Now this is really reassuring the markets. The Euro is tanking!
We have seen the current pattern of behaviour before. We saw it in 2005-2007 and in 1999-2000. In both cases easy money conditions led to asset bubbles and reckless investor behaviour. Now we are seeing it again even more blatantly, egged on openly by the Fed. Without wanting to sound as over-confident as Ben Bernanke, I do not really have one scintilla of doubt that this will all end in tears - again. -- Albert Edwards, strategist, Societe Generale
from Zero Hedge:
Initial jobless claims came at 420K, a slight decline from the prior number of 423K, and as always woefully insufficient to actually start helping the unemployment rate. The prior was naturally revised higher, as we expected last week. On the other hand, continuing claims jumped from 4.086MM to 4.135MM on expectations of 4.115MM. NSA claims continued to be a notably higher than seasonal, and was at 486,284 this week. Most notably, people claiming benefits across all Unemployment Insurance Programs rose by a huge 893,959 in the week ended November 27 (of which 142K was in EUC and 182K was in extended claims)
Germany stiffened its opposition to expanding government-financed aid for debt-plagued euro nations, leaving the European Central Bank to shoulder the bulk of the burden of fighting the crisis.
With Chancellor Angela Merkel ruling out an increase in the euro area’s 750 billion-euro ($1 trillion) emergency fund, Germany yesterday put the spotlight on the ECB by endorsing a possible boost in its capital.
Discord between Merkel and ECB President Jean-Claude Trichet and Luxembourg Prime Minister Jean-Claude Juncker on the eve of a European Union summit evokes the tensions during the first phase of the debt crisis, when Germany held out for more than two months before consenting to a loan package for Greece.
“The consequence is a stalemate that leaves us with a familiar sense of déjà vu,” Ken Wattret, chief euro-area economist at BNP Paribas SA in London, said in a note to investors. “Market tensions are likely to resurface, as governments remain very publicly divided on the appropriate way forward.”
The euro weakened after Moody’s Investors Service said today it may cut Spain’s Aa1 credit rating. The country lost its top rating in September. The currency declined 0.4 percent to $1.3321 at 12:32 p.m. in Berlin.
The review is “not good for spreads or the euro,” Charles Diebel, head of market strategy at Lloyds TSB Corporate Bank in London, wrote in an e-mailed note.
Evidence that core countries in Europe are also at risk mounted yesterday when Standard & Poor’s cut the debt outlook for Belgium, which is stuck with a caretaker government six months after inconclusive elections. Belgian bonds fell, pushing the risk premium against comparable German notes up 2 basis points to 102 basis points.
“The main risk to economic recovery and the main risk to market performance in 2011 is the euro zone,” Andrew Popper, chief investment officer at SG Hambros Bank Ltd., said on Bloomberg Television’s “On The Move” with Francine Lacqua. “The euro zone will be the dominant problem.”
Merkel, in a speech laying out Germany’s position for the EU summit, said that “strict conditions” will be tied to aid for distressed countries under a planned permanent rescue system that leaders are set to discuss.
“For me it’s important that financial aid will, also in the future, be granted only as a last resort,” Merkel told lower-house lawmakers in Berlin today.
EU leaders start a two-day summit at 5 p.m. in Brussels tomorrow with the focus on the permanent crisis-fighting system to be launched in 2013.
Proposals facing German resistance include using EU money to buy distressed governments’ bonds directly or in the secondary market, boosting the fund’s size or redrafting guarantee rules to make more of the money available.
The need for a cash buffer to maintain an AAA credit rating puts the bailout fund’s effective lending capacity as low as 230 billion euros. Abandoning the top rating isn’t up for discussion, an EU official said yesterday.
Leaders of the 16 euro governments continue to be prodded by Trichet and the International Monetary Fund, contributor of 250 billion euros to the European rescue packages.
Trichet said euro-area governments need to put more money on the table to halt the crisis instead of depending on the central bank to soothe markets by buying the bonds of distressed governments.
“We’re calling for maximum flexibility and maximum capacity, quantitatively and qualitatively,” Trichet told reporters in Frankfurt in remarks released yesterday.
The ECB settled 2.667 billion euros of bond purchases last week, a 23-week high for a program without unanimous support on the bank’s council. With 72 billion euros of potentially loss- making bonds now on its books, the ECB may ask national central banks for more capital, an official with knowledge of the situation said yesterday.
The ECB’s other main crisis-fighting step is to provide unlimited liquidity for commercial banks, a policy it extended on Dec. 2 into the second quarter of 2011.
Germany, Europe’s largest economy and biggest contributor to aid packages for Greece and Ireland, is against tinkering with the 440 billion-euro European Financial Stability Facility, set up in May and underwritten by euro-area governments, a German official told reporters in Berlin yesterday.
Ireland on Nov. 28 borrowed 17.7 billion euros from the facility as part of an 85 billion-euro package to plug the fiscal holes from the bursting of its property bubble and near- collapse of its banking system.
