California Has 50 Days to Live

California Has 50 Days to Live
From The Business Insider, June 2, 2009:

California officially has a drop-dead date now. State Controller John Chiang told Arnold Schwarzenegger last night that the state has 50 days before it hits a financial meltdown. So in that time, it either needs a bailout, massive budget cuts, or a brand new bubble (green tech, internet, real estate, something like that).
The tax revenue numbers are not at all good for the green shoots crowd:
Reuters: Underscoring the severity of California's cash crisis, Controller John Chiang, who has previously warned the state's government risks running out of cash without a budget deal, said revenues in May fell by $1.14 billon, or 17.7 percent, from a year earlier.
Additionally, the revenues of the government of the most populous U.S. state fell short of estimates in Schwarzenegger's budget plan by $827 million, Chiang said.
Of all three outcomes, we'd say the federal bailout is the most likely, sinse surely a California collapse would kill any recovery.
Yesterday, the Economist's Free Exchange blog argued that, indeed, California is too big to fail. And though we're deeply uncomfortable with the concept, under the general notion of that idea, we'd say they're probably right:
California is the world's eighth largest economy, and it contributes roughly an eighth of total American output (and drives much of the output in surrounding states). It's very difficult to imagine the European Union standing by and allowing a budget crisis to ravage the German economy, or the IMF doing nothing at all to assist a Russia or a Brazil as they melted down.

Were California forced to make significant cuts to its spending, the ramifications could be quite serious. School systems and universities would be endangered (which would threaten the state's long-term economic prospects). Increases in crime, homelessness, and serious poverty would encourage residents to leave. Service cuts could threaten key industries. In short, the recession could grow far more serious in the state than it already is. That would threaten recovery across the nation.
See article..
http://finance.yahoo.com/tech-ticker/article/262207/California-Has-50-Days-to-Live?tickers=dia,spy,CB,NVC,IQC,NXC,BJZ?sec=topStories&pos=5&asset=&ccode=

Brazil has gone into recession after its economy contracted by 0.8% in the first three months of 2009.

Brazil's economy enters recession
Brazil has gone into recession after its economy contracted by 0.8% in the first three months of 2009.

(Source BBC)
The figure from statistics agency IBGE was still better than expected and a big improvement on the 3.8% decline in the last three months of 2008.

Most economists define a recession as being two consecutive quarters of negative growth.
Also on Tuesday, Romania went into recession following a decline of 4.6% in the first three months of the year.
It had contracted 3.4% in the last three months of 2008, according to the statistics agency Ins.
The International Monetary Fund, which has recently approved a 12.9bn euro ($18bn; £11.1bn) loan for Romania, predicts that its economy will contract by 4.1% in the whole of 2009.

'Momentum'

In Brazil, while household spending grew 0.7% and government spending expanded 0.6%, capital spending fell by 12.6% in a sign of companies cutting back on investment.
"The stronger first-quarter number should add some momentum to the view that the second-quarter recovery could be stronger than expected and growth may not be as bad for the whole year," said Paul Biszko from RBC Capital Markets.
"Obviously it's positive for the currency and I think it will lessen the need for the central bank to cut interest rates aggressively, moving forward."
Foreign investors have been putting money into Brazil recently in the hope that its economy will recover more quickly than other countries.
The Ibovespa stock market index has been reaching levels not seen since before the global financial crisis.
http://news.bbc.co.uk/2/hi/business/8091632.stm

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

Latin American stocks end week at 8-month highs as commodity prices boost recovery hopes

Latin American stocks end week at 8-month highs as commodity prices boost recovery hopes

(Souce Yahoo Finance)
MEXICO CITY (AP) -- Latin American stocks were mixed Friday but ended the week at eight-month highs as rising commodity prices boosted outlooks for some of the region's top exporters and suggested a deeper economic recovery.
Brazil's benchmark Ibovespa index gained 0.3 percent to 53,198, its highest close since Sept. 3, with shares in steel maker Gerdau SA climbing 1 percent. The Porto Alegre-based company comprises about 3.7 percent of the index.

Brazil's currency strengthened 2 percent to 1.97 reals to the U.S. dollar, ending the day below the 2-real mark for the first time since Oct. 1. The currency has gained about 28 percent since its three-year low in December as the government sold billions in dollar reserves to weaken demand for the greenback.

"The sustained appreciation trend is not only a reflection of Brazil's more optimistic outlook, but also is common to many other currencies in Latin America," Barclays Capital said in a note to investors. "As risk aversion dwindles, the dollar's role as a safe haven has tended to come down and we have seen a joint pickup in investments in emerging markets."

The real's outlook is so strong that Brazil's central bank has resumed buying dollars, and analysts say it may not let the dollar slip much below the 2-real mark in order to keep Brazilian exports more competitive. Agriculture Minister Reinhold Stephanes this week warned that a less than 2-real dollar may hurt Brazilian crop sales.
http://finance.yahoo.com/news/Latin-American-stocks-end-apf-15389363.html?.v=2