Archive for March, 2013

UK Only Article: 
standard article

Issue: 

Heathrow: our solution

Fly Title: 

Canada’s economy

Rubric: 

Disappointing exports, stalled investment and fiscal austerity leave the overstretched consumer as Canada’s only hope for growth

Location: 

OTTAWA

Main image: 

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WHEN the world financial system collapsed in 2007, triggering a global recession, Canada recovered faster than any of the other members of the G7 group of large developed countries. Its banks remained solid, while low interest rates encouraged consumers to borrow and spend. But five years on, consumers are showing signs of flagging. The economy is set to expand by a paltry 1.6% this year. So the authorities are casting around for another source of growth. The trouble is they cannot seem to find one.
Government, both federal and provincial, is trying to curb deficits swollen by stimulus spending. Companies are restrained by uncertainty prompted by …

via Economic Crisis http://www.economist.com/news/americas/21574481-disappointing-exports-stalled-investment-and-fiscal-austerity-leave-overstretched-consumer?fsrc=rss

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UK Only Article: 
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Heathrow: our solution

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Charlemagne

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The euro zone’s exasperated north must do more than complain about the south’s troubles

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LAPLAND is just about as far from Cyprus as one can go in Europe. But on a spring day the sun reflected on an endless expanse of snow can be as bright as a Mediterranean beach. Russian pleasure-seekers and businessmen may flock to both countries. Yet in economic terms they are worlds apart. This week Cyprus became the fifth euro-zone country to negotiate a euro-zone bail-out; AAA-rated Finland, in its laconic way, is perhaps the most hardline of creditor states.
It is striking how the economies of EU countries on the Baltic Sea—from Scandinavia round to Germany, Poland and the ex-Soviet Baltic states—boast the union’s fastest-growing economies while many of those on the Mediterranean, from Greece to Spain, are shrinking fastest. The reasons are complex. For now, north and south are …

via Economic Crisis http://www.economist.com/news/europe/21574539-euro-zones-exasperated-north-must-do-more-complain-about-souths-troubles-north?fsrc=rss

UK Only Article: 
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Just when you thought it was safe…

Fly Title: 

Free exchange

Rubric: 

Demography may explain the weakness of America’s recovery

MILTON FRIEDMAN once compared the business cycle to an elastic string stretched on a board. How far the string is plucked determines how much it springs back; similarly, the depth of a recession decides the strength of recovery. America’s recent experience has not been kind to the plucking model. Although the recession was the deepest since the second world war, the recovery has been a disappointment. In the three years since the end of the recession in mid-2009, growth averaged 2.2%, barely half the 4.2% average of the seven previous recoveries.
In part, this is because recoveries from financial crises face greater difficulties. Consumers are too much in debt; businesses cannot or will not spend; a damaged banking system stifles credit. But in its annual economic report, issued on March 15th, Barack Obama’s Council of Economic Advisers argues that this is not the whole story. The plucking model …

via Economic Crisis http://www.economist.com/news/finance-and-economics/21573969-demography-may-explain-weakness-americas-recovery-where-did-everyone-go?fsrc=rss

A VERY serious crisis for Cyprus has not translated into panic on the continent itself. With markets behaving themselves, the world can go back to not caring about the other big crisis in Europe: the euro-zone recession that just won’t end.

According to the flash estimate of the euro zone’s economic activity in March, conditions deteriorated at a faster pace than before for the month. Hopes that the moderation in the economy’s contraction from the fourth quarter of last year to the first quarter of this year would continue seem to be fading. Both service-sector and manufacturing activity did worse in March relative to February. As you can see in the chart above, the rum performance was broad based. German economic growth was only barely positive for the month. An encouraging slowdown in the pace of contraction across most of the euro zone stalled out. And the French economy seems to be imploding; the pace of contraction in France was its lowest since early 2009, when the entire world was in an economic tailspin. The figures are not encouraging.But so long as markets aren’t panicking, euro-area leaders seem reluctant to change course. That includes a European Central Bank facing sub-2% inflation in an economy that hasn’t grown in over a year. And so we all sit and wait, for things to get so bad that they can’t get any worse, or for euro leaders to come to their senses, or …

via Economic Crisis http://www.economist.com/blogs/freeexchange/2013/03/euro-crisis-1?fsrc=rss

THE Federal Open Market Committee concluded its two-day meeting today with a nothing-burger of a statement. Very little changed in its wording on the state of the economy, and both asset purchases and interest-rate guidance remain as they were before. Things continue on as they have. New economic projections released with the statement suggest the Fed expects a bit less output growth and a bit less inflation than it previously did over the next few years, with the unemployment moving toward its long run range (between 5.2% and 6.0%) a little bit faster. Nothing to see here.That’s a problem. It’s easy to lose perspective on the state of the labour market, given that our expectations slowly adjust over time and that relative to other large economies America doesn’t look so bad. But the recovery is nearly four years old, and the unemployment rate remains well above the pre-recession level. And the Fed doesn’t anticipate unemployment returning to its natural level until 2015 at the earliest. It should go without saying that seven full years with unemployment above normal is a sign of a pretty lousy monetary-policy performance.A good part of the explanation for that miserable showing can be summed up in three words: zero lower bound (ZLB). Since December of 2008, when the Fed cut the fed funds rate target to roughly zero, the FOMC has been scrapping to try and boost recovery …

via Economic Crisis http://www.economist.com/blogs/freeexchange/2013/03/monetary-policy-2?fsrc=rss

Stockmarkets

Posted: March 15, 2013 in economy
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UK Only Article: 
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Issue: 

The America that works

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After more than five years of financial turmoil, some stockmarkets are back to, or close to, their pre-crisis levels. Stockmarkets rose until mid-to-late 2007, and even into 2008, before the severity of the financial crisis hit them; their troughs were in early 2009. Last week the Dow Jones Industrial Average surpassed its previous peak (though it is still around 7% off once inflation is taken into account). The S&P 500 and Germany’s DAX are expected to reach all-time highs soon. The FTSE 100 is near its 2007 peak, which was only 3% shy of its record high in December 1999. Not all stockmarkets have recovered to this degree. Greece’s Athex composite index is still more than 80% below its peak in October 2007.

Article body images: 

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Published: 

20130316

Source: 

The Economist Newspaper

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via Economic Crisis http://www.economist.com/news/economic-and-financial-indicators/21573571-stockmarkets?fsrc=rss

NEIL IRWIN (it’s Neil Irwin day!) recently discussed Paul Ryan’s views of potential inflation in America:Unless we change course, we will have a debt crisis. Pressed for cash, the government will take the easy way out: It will crank up the printing presses. The final stage of this intergenerational theft will be the debasement of our currency. Government will cheat us of our just rewards. Our finances will collapse. The economy will stall. The safety net will unravel. And the most vulnerable will suffer.As my colleague points out, Mr Irwin essentially writes this off as a non-possibility. My colleague isn’t quite willing to do so. He says:The full story in the event of a hyperinflationary catastrophe is far too complex to predict, but it’s fun to think about how it might go. Here’s my very rudimentary sense of things. Why would America, if “pressed for cash”, as Mr Ryan puts it, start financing its spending through rapid inflation? Probably because the cost of issuing new debt (currently a relatively cheap option) had become too dear. But then the Treasury’s credit rating would tank even further, and the cost of borrowing would become really prohibitive, forcing the government to finance new spending mainly through new revenue. But runaway inflation would quickly kill the real value of any taxes collected, no matter how high rates are jacked up. So, assuming Americans won’t …

via Economic Crisis http://www.economist.com/blogs/freeexchange/2013/03/hyperinflation?fsrc=rss