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Economic bits
The document discusses several economic considerations around the world. It summarizes that Japan faces major economic challenges after the earthquake, including factory shutdowns and parts shortages that will impact the global economy. Several Middle Eastern countries are experiencing political unrest and uncertainty that threatens oil supply. The Eurozone faces sovereign debt crises as countries like Portugal and Spain struggle with austerity measures and high unemployment. The US faces its own economic challenges around housing, employment, and the risk of a government shutdown if budget issues are not resolved.
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Economic bits
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- 2. Japan, before andafter • Before – Debt over 200% GDP – But very positive balance of trade. Export economy • After – Hundreds of factories shut down – Rolling blackouts – 25% reduction of power to even major factories – Total recovery cost > $100 billion
- 3. Japan After • SupplyImplications – Many high tech and machined parts in short supply from Japan – Toyota reduces US production on part shortages • Major plant closings – Toyota and Nissan halt production in 20 factories – Sony suspended production in eight factories – Many others • Long term implications – Japan will survive • Sell off of assets may inflate its currency – But blow to world economy as Japan is #2 or #3 economy
- 4. Middle East, SaudiArabia • China passes US as main buyer of Saudi oil – Sign of decreasing US influence? • S.A. is a main buyer of US securities – Much more than China now • S.A. is best foreign customer of US arms industry – S.A. seeks to buy US warship • Internal protests – Bought off for now? – Saudi unrest could drive oil to $300 a barrel
- 7. Middle East, Libya •NATO airstrike kills rebels – NATO takes sweet time apologizing • Warships off Libyan coast • Overflights and bomb runs – Recent attacks damaged some oil fields • Thus far insistence of know ground troops – Though there are stories of military advisers among the rebels • Largest oil reserves in Africa and ninth largest reserves in the world
- 10. Middle East, Pakistan •CIA operative shoots two Pakistanis – Apparently in cold blood – Acquitted by US courts • Massive drone strikes in Pakistani terriroty in March • Pakistan put joint operations with US on hold • US threatens to without $1.5 billion in annual economic aid
- 11. Middle East, Syria •Syria is historically very anti-Israel – Obama administration has been seeking to change that • Syria reacts very agressively to internal unrest – Opens fire on thousands of protesters killing at least 61 – Scuttles hopes of Israel peace treaty or credibility – Adminstration claims that Jordan and Saudi Arabia are behind the protests
- 12. Middle East, Jordan •Jordan has long had a peace treaty with Israel • Recently protest within Jordan turned violent – Between differing ideological groups rather than from government violence. – 1 death and hundreds injured • Jordanian king is very pro-reform – But claims switch to constitutional monarchy would too seriously weaken the country at this time.
- 13. Eurozone • Portugal – Scheduled for bailout • About $120 billion – Government collapsed over latest austerity package • Spain – 30 of its banks just downgraded by Moody’s – Claims it does not and will not need bailouts • So did Portugal a year ago – Runs highest unemployment in developed world • Moody’s also threatens downgrade of British sovereign debt
- 14. Eurozone • Raises interestrates – 1 to 1.25 – First raising of rates in west since 2008 crisis – Inflation is increasing worry has commodity, energy and food prices are rising – Will have side effect of currency appreciation and depreciation of dollar • Which will raise the price of dollar denominated goods such as oil faster – Makes overall rise in rates much more likely
- 15. World Bank/IMF Concerns •Washington, next week • Japan quake and aftermath • Middle East unrest – Especially effect on oil supply/price – And everything that depends on it – Some signs of push for Middle East economic integration • Debt crises • Rapid oil price spike
- 16. US Defense, FEDactions • Defense spending – Total counting “overseas contingencies” - $700 billion – More than rest of world combined – Includes over 560 bases around the world • Likely major change in Federal Reserve policy by June – Fed buys over $100 billion of US Treasuries per month – Scheduled to end in June – May get QE3 to continue practice – Rest of world not so interested in US Treasuries
- 19. US – Housing •Housing – Millions of empty homes • Sitting on bank books – No longer counted against bank • Or soaked up into FEDs portfolio – Nearly 25% of all active non-defaulted mortgages in US are under water – It will take years before the housing market prices really stabilize much less recover.
- 21. US Employment • 8.8%official number is bogus – Does not count those that gave up – Or even those no longer eligible for benefits – Or those severely underemployed – Real number likely nearly double the official figure • Many who do go back to work do so for less money and/or in lower skilled job
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- 23. US Government Shutdown? •Failure to pass budget risked shutdown – Many services would have slowed • Or not paid for – Others would stop until budget resolved – 800000 fed employess would be furloughed • Interestingly each office picked which employees were non- essential. • Good information to have when we trim the fat! • Emergency agreement hammered out late Friday and signed Saturday – Only cuts $39 billion from the budget • Government debt will pass its $14.3 trillion current cap by about a month from now.
Editor's Notes
- #4 •❑www.guardian.co.uk—japan-economy-recession-earthquake-tsunamiwww.chinadaily.com.cn—content_12189197.htm
- #5 www.reuters.com—us-saudi-usa-arms-idUSTRE73787G20110408The oil-rich nation has successfully stifled domestic protests with a combination of billions of dollars in new jobs programs and an overwhelming police presence.But it has also taken unusually aggressive actions, including sending 2,000 troops into Bahrain, the tiny kingdom across a causeway from Saudi Arabia where protests by the Shiite minority have threatened the government.The Saudis are worried that the turmoil in the region could present an opening to Iran, a Shiite country that has formed alliances across the region with groups opposed by Saudi Arabia, including Hezbollah and Hamas. SINGAPORE, April 8 (Reuters) - U.S. oil prices CLc1 on Friday rose to a fresh 2-1/2-year high near $111 a barrel on supply worries tied to fighting in Libya and Middle East turmoil.
- #8 www.telegraph.co.uk—Libya-Live.html
- #9 http://www.huffingtonpost.com/2011/04/08/oil-prices-libya-fields-attacked_n_846553.htmlhttp://www.theatlantic.com/daily-dish/archive/2011/02/libyas-oil-production-falls-off-a-cliff/175349/
- #11 "It is very clear that intrusion into our territory is no longer acceptable and drone flights inside our territory is an intrusion," the military official said, suggesting the drones could be shot down. Civilians casualties inflame anti-American sentiment in Pakistan and bolster support for the militants.But a U.S. official familiar with the state of relations said the Pakistanis are making more effort to curb, restrict, or at least more intensely monitor, CIA activities. The revelation that armed CIA contractors such as Davis were working in Pakistan deeply angered and embarrassed the ISI."It is our land. We know how to tackle things. We will set the rules of the game. It is not Afghanistan," a senior Pakistani military official told Reuters. "They have to cease spying operations.”The strain in relations could hinder efforts by the Obama administration to get the annual $1.5 billion in economic assistance for Pakistan appropriated for the 2012 fiscal year through Congress, said Bruce Riedel, a former CIA Middle East expert who has advised the White House.
- #19 This chart shows US overall increase / decrease of domestic stock fund purchase versus S&$500. The significance is that most of the so-called recovery is from large institutional players, many flush with bailout and stimulus funds.
- #20 "Housing is a crippled market, one that acts like a gigantic millstone around the USEconomy. Housing prices will descend further in 2011, as the shadow inventory acts with powerful forces upon the Supply & Demand equation."
- #23 People are taking steep pay cuts, enduring lasting reductions in wages. People are taking jobs far below their skill levels.Between 2007 and 2009, more than half the full-time workers who lost jobs (held for at least three years) and found new jobs later reported wage declines, according to the USDept Labor.