World News Blog

2009 German economy worse since WWII

Germany's economy will dip lower in 2009 than at any time since World War II, the government predicted today.

The government forecasts a 2.25 percent downturn much lower than the previous prediction of 0.2% growth, made in October.

Exports will drop by a predicted 8.9% this year and the jobless rate would climb to an average of 8.4% in 2009, from 7.8% in 2008.

"The German economy is facing this year the greatest challenges since unification [in 1990]. Germany is integrated into the global economy like hardly any other industrialised country," said Germany's economy minister Michael Glos.

BBC News

German economy faces gloomy 2009
BBC News - 2 hours ago
Germany has predicted that its economy will shrink by 2.25% in 2009, which would be its worst performance in the post-World War II era.
Germany forecasts worst recession since World War II AFP
Germany Cuts Economic Outlook Wall Street Journal

Labels: germany, michael glos, recession, world war II

Comment: How long tell economic recovery?

With much of the world in recession, there's been a lot of analysis in the media on when things will "bottom out" and start to pick up again.

One could argue that the present crisis was started by the mortgage meltdown in the United States. Thus, it is often puzzling to see economists talk about recovery without mentioning the problem with mortgage resets.

Mortgage resets for three-year adjustable rate mortgages will begin in 2009. In layman's terms, this means that people who have such mortgages will begin paying sharply higher payments on their property. Many are likely to default as happened when sub-prime mortgage payments were jacked up.

When homeowners default, the lending institution takes over and often tries to sell as quickly and cheaply as possible. This floods the market with cheap homes and, following the rule of supply and demand, drives down home values. In turn, many investors and even some folk looking for a real home may be turned off not wanting to see their investments decline in value.

Of course, the low prices could also attract new buyers especially if interest rates on mortgages come down further. But we have to think that this might be balanced in the mid-term at least by the gloomy jobs picture.

So, unless something is done to address the mortgage resets, it's hard to imagine anyone confidently predicting the recession ending quickly. Indeed resets will continue until 2011.

Another problem that I have addressed often, is that too much money is hoarded by the super rich in America and many other countries. This money is not effectively recycled into the economy and will continue to cause economic cataclysms until the government steps in and restores traditional tiered tax rates. Mark my word on this on!

Labels: economic depression, economic recovery, mortgage resets, recession, recovery prediction, tax rates

U.S. Holiday Sales nosedive

Holiday retails sales in the United States dropped in the steepest decline in four decades.

Yet more evidence that there is a ripple effect in the economy with problems in one sector adversely impacting other sectors of the economy. Thus, the sharp increase in unemployment is hurting retail sales as people tighten up the purse strings.

Video: Rotten Holiday Season for Retailers AssociatedPress
A weak economy and strong winter storms brought total retail sales down between 5.5 percent and 8 percent from a year ago, according to preliminary data from SpendingPulse. (Dec. 26)

Holiday Sales Tumble as US Consumers Cut Spending
Bloomberg - 1 hour ago
By Heather Burke Dec. 26 (Bloomberg) -- Consumers spent at least 20 percent less on women’s clothing, electronics and jewelry during November and December, resulting in what may be the biggest holiday-shopping sales decline in four decades.

sRetailers' holiday sales plummet Reuters

Labels: christmas sales, holiday sales, recession, retail sales

Max Keiser on Madoff case

Max Keiser comments on the Madoff case and compares it to the U.S. social security system.

In both cases, there is a Ponzi or pyramid scheme in which there is no "fund" involved, but dividends were payed by people currently paying into the system. Madoff's empire broke down because the financial crisis impaired the ability of new members to pay sufficient funds to keep the scheme going. Keiser thinks that the economic crisis could last long enough to threaten the multi-trillion Social Security system, which is also unfunded and relies on current workers to pay for current benefits. High and sustained unemployment could dry up the funds bankrupting the Social Security administration.

