five years while also opening the program for the first time to multi-family properties like beachfront condominiums. The flood insurance provisions were part of a bill known as the Moving Ahead for Progress in the 21st Century Act that passed the House 373 to 52 on June 29 and the Senate by 74 to 19 the same day. President Obama signed it into law on July 6 with remarks that dwelled on the transportation spending and student loan-related language in the Act, but made no mention at all of the flood insurance.”
The post The Taxpayer Subsidizes Those Houses Falling into the Sea appeared first on AgainstCronyCapitalism.org.
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American • Standard of living, meet falling US dollar
Standard of living, meet falling US dollar – how a falling US dollar benefits banks at the expense of working Americans.
There is certainly a cost to a falling US dollar. Many Americans are living the consequences of this multi-decade long trend. The Federal Reserve has only added fuel to this trend but many families are now realizing that there does come a cost to unrelenting debt based solutions to fiscal problems. Shopping at the local grocery store I’ve noticed that some items have doubled in the last few years. Fueling up is also more expensive. The issue with living on a low dollar policy is that eventually, you end up in a low wage capitalist system. The easy money slowly inflates away especially on global items. We are seeing this in the US in various arenas especially with higher education. The end result is that the standard of living for the vast majority of Americans has fallen dramatically in the last few decades.
US dollar trend
The US dollar has been on a multi-decade long trend that has resulted in a 50 percent haircut:
Think about what this has done in a more practical sense:
-Energy is more expensive because it is traded on a global market (you are trying to compete with others with a declining currency)
-Education. Massive debt has devalued the dollars even further. Very few families can actually afford to pay the sticker price of tuition and need to go into debt just to finance college. Most of the middle class jobs are now in fields that require degrees since the jobs are not growing in manufacturing (that is, making actual things):
-Food gets more expensive since you are also competing globally here. Take a look at your grocery bill and compare it to your bill from 10 years ago. This stands in stark contrast to household income that has been stagnant for over a decade.
We rarely hear about the massive decline in the US dollar in the mainstream press. This is not likely to come up in any of the campaigns because the Fed and government realize they need to inflate our debt away. Who in their right mind thinks we are ever going to pay off that growing $16 trillion debt? The middle class in the US is a shrinking group. We now have over 46 million Americans on food stamps, a record percentage. We also have a growing number of Americans that do not participate in the labor force:
This is a very important chart to understand. The rate at which people are entering the “not in the labor force” category is growing at record speeds given our demographics. From 1975 to 2000 not once did we touch an annualized 3 percent rate. That was reached. Then when the debt bubble burst, we actually reached a stunning 4 percent annualized rate. Things are dramatically shifting and given that many older Americans rely on Social Security, that declining standard of living is felt even more deeply.
Another outcome of a falling dollar is rising commodity prices. Ultimately you are competing on a global market with a currency that is worth less relative to other currencies. If the Fed with their banking allies and the government are willing to go into massive debt, at what point do other people stop lending? We already see this with our internal mortgage market. The Fed is basically the mortgage market now because no one in their right mind would lend out money for 30 years at these current rates. With this kind of action however you crowd out other investors and hot money flows to largely unproductive sectors. Just look at China and their millions of empty apartments.
Outrageous tuition, increasingly expensive food, energy costs, and stagnant wages are all part of the standard of living compression brought on by these actions. That is great that you are saving $200 bucks a month on your mortgage (behind the scenes the bank can offload these inflated assets and the American public slowly forgets about the biggest financial crisis perpetrated on the nation since the Great Depression). It is going to cost you $50,000 per year to send your kid to a good private college so hopefully that $200 saved per month is going to help. In the end the falling dollar is merely a way to inflate our way out of our massive debt and bailout the banking sector. Most Americans as based by their net worth are not doing financially better.
http://www.mybudget360.com/us-standard- … -benefits/
Statistics: Posted by yoda — Fri Oct 12, 2012 1:27 pm
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Agriculture • European pig herd falling like a stone.
New data shows European pig production falling sooner and at a much faster rate than was expected.
Countries that have so far reported their pig census results for summer 2011 to summer 2012 show significant falls in their breeding herds.
And all but one show a fall in output as well, demonstrating that the increased pig productivity seen in recent years has hit a ceiling.
