With the Eurozone debt crisis ongoing, the US jobs market flagging, a potential hard landing in China, a possible Israel-Iran standoff and nuclear North Korea flexing its muscles, the all-clear has not sounded yet. Keep your tin-hats and gas-masks handy well into 2013, and maybe beyond.
The reports over Easter from around the globe dispelled much of the Q1 euphoria that had been nurtured by the more blinkered pundits. Hype springs eternal, as they say, but not for Q2 this year.
We start with the US: the jobs reports, one showing a good number for new hirings and the other hardly a dent in unemployment, are not saying the same thing, as Bernanke had already warned, for the simple reason that, as we now learn, they are compiled from different data. What has become crystal clear as well, now that Romney has effectively won the Republican nomination, is that the election campaign has now started.
And the key issue is what happens on 1 January 2013, when the US economy reaches its 'Fiscal Cliff-face', when George Bush’s tax credits expire and mandatory cuts of a massive 4% of GDP cut in, just as the Total Debt Agreement is maxing out. Answers on one side of a postcard to the Editor, please. The US economy’s debt is on cruise control to hit the iceberg, all right.
China is now in a clear straight decline, but nobody knows if it is headed for a soft landing as the pundits assert, or a hard landing, and the male panda in Edinburgh Zoo is giving nothing away. The problem for China is that the banks have over-lent on property: where have we heard about that one before? In the boom, luxury apartments were being dung-flung up everywhere, rather like in Spain, but the trouble is they are over-priced for the local market and so prices are crashing, leaving the banking system in a bad mess. And China’s export markets are shrinking. A double-whammy is in the air here.
The problems of the Euro-zone are getting worse and bigger, quite quickly too. Forget Greece: her former Treasury Secretary from 2007 was interviewed on CNN and called for a further debt forgiveness of €80 billion now, and €20 billion of EU investment to save the economy from collapse! Greece’s woes are nothing, however, as compared to the problems looming in Spain, whose bond yield is headed back to 6% and rising.
Meanwhile, the diminutive Herr Schauble, with the usual German sensitivity to such issues,sits in Field Marshall Goëring’s former Lüftwaffe headquarters liberally carpet-bombing the PIGS with austerity, but what happens if they cannot recover inside the inflexible euro-zone? Germany is rapidly taking over Europe economically, but is not prepared to shoulder the euro-burden. Disaster is surely baked into this unholy pie, a pie whose main ingredient was a political will for the euro which is now lacking. And the French electorate no longer know what they want or who to vote for on 22 April.
That big unknown, the Iran-Israeli stand-off, needless to say has not gone away. And now North Korea has decided to help matters by launching an ICBM: the Iran-Pakistan-North Korea axis is alive and well and getting ready to bring the West coast of America within its range – Holy Shit! President and Congress might actually have to do something together for a change, like spend some big ones, but from where? Regular readers of this blog will know the all-clear has not sounded yet and that this consumer and sovereign debt crisis is far from over. Keep your tin-hats and gas-masks handy well into 2013, and maybe beyond.