“These instruments are far from exhausted,” European Commission President Jose Barroso told the European Parliament in Strasbourg, France yesterday. “If need be, they can be improved and adapted much more quickly than any alternative.”
IMF Managing Director Dominique Strauss-Kahn told euro-area finance ministers on Dec. 6 that they should disburse aid preemptively instead of waiting for a last-ditch request as happened with Ireland, an official familiar with the debate said yesterday.
In a side battle with a onetime ally, Merkel is also trying to muzzle proposals by Juncker for joint euro-region bond sales to create a more liquid market.
Juncker, head of the panel of euro-area finance ministers, called for European governments to pool borrowing for debt up to 40 percent of gross domestic product.
To provide an incentive to keep debt down, each country would have to finance borrowing above that limit on its own, incurring penalty interest rates, Juncker and Italian Finance Minister Giulio Tremonti proposed last week.
Merkel reiterated her opposition to euro-area bonds today, saying they “are not the answer” to Europe’s debt challenges.
So much for cheap technology!
* China controls 95 percent of global rare earth supplies
* China plans to raises fees on rare earth exports in 2011
* U.S. needs to boost domestic mining of rare earth metals
By Tom Doggett
WASHINGTON, Dec 15 (Reuters) - The United States risks major supply disruptions of rare earth metals used in clean energy products unless it diversifies its sources of the minerals, the Energy Department warns in a report due to be released later on Wednesday.
The United States and other countries are worried that China, which controls 97 percent of the world trade in rare earth metals, will use those supplies as a political weapon and cut back their export when it is in a dispute with another country or to grow China's clean energy technology sector.
"The availability of a number of these materials is at risk due to their location, vulnerability to supply disruptions and lack of suitable substitutes," U.S. Energy Secretary Steven Chu said in a report, due to be unveiled on Wednesday at a rare earth metals conference at the Center for Strategic and International Studies.
The release of the report coincides with trade talks in Washington between the United States and China. U.S. officials are expected to push Chinese officials to loosen export restraints on rare earth elements.
China, which said on Tuesday it planned to raise export taxes on some rare earth metals beginning next month, holds 37 percent of known rare metal reserves, the United States has 13 percent and the rest is in other countries.
The 17 rare earth metals, with exotic names like lanthanum and europium, form unusually strong lightweight materials and are used in a wide range of applications including high-tech and defense products, car engines and clean energy.
China has vowed that it would not use its dominance of rare earth supplies as a bargaining tool with foreign economies but it has cut its exports of the materials on environmental grounds.
U.S. Secretary of State Hillary Clinton raised U.S. concerns over Beijing's export policy with Chinese Foreign Minister Yang Jiechi during a visit to Asia at the end of October.
The Energy Department said in its report that it looked at the use of rare earths in wind turbines, electric vehicles, solar cells and energy efficient lighting because these clean technologies are expected to be deployed substantially on a global basis over the next 15 years, increasing demand for rare earth metals.
It said that in order to manage the risk of rare earth supply disruptions, the United States must increase its domestic extraction and processing of the materials.
There is only one U.S. rare earths producer, Molycorp Inc (MCP.N: Quote). It is the largest non-Chinese rare earths firm and the only rare earth oxide producer in the Western Hemisphere.
The report said the United States must work closely with its international partners, including Europe and Japan, to boost their production of the materials.
"Diversified global supply chains are essential," the report said.
However, mining rare earth metals can be very expensive and the lead times for new mining operations are long, ranging from two to 10 years.
"Whether a deposit can be mined economically will depend on a number of factors, including rare earth prices, regulatory requirements and improvements in extraction and separation technologies," the report said.
Recycling and reusing the rare earth metals could also significantly lower world demand for the materials.
Traditional energy sectors are also at risk from rare earth supply problems, the report said.
Rare earth ores are used in the fluid cracking catalysts that convert heavy oils in the refining process into more valuable gasoline, distillates and lighter products. Rare earth elements are used in catalysts to produce higher yields of more valuable products such as gasoline.
A disruption in rare earth supplies could have a noticeable impact on refinery yields and require oil refinery owners to make investments so the fluid cracking process will work without the rare earth materials, the department said.
The department said it will develop an updated strategy by the end of next year for increasing supplies of critical rare earth metals.
In other words, HALF of what we spend is DEBT! We're BORROWING half the budget! This is no longer merely unsustainable! It is unmanageable! And it is unimaginable! Based upon this figure, simple math ($585.7 x 6 to reach a full year) suggests a much larger deficit than what is mentioned in the below article:Fiscal 2011 deficit (Since Oct 1, two months): $290.8 billionSpending for fiscal 2011 : $585.7 billion (2 mos.)Debt as percentage of budget: 49.65%
Projected Fiscal 2011 deficit: $1.744 trillion