London (CNN Business)The world’s oil-exporting countries have agreed to a tiny increase in output next month amid fears that a global recession will crimp demand.
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London (CNN Business)The world’s oil-exporting countries have agreed to a tiny increase in output next month amid fears that a global recession will crimp demand.
…click on the above link to read the rest of the article…
Facebook placed a ‘fact-checking’ label on a post written by a top economist stating that the United States is now in a recession – a move he termed ‘Orwellian’.
Two consecutive quarters of negative growth is the standard definition of a recession, and Phillip Magness, the research and education director at the American Institute for Economic Research, posted on Facebook a commentary about the country now being in a recession.
The post – which is no longer visible – was marked by Facebook’s fact checkers as being misleading.
‘We live in an Orwellian hell-scape,’ he tweeted.
‘Facebook is now ‘fact checking’ anyone who questions the White House’s word-games about the definition of a recession.’
Biden on Thursday (pictured) insisted that the country was not in a recession, despite new data showing a second consecutive quarter with negative growth
Phillip Magness, an economic historian, believes the U.S. is in recession – but the White House disagrees
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Veteran investor and bitcoin bull Michael Novogratz’s economic outlook is not rosy
Are we in a recession? It is an interesting question because nobody can know for sure. A recession is defined as two successive quarters of negative growth. Okay, but how do we know if, in the quarter we are in, the economy is shrinking? Again, we cannot know this. This is because the latest data we have is for February 2022… and it showed an unexpected fall in growth to just 0.1 percent. In the event that growth turned sufficiently negative in March 2022, then the first quarter of 2022 as a whole might have been negative. And in the event that this negative trend continued through April and on through May and June 2022, then we would indeed be in a recession… but we will only know for sure when the data is published in August.
It is on this kind of uncertainty that economic policy is set. On top of the slowdown in growth – which may have improved or worsened, but nobody knows yet – comes data for March showing a dramatic fall in retail spending, largely resulting from rising food and fuel prices. Is this because households and businesses can no longer afford to buy, or are they reining in their spending in anticipation of higher prices in future? Again, we do not know. Certainly, food and energy retailers have warned that prices will have to rise in future. At the same time, households and businesses face higher local and national taxes and utility bills. And so, falling sales is likely a combination of both prices that have already risen and the expectation of price rises to come.
Crucially though, the lens through which economic policy makers are viewing the economic clouds gathering on the horizon is a financial lens which looks back fondly on the sunlit uplands of the pre-2008 years as some kind of normal…
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Now inflation is Russia’s fault. Or is it greedy businesses pushing up prices? Maybe a combination of the two.
It seems that government officials and central bankers are looking everywhere for a place to pin the blame for inflation except the one place they need to look — in the mirror.
I’m already seeing headlines about how Russia’s invasion of Ukraine is causing inflation. CBS broadcast this storyline on the first day of the invasion. As Peter Schiff put it in a recent podcast, Russia is the latest “excuse variant” for inflation.
It is true that the Russian invasion and economic sanctions have caused some prices to spike. Oil was over $130 a barrel over the weekend. Copper hit record highs. The price of wheat surged. But this is not necessarily inflationary. Inflation causes a general rise in prices across the board. In this situation, some prices will rise while others fall. As consumers spend more on food and energy, they will cut spending on other goods and services. Ostensibly, those prices will drop.
Inflation — an increase in the money supply — causes prices to rise more generally. It’s the result of more dollars chasing the same number of (or fewer) goods and services. As Peter explained, the culprit is the central bank.
What makes the prices go up is when the central bank responds to rising energy prices or rising food prices by printing more money, which is what they are going to do. Because as consumers have to tighten their belts because food is so expensive, because home heating oil and gasoline are so expensive, and they cut back spending on everything else, that causes a recession. And that results in the Fed printing more money, and that’s what’s inflationary.”
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All three of these approaches are reaching limits. The empty shelves some of us have been seeing recently are testimony to the fact that complexity is reaching a limit. And the growth in debt looks increasingly like a bubble that can easily be popped, perhaps by rising interest rates.
