Still On Life Support

A Financial Times report, "World Economy Still on Life Support," pours more cold water on the notion that conditions are returning to "normal."

The world economy “remains on life support” from central banks and has deteriorated since last autumn, the latest Brookings Institution-Financial Times tracking index shows, despite some recent signs of stabilisation.

Economic weakness extends across the Group of 20 leading economies, according to the TIGER (Tracking Indices for the Global Economic Recovery) index, but advanced economies have deteriorated more than developing countries.

...

Although financial markets recovered significantly in the first quarter of the year as investors welcomed the European Central Bank’s massive injection of liquidity into the eurozone’s banks, the outlook for growth and jobs has become more precarious almost everywhere except in the US.

Professor Eswar Prasad of the Brookings Institution said: “The global economic recovery is still sputtering due to a lack of robust demand, policy tools that are stretched to their limits and unable to muster much traction, and enormous risks posed by weak financial systems and political uncertainty.”

No doubt highly-paid pseudo-analysts and the usual contingent of permabulls will zero in on the claim, noted above and later in the article, that the U.S. is faring better in relative terms than the rest of the world.

But they'll probably forget to mention two things: 1) our economy also remains on substantial life support from the Fed (if not, why have they kept interest rates near zero and allowed their holdings of securities to balloon to nearly $3 trillion?); and, 2) a great many of the export markets that helped keep U.S. businesses afloat (in the face of weak domestic demand) are likely to be hit by recession in Europe, slowing growth in China, Europe, and weakening demand everywhere else.

I know, I know. I just need to be a bit more positive -- right?

Comments

[Jess D]

After reading your article, somehow I felt the cold water pouring on my face. Reality sucks but I am hopeful that something positive is waiting for us. Hopefully those export markets will continue to stay on top of the game and that no recession will hit any part of the world. And yes, I am trying to be positive here. Your views on our economy have always been interesting. Cheers!

[Tom]

Gerald Celente on Alex Jones says the whole financial system is about to collapse and that the U.S. is about to declare marshall law due to the complete theft of anything monetary by the banksters, while the whole Homeland Security department continues (all the way down to the local police) abuse, beat-up and kill common citizens in it's attempt to get the populace into "the system." The Trayvon Martin event is just distraction that the administration clamps on to in order to deflect attention on what's really going on out here. You never hear about all the evidence of decay, collapse, corruption and corrosion of the rule of law and society (anywhere in the world) in the mainstream news. This is how the holocaust happened in Germany before WWII - slowly, day by day, until all of a sudden it was illegal to talk about what was happening in anything but a positive tone or YOU ARE THE ENEMY.

Particularly, the human effect on climate change is kept out of the social discourse. We're all going to pay dearly for this (too).

[Different choices, different outcomes]

Iceland's President Explains Why The World Needs To Rethink Its Addiction To Finance

As everybody knows now, we did not pump public money into the failed banks. We treated them like private companies that went bankrupt, and we let them fail. Some people say we did it because we didn’t have any other option, there is clearly something in that argument, but it does not change the fact that it turned out to be a wise move or whatever reason. Whereas in many other countries, the prevailing orthodoxy is you pump public money into banks and you make taxpayers responsible for the banks in the long run, and somehow treat the banks as if they are holier institutions in the economy than manufacturing companies, commercial companies, IT companies, or whatever. And I have never really understood the argument: why a private bank or financial fund is somehow holier for the well being and future of the economy than the industrial sector, the IT sector, the creative sector, or the manufacturing sector.

"Thirdly, we have, in our economic measures, tried to protect the lowest income sectors, we have to try and protect some of the elementary social and health services, and done more of that nature than has traditionally been done in dealing with such a crisis."

Read more: http://www.businessinsider.com/olafur-ragnur-grimsson-iceland-2012-4?nr_email_referer=1&utm_source=Triggermail&utm_medium=email&utm_term=Business%20Insider%20Select&utm_campaign=Business%20Insider%20Select%202012-04-13#ixzz1sCp1nns6

[Don't let them hijack your mind]

HFT Pirates And Their Academic Friends

Does every HFT defender simply reference the same old tired talking points? There must be an app somewhere that spits out these standard lines. While Professor Donefer stuck to script and hit all the talking points that the FIA/PTG would have liked him to hit, he has overlooked most of the structural issues that allow HFT to extract near risk free rents from the markets. He does not address:

-the fact that there are two separate quotes (the fast one that HFT calculates, and the slow one that the SIP provides)
-why are there 13 different stock exchanges
-the maker/taker model and the payment for order flow which has distorted asset pricing
-the conflicted order types like hide/slide and Day ISO
-the conflicted smart order routers
-the IOI’s that dark pools send to each other
-the poorly crafted regulations like Reg ATS and Reg NMS which helped create today’s fragmented market

Professor, these are the real issues.

http://www.ritholtz.com/blog/2012/04/hft-pirates-and-their-academic-friends/

[I wonder how much Spain would save if things went the elephants way?]

While The Spanish Suffer Under Austerity, Their King Spends $60,000 Shooting Elephants

Read more: http://www.businessinsider.com/spain-king-elephant-hunting-juan-carlos-2012-4#ixzz1sDHuNfhb

[The Big F]

Why Has the American Economic System Failed, and What Are We Going To Do About It?

"We always want to keep in mind what the function, the purpose, of the economy is. The purpose of an economy is not producing GDP. It is increasing the welfare of citizens, and it is increasing the welfare of most citizens. And the American economic system has failed, and failed very badly. Most Americans today are worse off, most American households have lower real income adjusted for inflation than they had fifteen years ago."

http://jessescrossroadscafe.blogspot.com/2012/04/why-has-american-economic-system-failed.html

[Life support good for some, bad for others]

Buffett Rule Hypocrisy

Other companies Mr. Buffett invested in or owns include: American Express, Goldman Sachs, General Electric, JP Morgan, Wells Fargo and US Bankcorp. All of these companies have or continue to get financial help from taxpayers. If the government would not have stepped in and bailed out these companies (and others), Mr. Buffett’s Berkshire Hathaway fund would have been decimated! Had there been no bailouts, no zero percent interest rates and no government sanctioned accounting fraud with the suspension of “mark to market” accounting by FASB in 2009, I’ll bet it would be difficult for Mr. Buffet to still be called the “Oracle of Omaha.” Party on, Mr. Buffett. Party on at the taxpayer expense. I think this is exactly what is meant by “privatize the profits and socialize the losses.” Of course, no one on financial TV would ever call Mr. Buffett out on this shame called the “Buffett Rule.”

http://usawatchdog.com/buffett-rule-hypocrisy/

[Shell games]

Its a Wonderful Life MF Global, Mole, DOJ, Adam Smith's Pink Slime of finance

What if you woke up one day only to find that your pension, brokerage,
or bank went bust! Your Savings and Loan (MF Global) did not have
enough money to return to its customers because all the assets it
managed on your behalf were locked into illiquid speculations. In the
depression world of "Its a Wonderful Life" all the collateral was in
the form of illiquid real estate.

http://youtu.be/L_m3LKi3KNo

[Bridging Loan]

Finance industry has experienced an exponential growth in the recent years. The reasons are many.