FEAR OF DEFLATION IN SPAIN
Fear of Deflation in Spain Raises. Prices dipping everywhere in Spain have signaled the possibility of a deflationary spiral..and similarities to the Great Depression and the “Lost 90s Decade” of Japan.
Deflation is defined as a general decline in prices of goods and services. Prices of goods and services rise gradually in a normal economy at about 3% annually (more or less). It indicates a healthy demand and a growing economy. Economists begin using the term "deflation" when normal inflation disappears (i.e. when inflation reaches 0% ). A deflationary period may occur when a nation’s weakened economy causes employment to falter, unemployment rises and with (fewer euros or dollars in circulation) the result is a weak demand for goods. This encourages retail companies to lower prices to stimulate sales. When such remediation does not generate results, companies resort to lay-offs of workers and to lowering prices still further. The increased unemployment only intensifies weak demand for goods and services and the process of falling prices, decreased demand for goods and increased lay-offs causes a complex of events that reinforces itself through a feedback loop to produce a vicious cycle. The country may continue into a generalized downward economic spiral.
In Spain, prices are reported to be falling “everywhere”—restaurants, pharmacies, supermarkets, and even fashion retailers. In March, Spain was the first euro-zone nation to report a negative inflation rate (thus meeting the definition of deflation). Inflation in Spain has averaged about 3.5% annually) Though the negative rate for March was small, only -0.1 percent inflation and this was reflected mostly in food (fish was down 6%, and sugar down 6%--these are areas where prices can fluctuate wildly and seasonally), there are concerns among economists since there were as well declines in prices of footwear, electronics, medical treatment and drugs. And with the nation’s jobless rate at nearly 16% (and nearly one third of workers in the under 25 age group unemployed) the falling prices cause economists worry that Spain is at the edge of a deflationary period.
Other nations in the euro-zone such as Portugal, Luxembourg, and Ireland have also reported drops in prices. See Paul Krugman’s piece on Ireland (“Ireland go Broke” in the NY Times and below).
Germany, the big economy of Europe, reported an 8% drop in wholesale price from a year ago, while Japan the Asian economic workhorse posted a 2.2% decline during the same period. Back here in the USA we registered a Consumer Price Index (CPI)fall of 0.1% in March (but if one excludes volatile food and energy prices that value was interpreted as a positive 0.2%). That negative value is the first time since 1955 that that the CPI has gone negative. So we will continue to evaluate these data and see what happens in April. To be continued.
Germany, the big economy of Europe, reported an 8% drop in wholesale price from a year ago, while Japan the Asian economic workhorse posted a 2.2% decline during the same period. Back here in the USA we registered a Consumer Price Index (CPI)fall of 0.1% in March (but if one excludes volatile food and energy prices that value was interpreted as a positive 0.2%). That negative value is the first time since 1955 that that the CPI has gone negative. So we will continue to evaluate these data and see what happens in April. To be continued.
FATTIES CAUSE GLOBAL WARMING!
The UK tabloid "Sun" (http://www.thesun.co.uk/sol/homepage/news/article2387203.ece) featured on its front page a glaring headline "Fatties cause global warming!" and included rear end pictures of several large British bums!
“Are these fatties causing global warming?” the paper asks under these unflattering rear-end pictures. The rise in the number of overweight people—who eat more (and use their cars more than walk)—so they say—is a major cause of added CO2 gas emissions. CO2 is the gas which effectively absorbs earth long-wave radiation..heating the earth's atmosphere and causing global warming. According to the Sun (which quotes the World Health Organization), a billion extra tons of carbon dioxide gas is generated each year by overweight people—thus speeding up global heating, polar ice cap melting and even the death of polar bears. Furthermore the demand for meat-- a particularly high energy food-- is increasing around the world and will soon reach USA standards. That’s not good for the planet. The Sun reports that a “staggering 40% of Americans are obese, among the 300 million world-wide (fatties).” I guess their point is that eating meat to is more likely to make you fat, and production of animal protein consumes more energy and generates more carbon (very much more--to see how much look back on my blog) than vegetable production. But let's not blame the obese when major companies are pumping carbon into the air by the millions of tons, when many of us drive vehicles which get only 12-15 miles per gallon, when we heat empty houses to tropical levels of temperature in winter and cool them till the windows frost on the inside in summer. Fatties are the last place we have to look for improvement on this score. But the bums were eye catching!
PIRACY ON THE HIGH SEAS!
Piracy has been a big topic in the news lately. The Somali teenager, who under a flag of truce went onto the USS Bainbridge to make a deal for the release of Captain Phillips, is now in New York. He and his parents claim he is a juvenile. But that would certainly crimp the style of the elements in our government and judicial system who would like to make a political point. His s captors claim he is over eighteen. From the pictures I have seen of him I would estimate that he is about sixteen or seventeen. But we can be sure that if there is any question...he will be judged an adult and tried accordingly. There are many questions about this case. Was he attempting to make a deal for Phillips by cooperating with the Navy? Was he on board under a flag of truce when his compatriots were shot by the Navy snipers? If so his legal status might be judged very different. Does the USA even have legal jurisdiction over this youngster? In the rush to judgment to characterize the Somali boy as a “pirate” and a killer we may be simply rushing to misjudgement. Hey he's only a scared black kid, facing the US Navy and angry NY crowds.
