France on brink of another recession: Troubled economy went into reverse over the summer

    Figures showed output fell by 0.1 per cent between July and September
    Dismal news came just a week after Standard & Poor’s cut France’s credit
    Contrast to the UK where economy grew by 0.8 per cent in third quarter

France was yesterday rocked by the news that its troubled economy slammed into reverse over the summer.

Official figures showed output fell by 0.1 per cent between July and September - leaving the country on the brink of another recession.

The dismal news came just a week after Standard & Poor’s cut France’s credit rating by a further notch to AA in a humiliating setback for President Francois Hollande.

The performance in the rest of the eurozone was little better with output in the single currency bloc growing by just 0.1pc in the third quarter down from 0.3pc in the previous three months.

The German economy slowed from 0.7 per cent to just 0.3 per cent.

Figures from Italy showed its economy shrank by 0.1pc following a 0.3pc contraction in the second quarter.

But Spain notched up growth of 0.1 per cent  - its first quarter of expansion since early 2011.

The disappointing figures from the across the region were a stark reminder that the eurozone crisis is far from over and fuelled fears of a long and painful recovery.

Unemployment in the eurozone is at a record high of over 12 per cent and more than half of Spanish and Greek youngsters who want a job cannot find work.

The European Central Bank last week cut interest rates from 0.5 per cent to a new record low of 0.25 per cent in a desperate bid to stave of deflation and inject life into the economy.

But with Germany, the eurozone’s biggest economy, slowing and France, the second biggest, in decline, experts fear the move was too little too late.

Link -
http://www.dailymail.co.uk/news/article-2507613/France-brink-recession-Troubled-...
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A few observations -
1) I would suggest that none of the stats being put out by governments, are all that believable and they are mainly slanted towards painting a "more optimistic picture, than actually exists".
2) Given the directions of the basic Global Economic Drivers, there is zero chance of any sustained Economic Recovery, in the foreseeable future!
ii

The Federal Reserve Is Monetizing A Staggering Amount Of U.S. Government Debt

The Federal Reserve is creating hundreds of billions of dollars out of thin air and using that money to buy U.S. government debt and mortgage-backed securities and take them out of circulation. Since the middle of 2008, these purchases have caused the Fed's balance sheet to balloon from under a trillion dollars to nearly four trillion dollars. This represents the greatest central bank intervention in the history of the planet, and Janet Yellen says that she does not anticipate that it will end any time soon because "the recovery is still fragile". Of course, as I showed the other day, the truth is that quantitative easing has done essentially nothing for the average person on the street. But what QE has done is that it has sent stocks soaring to record highs. Unfortunately, this stock market bubble is completely and totally divorced from economic reality, and when the easy money is taken away the bubble will collapse. Just look at what happened a few months ago when Ben Bernanke suggested that the Fed may begin to "taper" the amount of quantitative easing that it was doing.

The mere suggestion that the flow of easy money would start to slow down a little bit was enough to send the market into deep convulsions. This is why the Federal Reserve cannot stop monetizing debt. The moment the Fed stops, it could throw our financial markets into a crisis even worse than what we saw back in 2008.

The problems that plagued our financial system back in 2008 have never been fixed. They have just been papered over temporarily by trillions of easy dollars from the Federal Reserve. All of this easy money is keeping stocks artificially high and interest rates artificially low.

Right now, the Federal Reserve is buying approximately 85 billion dollars worth of U.S. government debt and mortgage-backed securities each month. We are told that the portion going to buy U.S. government debt each month is approximately 45 billion dollars, but who knows what the Fed is actually doing behind the scenes. In any event, by creating money out of thin air and using it to remove U.S. Treasury securities out of circulation,

the Federal Reserve is essentially monetizing U.S. government debt at a staggering rate.

If the Fed does decide to permanently stop quantitative easing at some point, stocks will drop dramatically and interest rates will skyrocket because there will be a lot less demand for U.S. Treasuries. In fact, interest rates have already risen substantially over the past few months even though quantitative easing is still running.

But if the Federal Reserve keeps doing this, it is going to become increasingly obvious to the rest of the world that the Fed is simply monetizing debt and is starting to behave like the Weimar Republic. The remainder of the planet is watching what the Federal Reserve is doing very carefully, and they are starting to ask themselves some very hard questions.

