Stagflation May Return as Price Pressures Meet Credit Squeeze The world economy is facing the risk of both recession and faster inflation. Global growth this quarter and next may be the slowest in four years, while inflation might be the fastest in a decade, say economists at JPMorgan Chase & Co. The worst U.S. housing slump in 16 years, coupled with a tightening of credit by banks, has brought the world's largest economy "close to stall speed,'' according to former Federal Reserve Chairman Alan Greenspan. At the same time, rapid growth in China and other emerging markets is driving energy and food prices higher worldwide.
Consumer inflation accelerates in November Consumer inflation increased at the fastest pace in more than two years in November, and analysts said the report wouldn't sit well with the Federal Reserve. Consumer prices rose 0.8% in November, led by higher prices for gasoline, the Labor Department reported Friday. But energy wasn't the entire story. Prices of apparel, drugs, housing, and airline fares also spiked. As a result, core inflation, which excludes food and energy prices, rose 0.3%, its biggest advance since January.
New York Fed Factory Index Falls to Lowest Since May Manufacturing in New York expanded this month at the weakest pace since May as orders slowed and companies cut inventories. The New York Federal Reserve Bank's general economic index fell to 10.3, lower than forecast, from 27.4 in November, the bank's Buffalo branch said today. Readings greater than zero signal expansion. The economy is cooling after accelerating in the third quarter as the housing-market recession and reduced access to credit hurt corporate and consumer spending. Export gains alone won't be enough to make up for slowing domestic demand, economists said.
Rupert Murdoch Sees Recession, 5 Years of Real Estate Woes Rupert Murdoch, media tycoon and new owner of the Wall Street Journal, predicts that the U.S. faces a recession that will hit the overall economy and could undermine real estate for five or six years. Appearing on Fox News' "Your World with Neil Cavuto," Murdoch admitted that he’s worried about the economy. "I think we are in for a recession, probably. How bad it will be, I don't know. But I think there's a lot more bad news to come ...”
Central Banks Activate Liquidity Plan LONDON -- Investors buffeted by the credit crisis will enjoy no pre-Christmas lull as central banks began putting a pump-priming plan into action on Monday while critical results from major American banks loom later in the week. The Swiss National Bank offered up to $4 billion in short-term funds at a discount to the official U.S. Federal Reserve rate as part of a concerted effort to ease strains on the interbank lending market. Jim Rogers: ‘Bernanke is an Idiot’ Jim Rogers, co-founder with George Soros of the Quantum Fund, readily admits he’s a "dollar bear looking for a big rally” so he can sell. "The U.S. dollar is not an asset I want to hold over the next 10, 15, 20 years. We have an idiot running the central bank right now who knows nothing about currency, history or the markets,” the commodities investment guru told Forbes Magazine, referring to Fed Chairman Ben Bernanke.
Subprime dampens festive holiday spirit Hong Kong, China creating their own toxic property debt? HONG KONG (MarketWatch) -- It may be the season of office holiday parties and long lunches, but investors in Hong Kong and China have been warned to be alert for a sobering subprime chill. And festive spirits in the mainland markets could be in short supply with renewed speculation Beijing might be about to unveil another rate hike, never mind most people must work through the holidays. So far, Hong Kong and most of Asia have largely skirted the growing subprime crises. Not only is the property misery in the U.S. not our problem; it has even prompted some global funds to retarget funds to safer havens in Asia.
US Trade Deficit Declines Trade Deficit Declines to Lowest Point in 2 Years WASHINGTON (AP) -- The U.S. trade deficit declined during the third quarter to the lowest level in two years, raising hopes that the country's trade troubles could be easing. The Commerce Department reported Monday that the current account trade deficit fell by 5.5 percent to $178.5 billion in the July-September quarter. That was a better-than-expected showing and the smallest current account imbalance since a $173.4 billion deficit in the third quarter of 2005.
U.S. budget path 'unsustainable,' CBO say Gauging the long-term budget outlook carries a number of uncertainties. But if there's one sure thing it's that the federal budget is now on an "unsustainable path," congressional budget watchers warned on Thursday. "In the absence of significant changes in policy, rising costs for health care and the aging of the U.S. population will cause federal spending to grow rapidly" in coming years, the Congressional Budget Office warned in its annual long-term budget outlook. "If federal revenues as a share of gross domestic product remain at their current level, that rise in spending will eventually cause future budget deficits to become unsustainable," the nonpartisan agency said.
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