Germany, Denmark, Austria and France all report falls in their breeding herds and all but Germany record a fall in the total number of pigs on farms.
Hungary, Ireland and Poland see huge falls in their breeding herds — Hungary down 5 percent, Ireland down 6.6 percent and Poland down 9.6 percent.
The sharp cuts presage tight supplies of pork next year and sharply rising prices. In Britain some forecasters see the deadweight price hitting 200p a kilo, or more.
The new data has prompted NPA to urge consumers, retailers and processors to step up their support for British pork and bacon now, to help secure national supplies in 2013-2014.
Every extra penny a kilo for Britain’s loss-making pig farmers now, could help save 2p in 12 months time, says the association.
In particular it is encouraging retailers to look to their supply chains to ensure they are not left at the mercy of rocketing continental and world prices over the months ahead.
The European Union remains self-sufficient in pigmeat (108.5 percent in 2008).
However breeding herd numbers declined last year as a result of chronic poor returns and an increasingly costly red-tape burden, and it is now clear numbers are falling this year and will continue to fall next year.
The falls come as no surprise to NPA which predicted them with some accuracy in January 2011.
But they were not forseen by the European Commission or most member countries.
The biggest pressure on pig producers is the high cost of wheat, maize, soya and other feed ingredients, which has plunged producers around the world into loss, with producers in both China and the United States reported to be culling sows at an alarming rate.
Faced with high feed costs through to next harvest and possibly beyond, many European producers are quitting production, or reducing numbers, or sending pigs to slaughter at lighter weights.
BPEX puts the current cost of production in Britain at around 170p and calculates it will remain at this level through to next July.
At current contract prices, that means most producers are losing around 17p a kilo, or over £12 a pig.
National Pig Association knows of at least 8,000 sows that have been taken out of production this summer, and says reports of more producers quitting or down-sizing are coming in almost daily.
On the continent the situation will be further aggravated in January by the introduction of the European Union’s partial stalls ban.
Faced with the double whammy of loss-making high feed costs and the need to invest heavily to convert to loose housing, a significant number of producers are expected to quit in the New Year.
Producing a slaughter pig takes nine months, which means changing market dynamics by reducing supply is a ponderous process.
For some producers, and their banks, the time-lag between higher costs and an increase in market prices is too long to contemplate.
In Britain, NPA is working to speed up the process with its Save Our Bacon campaign which has the support of Government and is urging consumers to make a point of buying only pork, bacon and sausages with the British Red Tractor logo.
NPA argues that an increase in demand for British product will encourage retailers to pay producers more now, which will encourage them to remain in production, and prevent much larger increases in consumer prices in the second half of next year.
"Retailers know what they need to do… but they don’t know how to do it," says Stewart Houston, a director of NPA and chairman of BPEX.
"Given the current economic gloom hanging over the high street, none of them wants to be the first to move up pork prices.
"That’s why it takes so long for increased feed costs to be reflected in the pig price and that’s why this time producers have taken really early decisions — they know that it is going to take us several months to get the price to where we need it to be.
And we know that people stopped serving sows way back in June, because they could see this coming."
http://www.meattradenewsdaily.co.uk/new … herd_.aspx
Statistics: Posted by yoda — Sun Sep 30, 2012 2:21 am
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Oil And Gas • WHAT FALLING OIL PRICES REALLY MEAN
Posted on 5th July 2012 by Administrator in Economy |Politics |Social Issues
Gail Tveberg, oil consumption, oil prices
Another excellent article from Gail Tverberg. None of the spin and propaganda about oil supply and oil prices that you get from the corporate media and industry shills. She wrote this article before oil prices surged by $10 on news about Iran sanctions and new threats about Middle East war. She correctly points out that plunging oil consumption in Europe and the U.S. is a sign of new nasty recessions. The drop in prices is not due to increased supply. The storyline about new supply is a lie. Consumption in the U.S. has fallen off the cliff, even as the MSM touts the tremendous car sales. And it has nothing to do with people buying smaller cars. The surge in vehicle sales has been led by pickups and SUVs. Every time oil prices try to fall below $80 per barrel, new projects will be scrapped. This will automatically lead to higher prices. The bumpy plateau of peak oil is a bitch. Welcome to the recession.
