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[11-06-06]
EUR0PEAN UNION ECONOMIC FORECAST
Autumn
economic forecasts 2006-2008: solid growth and unemployment and deficits
falling
MWM comments on this forecast: This forecast
shows how robust the Eurasian economy is becoming even as the North American
economy winds down. No doubt a good portion of this strength is a
recycling of Bush's warbucks and petrodollars from Arab, Indian, and Chinese
demand for European products and services. See below the EU article
for the latest independent professional projections for the U.S.
This suggest strongly that the downturn in the U.S. will
continue to escalate during 2007 and will not reach its full strength until
the end of 2007. Apparently my projections in the "Coming Economic
Collapse of 2006" based on Cayce's 24/25 year cycle are almost a year
"early", although it is already clear that the economy is sliding as a
result of the bursting of the housing bubble. This suggests that the
projection of the Europeans for 2008 is too rosy. The American slide
is likely to bring a loss of at least one third of the value in equity
markets and depression of values of this magnitude this will bring
down economic optimism all over the planet. Thus 2008 is likely to see
a worldwide downturn begin as a reflection of a depression setting into the
U.S. PLEASE TAKE NOTE THAT ALL OF THIS IS WELL
WITHIN THE TIME-FRAME OF THE CAYCE PREDICTION.
______________________________________
Reference: IP/06/1508 Date: 06/11/2006
IP/06/1508 Brussels, 6 November 2006
http://europa.eu.int/rapid/pressReleasesAction.do?reference=IP/06/1508&format=HTML&aged=0&language=EN&guiLanguage=en
Autumn economic forecasts 2006-2008: solid growth and unemployment and
deficits falling
Economic growth in 2006 is set to reach 2.8% in the European Union and 2.6%
in the euro area, up from 1.7% and 1.4% in 2005, according to the
Commission’s autumn economic forecasts. The main impulses are robust growth
in domestic demand, especially investment, and sustained global growth.
The economic activity should ease somewhat in
2007 and 2008 reflecting the global outlook and, in particular, the slowdown
in the United States. Yet, GDP growth is projected to remain around
potential in the next two years (EU: 2.4% in both 2007 and 2008; euro area:
2.1% in 2007 and 2.2% in 2008). The EU as a whole is expected to create 7
million new jobs over the period 2006-2008 (5 million in the euro area).
This will help increase the employment rate from 63¾ % in 2005 to 65½ % in
2008 while reducing unemployment from a peak of more than 9% of the labour
force in 2004 to 7.3% in 2008 in the EU (7.4% in the euro area). Inflation
is also forecast to gradually decline to below the ECB's 2% inflation
threshold in the euro area in 2008.
“After years of disappointing results, the European Union economy in 2006
will be at its best since the beginning of the decade and is expected to
grow at around potential in 2007 and 2008. This shows the benefits of
economic reforms and budgetary consolidation in an environment of a strong
global economy and ought to encourage Member States to pursue on what is the
only road capable of delivering strong and better growth and more jobs” said
Joaquín Almunia, the Economic and Monetary Affairs Commissioner.
The Commission’s economic forecasts published today project that this year’s
economic growth will reach 2.8% in the EU and 2.6% in the euro area, i.e.
more than 1 percentage point (pp.) above last year’s growth and ½ pp higher
than forecast six months ago. Looking ahead, economic activity is projected
to moderate to 2.4% in both 2007 and 2008 in the EU and 2.1% in 2007 and
2.2% in 2008 in the euro area.
The upward revision of the forecasts follows the better-than-expected
outcome of the first half of 2006. Real GDP growth rose by 0.8%
quarter-on-quarter in the first quarter and by 0.9% in the second quarter of
2006 in both the EU and the euro area. This is the strongest pace of
expansion in six years.
