● Beyond the Keynesian Endpoint: Crushed by Credit and Deceived by Debt — How to Revive the Global Economy
By Tony Crescenzi
Summary via publisher, FT Press
Since the 1930s, governments have overcome recessions by borrowing and spending to temporarily replace lost consumer and business spending. What happens when they can’t do it anymore? In Beyond the Keynesian Endpoint, PIMCO Executive VP Tony Crescenzi offers a sobering tour of today’s unprecedented global sovereign debt crisis. Crescenzi shows how exhausted national balance sheets have stripped policymakers of their ability to bolster growth… how investors are finding it increasingly difficult to navigate debt-ridden markets… how increased spending intended to cure the financial crisis is instead worsening it. He dissects each scenario for the future, and reveals the crisis’ profound long-term implications for governments, investors, and the global economy.
Sluggish Job Growth Prevails… Again
There’s (relatively) good news and (more of the same) bad news in today’s employment report. First the good news, such as it is. Private-sector job creation continues to chug along at a mediocre pace. Last month witnessed a net gain of 104,000 for private nonfarm payrolls, the Labor Department reports. That’s nothing to get excited about, but it’s obviously better than a loss and so it offers yet another bit of statistical evidence for thinking that the economy isn’t poised to slip into a new recession. There’s also encouraging news in the latest batch of revisions to previous payroll reports. In particular, September’s initial estimate of a 137,000 net rise in private payrolls has been substantially revised higher to 191,000. Even August’s originally dismal rise has been revised higher to a slightly less dismal gain of 42,000 vs. the earlier 30,000 advance.
One Small Cut In Interest Rates, One Giant Step For Macro Perspective
The newly installed head of the European Central Bank, Mario Draghi, broke with his predecessor and cut the benchmark interest rate to 1.25% from 1.5%. In one fell swoop Jean-Claude Trichet’s misguided austerity policy has evaporated. And not a moment too soon, given the signs of rising recession risk for the Continent. But there’s more to the story than just another rate cut.
Analyzing Obama’s Economic/Political Troubles
Nate Silver, a new breed of statistically oriented political analysts, boils down President’s Obama’s macro baggage in an article for this weekend’s edition of The New York Times Magazine. Silver’s impressive record in forecasting elections puts him on the short list of must-reads in political calculus circles these days and his latest foray into the dark art of looking ahead doesn’t disappoint for intriguing evaluations of the national political mindset. Think politics in a Moneyball
Jobless Claims Drop Below 400k
Initial jobless claims dipped below the 400,000 mark last week, signaling that the odds of a new recession aren’t rising and may very well be falling. New claims for unemployment benefits dipped to a seasonally adjusted 397,000 last week. That’s the lowest since touching 395,000 for the week through September 24. Yes, we’ve seen this movie before only to get burned with letting optimism carry us away. But a bit of good news never hurts these days and so we’ll take a bit of statistical sunshine wherever (and whenever) we can get it.
Abnormal Expectations
The Federal Reserve yesterday told us what we already suspected was coming. Economic growth will remain sluggish, according to the Fed’s new core projection. Real GDP for all of 2011 will rise by 1.6% to 1.7%, the central bank predicts, down from its June estimate of 2.7% to 2.9%. Next year’s real GDP is expected to deliver slightly better results in the 2.5% to 2.9% range, but that estimate has also been trimmed from June’s 3.3% to 3.7% guess.
Employment Expectations
Every monthly employment report is crucial these days, but Friday’s update may be the first among equals. When we last checked in with the nation’s payrolls report, there was a collective sigh of relief that private-sector job creation avoided a descent into darkness in August. A repeat performance is essential if there’s any hope for sidestepping a new recession.
The Pessimism Of Economics Bloggers
“Economics bloggers seem the most pessimistic in their outlook on the U.S. economy so far for 2011,” according to the Kauffman Foundation’s latest quarterly survey of 200 economics bloggers, including the views of yours truly. According to the report, 96% of the bloggers polled think overall economic conditions are “mixed, facing recession, or in recession.”
Major Asset Classes | Oct 31, 2011 | Performance Update
October was a month of renewal. After sharp losses virtually across the board in September, last month witnessed a healthy dose of the opposite. But in a sign of the times, the last day of October suffered a heavy bout of selling in risky assets amid new fears that the crisis in Europe rolls on. The red ink is spilling anew this morning as I write. For a brief, shining moment, however, it looked like there was a light at the end of the tunnel. But last month is suddenly so yesterday.
Australia Rethinks Inflation Worries
Bloomberg reports: “Australia’s central bank lowered its benchmark interest rate today for the first time since April 2009 as inflation eases and weaker global growth threatens to slow the nation’s resource-driven economy.” The Reserve Bank of Australia cut its benchmark rate by 25 basis points to 4.5%.