Why should they continue to use our dollars to trade with one another when the Fed is wildly creating money out of thin air and rapidly devaluing the existing dollars that they are holding? And why should they continue to lend us trillions of dollars at ultra-low interest rates that are way below the real rate of inflation when the U.S. government is already drowning in debt and the money that will be used to pay those debts back will be steadily losing value with each passing day?

Right now, the Fed is stuck in the middle of a "no man's land" where it is monetizing a significant amount of U.S. government debt but it is trying to sell everyone else on the idea that it is not really monetizing debt. This is a state of affairs that cannot go on indefinitely.

Ultimately, the Federal Reserve is faced with only bad choices. The status quo is not sustainable, ending quantitative easing will cause the financial markets to crash, and going "all the way" with quantitative easing will just turn us into the Weimar Republic.

The consequences of decades of very foolish decisions are catching up with us, and this is all going to end very, very badly. I hope that you are getting ready.

Link -
http://seekingalpha.com/article/1842622-the-federal-reserve-is-monetizing-a-stag...
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Most of that, should be pretty much "self evident", But no doubt it will come as a surprise to many & many will also disagree!

Nevertheless, this is a state of affairs that cannot go on indefinitely, although the FedRes & the USA do now find themselves in a catch 22 situation, they can not continue & they can not go back.

So, it is likely they will continue, until something uncontrollable out of left field intervenes & that's when TSHTF!

Ross Garnaut: Suffering some pain now will stave off the economic dog days (Cont)

The public interest is the much harder choice, but it has better consequences. For Australia to choose this approach, many of us - enough to influence policy decisions at a high political level - will have to put aside the slogans that have replaced thought about public policy so far in the 21st century. We will have to reconsider propositions to which we have given unthinking assent. That is hard. Harder still, we will have to change our minds when the evidence supports change. The public interest approach will not be chosen unless many Australians are prepared to support policies that sometimes go against their immediate personal interests. Political leaders will have to introduce changes that disappoint their strongest supporters.

The odds favour Australians choosing ''business as usual'' - what I have been calling, since 2004 the ''great Australian complacency'' of the early 21st century.

But let us at least consider alternatives to sleepwalking into a deeply troubled future as if we had no choice at all.

The election has been followed by a shift from talking down to talking up the economy in the New Newscorp majority press. Consumer and business confidence has continued to rise since the August cut in interest rates. There has been a lift in some of the financial markets. There is talk that increased confidence from the change of government will lift spending and economic activity, and even that the resources boom will burst back into life. That the employment and growth and budget and external payments challenges will go away.



Increased investment in any industry is shaped by calculations of expected profit. None of the purported increase in confidence and none of the high-profile election promises of the government will change profit calculations in ways that increase investment. None will help us to meet the fundamental challenge: to improve Australian competitiveness and to increase investment and activity in trade-exposed industries while keeping the budget on a path to long-term stability.

The fall in the Australian dollar so far in 2013 helps, but it is not nearly enough.

The new Australian political culture makes a prime minister seeking to govern in the public interest vulnerable to attack from an opposition focused on unpopular developments and measures. The dog days provide exceptional opportunities for negativity. The approach of the opposition matters. Whatever it might do to its own hopes for early return to government, an opposition that offers broadly constructive support for a new reform era would improve the prospects of a successful Australian transition.

If I am right and Australia gets it right, we will endure a period of moderate falls in living standards, without any part of our society suffering badly from the adjustment. After a while, living standards will start to rise again - moderately, in line with the higher productivity growth that a new reform era has made possible. We will be in a sound position to manage any major disruption to the international economy. We will feel comfortable with our democracy, and others will see our democratic capitalism in a positive light.

If we fail to take an early opportunity to adjust down the cost levels that have hung over from the China resources boom, we can look forward to economic instability, inflation, stagnation and high unemployment. Governments will do their best to deal with parts of the problem where solutions seem to be constrained less tightly by political reality, and stir up new nests of opposition for their troubles. We will become an unlucky country, run by second-rate people who share the country's bad luck.

If our country fails the challenge, Australians would be foolish to ignore the weakness in our democracy that contributed to failure - the rise in power of private interests; the fragmentation of the national conversation about policy; increasing comfort with conflict of interest. We would be wise to heed the lessons from the political history of other resource-rich countries in which democratic institutions have been broken by the power of resource-based wealth.

