Azinonomics: Stagnation Nation?

 Very interesting post from Azizonomics :

It has long been my view that most of the seeds of the West’s ills were sown in the 1970s: that was the decade when Western consumerism began to be sated by Chinese imports, and Arab oil, and the decade when America cut the link between the dollar and gold sparked the first flames of the great Keynesian debasement bonfire. Richard Nixon and Henry Kissinger were the chief architects, of all three of these innovations, and the internationalisation of the dollar as the global reserve currency. As I have reported time and again, it was free lunch economics — but there ain’t no such thing.

In the 80′s, the United States’ trade balance flipped over and the U.S. became a net debtor, sending more and more dollars and debt out to the world as the free lunch got bigger and bigger. But something odd happened from the 70s onwards, as demonstrated by our graphic of the day (Image on the left).
Robert Reich claims that this stagnation began in 1979, but I think it’s obvious from the graph that the wage stagnation began earlier. Ever since Kissinger and Nixon’s innovations wages have been stagnant, while productivity, imports, corporate profits, government debt, the price of gold have all soared.

The reality is that ever since the 70s government policy, and the shape of global infrastructure and industry has favoured the rich over the poor, has favoured the monied over the moneyless, and favoured the powerful over the powerless.

That’s why get skyrocketing corporate profits. [...]

Bernanke at the Economic Club of Minnesota Luncheon

No commitments made. Chairman Ben S. Bernanke at the Economic Club of Minnesota Luncheon, Minneapolis, Minnesota:

The U.S. Economic Outlook

Good afternoon. I am delighted to be in the Twin Cities and would like to thank the Economic Club of Minnesota for inviting me to kick off its 2011-2012 speaker series. Today I will provide a brief overview of the U.S. economic outlook and conclude with a few thoughts on monetary policy and on the longer-term prospects for our economy.

EU's Barroso Says Euro Will Survive

Hmmm, more market manipulations in the works :

SYDNEY  (Dow Jones)-- European Commission  President  Jose Manuel Barroso  said Tuesday the future of the euro is safe and the single monetary bloc is meeting its sovereign debt crisis head on.

 The remarks came in a speech in  Sydney  as Barroso sought to shore up global confidence in the ailing euro bloc as markets continue to drive up borrowing costs for heavily indebted member states and as question marks are raised over a pledged new bailout for  Greece .

"Some like to ask these days: 'Will the euro and EU survive?' My plain and direct answer is, "Yes". You can bet your money on that and I guarantee you don't need to take insurance," said Barroso.

Dark View At An Italian Idyll

Villa d'Este isn't a bad place to spend a long weekend. Nestled on the banks of Lake Como in northern Italy , the splendid 16th-century former abode of European aristocratic families last week served as the idyllic backdrop for an annual symposium on the state of the global economy.

Part uber-networking event a la Davos and part platform for serious policy discussion, like the Federal Reserve's annual event in Jackson Hole, Wyo. , this gathering offers financial, political and economic leaders the chance to mingle behind closed doors (sessions are off the record) and exchange ideas.

Or should I say "idea"? As top central bankers such as Jean-Claude Trichet rubbed shoulders with economists like Nouriel Roubini while being brushed aside by the bodyguards of heads of state such as Israel's Shimon Peres , there was really only one thought making the rounds: Major Western economies and their capital markets are in deep trouble.

The contrast couldn't have been starker. Outside, the stunning beauty of verdant hills plunging into the lake. Inside, a bunch of powerful people getting gloomier and gloomier about the economic environment in the U.S. and Europe .

Events didn't help the mood. Friday's news that the U.S. had added precisely zero jobs in August landed with a thud on Villa d'. I saw superstar economists like Mr. Roubini and Martin Feldstein , the Harvard professor who has advised numerous U.S. presidents, revise their chances for another recession (upward) live, while the nonfarm payroll numbers were rolling in.

As for Europe , the sight of Mr. Trichet, the president of the European Central Bank , imploring the Italian government to stop squabbling and finally approve much-needed austerity measures didn't fill investors with confidence about the troubled euro zone. As the manager of a big hedge fund said while listening to the ECB chief's impassioned plea, "this screams 'short the euro' to me."

Global Regulators To Amend New Rules on Bank Liquidity

The farce continues :

DOW JONES NEWSWIRES

The Basel Committee on Banking Supervision is looking to soften the technical definitions in the "liquidity coverage ratio," which requires banks globally to hold enough assets to withstand a 30-day run on their funding, the Financial Times reported Monday citing people familiar with the discussions.

Banks have complained that the new Basel III standards on liquidity, to be implemented in 2015, would force them to sharply curtail lending to consumers and businesses, the newspaper said.

The planned changes would have the effect of reducing how much liquidity banks have to hold, and allow them to count more corporate and covered bonds toward the total, the people told the newspaper.

German Court's Bailout Ruling Looms

BERLIN  (Dow Jones)-- Europe's  bailouts of struggling euro-zone countries could face fresh obstacles on Wednesday, when  Germany's  constitutional court rules on the bailouts' legality.

The court's judgment, highly anticipated in European capitals and financial markets, will settle whether Chancellor  Angela Merkel's  government breached the German people's property rights in agreeing to the initial bailout of  Greece  in 2010.

The court also is due to rule on whether the German government should have asked the country's parliament before taking part in the bailouts of  Ireland  and  Portugal , as well as on the legality of the  European Central Bank's  purchases of government bonds.

September Could Be Worse Than August

From Market Oracle :

September notoriously often leaves markets in negative territory. Since the start of the Dow Jones Industrial Average in 1896, the index has lost an average of 1.07% in September, with a 0.71% average gain for all other months.

That's a 1.78-point spread - enough to be "statistically significant at the 95% confidence level," and be considered a genuine pattern by statisticians.
More discouraging, the market has performed especially poorly in past Septembers when the preceding months were weak.

And that's where we are today.

August took markets on a wild ride. The Standard & Poor's 500 Index fell 5.7% and the Dow 4.4%. The month included two of the top ten worst-performing Dow days ever - a 635-point drop on Aug. 8 and a 513-point drop on Aug. 4.

Now with investors digesting a slew of disappointing economic reports, and the U.S. Federal Reserve unlikely to announce any stimulus measures until the end of the month at the earliest, it doesn't look like this September will buck the trend.

In fact, it could easily be worse.