Economic growth is being underpinned by robust domestic demand, in
particular investment that rose at an annualised rate of 6% in the first
half of 2006 and should remain solid in view of steady increases in capacity
utilisation, improved corporate balance sheets, benign financial conditions
and wide profit margins. Investment in equipment, especially, is set to grow
by more than 5% in 2006, before moderating somewhat in 2007-2008. Consumer
spending is expected to pick up more gradually, mirroring an improved labour
market. Exports, on the other side, continue to be supported by the strong
world economy. The more balanced growth pattern in the EU and the euro area
and the ongoing structural reforms should provide the basis for some
increase in potential growth, leading to a more sustained expansion than in
past upturns.
Unemployment, inflation and deficits: all on a downward path
Employment growth accelerated markedly in the first half of this year,
reflecting the beneficial effects of the structural reforms in both product
and labour markets as well as a renewed confidence in the economy. Overall,
the EU is expected to create 7 million new jobs over the period 2006-2008,
including 5 million in the euro area. This is almost twice the rate of job
creation that was seen in the euro area in the previous three-year period
and ¾ higher in the EU as a whole. As a result, the employment rate is
expected to reach 65½% in 2008, up from 63¾% in 2005.
After peaking at around 9% in 2004 in both EU and euro area areas, the
unemployment rate is set to decline in 2006 to around 8% in both areas and
to fall further to 7.3% in the EU and 7.4% in the euro area by 2008.
Labour productivity growth is also strengthening, which coupled with rising
investment and employment will have a beneficial impact. The long-term
decline in potential growth has been reversed since 2004 and trend growth is
projected to continue to rise gradually to 2.3% in 2008 in the EU (2.1% in
the euro area).
Inflation has remained remarkably stable this year at an
expected 2.2%, while it is set to rise from 2.2% to 2.3% in the EU. Core
inflation remains subdued, indicating that the oil price hikes have not had
any significant second-round effects. As the forecast assumes that such
effects will continue to be largely absent, headline inflation is projected
to stay just above 2% over the forecast period in both areas in 2007 and to
decline below 2% in 2008 in the euro area.
Public finances also turn out to be better than expected in the spring with
the average budget deficit seen at 2% of GDP this year (in both EU and euro
area), down from 2.3% in the EU and 2.4% in the euro area in 2005, mainly on
the back of higher-than-expected tax revenues. Despite this overall
improvement, five Member States, including two euro-area members, are still
running a deficit of more than 3% of GDP this year. Based on the available
2007 budgets and the usual assumption of no policy change thereafter, the
general government deficit is estimated to decline to 1.6% in 2007 and 1.4%
in 2008 in the EU (1.5% and 1.3% respectively in the euro area).
Global outlook remains bright, but risks persist
Growth in the EU is supported by a robust global economy. World growth is
projected at 5.1% this year, marginally below the record high attained in
2004. But it is likely to ease somewhat at the turn of this year,
predominantly due to the projected slowdown in the US, while other growth
poles will continue to expand at high rates. World GDP growth is projected
to moderate to just above 4½% in 2007-2008.
At the same time, the external sector also poses risks to the economic
outlook. A more marked slowdown in the US would have a negative impact on
growth. A disorderly unwinding of global current account imbalances also
remains a risk.
But there are also chances for a better-than-expected outcome. World trade
could prove more vibrant, especially in Asia. On the domestic side, the
labour market performance, in particular, could improve more strongly than
forecast, giving an extra boost to private consumption.
Finally, recent years have taught us that oil prices could go both ways.
Geopolitical tensions could lead to new oil price hikes, but a weaker demand
would put a downward pressure on prices that could, in turn, mitigate the
extent and spill-over impact of a US slowdown.
The full Commission autumn economic forecasts are available on the internet
at:
http://ec.europa.eu/economy_finance/about/activities/activities_keyindicatorsforecasts_en.htm
MWM: Now check out below this key indicator of the
sliding downturn in the U.S.
Can the Economy Survive the
Housing Bust?
Fortune on CNNMoney.com
By Jon Birger
Real estate downturns have a way of leading to recessions and stock market
slumps. So far the damage has been limited, but the numbers keep getting
worse, says Fortune's Jon Birger.