It matters to Australians that the public interest wins in the great struggle to shape the aftermath of the China resources boom. At a pivotal time in the spread of modern economic development throughout the world, the fate of democratic capitalism in our ancient continent matters for others as well.

Link -
http://www.smh.com.au/federal-politics/political-news/ross-garnaut-suffering-som...
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Garnaut certainly gets a number of issues correct, although I think there are a few issues where I would disagree & a deliberate Decline in the OZ$ is oe where I would not agree!

That said, IF we take the correct path, then we will be better placed, But the will still be a great struggle.

However, If we do not select the correct actions, then the path ahead will prove very rocky. indeed! 
i

As I have said previously, the Floating of the OZ$ was/is one of a select few of the momentous Economic moves made by Australian Pollies, for many decades.

And following is a new chart released by Commsec, which tracks the floating OZ$ since it was first floated in 1983, together with some "relevant" comments.



For those like me, who find the above print to be a little small, you may prefer to go to the following link, then click onto the chart, which then brings up a larger version.
http://www.macrobusiness.com.au/2013/11/thirty-years-of-floating-for-the-austral...

'Bad and lazy habits' costing nation

RIO Tinto chairman Jan du Plessis has offered an upbeat outlook on growth in the Chinese economy but has warned that Australia needs to shake off "bad and lazy" habits that have prevented it from becoming a more productive nation.

Mr du Plessis, speaking at an industry function yesterday, also defended the miner's focus on iron ore, which generates 80 per cent of the company's earnings, saying Rio's management was content with its current portfolio.

"We are not going to be tempted to do things or to make acquisitions or to diversify outside of iron ore just to appear more diversified," Mr du Plessis said.

"We invest appropriately in the iron ore business and we have got a whole portfolio of other businesses that in their own way are good businesses and at the right time they will come through and they will shine." Speaking at the Australian British Chamber of Commerce business lunch in Sydney, he said Australia was in a comfortable position but costs had rapidly escalated.

"From a mining perspective, it has become tough to operate here. Costs are very high," he said.

"The competitive position in Australia is not what it once was. Seven years ago, Australia was one of the cheapest places in the world to operate; today it is just about one of the most expensive," Mr du Plessis added.

In Australia, the resources boom underwrote what was a golden era of wealth creation between 1991 and 2009, making Australia's economy "the envy of many in the world".

In the aftermath of the global financial crisis, however, the situation had changed and the government and business needed to take stock, he said.

"For too long, government and business have taken prosperity for granted. We have developed bad and lazy habits," he said.

"The strength of the resources boom has masked the weakness of a slowdown in productivity improvements."

Co-operation and collaboration of business and government, at an industry and company, federal and state level was needed for effective reform in Australia.

Globally, structural problems remained in Europe while a recovery in Britain and the US was under way.

But the global economy's wellbeing depended on Asia, particularly China, he said, where gross domestic product grew 7.8 per cent between July and September.

"My long-term view of the Chinese economy remains positive and we expect to see continued, robust growth in demand for commodities," he said.

"This is good for those of us in the mining business and therefore good for Australia."

Early signs from the new federal government that the country was "open for business" were encouraging, with the government showing "all the signs" it was serious about making that happen. "This government, like the Howard, Hawke and Keating governments, seems to understand that you can't have sustainable growth without investment and fundamental reform," he said.

He urged business leaders to "stand up and argue the case about why change is needed".

"Business has to be prepared to do some of the heavy lifting on the policy reform front. It can't all be left to government," he said.


Link -
http://www.theaustralian.com.au/business/mining-energy/bad-and-lazy-habits-costi...
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A few observations -
1) It is correct that, we need to become a more Productive, as a nation.
2) It is correct that, for far too long, government and business & the general Public have taken prosperity for granted.
3) It is INCORRECT that, a recovery is underway in the UK & the USA.
4) It is INCORRECT that, the Chinese economy remains positive and that continued, robust growth in demand for commodities, can be expected.
5) It is INCORRECT that, the competitive position in Australia has gone from being one of the cheapest places in the world to operate seven years ago, to today being about one of the most expensive.

A phrase comes to mind here, "tell the truth, the whole truth and nothing but the truth".

Krugman, ZIRP And The Permanent Economic Slump

This past week Nobel Laureate Paul Krugman mused:

    ….. if our economy has a persistent tendency toward depression, we're going to be living under the looking-glass rules of depression economics - in which virtue is vice and prudence is folly, in which attempts to save more (including attempts to reduce budget deficits) make everyone worse off - for a long time.