KRUGMAN'S "ERIN GO BROKE"
Not Erin Go Bragh! (i.e. "Ireland Forever") but, "Erin go Broke" (by Paul Krugman, NY Times) See: http://www.nytimes.com/2009/04/20/opinion/20krugman.html?
The informative and entertaining Mr Krugman, in response to a question regarding the worst case scenario for America’s aling economy retorted: “America can turn Irish!” No, he was not impugning Ireland’s culture, history, beer, or its hardworking friendly people…but their economic plight and Dublin's response to the recession--that's what bothers Mr Krugman.
What troubles him so much about Ireland's response to the recesion? Ireland’s GDP (gross domestic production) will likely soon fall more than 10% from its peak value--according to Krugman and that’s a line that divides a simple recession from a depression. But to add insult to Krugman’s sense of injury, the Irish--to satisfy nervous lenders--are raising taxes and slashing spending. These are policies that Mr. Krugman says will only deepen the slump and make things worse.
Ironically the trouble started when Ireland became too much like America. It jumped wholeheartedly into risky, ungoverned, entrepreneurship. Only last year, the reactionary Heritage Foundation of the USA, darling of the Bush White house, classified Ireland as the "third freest” economy in the world" after Singapore and Hong Kong. They, the Heritage “alternate reality” gang, viewed the lack of banking regulations as “just barmy”. These weak regulations led to Ireland to become, according to Professor Krugman, "a cool, snake-free version of coastal Florida” as regards it ubiquitous and over-zealous housing-construction sector. Then when overbuilding and falling prices burst the housing and construction bubble and, as in the USA, many investors and home buyers were left with negative equity. Only, in a smaller economy and smaller nation the impact was more severe and more widespread. The Irish banks took a heavy hit. But the Dublin government which had expanded with the bubble economy also got burned. Its revenues collapsed with “Mick the carpenter’s” income. As home-mortgage defaults increased to a tidal wave, the banks began to falter. Government had to protect their citizen’s accounts and pledged to purchase the bank's bad assets. This of course with citicen's tax monies to the tune of more than twice the country’s GDP (estimated by this author at $160 billion dollars) according to Krugman. That would be equivalent to about $30 trillion dollars in US terms. The Irish taxpayers are paying for the bad judgment and lack of risk-aversion of the Irish banking class. Does this sound familiar?
To reassure lenders who worried about long term Irish solvency the government was forced (by the threat of increased risk premiums) to raise taxes and cut spending. Bad news for a smooth recovery according to Krugman. But given the circumstances Irish government has few options.
In regard to the US, we haven’t reached the point where our financial solvency is in question, our present national debt is estimated at $11.1 trillion while our GDP (estimated for April 2009) at $14.2 trillion thus: 11.1/14.2 = 0.78, or approximately 78% of GDP. See: http://forecasts.org/gdp.htm. Thus our Debt to GDP ratio is close to 80%, that is considerably higher that what it had been in the past and higher than many western industrialized nations.
A CHANGE OF COURSE ON TORTURE PROSECUTIONS
Today the President has signaled that he is in favor of prosecuting those such as Mr Jay Bybee and Mr Yoo who signed documents which facilitated what some persist in calling enhanced interrogatin (as does Wolf Blitzer on CNN--Come on Wolf!) On the other hand, Congressman Jerry Nadler, knows how to call a spade a spade.
Today the President has signaled that he is in favor of prosecuting those such as Mr Jay Bybee and Mr Yoo who signed documents which facilitated what some persist in calling enhanced interrogatin (as does Wolf Blitzer on CNN--Come on Wolf!) On the other hand, Congressman Jerry Nadler, knows how to call a spade a spade.
(See:http://www.huffingtonpost.com/2009/04/20/senior-judiciary-committe_n_189026.htmlnot Mr Nadler the senior Democrat on the House Judiciary Committee, called Monday for the impeachment of federal judge Jay Bybee, one of the principal authors of the torture memos which were released last week by the Obama administration.
"He ought to be impeached," Nadler said, in an interview with the Huffington Post (agreeing with the NY Times editorial of the preceeding day). "It was not an honest legal memo. It was an instruction manual on how to break the law." Nadler said it all in a nutshell! Kudos to Mr. Nadler.
Nadler, is a New York congressman, and chairman of Judiciary Committee and member of the Constitution, Civil Rights, and Civil Liberties Subcommittees. Bybee is currently serving a lifetime term on the Ninth Circuit Court of Appeals. He was appointed in 2003 and confirmed before it was publicly known that he had authorized the torture of detainees. This man certainly does not belong in any judicial setting where they read the American Constitution. He had made a mockery of it. Impeach him! Yoo belongs in jail! Once these "fruits on the ground" under the tree are collected. Then we can go for the ones on the lower branches and finally justice should come to those on the top of the tree--especially to Cheney and Bush who directed all this madness from their mad tree house.