Labels: madoff case, max keiser, ponzi scheme, pyramid scheme, recession, social security

Keiser and Jones on economy

Economist Max Keiser talks on the Alex Jones radio talk show about the most recent economic news.

Some items talked about are Iran's conversion of its reserves to gold, the problems of US auto makers in obtaining overseas parts, a Dow 3000 bottom, Hank Paulson and China.

Max Keiser on Alex Jones (1 of 3)

Max Keiser on Alex Jones (2 of 3)

Max Keiser on Alex Jones (3 of 3)

Labels: alex jones, auto industry, economy, financial crisis, max keiser, recession

Germany suffers deepest recession in decade

The German economy fell by 0.5 percent in second quarter after a 0.4 percent in the first quarter, the largest back-to-back declines since 1996.

Recessions in the European Union and United States together with the financial debacle will likely weigh down on the world economy causing a downward spiral that could take years to bottom out.

The Paris-based Organization for Economic Cooperation and Development said that it expects economies among its 30 member countries to shrink by about 0.3 percent in 2009.

BBC News

German Economy Enters Worst Recession in 12 Years (Update3)
Bloomberg - 1 hour ago
By Gabi Thesing Nov. 13 (Bloomberg) -- The German economy, Europe's largest, contracted more than economists expected in the third quarter, pushing the nation into the worst recession in at least 12 years.
Europe Trades Mixed; FTSE Falls 0.7% Wall Street Journal
Germany slides into recession guardian.co.uk

AFP

OECD says developed world in recession
The Associated Press - 17 minutes ago
LONDON (AP) - The world's developed economies, hard hit by the financial crisis, have slid into recession and will shrink further in 2009, a top international organization said Thursday.
German Recession Adds to Gloomy Economic Reports Washington Post
OECD Forecasts Recessions in the US, Europe, Japan (Update2) Bloomberg

Labels: germany, oecd, recession

Comment: Taxes and the Great Depression

During the election campaign, there was much discussion about taxes and the current economic problems. According to John McCain, the worse thing to do is to raise taxes during economic downturns.

However, history does not really bear out his arguments. Let's take the most pertinent example for today's financial meltdown -- the Great Depression.

In the run up to the Great Depression, we saw a policy of continually lowering tax rates from the end of World War I. At the end of the war, spending was about three times greater than revenues leading to large budget deficits.

The decade of 1920s saw taxes for the rich drop and some 80 percent of former taxpayers exempted from taxes completely.

By 1925, the top tier tax rate had dropped to 25 percent (sound familiar?) the lowest in eight decades. By 1929, the richest 1 percent of people own 40 percent of the nation's wealth, again a familiar statistic.

Following the stock market crash and the bottoming out in 1932, the US followed a policy of raising taxes especially on the wealthiest Americans.

By 1936, the top tax rate had risen to 79 percent, however it was the hostilities in Europe that really raised taxes as nations around the world sought to build up their armed forces in anticipation of hostilities. From 1939 to 1941, US manufacturing jumped by 51 percent, although unemployment numbers were still very high.

When America entered the war, unemployment plunged due to the draft and the full steam operation of the war machine. By 1945, the tax rate on the richest Americans was 91 percent! It remained around at least 88 percent until 1963 when it was lowered to 70 percent, and now stands at 35 percent.

So, we see that America declined into the Great Depression during a time of very low taxes when most workers, who formerly were required to pay taxes, were given full exemption and top tax rates were only 25 percent. On the other hand, it rose out of the Depression when taxes were very high with the wealthiest Americans paying a whooping 91 percent.

Labels: depression, recession, taxes

Economy slides most since 2001 recession

The U.S. economy contracted by the sharpest margin since 2001 as confidence dwindles and the housing market continues to deteriorate.

Bad economic news though is apparently helping presidential candidate Sen. Barack Obama. Most polls show him pulling ahead substantially over his rival Sen. John McCain. Polling this close to election day tends to be much more accurate than earlier surveys.

