AMERICAN FUTURE

Financial Times

• Editorial, “Greece’s tragedy is made at home“

If the Greek state stops paying salaries and pensions, that is a tragedy – but one of Athens’ own making, which others should not take it upon themselves to prevent.

• Martin Wolf, “Why breaking up is so hard to do“

US banks have an exposure of €478bn ($650bn) to Greece, Ireland, Italy, Portugal and Spain.

• Ralph Atkins, “Marked by a miracle“

“The German approach is principles first,” says Peter Bofinger of Würzburg university. “We may get Götterdämmerung but it doesn’t matter, we stuck to our principles.”

• Peter Spiegel, “Debate rages over source of euro rescue funds“

. . . where will the money for the new rescue system come from?

• Alan Beattie, “Eurozone crisis has making of horror sequel“

You hear two polarised arguments about fiscal policy in a debt crisis: one, austerity never works; two, you don’t get out of debt by taking on more debt.

• Yao Yang, “Don’t expect China to ride to the euro’s rescue“

China’s long-term goal is to make the renminbi an international currency, but this will take time. In the meantime, its interests are clearly served by a strong euro.

New York Times

• Landon Thomas, “Greece nears the precipice, raising fear“

Total Greek public debt is about 370 billion euros, or $500 billion. By comparison, Argentina’s debt was $82 billion when it defaulted in 2001; when Russia defaulted, in 1998, its debt was $79 billion.

Spiegel Online

• Horst Seehofer, “We won’t abandon Greece if it leaves the euro“

Eurobonds just means collectivizing our debts. We don’t go along with such a scheme under any circumstances.

Bloomberg

• Ramesh Ponnuru, “Strong Countries, not Greece, should ditch euro“

The economies of France and Germany are so large that a policy designed for the euro zone as a whole would inevitably be a better fit for their needs than for those of the countries on the zone’s periphery.

What a difference a year makes. From the Financial Times Alphaville:

Title of the IMF’s World Economic Outlook (WEO), September 2010:

Recovery, Risk & Rebalancing

The title of the September 2011 edition:

Slowing Growth, Rising Risks

It’s generally not a pretty picture and will make for especially unhappy reading in euro-peripheral finance ministries — Italy revised its 2012 growth numbers only yesterday to 1 per cent (previously 1.3 per cent). The IMF’s now gone and cut Italian 2012 growth to 0.3 per cent. Gulp.

The biggest revision is to US growth, with 1 percentage point taken off growth for both 2011 and 2012 and a very dark subtext of risks from austerity rising throughout the G7. It’s covered in jargon like this:

If fiscal consolidation were suddenly stepped up further at the expense of the disposable income of people with a high marginal propensity to consume, these economies could be thrown back into stagnation.

But it’s all over the WEO. Bit of a change in tone from the Fund to say the least. There’s also an interesting bit on equities-implied recession prospects:

As seen in Figure 1.3.1 [see above], the historical or unconditional probabilities of a new recession starting in the third quarter of 2011 are about 3½ percent for France and the United Kingdom and about 4½ percent for the United States. Assuming that the recent behavior of the equity markets in these economies during the third quarter of 2011 continues, the predicted likelihood of a new recession rises about fivefold for France and the United Kingdom (to about 18 percent and 17 percent, respectively) and eightfold for the United States (to about 38 percent). By contrast, the model for Japan indicates that there has been essentially no change in the likelihood of a new recession there.

Though Blanchard [the WEO's author] is careful enough to include the necessary caveat for such an extrapolation:

The stock market has information, but it doesn’t know everything.

Oh, and there’s a call for the ECB to cut rates if things get worse in the eurozone. That really is socking it to austerity.