Lower Oil Prices – Not a Good Sign!
Posted by Gail the Actuary on July 5, 2012 – 9:58am
Are lower oil prices good news? Not really, if it means the world is sinking into recession.
We know from recent past experience and from common sense that higher oil prices are a drag on oil importing economies, because if more $$$ are spent on the same amount of oil, there is less to spend on discretionary goods and services. In addition, oil money sent to oil exporting countries is likely to be spent within those economies, rather than being reinvested in the oil importing country that the funds came from. commentPosted on 5th July 2012 by Administrator in Economy |Politics |Social Issues
Gail Tveberg, oil consumption, oil prices
Another excellent article from Gail Tverberg. None of the spin and propaganda about oil supply and oil prices that you get from the corporate media and industry shills. She wrote this article before oil prices surged by $10 on news about Iran sanctions and new threats about Middle East war. She correctly points out that plunging oil consumption in Europe and the U.S. is a sign of new nasty recessions. The drop in prices is not due to increased supply. The storyline about new supply is a lie. Consumption in the U.S. has fallen off the cliff, even as the MSM touts the tremendous car sales. And it has nothing to do with people buying smaller cars. The surge in vehicle sales has been led by pickups and SUVs. Every time oil prices try to fall below $80 per barrel, new projects will be scrapped. This will automatically lead to higher prices. The bumpy plateau of peak oil is a bitch. Welcome to the recession.
Lower Oil Prices – Not a Good Sign!
Posted by Gail the Actuary on July 5, 2012 – 9:58am
Are lower oil prices good news? Not really, if it means the world is sinking into recession.
We know from recent past experience and from common sense that higher oil prices are a drag on oil importing economies, because if more $$$ are spent on the same amount of oil, there is less to spend on discretionary goods and services. In addition, oil money sent to oil exporting countries is likely to be spent within those economies, rather than being reinvested in the oil importing country that the funds came from.
Figure 1. A rough calculation of expenditure (in 2011$) associated with oil imports or exports, based on 2012 BP Statistical Review data, for three areas of the world: the Former Soviet Union (FSU), the sum of EU-27, United States, and Japan, and the Remainder of the World. (Negative values are revenue from exports.)
A rough calculation based on 2012 BP Statistical Review data indicates that the combination of the EU-27, the United States, and Japan spent a little over $1 trillion dollars in oil imports in 2011–roughly the same amount as in 2008. Governments have been running up huge deficits and have been keeping interest rates very low to cover up this damage, but it is hard to make this strategy work. The deficit soon becomes unmanageable, as the PIIGS (Portugal, Italy, Ireland, Greece, and Spain) countries in Europe have recently been recently been discovering. The US government is facing automatic spending cuts, as of January 2, 2013, because of its continuing deficits.
Furthermore, lower interest rates aren’t entirely beneficial. With low interest rates, pension funds need much larger employer contributions, if they are to make good on their promises. Retirees who depend on interest income to supplement their Social Security checks find themselves with less income. The lower interest rates don’t necessarily have a huge stimulatory impact on the economy, either, if buyers don’t have sufficient discretionary income to buy the additional services that new investment might provide.
Below the fold, we will discuss what is really happening with oil prices, and consider reasons why lower oil prices may be a signal that the world is again headed for deep recession.
Oil Supply is Not Rising Enough
The big issue is that oil supply is not rising enough–and hasn’t been for a long time.
When oil supply doesn’t rise fast enough, there are two opposite effects that can take place:
(1) The most common effect is that prices will go higher. This can be seen in the upward trend in prices in the last eight years.
(2) The other effect is that prices can drop quite sharply, as they did in late 2008. This happens when parts of the world are entering recession, and their demand is decreasing.
It seems to me that this second effect may be happening this time around, as well. The down-leg we are seeing in the prices may have farther to go, as the recession plays out.
One Problem Area: PIIGS Oil Consumption is Declining
If we look at three-year average growth rates for the PIIGS, we find that there is a close correlation between oil growth, energy growth, and GDP growth. Furthermore, in recent years, a growth (or drop) in energy use seems to proceed a growth (or drop) in GDP. Not all of this energy is oil, but for the PIIGS countries, even natural gas is a relatively high-priced import. Recently, oil consumption has been declining sharply, which could imply further economic contraction.
