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- Next Greek package: Dangers for the EZ | vox
Wow! Greece needs help. It needs much more help than it has received so far. It looks impossible to many Germans, but it will cost the whole European economy much more later if they don't act aggressively soon.
It does not take a math genius to observe that its economic situation has worsened since Greece entered into Troika programmes. The economic situation is horrible:
- GDP has plummeted, and continues to contract to a total of 30% over the last six years of deepening depression (see the figure below).
- The European Commission forecasted Greek growth of -4.1% for 2013, but it has been -5.5% so far this year according to the IMF.
- The unemployment rate stands at 27%;
- Youth unemployment is 57% (yes, that's fifty-seven, not 5.7).
The financial situation is almost as bad:
- At the end of 2009, on the eve on the crisis, Greek gross public debt stood at 130% of GDP, now it is 175%.
- Bank deposits have fallen by 30%, partly fleeing abroad, partly the result of strong dissaving by the population.
- Nonperforming loans to households and corporations have reached the amazing levels of 25% and 31%, respectively.
Debt restructuring can be achieved in many ways.
- Debts can be reduced explicitly through swaps or write-downs.
- They can be lengthened at favourable interest rates.
- They can be exchanged against shares or contingent bonds, as with the Brady bonds successfully used in Latin America in the 1980s.
- They can be monetised.
Read the source article … http://www.voxeu.org/article/next-greek- package-dangers-ez
- U.K. Homebuilding Approvals Jump as Mortgage Market Revives – Bloomberg
Homes approved for construction in the U.K. rose 49 percent in the second quarter as government assistance boosted mortgage lending and building permits became easier to get.
Approvals climbed to 37,000 from the same period a year earlier, the Home Builders Federation said in a statement today. The total for the 12 months through June reached 156,608, a 34 percent increase from the lowest year-long period, which ended in September 2011.
The Bank of England's Funding for Lending Scheme has helped lower mortgage costs while Chancellor of the Exchequer George Osborne's Help to Buy program allows a home purchase with a deposit of as little as 5 percent of the property's value.
We shall see whether they create an unsustainable situation: a bubble.
- Shutdown vs. Default: The Relative Impact – NYTimes com
Not a good idea:
Some financial experts argue that a few missed payments that spurred immediate Congressional action to lift the ceiling might not be so bad. But many, many others foresee a financial tsunami that would raise the country's borrowing costs, send investors scrambling for safety and deeply injure the United States and global economy.
… it would raise the United States' borrowing costs, with investors demanding more in exchange for their cash. How much more, we do not know. But a 0.5 percentage point increase in Treasury rates — from 3 percent to 3.5 percent, for instance — would eventually cost about $75 billion a year.
That would be bad enough. But the related costs to the economy would be far, far worse. The price tag on a huge range of other debt products is benchmarked to the cost of Treasuries. That means a spike in the federal government's borrowing costs would translate into pricier mortgages, car loans and corporate borrowing costs. And that means a slower recovery.
Read the source article … http://economix.blogs.nytimes.com/2013/0 9/23/shutdown-vs-default-the-relative-im pact/
- Austerity, Not Uncertainty, Is the Scary Part of Fiscal Showdowns | Economic Policy Institute
Why don't more people know this? Whose failing to educate the people in general about it? Is it really helping anyone to keep the people in the dark about it? What are your thoughts?
By Josh Bivens …far too many people get the story wrong about how these annual fiscal dramas have slowed recovery. In short, it's not that they introduce damaging "uncertainty." Rather, it's that they have led to smaller budget deficits, which have sucked purchasing power out of an economy that remains severely demand-constrained.
Read the source article … http://www.epi.org/blog/austerity-uncert ainty-scary-part-fiscal/
- Calculated Risk: MBA: Mortgage Applications Increase in Latest Weekly Survey, HARP Refinance Share Increases
No surprise here:
By Bill McBride … The refinance index increased partially because of more HARP refinance activity. I expect to see even more HARP activity soon.
We have avoided a double-dip. Austerity (including premature tapering) would cause another recession (if we're not still in one by some definitions) nearly instantly.
Read the source article … http://www.calculatedriskblog.com/2013/0 9/mba-mortgage-applications-increase-in_ 25.html
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