Around the Globe 08.14.2013

New York Fed: Household Debt at Lowest Level Since 2006 –

Total FOR 1q2013

The major problem with the mainstream media’s reporting of the economic downturn and ensuing anemic recovery is that journalists stick to the usual recovery narrative.  After an economic downturn, a recovery follows and adheres to a script.  Usually, economic growth accelerates to a 4% clip and millions of jobs are created.  This rapid growth is presaged by leading economic indicators including the decreasing debt levels discussed in this article.

Unfortunately, this time is different.  Growth continues to sputter along, and consumers are not behaving like they have during past recoveries.  While the Fed believes that decreasing consumer debt levels will bolster consumer spending in the second half, this prediction is based on the old paradigm.  In the new paradigm, consumers are fearful of taking on too much debt.  Indebtedness levels will continue to fall, but consumer spending growth will remain tepid.

Moreover, despite the fall in gross debt, debt as a percentage of income has begun rising again due to shrinking pay packets, as our handy chart illustrates above.

Euro Zone Returns to Growth, but Malaise Lingers –

Europe is showing signs of life, yet Macy’s certainly isn’t.


Eurozone GDP Performance QoQ Through 2Q2013

The Wall Street Journal actually places the end of the Eurozone recession in perspective.  Germany remains strong, France surprises and the PIIGS continue their slide into debt restructuring.  While the Eurozone grows again, the economic fortunes of each member continue their divergence.

By the way, in terms of annual growth, the Eurozone recession continues as its economy managed to contract 0.7% in the last year:

Eurozone GDP Performance YoY Through 2nd Quarter 2013

Portugal’s Economy Grows for First Time Since 2010 on Trade – Bloomberg.

Portugal Emerges From Recession –

Portugal Debt to GDP Ratio 08.2013

Portugal ended its streak of 10 consecutive quarters of contracting GDP by registering 1.1% growth from the first to second quarter.  The fly in the ointment is that Portugal’s debt is expanding to dizzying heights in the meantime.  The country’s budget cuts have the perverse effect of raising its debt.  This means that Portugal will eventually require a debt restructuring, but not until after German elections.

Germany, France haul euro zone out of recession | Reuters.

Hollande Boosted by French Growth –

French Retail Sales 08.2013

Resilient French consumers saved the quarter for Hollande, but business better pick up if growth is to sustain itself:

French Industrial Production 08.2013

Special Report: Inside Greece’s violent new anarchist groups | Reuters.

There are lots of disaffected young Greeks with little hope for the future making political turmoil inevitable.  Hopefully, this seething cauldron will not boil over until after German elections, when something will be done about the Greek debt pile.  Everything should be fine as  Europe is usually quiet during August and September.


One thought on “Around the Globe 08.14.2013

  1. Thanks again for your posts.

    Total financial obligations and ” decreasing consumer debt levels ”

    ” U.S. household debt declined by $78 billion in the second quarter from the previous quarter, a decline of 0.7%, the Federal Reserve Bank of New York said Wednesday. ”

    ” According to the New York Fed, mortgage balances decreased $91 billion to $7.84 trillion. ”

    So – hmmm. MORTGAGE debt decreased $ 91 billion, I imagine in large part due to
    foreclosure and bankruptcy; the wiping out of the debt. But U.S. household debt declined by $78.

    So am I reading this correctly, in actuality, DEBT is rising.

    But of course the Fed sings, ” don’t worry be happy ! “

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