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France: Double dip or the edge of the abyss?
We’ll avoid the “c” word as one thing France isn’t doing is celebrating. A year ago, the electorate ousted the discredited Psycho-Sarko. The victor Hollande campaigned on a remarkably left wing manifesto (even by French standards). His redeeming feature for those of us not blessed with the looks of Brad Pitt, was that despite being nicknamed after a custard tart, Monsieur Flanby seems to have a remarkable way with beautiful women.However, given the lack of empirical evidence that glamorous women close to the Presidency have actually galvanised economic growth (in the case of Hollande, even the simple act of buying engagement rings seems to be a commercial act too far), let’s stick to the essence of political economy…To describe the French as in a depressive torpor rather overstates things. Monsieur Hollande’s first year as President has delivered a double dip recession. The crescendo of cynicism is rising about France’s discredited “third way” economics. Government spends with gusto, taxes with rapacious alacrity and watches wealth creators flee to South Kensington or Belgium…Rank Government hypocrisy has further decimated Presidential credibility: it transpired the Budget Minister held significant assets offshore to evade his own punitive tax regime.True, the government recently held high profile meetings to convince business leaders that the President believes in enterprise. The tricky point was that this came after months of increasingly shrill posturing against all forms of wealth creation. The entrepreneurial actor/national icon Gerard Depardieu ditched his passport, availing himself of Russia’s pragmatic flat tax fiscal policies at a fifth of the retrograde 75% rate imposed by Paris. Historians recall short Frenchmen used to march on Russia with invasion forces. Had it not been for flawed early adoption of global warming theory they might have succeeded. Now Frenchmen arrive in Moscow to renounce their nationality and embrace a prevailing capitalist culture… How times change, the east looks progressive, the west is festering in a socialist mess of centralised planning.Other tax rises include investment transactions which will help impoverish future pensioners with the temerity to save. Now a plan is afoot to tax “smart” devices such as mobile phones and tablets. The insanity of taxing data - a key future engine of economic growth – pinpoints the closeted bunker-like attitude of the government. When faced with the infant Web, the French bureaucracy actively protected their Minitel network against ‘upstart’ global web standards.Foreign relations are messy too. The historical Franco-German axis anchoring the EU looks creaky. Germany wants austerity. France, having failed to balance their budget since 1974, want the punchbowl kept at the table to restart the party. To describe relations between the inept left wingers and their conservative counterparts as cool is an understatement.France is tumbling towards a denouement: decades of irresponsible government promising the people cake have left the economy on the brink of collapse. The nation is ‘bankrupt’ according to Employment Minister Sapin’s own words in January. Maintaining the high spending, high tax, 57% government controlled economy risks disaster and France runs the risk of being just an auction or two away from becoming the next Mediterranean Bond market disaster…Talk of revolution is premature although it preoccupies French media. Certainly the French political elite is staggeringly out of touch. When Hollande “relaunched” his Presidency with a walkabout ‘relaunch’ in Dijon during March, he was “visibly overwhelmed” by the vocal antipathy to his shambolic regime. Hollande is a damning indictment of the “grandes ecoles” system where remote “leaders” are de facto anointed by attending an elite college.However, all is not lost. Entrepreneurs may feel crushed by France’s intransigent anti-capitalist culture but there is much to celebrate. French multinationals are enormously successful at the cutting edge of emerging markets: building, producing, supplying and retailing with panache throughout the world.Nevertheless, President Hollande is already less popular than Charles De Gaulle when he sought protection in a German air base from rioting students in 1968! Clearly Mr ‘Flanby’ has panache: to be this unpopular after one year demonstrates a certain talent! Now he needs to focus on actually running a government and not a juvenile debate which is of lesser quality than on the barricades of 1968… … Read More
Gerald Celente: Prepare For The Coming Economic Collapse
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What recovery? US rich get richer, middleclass treading water
“Inequality is as dear to the American heart as liberty itself,” William Dean Howells once observed. But this quaint aphorism notwithstanding, the latest report on wealth polarization in the US may be difficult for many Americans to accept. The top 7 percent of Americans saw their average net worth explode by 28 percent between 2009 and 2011, while the wealth of the remaining 93 percent of the population steadily declined during the same period, according to a study by the Pew Research Center. From 2009 to 2011, the average net worth of the country’s 8 million wealthiest households surged from an estimated $2.7 million to $3.2 million, the Pew study said. For the 111 million households that make up the bottom 93 percent, average net worth plunged 4 percent, from $140,000 to an estimated $134,000.The wealth chasm separating the top 7 percent and the rest of American society increased from 18-to-1 to 24-to-1 between 2009 and 2011. Meanwhile, the most affluent 7 percent of households owned 63 percent of the nation’s household wealth in 2011, up from 56 percent in 2009.The results of the study throw a spotlight on a decades-long trend of increasing wealth disparity across the country, despite growing social and political awareness of the issue. In September 2011, protesters from the Occupy Wall Street movement descended on Manhattan, the financial heart of the US, and in Washington and elsewhere, to protest against rising social and economic inequality, corporate greed and political malfeasance.Although the last presidential election between Barack Obama and Republican challenger Mitt Romney attracted attention to issues of inequality, proposed tax legislation aimed at narrowing the wealth gap has failed to pass in Congress.Meanwhile, too-big-to-fail banks and other corporate entities that failed magnificently during the crisis, only to be rescued by a massive government bailout, continue to grow in size and – critics say – vulnerability to another setback.Where’s the wealth? The main difference between the richest Americans and other economic groups, Pew reported, is that the top 7 percent have their wealth diversified in stocks, mutual funds and other financial schemes. For the remainder of the population, household wealth is locked into the value of their homes, the sector that took the greatest hit when the bottom fell out of the US economy in late 2008. This left the American middle class holding the bag, since this large group lost not only the greatest part of its savings, and there was no government plan to protect Americans from losing their homes in the ensuing chaos. Since 2007, almost 4 million homes have been lost in the foreclosure crisis, according to Forbes. Today, US home prices – except in the most affluent neighborhoods – remain essentially flat. At the same time, stock prices – due in large part to a massive bailout and buy-in of US banks and corporations, which artificially enhanced the performance of these institutions with the injection of hard cash – have withstood the economic storm. In the two-year period examined in the report, the Standard & Poor’s 500 stock index increased by 34 percent, while the S&P/Case-Shiller home price index dropped by 5 percent.“It has been a very good recovery for those at the upper end of the wealth distribution,” said Paul Taylor, executive vice president of the Pew Research Center and co-author of the report along with Richard Fry, according to the Washington Post. “But there has been no recovery for the lower 93, which is nearly everybody.” The grim picture put forward by Pew is consistent with the increasing wealth concentration observed in income statistics, as well as in reports of the paltry growth of middle-income jobs since the end of the Great Recession was declared. Overall, the amount of wealth held by American households increased 14 percent between 2009 and 2011, going from $298,000 to $339,000 in inflation-adjusted dollars, the report said. Yet the study also revealed that only the 13 percent of households with a net worth of $500,000 or more saw their wealth increase. Every other income group in the US saw their net worth decline. … Read More
Why can’t America unite on the economy?