In my view, the first item listed is critical at this time: Is the supply of cheap-to-produce energy products growing fast enough to keep the world economy operating and the debt bubble inflated? My analysis suggests that it is not. There are two parts to this problem:
[a] The cost of producing fossil fuels and delivering them to where they are needed is rising rapidly because of the effects of depletion. This higher cost cannot be passed on to customers, without causing recession. Politicians will act to keep prices low for the benefit of consumers. Ultimately, these low prices will lead to falling production because of inadequate reinvestment to offset depletion.
[b] Non-fossil fuel energy products are not living up to the expectations of their developers. They are not available when they are needed, where they are needed, at a low enough cost for customers. Electricity prices don’t rise high enough to cover their true cost of production. Subsidies for wind and solar tend to drive nuclear electricity out of business, leaving an electricity situation that is worse, rather than better. Rolling blackouts can be expected to become an increasing problem.
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After 20 months of economy-wrecking lockdowns and restrictions, 2019 is fondly remembered as a period of prosperous calm. Memories though, are deceptive. And in the days before we learned what gain-of-function meant, things were not as rosy as they now seem. Although the decade 2009-2019 was officially one of the longest periods of economic growth ever recorded, the rate of growth was anaemic – the media reporting on any quarter with more than 1.0% growth as if it heralded a return to the 1960s. And what growth there was owed more to additional debt than to improvements in productivity. The reality of the post-2008 years was of the mergence of an 80:20 economy in which the majority watched their prosperity evaporate, while a shrinking metropolitan salaried class fought a rear-guard defence of their income and status.
The political dam broke in 2016, with “the revenge of the places that didn’t matter” – aka Brexit and the election of Donald Trump. But few in the salaried class understood the economic decline which had spilled over into the political arena; preferring instead to blame it all on Russian bots. Nevertheless, whether the elites and their salaried lapdogs chose to understand the economic situation or not, the process of decline continued.
In the UK, Christmas 2018 had been the worse on record… until Christmas 2019 rolled around. And whereas Christmas 2018 had seen a big decline in discretionary spending, Christmas 2019 produced the first indicators of a decline in borderline essential spending too. We might choose to regard the humble Christmas pudding as something which can be lived without – although those who lived under Cromwell’s puritanical dictatorship might beg to differ – but a decline in sales – along with those of turkey and seasonal biscuits – points to a nation which was reining in its spending long before SARS-CoV-2 embarked upon the European leg of its world tour.
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In October 20XX. That’s not a typo. To reach the best guesstimate of when the next recession will begin, we need to understand how the Federal Reserve creates unsustainable booms and why the next bust may be just around the corner.
A caveat is in order. As physicist Niels Bohr exclaimed, “Prediction is very difficult, especially if it’s about the future.” Nevertheless, I will weigh in fearlessly with my 10 cents. The Fed’s inflationary policies have increased my two cents fivefold. Maybe the next cryptocurrency is on the horizon: My 10 Cents.
If a dog can have a crypto, why can’t a retired finance professor who warned the public that prices were about to accelerate due to the Fed’s inflationary policies in the spring of 1976 have one?
Consumer prices rose 5.7% in 1976, 6.5% in 1977, 7.6% in 1978, 11.3% in 1979 and 13.5% in 1980. Talk about being right on the money!
As inflation was galloping throughout his presidency, then President Jimmy Carter appointed Paul Volcker, a former banker and U.S. Treasury official, in 1979 to halt the multiyear price spiral. Volcker succeeded spectacularly. Consumer prices rose 10.3% in 1981, revealing how inflation momentum can continue for a while before the Fed’s tight money policies slay the inflation dragon. In 1982, prices rose 6.1%, 3.2% in 1983, and (miracle of miracles) only 1.9% in 1986, a year before Volcker stepped down as Fed chairman and was replaced by Alan Greenspan.
To accomplish what was considered at the time improbable due to high inflation expectations, the Volcker-led Fed raised the Fed Funds Rate–the rate banks borrow from each other for overnight loans–to 22% by December 1980. The cost of Volcker’s tight monetary policies necessary to halt the dollar’s slide was back-to-back recessions: a short downturn 1980 and then another one, 1981-1982. A case can be made that one long recession occurred that in effect lasted three years, from January 1980 to November 1982.