Furthermore, data from the Joint Organizations Data Initiative (JODI) shows that recent PIIGS oil demand is down even more. Comparing oil demand for February-April 2012 with February-April 2011, demand is down by 10% for the five PIIGS countries combined. This would suggest that these countries are sliding more deeply into recession.
US Oil Consumption Is Also Shrinking
US oil consumption shrank by 3.2%, comparing the first four months of 2012 with a similar period of 2011. This is concerning, because based on Figure 5, it looks much like a repeat of the pattern that took place in the 2005 to 2009 time period. Oil consumption was stable during the period 2005 through 2007, then dropped in early 2008 by an amount not too different from the decrease in oil consumption from 2011 to 2012. The bigger step-down in oil consumption came in 2009, after oil prices dropped, and the follow-on effects (reduced credit availability, layoffs) had started. Now oil consumption has been relatively stable in 2009 to 2011, but there has been a step down in consumption in 2012, similar to the step-down in early 2008.
If Oil Prices Stay Down, or Drop Further, Not All Oil is Economic
Oil prices make a difference in a company’s willingness to drill new wells. For example, oil sands production in Canada is quoted as being not economic below $80 barrel, and the West Texas Intermediate price is below that level today. In most instances, existing production will be continued, but new production will be stopped. There are quite a few other types of oil extraction elsewhere (for example, arctic extraction, new very small fields, very deep oil wells, steam extraction outside Canada) that may not be economic at lower prices.
Saudi Arabia makes frequent statements about offering its production to keep prices down, but if a person looks at production patterns in the past few years, they have been highest when oil prices have been highest. Production has dropped as oil prices drop. So a rational person might conclude that oil wells which cannot be operated continuously (of which there are some in Saudi Arabia) tend to be operated when prices are highest, and turned off when prices are lower, thus maximizing profits. As oil prices drop this time around, we can expect Saudi Arabia and others to find excuses to save production until prices are higher.
Countries exporting oil depend on the revenue from the sale of oil, plus taxes on this revenue, to help support country budgets. As oil prices drop, governments find themselves with less money to fund promised public welfare programs. This dynamic can cause lower oil prices to lead to political instability in some oil exporting nations.
Thus, any drop in oil prices tends to be self-correcting, but not until oil production drops, prices of other commodities drop, and many workers have been laid off from work. We saw in 2008-2009 that this kind of recession can be very disruptive.
What’s Ahead?
We can’t know for certain, but the big issue is chain reactions, as one problem causes other problems around the globe. We are dealing with an interconnected international economy. If countries are in financial difficulty, their banks are likely to be downgraded as well. Other banks hold debt of the bank, or of the country in difficulty, or derivates relating to a possible default of the country or bank. If default occurs, these other banks may be affected as well. Thus one default may start a chain of defaults.
Banks that are facing difficulty (inadequate capital, poor ratings), are likely to become more selective in their lending. This makes it even more difficult for small businesses to obtain loans, and may lead to layoffs.
A country which appears to be near default is likely to face higher interest rates, making its cost of borrowing higher. The higher interest costs, by themselves, push the country closer to default.
One of the issues with high oil prices is that the higher prices, especially among oil importers, give rise to a kind of systemic risk that affects many kinds of businesses simultaneously. High oil prices tend to do several things at once: lower the real growth rate, make it more difficult to repay loans, and increase the unemployment rate. All of these issues make it more difficult for governments to function, because governments play a back up role. If workers are laid off from work, governments are expected to compensate laid-off workers at the same time they are collecting less in taxes and bailing out distressed banks. This type of systemic risk leads to the possibility of multiple government failures.
Promises of Future Oil Capacity Growth Aren’t Very Helpful
We keep reading articles claiming that world oil production will grow by some large amount by some future date. One of the latest of these is by Harvard Kennedy School researcher (and former oil company executive) Leonardo Maugeri, called Oil: The Next Revolution. According to the report, “Oil production capacity is surging in the United States and several other countries at such a fast pace that global oil output capacity is likely to grow by nearly 20 percent by 2020, which could prompt a plunge or even a collapse in oil prices”.