WATER CATASTROPHY IN THE WEST BANK
The head of the World Bank has indicated today (April 22, 2009) as reported in Il Manifesto.It that a crisis is brewing in the occupied territories: "Israelis Use of Scarce Water in the Territories leading to a humanitarian crisis" reports Il Manifesto.
See: http://www.abc.net.au/worldtoday/content/2008/s2549566.htm
See: http://www.abc.net.au/worldtoday/content/2008/s2549566.htm
My translation from the Italin follows:
Israel: the head of the World Bank today indicated that the Israelis (settlers) consume as much water as four Palestinians. It (their action) is called the "thirsty ('sete'=dry or thirsty) torture" for the Palestinians. The distribution of water according to the Israelis and Palestine agreement of Oslo in 1995, must be modified immediately if one wants to put and end to the discrimination that will provoke a castastrphy in the occupied territories."
Other sites: http://washmena.wordpress.com/2009/04/22/palestine-world-bank-reports-assesses-restrictions-on-water-development/
This report was only lightly covered in the western press. Too bad!
ONLY WHEN THE TIDE GOES OUT, CAN YOU SEE THE NUDE BATHERS
So said Warren Buffett..as quoted by Tom Friedman in the NY Times (April 22, 2009) What did he mean? Bubble economies –like our housing embroglio—can hid a lot of rot. “In our case, the excess consumer demand and jobs created by our credit and housing bubbles have masked not only our weaknesses in manufacturing and other economic fundamentals, but something worse: how far we have fallen behind in educaton during the Bush years. Friedman takes up the case of K-12 education and how much its decline is now costing us. Friedman points out that in the 50s and 60s the US dominated the world in education…and the world economy. By the 70s and 80s we still had a slim lead…but today we have fallen way behind in numbers of graduates (per capita) and their quality. Based on data Friedman quotes from a study entitled “Economic Impact of the Achievement Gap in American Schools” ( by McKinsey Consultants) the US ranked 25th (out of 30 countries) in math and 24th in science. Our students are on a par with Portugal and the Slovak Republic. More significantly the longer the students were in school the more they lagged behind, suggesting that they are not stupid but the system is! “They are being prepared for $7-12 dollar an hour jobs not $40 to 50 dollar an hour or more jobs," writes Friedman. This has its economic implications. The report concludes that had the education gap been closed when it was first noted (in 1983, when a study entitled> “A Nation at Risk” was published) the GDP in 2008 would have been $ 1.3 to $2.3 trillion dollars higher than it is now!
RECESSION EXPOSED WEAKNESSES IN JOBLESS BENEFITS
http://finance.yahoo.com/news/Recession-exposes-holes-in-apf-14284950.html
Leaving aside the medical plan that many loose when they leave their jobs and the fact that the USA ranks 44th in the world as to the quality and efficay of its public safety net services, workers here in the US suffer more and longer than other western industrialized nations when the economy falters. Out social security safety-net so maligned by the GOP (not to mention how it was undermined) was designed not only for the welfare of the workers but to help pump money back into an aling economy. Think of social security payments as a bailout for workers. The money paid out goes through the hands of the unemployed and into those of the small businessman and thus help sustain the local economy which depends on worker’s daily and weekly purchases.
RECESSION EXPOSED WEAKNESSES IN JOBLESS BENEFITS
http://finance.yahoo.com/news/Recession-exposes-holes-in-apf-14284950.html
Leaving aside the medical plan that many loose when they leave their jobs and the fact that the USA ranks 44th in the world as to the quality and efficay of its public safety net services, workers here in the US suffer more and longer than other western industrialized nations when the economy falters. Out social security safety-net so maligned by the GOP (not to mention how it was undermined) was designed not only for the welfare of the workers but to help pump money back into an aling economy. Think of social security payments as a bailout for workers. The money paid out goes through the hands of the unemployed and into those of the small businessman and thus help sustain the local economy which depends on worker’s daily and weekly purchases.
But our present system, designed in 1935--that was 74 years ago--and now there are many shortcomings that may not be effective and ironically may be actually helping to fuel the recession. For example, this report points oth there are more part-time workers today, but the 1935 program was designed for full time workers and many of these are shut out of benefits because it serves only those looking for full time work. Unemployment lasts much longer now. Not the six months and 2 weeks (26weeks of help) established in 1935. The recession has been in progress now since 2007! Many workers have run through their 26 week (now it has been extended to 33 weeks) benefits. When that happens these families cut back on expenditures (exacerbating the local economic situatuation—and then dip into their savings. But when saving are gone--or are non-existant--they have no other recourse but penury. Estimates are that some one third of the total unemployed have run through their benefits.
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