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On New Year’s Eve 2006-7, something unexpected happened. For most of the previous two decades, most of the pubs where I live had operated a system where they gave tickets to regular drinkers in order to limit the number of people seeking entry. This was a problem because one couldn’t secure tickets for guests. And since my relatives only stayed over for the holidays, it left us to seek out the few pubs that did not operate a ticket policy. And in most years, these pubs would be packed to the rafters.
When we set out in the last couple of hours of 2006, we fully expected the same crowds as the year before. So did the pubs, apparently, because they had hired security to control entry – something that was common for British nightclubs but rare for pubs. What none of us had anticipated though, was that the pubs would be almost empty! Nor was it just one or two pubs. Everywhere we went it was the same story. Indeed, on one occasion the security staff hired to keep the masses out tried hard to encourage us to come in. Quite simply, tens of thousands of people who had previously gone to pubs to celebrate New Year, stayed at home in 2006.
To me it was a warning sign that something unpleasant and dramatic was about to happen to the economy. It wasn’t that the beer had risen in price – although supermarket beer had long been cheaper than pub beer. It was an indicator of something much more profound. Coming on the heels of rising fuel prices and the central bank decision to begin jacking up interest rates, it was a signal that people’s standard of living had been impacted to the point that discretionary spending was being seriously curtailed.
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One month ago, Goldman said that the one thing that could accelerate the resolution of Europe’s energy crisis was plain, simple “demand destruction” – i.e., a plunge in demand due to prices that were too high until the reduced demand leads to less supply and a lower price. Specifically, Goldman estimated “that the potential capacity for gas-to-oil substitution could be larger should gas rally further, of up to 1.35 mb/d in power and 0.6 mb/d in industry (in Asia and Europe), although such a large demand boost would prove too large for the oil market to absorb, leading to a spike in prices to in turn achieve oil demand destruction, the ultimate solution to widespread energy scarcity.”
There is just one problem with this: “demand destruction”, i.e., forcible shutdown of manufacturing facilities has direct cost on output.
And as Charif Souki, Executive Board Chairman at U.S. LNG developer Tellurian, said at the online IEF gas forum, the demand destruction that results from high natural gas prices could lead to global recession.
“We are dealing not with a gas crisis, the gas is simply the leading horse, but we are dealing with an energy crisis”
Echoing what Goldman said a month ago, Souki said that the first manifestation of demand destruction is a switch from one fuel to another.
“But if all fuels become too expensive then you ask people to start changing their lifestyles, start driving less, turning off the lights more often, not putting the air conditioning on, not heat your home.”
“My great fear is the lack of planning is going to lead us to global recession.” He also added that having adequate gas storage is “critical” as is investment in infrastructure.
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Japan. the world’s third-largest economy is highly dependent on exports and the reality it is still struggling even after a great deal of America’s stimulus money leaked into buying imported goods speaks volumes. While it feels a bit like ancient history, Japan’s GDP contracted at an annualized rate of 28.8 percent in Q2 of 2020, the biggest decline on record. Even after bouncing back 21.4 percent quarter-on-quarter in Q3 and 12.7 percent in Q4 Japanese national accounts are still lagging behind mid-2019 levels. For all of 2020, spending by households with at least two people fell 5.3% due to the hit from the pandemic. It was down 6.5% for all households, the worst drop since comparable data became available in 2001.
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All in all, this means the country is still playing catch up, partly because Japan also experienced two additional quarters of negative growth in Q1 of 2020 and Q4 of 2019. Adding to the problem is Japan’s household spending fell for the first time in three months in December, in a sign consumer sentiment was weakening even before the government called a state of emergency to control a new wave of the coronavirus. Lower demand for services such as travel tours also weighed, as the pandemic forced the cancellation of domestic tourism promotions. Last year, spending on accommodations fell 43.7%, while overseas and domestic tour travel expenditure slumped 85.8% and 61.9%, respectively.Not only is Japan again struggling to stay out of recession, but it also faces a wall of debt that can only be addressed by printing more money and debasing its currency. This means they will be paying off their debt with worthless yen where possible and in many cases defaulting on the promises they have made. Japan currently has a debt/GDP ratio of about 240% which is the highest in the industrialized world. With the government financing almost 40 percent of its annual budget through debt it becomes easy to draw comparisons between Greece and Japan.
