Russia's ailing economy. Red square blues

Russia's ailing economy. Red square blues
Russia’s failure to diversify away from oil should worry the Kremlin

(Source Economist.com)
NOT long ago, Russia proudly counted itself as one of the BRICs—with Brazil, India and China, the four emerging-market giants that were outgrowing the rich world. Yet it now makes more sense to talk of the BICs. With GDP shrinking by almost 10% in the year to the first quarter, Russia is in deep recession.

This is upsetting and worrying for the country’s political masters in the Kremlin. Upsetting because, as late as last autumn, they dismissed the economic crisis as a Western problem that would leave Russia unscathed. But the collapse in the oil markets has shown just how much Russia still depends on getting a good price for its natural resources. Neither President Vladimir Putin in 2000-08 nor (since last May) President Dmitry Medvedev has done anything like enough to diversify the economy—indeed, it depends more on oil and gas now than it did. The government has utterly failed to create a legal and political infrastructure to support business and enterprise.

The Kremlin may not care much about either of these shortcomings, especially now that oil once again costs $70 a barrel. Yet even at this price it must worry, for it can no longer honour its side of Mr Putin’s original bargain: that, in return for a guaranteed rise in living standards, ordinary Russians would accept curbs on the media, rigged elections and a slide into autocracy. The Russians are now lumbered with the second part of this deal without gaining the benefits of the first. Not since Mr Putin came to power have high inflation and shrinking GDP caused such a fall in real incomes (see article).
http://www.economist.com/opinion/displayStory.cfm?story_id=13782988&source=hptextfeature

Bernanke: Recovery will be slow

Bernanke: Recovery will be slow
(01:23) Report Reuters Video

June 3. - Federal Reserve chairman Ben Bernanke says the weak labor market and the continued tightness of credit will slow the economic recovery's pace.

Federal Reserve Chairman Ben Bernanke told lawmakers on Wednesday (June 3) that data shows the economic contraction may be slowing, but unemployment will continue to rise for some time."We expect to see some growth -- not robust growth -- but some positive growth later this year," Bernanke said.Bernanke said he still anticipates that the economy will start its recovery later this year, but cautioned that "we will have a weak labor market for some time."
NOTE: Original sound only, no reporter narration.

Volgens PWC kost de crisis de Nederlander 26.000 euro en verliezen huishoudens 325 miljard euro tot nu toe

Crisis kost Nederlander 26.000 euro
Huishoudens verliezen 325 Miljard Euro

Het vermogen van de Nederlander is sinds het begin van de financiële en economische crisis met gemiddeld 26.000 euro afgenomen. Dat blijkt uit cijfers van PricewaterhouseCoopers.
In totaal zijn huishoudens 325 miljard kwijtgeraakt. Dat bedrag komt overeen met 56 procent van het BBP, het Bruto Binnenlands Product.
Het verlies komt voornamelijk door de daling van de aandelenkoersen en de huizenprijzen en de lagere waarde van de pensioenopbouw.

N.B. Dit is nog maar een eerste berekening c.q. schatting. In Nederland is de recessie nog maar sinds een klein half jaar voelbaar of volgens het ('samen slaperige') Kabinet Balkenende herkenbaar. De totale schade kan pas in 2012/2013 berekend worden en zal minstens verdubbelen of misschien zelfs wel drie of vier maal zoveel worden.

Poll Finds New Optimism on Economy Since Inauguration

Poll Finds New Optimism on Economy Since Inauguration
By ADAM NAGOURNEY and MEGAN THEE-BRENAN Published: April 7, 2009
(New York Times Permalink)
President Obama is enjoying some success in rebuilding confidence in a troubled nation, according to the latest New York Times/CBS News poll.

From Bubble to Depression?

