Contrary to conventional wisdom, the euro crisis was NOT triggered by runaway spending, Dean Baker reminds. It follows, then, that monetary policy—NOT fiscal policy—is the solution, as Ambrose Evans-Pritchard explains. Instead, the politicians are, of course, pushing for a political solution engineered by Germany. “For the third time in less than twenty years, Germany is trying to force down the throat of Europe a federal ‘political union’ which, in the eyes of too many European observers, eerily resembles a gentler, kinder Anschluss,” writes Tony Corn. You can’t always get what you want. The question is whether Europe will get something it needs before it’s too late? The jury’s still out.
Book Bits For Saturday: 12.3.2011
● Cannibal Capitalism: How Big Business and The Feds Are Ruining America
By Michael C. Hill
Summary via publisher, Wiley
Unlike in most other recent instances of financial turbulence, when this crisis hit, the country turned on itself economically, with the powerhouses—corporations, business leaders, and government—throwing the everyman under the bus. In an effort to avoid becoming slightly less rich, the super-rich effectively cannibalized the true engines of growth in the economy, in the process putting the bottom ninety-nine percent of the population at serious risk of losing everything. Cannibal Capitalism fights back, arguing that to really recover we need to educate our children, invest in our small businesses, use our inflated money to develop real things that build real wealth, and get back to exporting in a big way.
Labor Dept Says Private Payrolls Rose A Moderate 140,000 In November
Private nonfarm payrolls rose 140,000 last month, the Labor Department reports. That’s ok and it’s certainly far enough above zero to keep chatter about an imminent recession at bay. But today’s number is a bit of a disappointment after ADP’s strong report on Wednesday, which implied that the government’s estimate of employment growth would be much higher. Still, beggars can’t be choosy and a net gain of 140,000 private sector jobs is respectable given all the headwinds from Europe these days.
Will Manufacturing’s November Revival Last?
Yesterday’s update on the ISM Manufacturing Index offers another encouraging data point that builds on the acceleration in jobs creation via ADP’s November employment report. If it wasn’t for ongoing euro crisis and the potential for instability in the budget negotiations in Washington, optimism would be a no-brainer. But we live in interesting times, and so expectations must be managed carefully.
Jobless Claims Rise For 2nd Week In A Row
New jobless claims rose last week, taking some of the wind out of yesterday’s inspiring rebound in ADP’s November employment report. Filings for unemployment benefits increased 6,000 to a seasonally adjusted 402,000—the first time in a month that the numbers have settled above the 400k mark. But it’s too soon to argue that the labor market is headed for a reversal of fortunes.
Major Asset Classes | Nov 30, 2011 | Performance Update
November was a rough month for asset returns, but it would have been a lot rougher without yesterday’s buying frenzy in the wake of the news of a coordinated central bank intervention on behalf of the eurozone. Even so, most risky assets suffered hefty losses in November, reversing a large slice of October’s rally. Hardest hit in November: emerging market stocks, which sank 6.7%. The only winner among our broadly defined list of major asset classes: Inflation-indexed Treasuries, which advanced 0.8% last month.
ADP Says Job Creation Accelerated In November
Job creation rolls on, today’s ADP Employment Report advises. The preliminary update for November shows a net gain of 206,000 private sector jobs on a seasonally adjusted basis. That’s the highest monthly advance for this series since December 2010. If there’s a recession brewing in the U.S., it’s not obvious in these numbers.
Stressed Out & Up
To say that the global economy is stressed is to state the obvious these days. The potential for implosion in one of the world’s major currencies is no trivial development. The great mystery is whether the rising stress on the system will unleash a new recession. That looks like a done deal in Europe by some accounts, although there’s still a lively debate about where the U.S. economy is headed. This much, however, is clear: the financial system is under pressure and so the threat of an economic contraction in the U.S. is higher these days. But tipping points are only obvious in hindsight, particularly during delicate periods such as the one currently blowing through the global economy.
Will October’s Economic Momentum Last?
Consumer confidence rebounded strongly in November, the Conference Board reports. David Semmens, an economist at Standard Chartered Bank, opines that “the improvement in the labor market must be offering greater comfort to consumers.” The question, of course, is whether the labor market’s “improvement” can survive the sentiment attack blowing through the global economy via the euro crisis. Today’s rise in the Conference Board’s consumer benchmark provides fresh encouragement for thinking positively, but this is still mostly guesswork until the major economic reports for November arrive. For the moment, it’s still a blank slate.
Euro Explanations
The euro crisis is a tragedy—or a farce? Whatever it is, it’s bit less so today, or one could reason by way of today’s rally in U.S. stocks. But how did we get here? Everyone has an opinion.