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ECONOMY ADVANTAGE

Econ collapse by September


International Business Times 6/29 (MELÉNDEZ, Eleazar D; reporter for the International Business times, “Collapse Of Financial System Will Come In August, Maybe September: Market-Watchers,” June 29th, 2012; http://www.ibtimes.com/articles/357971/20120629/economy-collapse-prediction-august-september.htm)

Disappointed by the lack of aggressive action by the U.S. Federal Reserve at the meeting of its powerful rate-setting committee last week, and assuming a wait-and-see posture on results from this week's European summit, pessimistic market-watchers are turning once again to guessing when the clock atop the euro zone time-bomb will finally run to 0.¶ The consensus? The world economy has entered a final countdown with three months left, and investors should pencil in a collapse in either August or September. Citing a theory he has been espousing since 2010 that predicts "a future lack of policy flexibility from the monetary and fiscal side," Jim Reid, a strategist at Deutsche Bank, wrote a note Tuesday that gloated "it feels like Europe has proved us right."¶ "The U.S. has the ability to disprove the universal nature of our theory," Reid wrote, but "if this U.S. cycle is of completely average length as seen using the last 158 years of history (33 cycles), then the next recession should start by the end of August."¶ Follow us ¶ Reid is not the only one on Wall Street invoking history to predict a late-summer crisis. Since the employment data starting looking pear-shaped in April, economists and strategists have been quick to point out that 2012 is, in economic terms, a deja vú to 2011, when unexpectedly strong gains in manufacturing and employment during the first three months of the year fizzled coming in the summer.¶ Those holding on to the "mirror image" theory point out that, if the pattern continues, things will turn sour very quickly sometime in August or September. To wit, August 2011 was the month that brought the Standard and Poor's downgrade of the U.S. sovereign credit rating and accompanying volatility in the equity markets. It was also the month the European Central Bank acknowledged just how badly the situation was going in Europe, stepping in to buy sovereign bonds.¶ Last September was not much kinder to the global economy, bringing an intensification of the crisis that prompted the Fed to begin its "Operation Twist" program of monetary accommodation.¶ This year, pessimists are pointing to the next meeting of the Fed's rate-setting body, on Aug. 1; the next "progress report" on Greece by the institutions providing bailout monies to that country, also in August; or the September release of the results by auditors currently combing through the Spanish banking system, scheduled for September, as possible catalysts for the next crisis.¶ "Historically, August is a good month for a big European crisis," Simon Johnson, a prominent MIT economist, wrote in the New York Times' Economix blog on June 21.¶ Pundits and experts had been putting a deadline on the current crisis for weeks now. Earlier in June, for example, billionaire financier George Soros noted European leaders had a "three months' window" to resolve the political factors underlying the economic crisis in the Continent.