Professor Krugman's post was monumental in so many ways as it appeared to be a departure (or movement) from some of his positions. Consider his "new" thoughts which I find fully consistent with the New Normal:

    …. evidence suggests that we have become an economy whose normal state is one of mild depression, whose brief episodes of prosperity occur only thanks to bubbles and unsustainable borrowing ….

    ….

Why might this be happening? One answer could be slowing population growth

….

    …. Another important factor [for the mild depression] may be persistent trade deficits ….

The main crux of the Krugman argument is that the Fed should maintain its easy money policy (aka zero interest rate policy [ZIRP] and quantitative easing [QE]) as the American economy is mired in a mild depression.

Where is the evidence that monetary policy can do any more than guide an economy for short periods of time. I cannot produce a single chart to evidence QE is working, nor can I produce a single chart predicting with any degree of confidence what the economy would look like today had there been no QE.

USA monetary policy effects every dollar in existence - whether it exists in the USA or outside the USA. Low interest rates for dollars mean dollars can be used for low cost loans anywhere in the world to fund expansion. Dollars will flow in search of the highest return - which again can be anywhere in the world.

I muse whether the Fed can do any more than guess at the proper monetary policy. I ponder the endgame of QE: If the argument is that QE helps an economy, then shouldn't the disposal of QE assets hurt an economy?

How can one ever dispose of QE assets unless inflation takes hold making the QE assets worth a lot less? And inflation is not cooperating.

Why can't the Fed balance sheet continue to grow as long as the (permanent?) slump continues?

But, I hear someone cry out, the Fed will lose a lot of money if they sell Treasuries in a higher interest rate environment at a reduced price. I don't understand that concern - How can the Fed, which has been subcontracted by the U.S. Treasury to create the currency of the land, lose money?

They create money.

No matter how you cut it, ZIRP is a tax on the middle class. It effectively lets the government and big business use money at little cost - while retirees and individual savers get no return on their life savings. Or maybe that is the plan - try to force spending on the middle class (at the expense of reduced saving).

Whatever the case, there is no proof that easy money is helping the majority of Americans and there is no proof that removing easy money won't hurt them.

Link -
http://seekingalpha.com/article/1859361-krugman-zirp-and-the-permanent-economic-...
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No matter, which way it is sliced & diced, IF INCOME IS LESSENED, in this case by lower interest rates AND an expectation is thrown in (Rightly so) that the Share Price BUBBLE will burst in the not too distant future, THEN THE LOGICAL OUTCOME IS A LOWERING OF DEMAND!

But, WHEN YOU ALSO THROW IN the very real Expectation of A GLOBAL POPULATION GROWTH RATE THAT CONTINUES TO SLOW over the next 10-20 years, PRIOR TO GOING INTO ACTUAL DECLINE for the rest of this century, THEN A LOWER DEMAND IS NOT ONLY LOGICAL, BUT IT IS ABSOLUTELY GUARANTEED!

I should also add that, THERE ARE ALSO 2 OTHER MAJOR FACTORS that must be thrown into this mix & they are -
1) ENERGY - A SLOWING GLOBAL SUPPLY, WITH DEMAND STILL INCREASING FOR SOME 20 YEARS, RESULTING IN MUCH HIGHER PRICES!
2) CLIMATE CHANGE - AS THE GOLDILOCKS CLIMATE GOES, SO TO DOES THE SUPPLY OF FOOD & FRESH WATER, BUT UP GOES PRICES!

Honestly Perce.....I have heard 'experts' say that

"when the US economy starts to come around next year blah blah blah".....

UNBELIEVABLE!!!!

“When the Fed finally stops printing $85 billion a month . . . we’ll have falling bond prices and rising yields, a crisis at the heart of the financial system, the $12 trillion Treasury note and bond market.  That’s when the day of reckoning will finally begin to unfold, and everybody will be caught up in it.”  Stockman warns, “This is not a viable system.  It’s a house of cards . . . I think it will be a deflationary event . . . financial asset prices will collapse. ”


What if they never stop printing?

Why can't they have a $200trillion debt?

They don't seem to be all that concerned about $12 trillion.

Will it be a case of the more they print, the more other nations will turn away from the US dollar?