From Bubble to Depression?
(Source Wall Sreet Journal)
Bubbles have been frequent in economic history, and they occur in the laboratories of experimental economics under conditions which -- when first studied in the 1980s -- were considered so transparent that bubbles would not be observed.
We economists were wrong: Even when traders in an asset market know the value of the asset, bubbles form dependably. Bubbles can arise when some agents buy not on fundamental value, but on price trend or momentum. If momentum traders have more liquidity, they can sustain a bubble longer.
But what sparks bubbles? Why does one large asset bubble -- like our dot-com bubble -- do no damage to the financial system while another one leads to its collapse? Key characteristics of housing markets -- momentum trading, liquidity, price-tier movements, and high-margin purchases -- combine to provide a fairly complete, simple description of the housing bubble collapse, and how it engulfed the financial system and then the wider economy.
Read article and analysis...

http://online.wsj.com/article/SB123897612802791281.html

U.S. credit card defaults rise to 20 year-high

U.S. credit card defaults rise to 20 year-high
March 16, 2009 6:17 PM ET

NEW YORK (Reuters) - U.S. credit card defaults rose in February to their highest level in at least 20 years, with losses particularly severe at American Express Co and Citigroup amid a deepening recession.
AmEx, the largest U.S. charge card operator by sales volume, said its net charge-off rate -- debts companies believe they will never be able to collect -- rose to 8.70 percent in February from 8.30 percent in January.
The credit card company's shares wiped out early gains and ended down 3.3 percent as loan losses exceeded expectations. Moshe Orenbuch, an analyst at Credit Suisse, said American Express credit card losses were 10 basis points larger than forecast.

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20090316&id=9700831

The Chairman, Ben Bernanke Part 1 and 2 CBS Video

The Chairman Part 1

If you think your job is tough, consider Ben Bernanke`s. As Chairman of the Federal Reserve, the task of reviving the U.S. economy falls largely on his shoulders. Scott Pelley has the interview.



The Chairman Part 2

Federal Reserve Chairman Ben Bernanke candidly speaks to Scott Pelley about his personal life, as both visit his old high school and how the current financial crisis is affecting Main Street America.

Bernanke May Need to Ramp Up Fed’s Asset Purchases
March 17 (Bloomberg) -- Chairman Ben S. Bernanke and Federal Reserve policy makers may have to ramp up their purchases of mortgage securities and other assets after the economy and job market deteriorated further since they last met.
The Federal Open Market Committee, gathering today and tomorrow in Washington, needs to redouble its efforts after the central bank’s balance sheet shrank 17 percent from a $2.3 trillion December peak, Fed watchers said. The retreat came even as Bernanke acknowledged the chance that the unemployment rate will exceed 10 percent for the first time in a quarter century.
“It takes massive balance-sheet expansion to generate significant easing in financial conditions,” said Andrew Tilton, an economist at Goldman Sachs Group Inc. in New York who used to work at the Treasury. “More needs to be done.”
This week’s FOMC meeting could mark a shift toward more aggressive monetary expansion to fight deflation after demand waned for many of the Fed’s existing programs. One top consideration is an increase in the pace and size of a $600 billion program to buy bonds issued and backed by U.S. housing agencies such as Fannie Mae, analysts said.

Wen Jiabao is getting 'a little worried', the Chinese way of warning, a shot across the bow.

China's Wen Jiabao concerned about stability of U.S. debt

About half of China's $2-trillion foreign exchange reserves are invested in U.S. government bonds. 'We hope the United States honors its word and ensures the safety of Chinese assets,' Wen says.
March 14, 2009 (Source L.A.Times)
Reporting from Shanghai and Beijing -- Showing China's growing economic muscle, the nation's premier Friday expressed concerns about the stability of U.S. government bonds in Chinese hands and urged Washington to provide assurances to its largest foreign creditor.

"To be honest, we are a little bit worried," Wen Jiabao said at the closing news conference of China's annual legislative session. "We have loaned huge amounts of money to the United States, so of course, we have to be concerned. We hope the United States honors its word and ensures the safety of Chinese assets."

