An Even Better Thing

Last week I wrote that "it's a good thing we're in a recovery and there's no real prospect of another downturn (at least that's what Wall Street 'strategists' and politicians keep telling us)." Otherwise, a variety of negative reports about conditions in this country (which I cited in the article) "might be a cause for concern."

I'd add that it's an even better thing that economic woes overseas are unlikely to have any real impact on the pace of growth in the U.S., as "economists" and other so-called experts have been reassuring us since the Great Recession "ended." Otherwise, reports like the following might be an even greater cause for concern:

"McDonald’s Sees Downbeat Consumers World-Wide" (Real Time Economics)

New McDonald’s CEO Don Thompson says consumer confidence has become a problem in most markets around the world, pressuring the company to “crank up” its focus on value, even though such a move weighs on margins.

“We are seeing more markets that have consumer-confidence issues and at what we consider to be more-substantial levels,” he said during the company’s second-quarter earnings conference call.

“This is one the first times where we have seen it in a much broader-based perspective. It’s a little bit more than a European cold.” CFO Peter Bensen added, “The magnitude of the issues in Europe are having ripple effects around the world,” hurting consumer confidence and causing fewer people to eat out.

"Global Economy in Worst Shape Since 2009" (Associated Press)

Mounting fears about Spain's financial health help illustrate why the global economy is in its worst shape since 2009.

Six of the 17 countries that use the euro currency are in recession. The U.S. economy is struggling again. And the economic superstars of the developing world — China, India and Brazil — are in no position to come to the rescue. They're slowing, too.

The lengthening shadow over the world's economy illustrates one of the consequences of globalization: There's nowhere to hide.

"Japan Sees Wider Global Slowdown as China Growth Cools: Economy" (Bloomberg)

China’s economic outlook was cut by Japan, its biggest Asian trading partner, as the Shanghai Composite Index fell to its lowest level in three years on concern about faltering domestic demand and export growth.

“The slowdown in the global economy is becoming more widespread,” the Cabinet Office said in a monthly report released in Tokyo today. Song Guoqing, an academic member of a monetary policy committee, said July 21 that China’s expansion may be 7.4 percent, the least since the first quarter 2009.
Enlarge image Japan Sees More ‘Widespread’ Global Slowdown With China Cooling

Japan’s increased pessimism echoes that of the International Monetary Fund, which lowered 2013 global growth forecasts this month on Europe’s debt crisis and slower expansions in emerging markets from China to India.

"IMF Warns of Rising Risks to Global Economy" (Agence France-Presse)

WASHINGTON — The International Monetary Fund stepped up its warnings Monday on risks to the global economy, mainly from the crisis-mired eurozone, as it trimmed its growth forecast for the rest of the year.

IMF economists said that the frail situations in Spain and Italy especially could quickly turn worse amid market doubts over eurozone leaders' resolve in implementing pledged reforms.

But they also pointed to the US "fiscal cliff" trajectory which, if not corrected, could crunch the US economy and heavily impact the rest of the world.

"In the past three months, the global recovery, which was not strong to start with, has shown signs of further weakness," the fund said in its quarterly economic forecast.

"Financial market and sovereign stress in the euro-area periphery have ratcheted up," it said, while growth has fallen below expectations in a number of major emerging-market economies.

If policy reactions in major economies remain inadequate or too slow, the IMF said, fissures could deepen, they added.

"The main risk is obvious," IMF chief economist Olivier Blanchard told reporters.

"Rio Tinto Warns on the Global Economy" (Ninemsn)

Rio Tinto had mixed news for investors when it released its second-quarter production statement.

On the plus side, iron ore, which accounts for over three-quarters of its profits, saw record first-half production. But the comments of Rio Tinto chief executive Tom Albanese on the global economy were less inspiring:

Global economic conditions and sentiment dropped markedly in the second quarter. We are keeping a close eye on the pace of the US recovery, the continuing eurozone crisis and the impact of efforts to stimulate the Chinese economy on the markets that we serve.

Comments

[Tom]

McDonald's will end up seeing BEAT DOWN customers by the end of this year.

So just in time for winter, when people will be struggling to make ends meet, what with rising food prices already baked in (sorry), fuel oil at a premium due to the rapacious oil producers, while jobs and money are hard to come by - Nouriel Roubini says we're heading for a perfect storm of problems in 2013.

i figure, right after the elections the shit will hit the fan.

[marty]

Then can we please.....please.....not just lower taxes on the rich? PLEASE...let's eliminate them entirely NOW! People need jobs and they need them now - and since it's obvious that there aren't more jobs because the rich are choked by high taxes, let's not wait for the jobs that will come by lowering their taxes - we need the jobs that will come by eliminating their taxes entirely!

NO TAXES FOR THE WEALTHY NOW! THE JOBS CAN'T WAIT! /End of Republican bullshit

[D]

Well, that's it, I'm convinced its a worldwide recession now with possibility of a depression. If McDonalds is seeing a downturn in what their customers are buying and the general look of their customers; its inevitable.

I also am convinced the US avoids/is distracted from financial reality until after the election; but after that; no matter who wins; the US will hit the storm.

[Tom]

Marty: with the rich hiding $21 TRILLION in off-shore accounts to keep from paying taxes, i'm sure you're being facetious.

