Category Archives: Economic fundamentals

States Running Out of Unemployment Funds

This is seriously not good, particularly since extending unemployment benefits is one of the preferred mechanisms for economic stimulus (unlike other ways of getting money to citizens, this mechanism is likely to lead to pretty much all being spent, which is the object of the exercise). Now some way will be found to make sure […]

Is a GM Bankruptcy Inevitable?

Markets in Asia are staging a peppy rebound rally on the assumption that US rescue of the Big Three is in the cards. No one seems to be taking seriously the possibility that bankruptcy is inevitable for GM and perhaps Chrysler. And were that to take place, opinion is sorely divided as to what that […]

Investors May Be Too Optimistic About Consumer Recovery

The most accurate banking analyst, Meredith Whitney, has warned that banks are likely to continue to restrict consumer credit, particularly if reforms to end “gotcha” practices, like universal default and double-cycle billing, are implemented. Credit card issuers shifted their model away from one where they earned a reasonable return from all types of customers – […]

"Deflation has become inevitable"

I’m reproducing the bulk of a very good (and possibly final) post by London Banker, a former central banker and securities regulator, that takes issue with some of the conventional wisdom surrounding the efforts to remedy our economic crisis via liberal applications of monetary easing and fiscal stimulus. I happen in general to be sympathetic […]

Many Auto Suppliers Already on the Brink

GM and Chrysler have been stretching payables, which means that many auto parts suppliers are in dire cash flow straits. And if auto parts makers fail, it doesn’t hurt just the Detroit car makers, but the foreign transplants as well. From the New York Times: With Congress failing to agree on a bailout for Detroit, […]

Auto Bailout Compromise Fails

We had doubted the earlier Bloomberg report claiming a deal had been cinched, since an hour later, there was no corroborating report. So now a rescue falls to Paulson. From the Washington Post: An eleventh-hour effort to salvage a proposed $14 billion rescue plan for the auto industry collapsed tonight as Republicans and Democrats failed […]

Auto Bailout Compromise Reportedly Moving Forward (Update: Further Progress))

Contrary to usual form, I’m putting the latest update first, but Bloomberg claims that the Senate Republicans and Democrats have reached a compromise on the auto bailout bill. However, the Detroit Free Press, in a story posted at almost the same time, say the Democrats say there is a deal, while the Republicans beg to […]

GM Hires Advisors to Prepare for Possible Bankruptcy Filing

The Wall Street Journal story on GM engaging a team of bankruptcy advisors stresses that this move is in part political, to underscore that the top US automaker really is at the end of its rope. Most observers assume that if Congress failed to authorize a rescue bill, that the Treasury would uses it TARP […]

Auto Rescue Bill Lacks Votes to Pass Senate

We appear to be at an impasse, Senate Republicans are unhappy with the provisions of the auto industry rescue bill that passed the House last night. While they are signalling that they would back legislation with a stronger role for the “car czar” and some also want a bondholder and UAW pension cram-down, the House […]

Finally, Some Semi-Official Interest in Trade Finance Woes

This blog, over the last couple of months, has intermittently pointed to the difficulties of obtaining trade finance (particularly letters of credit) as playing a role in the fall in international trade. Because L/Cs are a profitable backwater at most banks, serving smaller/midsized customers (big ones are more likely to deal with existing supply chains […]

Guest Post from Lune: The Automakers Take Their Turn at the Trough

After months of negotiations, Congress appears close to a deal on the bailout of the Big Three. While the final bill has not yet been formally introduced and made available for public inspection, major elements are emerging. Roll Call (subscription required), the New York Times, and Bloomberg are reporting the following details: 1. Size of […]

Questioning the Commodities Super Cycle

Conventional wisdom is that the plunge in commodities was due in part to the deflating of a speculative bubble, the balance the result of the nasty contraction now in full force. Once things recover, basic materials should enjoy a strong rebound as China and other emerging markets get back on the growth path. Comparisons to […]

China’s Exports Fell in November

Further signs that the Chinese economy is in the throes of a serious downturn. From Bloomberg: China’s exports shrank last month and industrial-production growth cooled, Fan Gang, an adviser to the People’s Bank of China, said today. “Things are not so good,” Fan said at a forum in Beijing. “November figures will come out soon, […]

Japan Slowdown Exceeds Expectations

The Nikkei and Topix are marginally in positive territory as of this writing (the Nikkei up a bare five points) retracing earlier gains. The proximate cause appears to be a downbeat revised GDP report. Stocks initially appeared to shrug off the bad news, taking momentum from the Euro/US rally, but upon reflection, have (for the […]

Auto Industry Duress to Take Toll, Worsen Unemployment

Be careful what you wish for. Even a successful auto industry restructuring will involve substantial headcount cuts, deepening the recession underway. A Bloomberg story tallies the likely damage; While the loans may spare General Motors Corp., Ford Motor Co. and Chrysler LLC from collapse, shrinking their workforces would sap an already weak economy, said Paul […]