Even if the forecast were true (which I am doubtful), the problem is that this is simply too late. We have been having oil supply problems for quite some time–since the 1970s. The rate of oil supply growth keeps ratcheting downward, and the world keeps trying to adapt, with recessions to show for its efforts. (James Hamilton has shown that 10 out of 11 recent recessions were associated with oil price spikes.)
We don’t have time to wait until 2020 to see whether the supposed additional capacity (and production) will actually materialize. We have a problem right now. The downturn in oil prices and the reduction in demand in the US and PIIGS is looking more and more like the current oil price spike (of 2011 and early 2012) may give rise to yet another recession. Based on our experience in 2008-2009, and our difficulties since then, this recession may be severe.
This post originally appeared on Our Finite World.
http://www.theburningplatform.com/?p=36875
Statistics: Posted by yoda — Thu Jul 05, 2012 3:30 pm
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Other • Is the austerity consensus falling apart in Europe?
April 25, 2012
Is the austerity consensus falling apart in Europe?
Rick Moran
With the probable election of the first socialist president in France in more than 15 years, and bond rates rising in Spain and Italy, investors appear to be questioning the committment of the euro zone to tackling budget deficits and the sovereign debt crisis.
Markets were shaken after a first round of French presidential elections on Sunday put Socialist Francois Hollande, who wants the euro zone to focus on growth rather than austerity, ahead of incumbent Nicolas Sarkozy. The two contenders face off in a final vote May 6.
Further undermining stability, the Netherlands’ government collapsed yesterday after failing to reach agreement over austerity measures, placing its AAA credit rating at risk. But Spain still managed to lure strong interest in the auction with overall demand outstripping supply by more than four-to-one.
The money raised was towards the top of its targeted range of €1-2 billion. But it had to pay a steep price. The borrowing rate leapt to 0.634% from 0.381% for three-month bills and to 1.58% from 0.836% for six month bills, when compared with the last similar auction on March 27.
Spain has promised to cut its public deficit – the annual shortfall of income compared to spending – to 5.3% of gross domestic product in 2012 and just 3% of GDP in 2013. Last year it had allowed the deficit to hit 8.5% of GDP – 2.5 percentage points over target.
Desperate to meet its targets, the government approved €27 billion in fiscal tightening in its 2012 budget, in addition to an earlier round of tax increases and spending cuts amounting to €15.2 billion.
But analysts say those targets will be harder to reach as tax income declines and welfare costs rise because Spain is back in recession just two years after emerging from the last downturn. Spanish GDP fell by an estimated 0.4% in the first quarter of 2012 after a 0.3% decline in the last three months of 2011, the Bank of Spain said yesterday.
Social unrest in Greece and Spain are rocking the governments of those two countries. Greece has seen its economy contract an astonishing 5% and along with austerity measures, will cause enormous pain among the citizenry. An election next month is not likely to solve anything, as the major parties are all committed to drastically cutting the budget in order to keep receiving the EU bail out package to prevent default. If anything, some of the fringe parties on the right and left may make sizable gains as they promise a way out of the crisis without the accompanying sacrifices being asked by the current government.
Recession has complicated the Spanish situation enormously. There is little chance they will meet those deficit targets – or even come close – while the economy is contracting. The demonstrations in Spain have been massive and a general strike last month paralyzed many sectors of the economy. Spanish prime minister Mariano Rajoy has pledged to continue the austerity program – referred to as the "harshest budget ever seen in Europe – but has very little room to maneuver. Unemployment is expected to climb to depression-era levels of 25%.
All of this has led some analysts to wonder if by this time next year, the austerity budgets in most of the eurozone will be history. It is possible that governments may fall, unrest roil the streets, and some countries default rather than inflict pain on their citizens – the result of decades of overspending and over promising. What becomes of the european experiment if this happens, no one knows.
But it is very possible that the face of Europe will change dramatically and the ancient concept of a United States of Europe end in a sea of red ink.
Read more: http://www.americanthinker.com/blog/201 … z1t1vyX6Ls
Statistics: Posted by yoda — Wed Apr 25, 2012 12:16 am
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