Republicans across the board are hurting from the declining economy. The Democrats look poised for their second straight election in which they make significant gains in Congress, an unusual phenomenon.

US Economy Contracts Most Since the 2001 Recession (Update1)
Bloomberg - 46 minutes ago
By Shobhana Chandra Oct. 30 (Bloomberg) -- The economy suffered its biggest decline since 2001 in the third quarter, ushering in what may be worst recession in a quarter century and boosting the chances of Barack Obama and his fellow Democrats in next ...
Economy Shrinks on Weak Spending Wall Street Journal
More pain: Economy shrinks CNNMoney.com

Washington Post
Ailing US economy may cost Republicans big
Reuters - 20 hours ago
"Fairly or unfairly, they (Republicans) have taken most of the blame for the economic crisis and Democrats have leveraged this to their advantage," Gonzales ...
Political parties grasp for coattail pickups FayObserver.com
Sen. Clinton hits campaign trail for House candidates Upstate Ithaca Journal
Double Whammy: Money, McCain Burden RepublicansRoll Call (subscription)

Map of the United States showing how each state is expected to vote in the presidential election. Democrat Barack Obama Wednesday rolled out a new offensive on the stricken US economy while his White House rival John McCain pressed back with character attacks six days from the historic election.(AFP)

Labels: barack obama, democrats, economy, john mccain, presidental polls, recession, republicans

Nouriel Roubini: Hedge fund could vanish Darwin-style

In a speech before hedge fund managers in London today economics professor Nouriel Roubini predicted a run on hedge funds that could result in 30 percent of the hedge fund assets disappearing in a "fairly Darwinian manner."

The impact on the stocks could be so severe that the market would have to be closed for a week or more.

Roubini predicted the current crash in 2006.

He predicts the worse recession in 40 years that will last at least 24 months in the United States. Roubini sees a vicious cycle occurring between the financial sector and the "real economy." Because of the tsunami of mortgage foreclosures, he suggests that the government help homeowners as they did during the Great Depression.

He sees a 40 percent drop in home prices, which would be worse than the Great Depression. And he thinks at least $3 trillion will be needed in bailouts to prevent a systemic banking failure.

Nouriel Roubini on Bloomberg TV

Labels: debt, financial crisis, great depression, mortgage foreclosures, nouriel roubini, recession, stock market

Comment: Beware the swinging stock market

Monday's record climb in the US stock market might have seemed like good news to some that things were starting to turn around for equities.

However, as we saw Wednesday and so far early today, the market is still very volatile.

In fact, the four highest percentage gains for a day in the history of the Dow Jones Industrial Average came during the darkest days of the Great Depression.

Highest Daily Percentage Gains

1933-03-15 -- +15.34
1931-10-06 -- +14.87
1929-10-30 -- +12.34
1932-09-21 -- +11.36

Three of the four highest daily percentage losses also came during the Great Depression.

So generally until things stabilize for a goodly period, it will be difficult to say when the current bottom has been reached.

NYU economics professor Nouriel Roubini discuses what Americans can expect to see over the next few months due to the financial crisis on the Charlie Rose show.

Labels: dow jones industrial average, economy, market volatility, nouriel roubini, recession, stock market

World News Blog

Wednesday, January 21, 2009

2009 German economy worse since WWII

Thursday, January 01, 2009

Comment: How long tell economic recovery?

Friday, December 26, 2008

U.S. Holiday Sales nosedive

Monday, December 22, 2008

Max Keiser on Madoff case

Thursday, November 20, 2008

Keiser and Jones on economy

Thursday, November 13, 2008

Germany suffers deepest recession in decade

Wednesday, November 12, 2008

Comment: Taxes and the Great Depression

Thursday, October 30, 2008

Economy slides most since 2001 recession

Thursday, October 23, 2008

Nouriel Roubini: Hedge fund could vanish Darwin-style

Thursday, October 16, 2008

Comment: Beware the swinging stock market

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