Analysts said that Wen's concerns were natural, given that China holds roughly $1 trillion of U.S. Treasury and other government-backed bonds, and that Washington is now looking to borrow record sums to try to dig out of the recession.
Still, his surprisingly candid comments reflected Beijing's increasing confidence and assertiveness in a global economy in which the communist nation is banker to the world's richest country.
His words would not have been lost on Washington. The White House is counting on China to continue holding American debt and making future purchases to support President Obama's $787-billion economic stimulus plan. China's big appetite for Treasury issues has helped keep U.S. interest rates low and thus supplied cheap credit for Americans to buy homes and other goods.
More to follow...

An economic Grand Bargain? Reuters Video , US President Barack Obama

An economic Grand Bargain?
(01:57) Report Reuters Video

Mar. 11 - As Finance Ministers from the G20 prepare to meet in London, some analysts hope the US and Europe can reach a kind of "grand bargain" on stimulus and regulation.
Deborah Lutterbeck reports.
SOUNDBITE:
# US President Barack Obama

Putin's Circus Lions Are Hungry -- and Angry

Putin's Circus Lions Are Hungry -- and Angry
02 March 2009
Putin's Circus Lions Are Hungry -- and Angry

(Source Moscow Times, by Dmitry Oreshkin)
For most countries of the world, the global crisis is strictly economic. But Russia is experiencing two crises simultaneously -- economic and political.
Economic downturns, including the current one, come and go, but Russia's political crisis will never go away. This is because Russia's political model has always been deeply grounded in the myth of monism: one monolithic state, one party, one ideology, one national leader and one people. Those who lived during the Soviet period remember the ubiquitous overblown slogans of "the unity of all Soviet nationalities" or "the unified Soviet nation."
Russia under Vladimir Putin's leadership is doomed by historical inertia and tradition to continue the Soviet monistic model. United Russia is Putin's modern version of the Soviet Union's "United U.S.S.R." -- that is, the Communist Party. Nonetheless, United Russia is not as unified as Putin would like. There is the United Russia faction loyal to State Duma Speaker Boris Gryzlov, and there is the one loyal to Mayor Yury Luzhkov. Luzhkov rigidly controls the party's membership in Moscow and won't let any federal functionaries get within a mile of holding power.
Of course, you don't have to look very hard to see how empty the concept of a "unified people" really is. A large percentage of the Russian population don't hide their opposition to being "unified" or placed on the same level as the people from the Caucasus. This leads to the country's social schizophrenia. On one hand, Russians passionately supported the Russia-Georgia war to protect their "fellow citizens" in South Ossetia, in accordance with myths of a unified, monolithic superpower. But on the other hand, if they happen to meet one of their repatriated fellow citizens at any one of Moscow's street markets, they are quick to complain that the capital is being invaded by the "dark-skinned scum" from the Caucasus. Read Article...
The article Part I and II is also on the well informed blog 'La Russophobe', http://larussophobe.wordpress.com/2009/03/03/part-i-putins-russia-is-collapsing/

http://www.themoscowtimes.com/article/1016/42/374919.htm

Unemployment hits 25-year high

Unemployment hits 25-year high Jobless rate hits 8.1% in February as a record-high 12.5 million people are unemployed.

NEW YORK (CNNMoney.com) -- The U.S. economy continued to hemorrhage jobs in February, bringing total job losses over the last six months to more than 3.3 million, and taking the unemployment rate to its highest level in 25 years.
The government reported Friday that employers slashed 651,000 jobs in February, down from a revised loss of 655,000 jobs in January. December's loss was also revised higher to a loss of 681,000 jobs, a 59-year high for losses in one month.
Economists surveyed by Briefing.com had forecast a loss of 650,000 jobs in February.
"The economy is headed south with a vengeance," said Kurt Karl, head of economic research for the U.S. unit of insurer Swiss Re.
The unemployment rate rose to 8.1% from 7.6% in January. It was the highest reading since December 1983 and higher than economists' projections of 7.9%.
Most workers who have jobs today are not old enough to have worked in a labor market this bad, while 13% of workers weren't even alive the last time unemployment was at this level.

http://money.cnn.com/2009/03/06/news/economy/jobs_february/index.htm?postversion=2009030610

152nd (Ordinary) Meeting of the OPEC Conference in Vienna, March 15

152nd (Ordinary) Meeting of the OPEC Conference

Next OPEC Meeting in Vienna
Sunday, 15 March 2009
Vienna, Austria
http://www.opec.org/home/

Organization of the Petroleum Exporting Countries
Monthly Oil Market Report, February 2009 (Download PDF)
The Monthly Oil Market Report contains a wealth of information, including developments in the world economy, data on oil prices, supply and demand, crude and product stocks and much more.