We come together as Americans when confronting common disasters and common threats, such as occurred in Boston on Monday, but we continue to split apart economically.Anyone who wants to understand the dis-uniting of America needs to see how dramatically we’re segregating geographically by income and wealth. Today I’m giving a Town Hall talk in Fresno, in the center of California’s Central Valley, where the official unemployment rate is 15.4 percent and median family earns under $40,000. The so-called “recovery” is barely in evidence.As the crow flies Fresno is not that far from California’s high-tech enclaves of Google, Intel, Facebook, and Apple, or from the entertainment capital of Hollywood, but they might as well be different worlds.Being wealthy in modern America means you don’t come across anyone who isn’t, and being poor and lower-middle class means you’re surrounded by others who are just as hard up. Upward mobility — the old notion that anyone can make it with enough guts and gumption — is less of a reality.Continue Reading… … Read More
Gold goes over the edge: Was it foreseen and who lost most?
Those who decided that it was too early to dump gold for good, lost a lot in the past few days. Billionaire John Paulson lost almost $1 billion of his personal wealth in the past two days as gold price fell to its lowest in almost two years, losing 13%, Bloomberg reports. Out of around $9.5 billion invested across his hedge funds, some 85% is invested in gold.Influential investor George Soros seemed well prepared for the slump. He said earlier in April that gold has been “destroyed as a safe haven” during the euro crisis. However he added he expected the global central banks to continue buying gold to support prices.Speaking with the South China Morning Post, Soros sounded cautious on the metal.“It has disappointed the public, because it is meant to be the ultimate safe haven. But when the euro was close to collapsing last year, actually gold went down, because if people needed to sell something, they could sell gold,” Soros said.Soros said he did not expect gold “to go down.” However he started significantly shortening his positions in gold in 2011 when he dubbed gold “the ultimate bubble.” Back then he sold most of his holdings in the bullion-backed SPDR Gold Trust and iShares Gold Trust funds and invested in mining instead. Some experts believe its is too early to drop gold. If the economy in the US does not recover, gold might yet be a worthy hedge.Renowned bond investor Bill Gross, the manager of PIMCO’s Total Return Fund said in early February said that he saw gold as a “stellar inflationary hedge” as global central banks attempt to reflate their economies.Investor Jim Rogers commenting on the latest gold drop to Bloomberg, said he’s not buying the commodity yet, as he expects it to go even lower.“This may be the correction that gold needs,” said Rogers, chairman of Rogers Holdings. “If it goes down enough, I will start buying it,” Rogers told reporters in Singapore.Gold slump not such a great surprise Experts say gold dropped so significantly due to a number of short and long term reasons. JPMorgan sees falling global inflation as the main factor slashing gold’s value as a sustainable hedge. In the short term, the main reason for gold’s weakness is the rise of the US dollar value due to the credit crisis in Europe. Signals that the US economy is recovering may force the Federal Reserve to withdraw its stimulus package sooner than expected, the Economic Times reports.Goldman Sachs lowered its gold price prognosis expecting accelerating US economic growth. The price forecast for 2013 was lowered to $1,545 an ounce from $1,610. The forecast for 2014 hints at a further decline to $1,350 an ounce from $1,490.Global investors were seen getting rid of gold and transferring their funds in riskier assets. Weak economic data from China and reports that Cyprus could sell of its gold reserves to pay off debts contributed to the latest slump in the gold price.Сommodities super cycle over?Meanwhile analysts at Citigroup claim the commodities super cycle might be over. Citi Research’s Ed Morse, released a report on Friday, to coincide with the historic gold slump, while oil prices demonstrated a steep decline as well.“The second quarter should provide another affirmation that the so-called commodity super cycle has finally ended and should usher in the first ‘normal’ year in over a decade in which, broadly, commodity prices end the year lower than when the year started,” Morse’s reports said adding that the super cycle headed towards the end for several years dubbing it “Supercyle Funeral” that began in 2011. This year would be the “afterparty,” he added.Experts also foresee a drop in prices for aluminum, copper and nickel by some 5%-10% in 2013, and by 8% to 13% in the following year. … Read More
Nigel Farage on Greek Bailouts and Euro Crisis
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