[Screwed]

WHY WE’RE SCREWED

After 1990 we removed what was left of financial regulations following the flurry of deregulation of the early 1980s that had freed the thrifts so that they could self-destruct. And we are shocked, SHOCKED!, that thieves took over the financial system.
Nay, they took over the whole economy and the political system lock, stock, and barrel. They didn’t just blow up finance, they oversaw the swiftest transfer of wealth to the very top the world has ever seen. They screwed workers out of their jobs, they screwed homeowners out of their houses, they screwed retirees out of their pensions, and they screwed municipalities out of their revenues and assets.
Financiers are forcing schools, parks, pools, fire departments, senior citizen centers, and libraries to shut down. They are forcing national governments to auction off their cultural heritage to the highest bidder. Everything must go in firesales at prices rigged by twenty-something traders at the biggest and most corrupt institutions the world has ever known.
And since they’ve bought the politicians, the policy-makers, and the courts, no one will stop it. Few will even discuss it, since most university administrations have similarly been bought off—in many cases, the universities are even headed by corporate “leaders”–and their professors are on Wall Street’s payrolls.

Bill Black joined our department in 2006. At UMKC (and the Levy Institute) we had long been discussing and analyzing the GFC that we knew was going to hit, using the approaches of Hyman Minsky and Wynne Godley. Bill insisted we were overlooking the most important factor, fraud. To be more specific, Bill called it control fraud, where top corporate management runs an institution as a weapon to loot shareholders and customers to the benefit of top management. Think Bob Rubin, Hank Paulson, Bernie Madoff, Jamie Dimon and Jon Corzine. Long before, I had come across Bill’s name when I wrote about the S&L scandal, and I had listed fraud as the second most important cause of that crisis. While I was open to his argument back in 2006, I could never have conceived of the scope of Wall Street’s depravity. It is all about fraud. As I’ve said, this crisis is like Shrek’s Onion, with fraud in every layer. There is, quite simply, no part of the financial system that is not riddled with fraud.

As Sherrill said, without regulation, capitalism is thievery. We stopped regulating the financial system, so thieves took over.
http://www.economonitor.com/lrwray/2012/07/23/why-were-screwed/

[Bam_Man]

Consumers need to feel "confident" to eat at McDonald's? WTF? I would think it's quite the opposite. Eating off the Dollar Menu at McDonald's is a heck of a lot cheaper (and easier - but certainly not healthier) than preparing a nutritious meal at home.

[roger]

Money is the source of the greatest vice,and the nation which is the most rich,is the most wicked (Frances Burney,1768) translation: humans 100% subjective to their environment and never accept responsibility for their actions, it's always something or somebody else.
The American brain has corralled itself into a Cul de sac,
delusional about it's history,fearful about the present and
unable to understand the mandate of structural social changes. What do you do when the money just isn't there? but the ability to produce the necessity's are,well you just
reorganize the system.

[marty]

Marty: with the rich hiding $21 TRILLION in off-shore accounts to keep from paying taxes, i'm sure you're being facetious.

Yes....I was hoping it was more apparent....it seems to me beyond any shadow of doubt how much utter bullshit the whole idea is, yet for about 30 years at least and even to this very day,you can hear some Republican spouting this shit.

I fear for our country even more than I already do if we fall for it any longer.

[No bailout for you]

Wall Street’s Ongoing Great Bailout
By Janet Tavakoli – July 24, 2012

Among many other issues shortly thereafter, the U.S. taxpayer bailed out the counterparties of AIG, including Goldman Sachs, Merrill Lynch, French banks: Societe General and Calyon, and many more, when we paid 100 cents on the dollar for securities that others settled for 40 cents on the dollar or less. It costs the American taxpayer tens of billions of dollars, and AIG and its counterparties were not held accountable. Yet there was widespread massive fraud in the mortgage lending and “securitization” process, and the banks and investment banks that engaged in this activity should be prosecuted for securities fraud. Without them supplying the money to fuel this activity, and without the leverage of fraudulent products provided by rigged derivatives, our financial crisis would have been much more contained. The Great Recession grinds on while culprits skate.

http://www.tavakolistructuredfinance.com/TGB.pdf

[Marion Shaw]

Screwed: You left out one important
component. Around 1987, the politicians and friends killed the
public school system with Goals
2000. By 1997, it had been buried
under a 100 pounds of textbooks
for fifth grade children, called
"No Child Left Behind." The informed tried to tell parents who
did not want to hear. Thousands
of bright young males became fodder
for the prisons and drug rehab
programs. Thousands of girls had
illegitimate children. Hollywood
said it was fine. Koreans walk off
now with the top math slots and
engineering jobs, because they
adopted the methods of the United
States education system which was
one of the best in the world.WAS
We still have some very bright kids
who made it through school, but
look what many of them have to
build to survive (ie: missile
defense shields and smart bombs,
etc.). Just as financial crisis
is about fraud, a noncompetitive
industrial state taught its children that math was about
saving the whales and growing
tomato seeds on the moon.That
was planned destruction of an
entire generation under the guise
of preparing for globalization,
which as you point out, was one
of the largest pirate raids in
history.

[roger]

Capitalism cannot be regulated,it's basic law is unlimited
growth and the enrichment of the few,the power to make laws
reside with those who have accumulated the most wealth.
Capitalism has generated many financial crisis down history,and wars of colonization,two world wars,and now we even have perpetual wars going on, the volume of it's destruction can be measured by it's manufacturing power,it is the most productive and destructive way of life ever devised,it is a system that is leading us to a massive extinction of life.If you want to regulate it you will have to change it's name.