World Oil Outlook 2008 (Download PDF)
OPEC’s World Oil Outlook 2008 is part of the Organization’s commitment to market stability and a means to highlight and further understand many of the possible future challenges and opportunities that lie ahead of the oil industry. The publication is also a channel to encourage dialogue, cooperation and transparency between OPEC and others within the industry.

G20 London Summit. On the 2 April 2009 world leaders will gather in London to address the global financial crisis.

The London Summit (April 2, 2009)
On the 2 April 2009 world leaders will gather in London to address the global financial crisis.
The London Summit brings together leaders of the world’s advanced and emerging economies, including the G20, and representatives of international financial institutions to work cooperatively to restore stability and stimulate global economic growth.

The Summit aims to reach international agreement on:
* coordinated actions to revive the global economy - to stimulate growth and employment
* reforming and improving financial sectors and systems - to deliver progress on the Washington Action Plan to build better financial systems
* principles for reform of international financial institutions (IFIs) - the International Monetary Fund, Financial Stability Forum and World Bank.
http://www.londonsummit.gov.uk/en/

Global update - Global Crisis - London Summit
This website is a global hub for debate for the London Summit. As the Summit draws closer we're highlighting contributions to this global conversation from around the world - including in local languages.
Highlighting the debate in all countries that are significantly affected by this global crisis.

Brown's global call
(02:12) Report Reuters Video
Mar. 4 - UK Prime Minister Gordon Brown told a joint session of the US Congress that the economic crisis calls for a global response.

Brown will host a Group of 20 summit next month in London. He'll seek agreement on a coordinated plan to boost the global economy as it faces its worst crisis in decades. Deborah Lutterbeck reports from Washington. SOUNDBITES:
# Morris Goldstein of the Peterson Institute for International Economics
# UK Prime Minister Gordon Brown

Governments must maintain reforms for long-term growth during crisis, says OECD

Governments must maintain reforms for long-term growth during crisis, says OECD

Watch the webcast of the press conference

03/03/2009 - The current crisis offers governments the opportunity of combining emergency action with the important structural reforms needed to improve long-term growth and resilience in their economies, according to OECD’s latest Going for Growth.
"The debacle in financial markets does not call into question the beneficial effects of recommended reforms of product and labour markets”, said OECD Chief Economist Klaus Schmidt-Hebbel. Read his speech in full.
Going for Growth identifies key reforms to raise living standards in each OECD country. It points out that a number of policies, if carefully implemented, can both boost demand in the short term to soften the impact of the recession, and also raise economic growth over the long term.
http://interwebcast.oecd.org/conferences/1_403/en/event_medias/video.wvx

Economy Much Worse Than Roubini Predicted (Tech Ticker Video)

Even 'Dr. Doom' Is Scared: Economy Much Worse Than Roubini Predicted

A year ago Roubini was forecasting an 18-month recession with a U-shaped recovery; now, he's now expecting the downturn to last at least 24 months and possibly 36-months. He also sees rising risks of a Japanese-style L-shaped stagnation, i.e. a prolonged period with little or no economic growth.
"I was one of most bearish people [but] the economy has surprised the bears on the downside," says Roubini of NYU's Stern School and RGE Monitor. "What's happening in the world now is scary."