Econ collapse coming soon- banks, commodities, jobs, and Europe


Lendman 6/24 (Stephen, BA from Harvard University and MBA from Wharton, “Heading for Economic Collapse,” June 24, 2012; http://www.opednews.com/articles/Heading-for-Economic-Colla-by-Stephen-Lendman-120624-246.html)
Goldman Sachs "takes the cake," says Roberts. Its $44 trillion in derivatives speculation "is covered by only $19 billion in risk capital." In other words, its bets are "2,295 times larger than" cash on hand covering them. Derivatives bets by America's five largest banks exceed US GDP over 15-fold. Corrupt politicians allowing it assure eventual economic collapse.¶ Banking executives are serial liars. After Moody's downgrades, Citigroup and Bank of America officials said its action failed to reflect "safeguards" in place for years. Roberts destroyed their argument. So did Brown and other independent analysts.¶ Moody's and other rating agencies long ago lost credibility. They failed to acknowledge the sub-prime crisis until headlines revealed it. They bogusly call toxic assets safe in return for large fees and big profits. They're called lagging, not leading indicators. They're many days and dollars short. They're part of the dirty game that scams ordinary people.¶ RBC Capital Markets analyst Gerard Cassidy said Moody's "action is five years too late." Stanford University Professor Anat Admati called its downgrades bad news at a time bank "balance sheets are very fragile." Credit Agricole Securities analyst Mike Mayo said "America doesn't have a coherent solution to its banking crisis. Will actions like Moody's make it safer," he asked?¶ Saying the jury is still out, he doubts it. He also called Thursday's downgrades "unfortunate four years after (a) crisis" that's deepening, not improving. Evidence shows troubled global banking conditions. Central bank liquidity injections alone prevent collapse. They're running their course. Each new round helps less than previous ones. Ahead they'll be ineffective at a price too great to bear.¶ They've bailed out banks at the expense of economic growth. Recovery is more distant than earlier. Speculators alone profited. Good times they alone enjoyed are ending. Economic data show it. The closely watched Markit Eurozone purchasing managers composite index matched May's 46 read. It showed production contracting at the steepest level since June 2009.¶ Its flash measure dropped from 45.1 in May to 44.8 in June. It reflected a 37-month low. Markit's chief economist, Chris Williamson, said the flash reading "rounded off the weakest quarter for three years." China's flash PMI fell to 48.1 in June. Manufacturing contracted for the eighth consecutive month. The Fed slashed 2012 and 2013 US growth. Growing numbers of companies are cutting revenue and profit estimates. Germany's ZEW confidence index plunged to -16.9 from 10.8 in May. It's the largest monthly decline since the 1998 LTCM/Russian debt default crisis.¶ Moreover, its Ifo business confidence index hit a two-year low, and Italy's consumer confidence plunged to its lowest level since 1996. US initial jobless claims are rising. On June 21, they reached a 2012 high. Slowdown is gaining speed. Economic underpinnings look wobbly. In June alone, about 70% of economic reports showed weakness. ¶ The Fed's Operation Twist extension underwhelmed analysts. Officially it's called the Maturity Extension Program. It exchanges short-term debt for longer term holdings. In theory, it's to lower interest rates on 10-year Treasuries. In early June 22 trading, they stood at 1.63%, a near record low.¶ Housing remains in Depression. In the week ending June 15, mortgage purchase applications plunged 8.5%. Companies keep cutting planned capex expenditures. According to the latest Architectural Billings Index, commercial construction keeps contracting. Down 22% from their highs, commodity prices entered bear market territory. Oil prices hit an 18-month low. It signals weak demand. Brent fell 8% in one week. It's down 30% from its earlier high.¶ US factory output reached an 11-month low. Eurozone business activity dropped for the fifth straight month. At a 48.5 read in June, Germany's PMI shows contraction. The Fed's June Philadelphia manufacturing index contracted sharply to -16.6 after dropping 5.8 points in May.¶ The Jolts (Job Opening/Labor Turnover) survey showed job openings plunged 325,000 in May. It was the steepest drop since Lehman's September 2008 collapse. Only twice before in the past decade did it decline that much. All major categories were affected.¶ New hires decreased for the second straight month. They're lowest since July 2011. Again all categories showed weakness. Layoffs keep increasing. Cuts rose in three of the past four months. Data revisions are mostly negative. Peak levels were reached months ago. The full impact of how weak things are has yet to hit home. So-called recovery is an illusion, not reality. Europe's economic condition is grim. Bailing out Spain gets harder. Economist Jack Rasmus estimates its banks need at least $300 billion, not the publicly announced $78.75 billion. He added that hundreds of billions more are needed to rescue Spain's regional and central governments. At issue is who'll supply it. Sick economies can't solve their own problems. Eurozone ones look to Germany for help. It bears the greatest burden when it's economy is weakening. Italy's troubled economy combined with its 12-month 29% of GDP sovereign financing burden means it can't contribute much.¶ Europe's PIIGS (Portugal, Ireland, Italy, Greece and Spain) combined with troubled France have a combined public debt of 200% of Germany's GDP. Its own debt to GDP ratio is 80%. Simple math says it can't backstop the Eurozone. Bailouts can't continue forever. Debt burdened economies head for collapse. Adding more hastens the timeframe. ¶ Troubled Eurozone economies are so weak that cross-border bank-to-bank lending dried up. ECB chairman Mario Draghi calls inter-bank lending "dysfunctional." It's "not working," he said. As it goes, so does business lending altogether.¶ Rasmus said these developments show deepening crisis conditions. He blames wrongheaded policy measures. Austerity when stimulus is needed hit hard. Government revenues are down. So is consumption. Business spending keeps falling. Debt keeps rising. A looming train wreck approaches.

US not key


The Economist 7 (November 23, “America’s Vulnerable Economy”, pg. 13)

The best hope that global growth can stay strong lies instead with emerging economies. A decade ago, the thought that so much depended on these crisis-prone places would have been terrifying. Yet thanks largely to economic reforms, their annual growth rate has surged to around 7%. This year they will contribute half of the globe's GDP growth, measured at market exchange rates, over three times as much as America. In the past, emerging economies have often needed bailing out by the rich world. This time they could be the rescuers. Of course, a recession in America would reduce emerging economies' exports, but they are less vulnerable than they used to be. America's importance as an engine of global growth has been exaggerated. Since 2000 its share of world imports has dropped from 19% to 14%. Its vast current-account deficit has started to shrink, meaning that America is no longer pulling along the rest of the world. Yet growth in emerging economies has quickened, partly thanks to demand at home. In the first half of this year the increase in consumer spending (in actual dollar terms) in China and India added more to global GDP growth than that in America. Most emerging economies are in healthier shape than ever (see article). They are no longer financially dependent on the rest of the world, but have large foreign-exchange reserves—no less than three-quarters of the global total. Though there are some notable exceptions, most of them have small budget deficits (another change from the past), so they can boost spending to offset weaker exports if need be.

93 crises prove no war


Miller ‘00 (Morris, Economist, Adjunct Professor in the Faculty of Administration – University of Ottawa, Former Executive Director and Senior Economist – World Bank, “Poverty as a Cause of Wars?”, Interdisciplinary Science Reviews, Winter, p. 273)

The question may be reformulated. Do wars spring from a popular reaction to a sudden economic crisis that


exacerbates poverty and growing disparities in wealth and incomes? Perhaps one could argue, as some scholars do, that it is some dramatic event or sequence of such events leading to the exacerbation of poverty that, in turn, leads to this deplorable denouement. This exogenous factor might act as a catalyst for a violent reaction on the part of the people or on the part of the political leadership who would then possibly be tempted to seek a diversion by finding or, if need be, fabricating an enemy and setting in train the process leading to war. According to a study undertaken by Minxin Pei and Ariel Adesnik of the Carnegie Endowment for International Peace, there would not appear to be any merit in this hypothesis. After studying ninety-three episodes of economic crisis in twenty-two countries in Latin America and Asia in the years since the Second World War they concluded that:19 Much of the conventional wisdom about the political impact of economic crises may be wrong ... The severity of economic crisis – as measured in terms of inflation and negative growth - bore no relationship to the collapse of regimes ... (or, in democratic states, rarely) to an outbreak of violence ... In the cases of dictatorships and semidemocracies, the ruling elites responded to crises by increasing repression (thereby using one form of violence to abort another).



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