As the Economy Crumbles #7
As the Economy Crumbles features selected news summaries with links to further information about the lousy economic trends affecting many of us. The rose-colored rhetoric, hype and spin from economists, bureaucrats, PR flacks and analysts emanating from Wall Street and the financial media requires a skeptical mind and a well-functioning bullshit detector.
1. Running on Empty
2. New World Disorder
3. Burning Down the House
4. Rank & File Blues
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1. RUNNING ON EMPTY
End Game for the Industrial Era?
Roughly three-quarters of the world’s crucial remaining petroleum reserves lie within the borders of predominantly Muslim nations of the Middle East and Central Asia – nations that, for historical, geographic, and political reasons, were unable to develop large-scale industrial-military economies of their own and that have, throughout the past century, mainly served as pawns of the Great Powers (Britain, the US, and the former USSR).
FROM: MuseLetter, Feb 2003 issue
Million-barrel shortfall looms
THE world faces a shortfall in oil later this month if war breaks out soon, an energy watchdog warned yesterday. The shortfall could amount to nearly a million barrels of oil a day, said the International Energy Agency (IEA).
FROM: Business Times (Singapore), 14 Mar
Yamani fears war could cut off Iraqi oil forever
Oil prices could race to well over $50 per barrel and "ruin" the world economy if Iraqi crude output is severely hit by a US military strike, former Saudi oil minister Sheikh Ahmed Zaki Yamani said in London yesterday.
FROM: The Guardian, 15 Mar
IEA: Oil Markets Are Tight, With Little Room to Offset a Wartime Halt in Supplies From Iraq
A surge in world oil output last month has left producer countries with too little spare capacity to fully offset a wartime halt in supplies from Iraq, the International Energy Agency warned Wednesday. ... International oil markets are "running on empty" as war clouds gather again in the Gulf, the agency said in its monthly oil market report. "A further supply disruption would tax a system operating at close to capacity," the report said.
FROM: Associated Press, 13 Mar
OPEC unlikely to cover shortfall in crude from Iraq and Kuwait, oil minister says
If war erupts in the Persian Gulf, OPEC will be hard-pressed to boost its oil production further to cover a simultaneous shortfall in crude exports from Iraq and northern Kuwait, an oil minister from one of the group's key members said Monday.
FROM: Associated Press, 10 Mar
2. NEW WORLD DISORDER
World Creating Food Bubble Economy Based on Unsustainable Use of Water
As world water demand has tripled over the last half-century, it has exceeded the sustainable yield of aquifers in scores of countries, leading to falling water tables. In effect, governments are satisfying the growing demand for food by overpumping groundwater, a measure that virtually assures a drop in food production when the aquifer is depleted. Knowingly or not, governments are creating a "food bubble" economy.
FROM: Earth Policy Institute, 13 Mar
Economy on edge of recession cliff
The past eight days have seen publication of disappointing, recession-like data, proving beyond a doubt that the U.S. economy has slowed sharply in recent weeks.
FROM: MSNBC, 14 Mar
Economy May Be Near New Recession
The U.S economy is increasingly vulnerable to threats like the current spike in oil prices and could, in the worst case scenario, be on the verge of heading back into recession, a report said on Friday. The Economic Cycle Research Institute said its weekly index fell to a nine-week low due to worries about war and spending. ... "This week we see an increasingly fragile economy that is at a tipping point," ECRI research director Anirvan Banerji told Reuters. "Depending on the course of oil prices and geopolitical events, we could be tipped into a new recession."
FROM: Reuters, 14 Mar
Markets threatened by ‘new world disorder’
Global stock markets will slump further into turmoil if there is a war on Iraq without a clear United Nations mandate, the City is warning. Bond and stock traders fear action by the United States and Britain without backing this week from the UN Security Council could lead to economic and financial disruption around the world. 'The political damage could be massive - globally, regionally, between and within nations - new world disorder,' said Mark Cliffe, chief economist at ING Financial markets. 'This would imply greater postwar instability, heightened terrorist risks and collateral damage to economic relations.'
FROM: The Observer, 9 Mar
The United States hasn't been this underwater since the '80s. Could it bring on another recession?
The twin terrors of the 1980s, the U.S. deficits in trade and the federal budget, are nearing record highs again. While that could spell bad news for the U.S. economy -- especially if overseas investors flee U.S. assets and cause an '80s-style plunge in the dollar -- most analysts say that's not the most likely scenario. ... In 2003, the picture is likely to get worse. Government spending -- on war and rebuilding in Iraq, homeland security, tax cuts or other measures meant to goose the moribund economy -- will create the biggest budget deficit in U.S. history. Together with a current account deficit that seems unlikely to fall much, the "twin deficits" could well become the biggest ever relative to the nation's $10 trillion economy.
FROM: CNN Money, 11 Mar
Digging the Deficit Hole
The deficit numbers grow ever grimmer. The Congressional Budget Office on Friday put out a new estimate for this fiscal year in which the projected deficit is 24 percent higher than the CBO had anticipated two months ago, mostly owing to the faltering economy.
FROM: Washington Post, 10 Mar
Budget Gaps Could Derail the Economy
Ballooning state budget deficits -- not a war with Iraq -- pose the biggest threat to the fragile U.S. economy and could tip the nation back into recession, according to a forecast released on Wednesday. The widely watched survey issued by the Anderson School at the University of California, Los Angeles said government and consumer spending could be undermined as states look to slash spending to deal with budget shortfalls.
FROM: Reuters, 12 Mar
Derivatives pose “potentially lethal” threat to financial system
Warnings by America’s second richest man, Warren Buffett, the head of the investment company Berkshire Hathaway, of the potential dangers of financial derivatives to the global banking and financial system appear to have received speedy confirmation. The Financial Times reported on Monday that the credit rating agency Fitch had found in a new survey that “European regional banks have taken on a lot more risk than their public accounts show because of heavy exposure to credit derivatives.” Fitch said the banks, more than half of which were German, had increased their exposure to high-yielding derivatives to offset falling profits in their traditional areas of business lending. In his annual letter to shareholders last week, Buffet, who at the height of the share boom warned that the hi-tech market, measured by the Nasdaq index, was grossly overvalued, said that derivatives were “time bombs, both for the parties that deal in them and the economic system.” Posing a “mega-catastrophe risk,” derivatives were “financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”
FROM: World Socialist Web Site, 11 Mar
Economists Chop US 2003 GDP Forecast
A top panel of economists on Monday slashed its forecast for U.S. economic growth this year, saying the threat of war with Iraq was dampening consumer spending and business activity. The Blue Chip Economic Indicators panel of forecasters said it expected U.S. gross domestic product to expand at a rate of 2.6 percent in 2003. The prediction, made at the beginning of March, was down from a rate of 2.7 percent projected in February and 2.8 percent forecast in January.
FROM: Reuters, 10 Mar
3. BURNING DOWN THE HOUSE
Housing Pops – So Does the Economy?
A big question has been why, despite the stock market collapse, rising unemployment and general economic trauma, growth has still sputtered along. The answer is last year's rising housing prices and cashing out of equity in homes. But that may be ending. And if you understand how important that was for the economy, the end of the housing bubble could mean depression. ... an additional $700 billion pumped into the economy last year. And it still just limped along. Subtract the housing bubble and add in Iraq and this year could be an unimaginable disaster for the economy.
FROM: NathanNewman.org, 4 Mar
Fannie Mae vulnerable to shocks
An unexpected financial shock at either of the top U.S. home finance companies, Fannie Mae or Freddie Mac, could inflict heavy damage on the broader U.S. economy, St. Louis Federal Reserve Bank President William Poole said Monday.
FROM: Reuters, 10 Mar
Betting the house
Housing markets in several countries are looking decidedly bubbly.
FROM: The Economist, 6 Mar
4. RANK & FILE BLUES
Long-term jobless near peak of ’90 recession
The percentage of Americans who have been out of work for six months or longer reached the highest level in more than a decade last month and could soon exceed the peak of the 1990 recession. The steady rise in the number of long-term jobless, who made up 22.1% of all unemployed workers in February, according to the Labor Department, is a telling sign the economy is in worse shape than the headline 5.8% unemployment rate would suggest. Further, private-sector payrolls, measured on a year-over-year basis, have been falling for 20 months. That's the longest decline since the mid-1940s, according to the Economic Policy Institute, a think tank.
FROM: USA Today, 10 Mar
Jobless claims still high
New weekly claims for jobless benefits in the United States dipped last week, the government said Thursday, but stayed well above a benchmark level, as the labor market continued to suffer in a sluggish economy. The Labor Department said the number of Americans filing new claims for unemployment benefits fell to 420,000 in the week ended March 8 from a revised 435,000 the prior week. Economists, on average, expected 419,000 new claims, according to a Reuters poll. Any number above 400,000 is generally considered to indicate a deteriorating labor market.
FROM: CNN/Money, 13 Mar
US jobs jumping ship
As painful as February's big job cuts were, what's even more painful is that many of those jobs are never coming back, as U.S. employers in a wide range of industries move more and more jobs overseas. That's old news for manufacturers, who have been cutting jobs and moving them offshore for decades, but it's a trend that's also starting to gather steam in a number of service industries, especially information technology, formerly one of America's best-paying industries.
FROM: CNN/Money, 13 Mar
Americans going deeper in debt
Almost half of U.S. consumers are making only minimum payments -- or no payments at all -- on their credit cards, a new credit survey shows. And a similarly large volume -- some 44 percent -- are continuing to take on debt because they don't have enough cash to pay ongoing expenses. The dire outlook is part of the latest Cambridge Consumer Credit Index, a monthly gauge of consumer attitudes toward credit and a reflection of the nation's mounting individual debt. On Friday, the Federal Reserve released its monthly survey of consumer credit for January, showing consumer debt rose sharply at an annualized rate of 9.1 percent, the fastest pace since November of 2001. "What people don't know is that a large portion of the increase in debt was involuntary -- that 44 percent are going further into debt knowing in advance they won't be able to pay when the bills come in," said Jordan Goodman, spokesman for the index, an affiliate of the Cambridge Consumer Credit Counseling Corp. of Islandia, NY.
FROM: Sacramento Bee, 9 Mar
Politicians and Banks: How to Fuck Over the Jobless, the Disabled, the Sick and the Poor
The House Judiciary Committee on Wednesday approved legislation to make it tougher for people to dissolve their debts in bankruptcy court.
FROM: Associated Press, 13 Mar
AS THE ECONOMY CRUMBLES is compiled by Visualize Economic Collapse
Editor: Dean Thomas
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