Of Recessions and Recoveries

Of Recessions and Recoveries
V-Shaped. L-Shaped. Shallow but long. Deep but short.
Economists use phrases like these to characterize recessions. Use this graphic to compare the current recession -- and the eventual recovery -- to other downturns and to put the current crisis in perspective. Data will be updated regularly over the next two years. (Interactive Grapic on WSJ online)

http://online.wsj.com/article/SB123574078772194361.html#articleTabs%3Dinteractive

Economy in Worst Fall Since '82
Output Sank 6.2% Last Quarter; Plunging Trade, Investment Signal Trouble Ahead

Economy Opinion: Climate of Change (New York Times)

Op-Ed Columnist
Climate of Change (New York Times Permalink)
By PAUL KRUGMAN Published: February 27, 2009
President Obama’s budget represents a huge break from policy trends. If he can get it through Congress, he will set America on a fundamentally new course.

Economic Scene

A Bold Plan Sweeps Away Reagan Ideas
(New York Times Permalink)

By DAVID LEONHARDT Published: February 27, 2009

The budget proposals seek to reverse the rapid increase in economic inequality over the last 30 years.

What is the lipstick indicator?

What is the lipstick indicator?

After World War I, Victorian-era prudishness began to melt away as adventurous girls dared to display more calf below their skirts. Flappers bedecked in headbands and short, shapeless dresses characterized the decadence of the Roaring '20s. But women's style shifted following the stock market crash in 1929, and during the Great Depression, hemlines dropped back down toward the floor.
In 1926, economist George Taylor noticed that fluctuating fashion. Like the stock market, the length of many women's dresses also fell with a peculiar synchronicity. Perhaps this hemline index, as Taylor coined it, reflected the grim economy's psychological effect on the public. It wasn't a time for rash celebration and risk taking; instead, the Great Depression called for a return to fiscal modesty. Read More...

http://money.howstuffworks.com/lipstick-indicator.htm

Official: Budget projects $1.75 trillion deficit

Official: Budget projects $1.75 trillion deficit
Thursday February 26, 6:43 am ET By Martin Crutsinger, AP Economics Writer
Official: Obama budget projects $1.75 trillion deficit, seeks Medicare cuts

WASHINGTON (AP) -- President Barack Obama is sending Congress a budget Thursday that projects the government's deficit for this year will soar to $1.75 trillion, reflecting efforts to pull the nation out of a deep recession and a severe financial crisis. A senior administration official told The Associated Press that Obama's $3 trillion-plus spending blueprint also asks Congress to raise taxes on the wealthy in 2011 and cut Medicare costs to provide health care for the uninsured.
The president's first budget also holds out the possibility of spending $250 billion more for additional financial industry rescue efforts on top of the $700 billion that Congress has already authorized, according to this official, who spoke on condition of anonymity before the formal release of the budget.
The official said the administration felt it would be prudent to ask for additional resources to deal with the financial crisis, the most severe to hit the country in seven decades. He called the request a "placeholder" in advance of a determination by the Treasury Department of what extra resources will actually be needed.
The spending blueprint Obama is sending Congress is a 140-page outline, with the complete details scheduled to come in mid- to late April, when the new administration sends up the massive budget books that will flesh out the plan.

http://biz.yahoo.com/ap/090226/obama_budget.html

The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble

The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble
Boomer wealth is evaporating
(CEPR) Center for Economic Policy and Research

This report builds upon previous CEPR projections to more accurately describe the current wealth prospects for the baby boom cohorts aged 45 to 54 and 55 to 64. The severity of the housing market meltdown, coupled with the recent collapse of the stock market, has had a severe negative impact on the wealth of these cohorts. Using data from the 2004 Survey of Consumer Finance and the November 2008 Case-Shiller 20 City Price Index, the authors create three possible scenarios for baby boomer wealth and find these households will enter retirement with little wealth beyond Social Security. For each cohort in 2004 and 2009, the paper analyzes net worth, financial assets, equity in real estate, percent of households in each cohort who will need cash to close on their primary residence, net worth of homeowners, net worth of non-homeowners, and the percent of homeowners who would need cash to close on their primary residence.

Download PDF: http://www.cepr.net/documents/publications/baby-boomer-wealth-2009-02.pdf

Plummeting house prices and investment losses will leave millions of baby boomers dependent on Social Security in their retirement
Press Release: February 25, 2009