Not mentioned in the FT is the title of the IMF’s April 2011 WEO:

Tensions from the Two-Speed Recovery

The IMF isn’t pleased with the current fiscal positions of the governments of countries with developed economies, emerging economies, and low-income countries. The one-paragraph summary of its just-released Fiscal Monitor admonishes governments to address fiscal challenges to reduce economic risks:

Despite progress in addressing key fiscal weaknesses in many countries, significant policy challenges remain in advanced, emerging, and low-income economies, and must be faced in an environment where downside risks to growth have increased. Many advanced economies face very large adjustment needs to reduce risks related to high debt ratios. The appropriate pace of adjustment in the short run will depend, for each country, on the intensity of the market pressure it confronts, the magnitude of the risks to growth it faces, and the credibility of its medium-term program. The euro area needs to sustain fiscal consolidation, minimize its growth fallout, and address concerns about the adequacy of crisis resolution mechanisms. In Japan and the United States, sufficiently detailed and ambitious plans to reduce deficits and debts are needed to prevent credibility from weakening. Meanwhile, many emerging economies need to make faster progress in strengthening fiscal fundamentals before cyclical factors or spillovers from advanced economies turn against them. Low-income countries also need to rebuild fiscal buffers, while addressing spending needs.

From Bloomberg

As of June 30, in euros

FMS Wertmanagement    8.76 billion *
Commerzbank           2.2 billion
EAA                   1.21 billion *
Deutsche Bank         1.15 billion
Munich Re             811 million
DZ Bank               793 million
Allianz               782 million
WGZ Bank              533 million
KfW Group             250 million
LB Berlin             230 million *
NordLB                217 million
LBBW                  131 million
HSH Nordbank          108 million
BayernLB              101 million
Dekabank              100 million *
Helaba                86 million *
Hannover Re           Zero
Hypo Real Estate      Zero

TOTAL                 17.46 billion

* Nominal figure

by Braden Goyette, ProPublica

Last month, we detailed the dismal state of the nation’s economy [1]. Now that the Census Bureau has released new poverty figures [2], we wanted to give you another snapshot of how Americans are faring more than two years after the recession.

Americans below the poverty line in 2010 [3]: 46.2 million

Official U.S. poverty rate in 2007 [4], before the recession: 12.5 percent

Poverty rate in 2009 [3]: 14.3 percent

Poverty rate in 2010 [3]: 15.1 percent

Last time the poverty level was this high [5]: 1993

Poverty line in 2010 [6]: $22,314 for a family of four, or $11,139 for an individual

Rough amount the poor are living on per week [7]: $200 or less

Poverty rate in American suburbs: 11.8 percent [8], the highest since 1967 [9]

Percentage of the population making less than half the poverty line [10] in 2010: 6.7 percent

Percentage of the population making less than half the poverty line in 2007, before the recession [10]: 5.2 percent

Poverty rate for white Americans in 2010 [8]: 13 percent

Poverty rate for African-Americans in 2010 [8]: 27.4 percent

Real median household income [11] in 2010: $49,445

Decline in median household income [11] since 2009: 2.3 percent

Decline in median household income since before the recession [11]: 6.4 percent

The last time median household incomes have been this low [5]: 1996

Real median household income in 1999 [5], in 2010 dollars: $53,252

Median income for full-time male workers in 2010 [12]: $47,715

Median income for full-time male workers in 1973 [12], in 2010 dollars: $49,065

Official unemployment rate in August 2011 [13]: 9.1 percent

Total unemployed people [13] in August: 14 million

People who were employed part-time for economic reasons in August 2011 [13]: 8.8 million

People not counted in the labor force who wanted work [13]: 2.6 million

Net jobs created in August 2011 [13]: 0

Long-term unemployed people [13] as of August 2011: 6 million

Unemployed workers per job opening as of July 2011: 4.34 (3.2 million openings [14] and 13.9 million unemployed people [15])

Uninsured Americans [16] in 2010: 49.9 million

Percentage of Americans without health insurance in 2010 [17]: 16.3 percent

Percentage of Americans without health insurance in 2007 [18], before the recession: 15.3 percent

Percentage of children who were uninsured in 2010 [16]: 9.8 percent

Percentage of children in poverty who were uninsured in 2010 [16]: 15.4 percent

Percentage of American households that had enough to eat throughout the year in 2007 [19]: 88.9 percent

Percentage of American households that had enough to eat throughout the year in 2010 [20]: 85.5 percent

How’s that for a catchy title? It didn’t come out of the blue. Instead, it comes from a presentation by Paul Kasriel, chief economist at Northern Trust. Mr. Kasriel is obviously aware of eminent economist and presidential candidate Rick Perry’s assertion that ““Printing more money to play politics at this particular time in American history is almost treacherous — or treasonous . . . ”

Here’s the conclusions from his “If Some Dare Call It Treason, Was Milton Friedman a Traitor”: