UK Markets dive as depression fears grow/Trouble Abroad Adds to Worries for U.S. Recovery

[Turborama]

Source: The Guardian/NYT

Bank of England warns of 'choppy recovery' as it cuts growth outlook amid slew of gloomy data

Katie Allen -

Fears that Britain could slip into a protracted depression intensified tonight as markets took fright at the US central bank's wary economic outlook, the Bank of England's own warnings on the UK, and a slew of gloomy data.

With businesses and households fretting over swingeing public sector spending cuts and shaky economic prospects around the world, the Bank cut its growth outlook and warned that Britain faces a long and "choppy recovery".

The move came as official figures showed a sharp rise in long-term unemployment and a smaller than expected fall in the number of people claiming jobless benefits.

The Bank's outlook intensified the debate over whether the economy is heading for a double-dip recession, or at least a period of depression. The National Institute of Economic and Social Research thinktank defines depression as a period when output is below its previous peak, and has predicted that in the UK's case this will last until 2012.

Read more: http://www.guardian.co.uk/business/2010/aug/11/market-fears-depression-double-dip

---

Trouble Abroad Adds to Worries for U.S. Recovery

NYT

By GRAHAM BOWLEY and CHRISTINE HAUSER

As economic recovery wavers in the United States, evidence is mounting that growth abroad is also slowing and may be unable to sustain the fragile rebound here.

Concerns about flagging global growth weighed heavily on Asian stocks Thursday, while European markets opened flat. Japan’s Nikkei index dropped more than 2 percent Thursday before recovering some of those losses, which came after steep declines Wednesday in American and European equities.

Those market drops followed a spate of developments signaling a slowing economy both in the United States and abroad. On Tuesday, Federal Reserve officials warned that the pace of recovery in the United States had slowed. Then on Wednesday came news from China suggesting its fast-growing economy was cooling. And later that day, the Bank of England reduced its already diminished forecast for the British economy.

Finally, new trade figures from Washington showed that American exports were faltering, a sign that hard-pressed domestic manufacturers could not rely on overseas markets to ease their pain at home.

Full article with embedded links: http://www.nytimes.com/2010/08/12/business/12markets.html?partner=rss&emc=rss&src=igw

[Downwinder]

1. "The basic problems the US economy is facing

- no jobs, no new business formation, no savings, under-investment, massive and growing debt - can't be solved by monetary policy," said Uwe Parpart, chief economist at Cantor Fitzgerald.

http://www.guardian.co.uk/business/2010/aug/12/world-stock-markets-on-high-alert

[Turborama]

2. Thanks for that link

Underneath the article there's some witty comments, in amongst all the doom and gloom...


Corinthian11
12 Aug 2010, 9:42AM

Anybody want to buy some pitchforks and torches?

Get in quick before the rush

-

frolix22
12 Aug 2010, 9:52AM

"Anybody want to buy some pitchforks and torches? Get in quick before the rush."

You trying to inflate a bubble in the pitchfork and torch markets? Last time I got into the pitchforks and torches market I got stabbed in the back and my fingers well and truly burnt.

[nyy1998]

3. lmao, the last thing we really need is the pitchfork/torch bubble bursting

That would truly devastate our economy.:+

[Lightning Count]

4. Whatever Germany did to get their economy back we should do immediately.

As in today.

[Tansy_Gold]

5. In a word

Manufacturing

[Lightning Count]

6. We are still the top manufacturing country in the world.

More is always better though. I know that they also issued a series of reforms that also seem to have helped.

[Tansy_Gold]

8. We have lost millions of manufacturing jobs and it is

manufacturing that CREATES wealth. Service jobs and FIRE jobs only move the money around. They do not create wealth.

The creation of wealth has shifted to low-wage labor markets like India, China, Vietnam, and so on, and we are moving our wealth into those economies.

Much of what we still manufacture here is military equipment.

Much of our consumer-goods manufacturing is not done here. And much of what we do "assemble" here uses parts and components made elsewhere.

Manufacturing is no longer the majority of our GDP. Much of our "wealth creation" -- as opposed to wealth creation -- over the past couple of decades has been due to inflation, particularly in housing values. Four years ago I was worth $350,000 because that's what the market value of my house was. today I'm worth about $200,000 and I haven't lost a penny.

TG, NTY

[Lightning Count]

9. If that is the case, then we will never be able to beat China

As the wisegeek points out.

http://www.wisegeek.com/what-are-the-top-manufacturing-countries.htm

Japan is cited as having the highest manufacturing per GDP and are currently having serious economic problems due to having too strong a currency.

[Yavin4]

11. China Is Tops in Mfg Strictly Because of their Currency

They enslave their own people through currency manipulation. They are the world's factory floor, yet most of their population lives in dire poverty.

When America dominated the world's mfg following WWII, we had the largest middle class in the history of mankind.

[dmallind]

18. By what measure is China tops in manufacturing?

It's certainly not value produced, where they lag the US by $400B a year.

[Yavin4]

22. Tops in Sheer Quantity of Produced Goods

Almost every consumer good made worldwide.

Also, the US is tops because of defense goods.

[dmallind]

25. Wrong on both counts

What percentage of US production do you think is defense?

[Tansy_Gold]

14. We don't have to "beat" China.

I reealize it's a difficult concept for most Americans, raised on the notion of market competitiveness, but there really doesn't have to be competition for everything. It's a matter of being self-sufficient, of manufacturing what we need and maybe a little for export and likewise importing a little.

Of course, that's pretty much a marxist concept, and marxism is verboten in any discussion of economics in this country. Most Americans -- including many here on DU -- do not have a freakin' clue what marxism really is.


TG, NTY

[Lightning Count]

19. That is not Marxism. That is provincialism. nt

[dmallind]

16. "Much" while technically correct is a small percentage of US manufacturing

Our manufacturing output is $1.8T annually. If we supplied every piece of military hardware in the world it would not make up a majority of that.

We generally make more higher value and more specialized stuff than other economies, but that's a relative term. We don't make much high labor content low value stiff because nobody can make a profit doing so on US wages. But all those little geegaws that say made in China on them? The ones people whine about saying we don't make "anything" any more? A lot of them made on US machines using US software in plants built with US heavy equipment and construction hardware.

[NickB79]

10. Yet 70% of the US economy is consumer and service-based

We may still be the top manufacturing country in the world (which I find hard to believe based on the sheer volume of Asian-made goods in every WalMart in this country), but the percentage is dropping every year while our population continues to grow.

[Jkid]

12. But what manufacturing jobs does the US has left?

[dmallind]

17. What you see on shelves is a small part of manufacturing

And is the lowest value added stuff too. The percentage incidentally has hardly moved, and that due only to a sudden shift to capitalism on the part of a command economy with almost a billion slave-level workers standing ready to comply.

I've worked for six different manufacturing companies in the last twenty years. All of them US based. All selling to other manufacturers. All with the US their largest customer market by far. All producing millions of units annually. Not one of them producing anything you would see marked for sale on a shelf.

[Lightning Count]

7. delete

duplicate

[dmallind]

15. Well that and seeing the value of their currency plummet making exports cheaper for buyers. NT

[mcollins]

13. Are you talking post 1945?

The US dumped tons of money into post war Europe. I am afraid there is no 'US' to bail 'us' out.

Post 1918 Germany went into crisis and recovered in the 1930 with the rise of nationalism. There was fighting in the streets between nationalists, socialists, ex-military, democrats and professional trouble makers. Out of that mess you saw the Spartacus groups (de-mobilized soldiers from the fronts who had no jobs to return to forming militias). One of those guys was Adolf Hitler.

There is a scary similarity between then and now. Say we do pull all the troops out of Afghanistan and Iraq, close all our bases around the world and have just a small defensive military of 200,000 troops. What are the other millions of out of work PTSD trained killers gonna do?
Are they going to claim we stabbed them in the back like those German soldiers did in 1918?

Interesting times we live in.

[Lightning Count]

20. I'm speaking of the recent reforms.

Within the past year. I wish I could remember more details. They seem to be the only country on the right track.

[mcollins]

21. I thought Germany had shifted to the right? nt

[Lightning Count]

23. I doubt that is the reason for their turn-a-round though. nt

[mcollins]

24. Which is why I was having trouble following the OP. nt