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japan, bruce wilds, advancing time blog, exports, recession, currency debasement, debt,
Economist Steve Keen predicts that even if the covid-19 health crisis subsides next year, a brewing financial crisis on par with the 2008 Great Recession is in the making.
He sees the pandemic as having delivered an “unprecedented shock” to the global economy, and the response from authorities as nothing less than a “catastrophe”.
With tens of millions of households having lost their income this year, personal savings becoming exhausted, government support programs on their way to drying up, and lots more company layoffs/bankruptcies/closures ahead — Steve expects a punishing recession to arrive in full force in 2021.
And on a larger scale, he sees modern neoclassical economics — which ignores the importance of natural resources and the health of our ecosystems — as completely unsuited for the reality in which we live today. He warns that if we don’t adapt a more informed approach to managing the global economy, we will only continue to make the mess we’re in worse:
In the New York Times on September 8, 2020, Paul Krugman suggested that
“The CARES Act, enacted in March, gave the unemployed an extra $600 a week in benefits. This supplement played a crucial role in limiting extreme hardship; poverty may even have gone down”.
For Krugman and many economic commentators, it is the duty of the government to support the economy whenever it falls into an economic slump. Following in the footsteps of John Maynard Keynes, most economists hold that one cannot have complete trust in a market economy, which is seen as inherently unstable. If left free the market economy could lead to self-destruction. Hence, there is the need for governments and central banks to manage the economy. Successful management in the Keynesian framework is done by influencing overall spending.
It is spending that generates income. Spending by one individual becomes income for another individual according to the Keynesian framework of thinking. Hence the more that is spent the better it is going to be. What drives the economy then is spending. If during a recession, consumers fail to spend then it is the role of the government to step in and boost overall spending in order to grow the economy.
In the Keynesian framework of thinking the output that an economy can generate with a given pool of resources (i.e. labour, tools and machinery, and technology) without causing inflation, is labelled as potential output. Hence the greater the pool of resources, all other things being equal, the more output can be generated.
If for whatever reasons the demand for the produced goods is not strong enough this leads to an economic slump. (Inadequate demand for goods leads to only a partial use of existent labour and capital goods). In this framework then, it makes a lot of sense to boost government spending in order to strengthen demand and eliminate the economic slump.
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France Holds Title Of World’s Most Visited Nation |
On Thursday the French government rolled out a new stimulus plan The fact France is again forced to stimulate its economy should be viewed as bad news. The move reflects the reality that all is not well and things are getting worse. France is facing one of Europe’s worst recessions and its deepest since World War Two. France is looking at posting an 11% drop in GDP 2020. This follows a 13.8% second-quarter contraction that coincided with the covid-19 lock-down. This is seen as an attempt to bolster French President Emmanuel Macron’s re-election prospects. Macron is not loved by many of the French people and the “Yellow Vest” protesters that have marched against his policies are proof of this. If France moves back to the right support for a stronger Euro-zone government body will take a big hit.
The stimulus scheme designed to lift the country out of the recent slump aggravated by covid-19 will cost 100 billion euros or about 120 billion dollars. As with most government stimulus plans, it is aimed at reducing unemployment which French officials concede is slated to top 10% next year. The amount of this particular package is equal to roughly 4.5% of the GDP and brings this year’s total stimulus to around 10% of France’s GDP. The French government is betting that by supporting jobs they will give consumers the confidence to start spending the 100 billion euros they stashed away during the lock-down.
Stash Learn shows France as being the second-largest economy in Europe, and the sixth-largest in the world. As the world’s most visited nation, France’s tourism industry is a major component of the country’s economy. This means that France’s economy being in the muck is a big deal.
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