Around the Globe 07.05.2013

ECB, BOE Signal Low Rates to Remain –

‘Semi-Rude’ Draghi, ‘Jump the Gun’ Carney Criticized.

From ZeroHedge

From ZeroHedge

Jawboning can only do so much.  While there was unanimous support among the ECB board for stating the obvious fact that rates will remain low, there is virtually no support for other methods of easing.  With rates at 0.5%, the ECB has two quarter point rate cuts remaining in its quiver if the Germans say it’s okay.  While all of this yapping was going on European stocks surged, but today Europhoria has subsided with stocks giving back most of those gains as our handy chart illustrates.

Obamacare Strikes: Part-Time Jobs Surge To All Time High; Full-Time Jobs Plunge By 240,000 | Zero Hedge.

U.S. Adds 195,000 Jobs; Jobless Rate Remains 7.6% –

Job Growth Posts Large Gain in June; Rate Holds.

U.S. Employers Added More Workers in June Than Forecast – Bloomberg.

Brightening jobs picture may draw Fed closer to tapering | Reuters.

Underemployment Rate 07.05.2013

In the last edition of Around the Globe, we touched upon how the economy is creating jobs at less than half the pace necessary.  Today, we will discuss quality.  While the headline unemployment rate remains at 7.6%, the underemployment rate in our chart shows us the true state of the labor market.  Worse, the rate actually rose .3 last month.  Workers continue to take jobs that neither take advantage of their skills nor their available work time.  If the Fed is really predicating its money printing initiatives on the health of the labor market, then it would be considering extending the duration or increasing the intensity of QE3.

German Factory Orders Drop as Euro-Area Economy Struggles – Bloomberg.

From Bloomberg

From Bloomberg

Eurocrats are very optimistic about the second half of the year and have been hyping the end of the European recession since November.  Of course, the end has been pushed back several times by now, and it appears as if another delay is on the horizon.  Germany accounts for over a quarter of the Eurozone’s GDP.  If Germany does not grow, then who will buy all of those Eurozone goods? Chinese demand has been slackening for quite some time and U.S. demand is stable.  The Eurozone economy has been struggling to cease contracting.   The latest PMIs show that it has gotten very close to stabilizing, but German weakness points to continued contraction.

Exclusive: Spain banks do not need new EU aid at present – EC document | Reuters.


Worldwide Property Valuations Spain 07.2013

The Spanish banking crisis is far from finished.  Cheap ECB cash has permitted Spanish banks to roll over non performing loans masking the true extent of the disaster as we explained in the June 30 edition of Around the Globe.  Moreover, our handy chart illustrates that Spanish property prices are not finished correcting.  The poor health of the Spanish banks is just a part of the larger European crisis unfolding.  Netherlands, Belgium, the U.K. and France all have overleveraged banks and overheating property markets.

China signals will cut off credit to rebalance economy | Reuters.

PBOC to Extend Cash Crunch as Zhou Discovers Flaws – Bloomberg.

UPDATE 3-China Rongsheng, symbol of shipping downturn, seeks govt help | Reuters.

As Shipbuilders Suffer Globally, China’s Rongsheng Seeks Government Help –

china-7-day-repo 07.05.2013


Chinese lending rates have subsided since late June’s mild panic, but the Chinese financial system remains short on cash.  As a result, weak companies are beginning to fail.  The pace of these failures will pick up in the coming months, as the government’s avowed policy is to allow firms within certain industries to fail in order to reduce overcapacity.  The Chinese government believes that it is engineering a soft landing, but there is no such thing as a gentle end to a credit bubble.


2 thoughts on “Around the Globe 07.05.2013

  1. (Reuters) – China said on Friday it would cut off credit to force consolidation in industries plagued by overcapacity as it seeks to end the economy’s dependence on extravagant investment funded by cheap debt.

    – worldwide cheap credit is permitting those that long ago should
    have folded, to exist and pay beneficial salary to management
    companies that should have gone under exist on the taxpayer dime

    – all at the ultimate expense of the taxpayer.

    – Of course the spoken goal for example in the US is to save jobs, but we all know that is not the long term result.


    – reminder that same cheap credit artificially permits robotics and like investment
    which will also ultimately remove a need for humans. China knows this
    their population needs to be employed.

    – In the US the knuckleheads then say, hey, let us raise the minimum wage.
    Fantastic, nothing could benefit China more. China knows their jobs are leaving
    for cheaper wage in India, Vietnam, and elsewhere due to increasing wage in China.

    What could be better for China than the US to increase minimum wage ?
    probably nothing.


    for example.


  2. The End Of Cheap China. Rising Wages And Their Impact.

    By Dan Harris on June 30th, 2013

    Already, China’s wages are looking pricey to some, compelling global conglomerates to bypass it and look elsewhere. Even Vietnam is becoming passe, Joerres said. Central African nations are fast becoming the new frontier.

    China Motor Corp. recently invested $1 billion to establish a manufacturing plant in South Africa. Canada’s Bombardier Aerospace invested $200 million in a production facility in Morocco. Nestlé SA opened a new plant in Nigeria.

    Across the United States, it is not limited to isolated and vulnerable sectors, such as manufacturing.

    Rather, wages have fallen across the entire national economy — down 1.1 percent in the 12-month period from September 2011 to September 2012, the most recent comparisons available.

    “Average weekly wages declined in every industry except for information,” the U.S. Bureau of Labor Statistics reported in its latest economic census.”

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