U.S. Economic/Financial News
U.S. Faces 'Mother of All Debt Problems'Financial Times
The "mother of all debt problems" is about to unfold in the U.S., wrote Financial Times columnist John Plender April 1. "Not since the breakdown in 1971 of the Bretton Woods exchange rate system have global markets been so heavily rigged," he noted. "At the heart of the matter is the extremely loose monetary policy wrought by the Federal Reserve in its attempt to boost asset prices and maintain consumption after the bursting of the stock market bubble in 2000." The ultra-low interest rates have actually caused a "flight to garbage" by investors: an explosion of all kinds of high-risk, high-yield investments. At the same time there are giant currency interventions by the Asian central banks. Furthermore there is the "distortion" in the U.S. mortgage market based on the belief that Fannie Mae and Freddie Mac, with all their debt and derivatives, are simply "too big to fail." All these manipulations are usually "ending in tears."
Plender then described a particular scenario for an imminent systemic disruption. While the bubbles in the bond markets are based on extremely low interest rates, there is rampant inflation in the commodity and property markets. At some point the Fed will have to raise interest rates, and at that point the "mother of all debt problems" will unfold in the United States.
Foreign Debt Jumps to $6.8 Trillion
U.S. foreign debt jumped to $6.8 trilliona whopping 60.4% of official GDPas of the end of 2003, an increase of $306 billion from the level at the end of September, the Treasury Department said in its quarterly report. A large amount of the "gross external debt"more than $1.4 trillionwill have to be rolled over in the next three months.
Bush Admin. Still Pushing Free Trade, Outsourcing
Bush Administration officials continued to tout free-trade and job outsourcing during March, despite continuing job losses:
* Federal Reserve governor Ben "Bubbles" Bernanke defended offshoring, saying it was not to blame for jobs losses, but rather, "asonishing" gains in productivity were. "Outsourcing abroad simply cannot account for much of the recent weakness in the U.S. labor market, and does not appear likely to be an important restraint" to job creation, he babbled at Duke University Fuqua School of Business. He argued against tariffs, while urging "appropriate monetary policies" and even more destructive free trade, citing the "proposition" that free trade "promotes economic prosperity."
* Treasury Secretary John Snow claimed that outsourcing of U.S. jobs overseas could help the economy, by magically creating "lots of jobs." Offshoring, even though it causes layoffs, "is part of trade ... and there can't be any doubt about the fact that trade makes the economy stronger," he told the Cincinnati Inquirer March 30.
* Chief White House economics adviser Stephen Friedman contended that free trade was the best course for the economy, shedding crocodile tears for unemployed workers. "There's an enormous amount of empathy for job loss," but "you really have to pursue what's best for the whole economy," the National Economic Council chairman told the Detroit Economic Club.
Greenspan 'Fine'; U.S. Economy on Life Support
Greenspan is "fine" and still running the Fed, a spokeswoman of the Federal Reserve had to announce following rumors that chairman Alan Greenspan had just suffered a heart attack, Reuters reported March 31. These rumors led to a rapid decline of the U.S. dollar in early trading, sending the euro up a full cent, to $1.23. A New York trader at WestLB commented: "The dollar is selling off across the board on fears that Greenspan may no longer be at the helm." The Fed spokeswoman dismissed these rumors, saying there was no truth to it, and Greenspan was "fine"; earlier, a Fed spokesman had said the Fed "does not comment on market rumors." The incident illustrates the hyper-tense mood on financial markets these days.
Percentage of Discouraged Workers Highest in 16 Years
The share of the U.S. population employed or actively seeking a job has fallen to 65.8%, the lowest level in 16 years. When workers give up their search for a job, they drop out of the officially counted "labor force" and no longer appear in the Labor Department's phony unemployment rate, which was 5.6% in February.
Baltimore-D.C. Grocery Workers Settle Strike
Workers for the Safeway and Giant supermarket chains in the Baltimore-Washington, D.C. area ratified a contract March 30 that cuts back health benefits and overtime pay. The contract, which covers about 26,000 employess of the two grocery chains, will double the cost of health-care deductibles and prescriptions for existing employees. New employees will fare even worse, with long waiting periods before health-care benefits kick in and the introduction of a "two tier" pay scale. While current employees will continue to earn time and a half for Sunday hours, new employees will get only "premium" pay of $1 extra per hour.
As in the West Coast grocery strike, the existence of non-union, free-trade pirates such as Wal-Mart was a major factor in the contract negotiations and ultimate settlement. Giant and Safeway account for about half of all grocery sales in the region but are losing market share to Wal-Mart, B.J.'s and Costco. Both Giant and Safeway had announced they would remain open during any strike and were running ads in the local press soliciting temporary workers.
|