Tucked away in the briefcase of Liz Ann Sonders, chief investment strategist
at Charles Schwab & Co., is a chart so scary she's hesitant to show it to
investors. It plots the National Association of Home Builders' Housing
Market index - a monthly measure of builder confidence - against the
Standard & Poor's 500 stock market index, with a one-year lag.
 It turns out that the mood of builders is a terrific stock market
bellwether: The correlation between current builder confidence and future
stock market returns over the past ten years is downright unnerving.
Not only did the NAHB index presage the start of the post-1994 bull market
in stocks, but its decline starting in 1999 foreshadowed the equity market
collapse that came the following year. Builder confidence rebounded in
November 2001 - a year ahead of the stock market upswing that began in
October 2002.
Why is Sonders worried now? Just look at the chart. Over the past year, the
NAHB housing index plummeted 54 percent. Were stocks to follow suit, the S&P
- 1400 in late October - would be trading below 700 this time next year.
Sonders isn't predicting anything so apocalyptic, but she doesn't hide her
concern about housing and her pessimism about stocks.
"In terms of consumer spending, I don't think we've felt anywhere near the
brunt of all the adjustable-rate-mortgage resets and the massive increase in
defaults and foreclosures in states like California," she says. "Housing
downturns happen in a fairly slow-motion way, and I really think we're just
at the beginning of the impact on the market and the economy."
The latest omen: GDP grew at its slowest pace in three years in the third
quarter, hurt by the housing slump.
Such bearishness flies in the face of the euphoria now rampant on Wall
Street. The Dow Jones industrial average keeps hitting new highs, and the
S&P is a stone's throw away from its own record (although in
inflation-adjusted terms, they're still below their peaks).
Third-quarter earnings? One report seems better than the next, with key
companies like Google (92 percent profit growth), IBM (54 percent), and Bank
of America (41 percent) all posting stellar numbers.
"The effects of the housing correction will be entirely contained within the
housing sector," says Mike Englund, chief economist of Action Economics.
Corporate balance sheets are stronger than they've been in years, with U.S.
companies sitting on $600 billion in cash. Interest rates are stable, and
may decline. Falling energy prices are easing the burden on energy-intensive
industries like chemicals and airlines.
And as PNC chief investment strategist Jeff Kleintop points out, there have
been only two midterm election years since World War II when the stock
market did not stage a fourth-quarter rally. The bulls' bottom line: Housing
may be a risk factor, but there's too much other good news for it to be the
catalyst for a recession or stock market meltdown.
That may turn out to be wishful thinking. All the economic activity
generated by home sales - new mortgages, realtor fees, outlays to painters
and handymen, the inevitable shopping trips to Home Depot and Best Buy -
played a huge part in digging the economy out of a recession in 2001 and
2002. Given the importance of home sales on the way up, it may be
shortsighted to minimize their importance on the way down.
"The historical record is extremely negative in terms of what comes next,"
says economist Ed Leamer, director of the UCLA Anderson Forecast. "We've had
11 sharp declines in the housing market since World War II, including this
one. Eight of the last ten were followed by a recession."
For now, there's little hard evidence that the housing slowdown is dragging
down the economy. Construction materials like concrete, wallboard and
structural steel should be the canaries in the economic coal mine, yet their
prices keep climbing.
Construction-related employment has been rising too - up fractionally from
August to September and up 3 percent over the past 12 months, according to
the U.S. Bureau of Labor Statistics.
But folks in the trenches paint a much darker picture, lending credence to
the idea that we're living through the lag - the period before the realities
on the street show up in economists' spreadsheets.
MWM: Now go here for a geostrategic situational
analysis:
The Dollar's Full-System Meltdown
http://www.informationclearinghouse.info/article15440.htm
By Mike Whitney
MWM comments: some points in this article below are a
bit over-stated in my opinion but the overall logic of the situation outline
here is a reasonable assessment in the light of everything I know.
Essentially, during the year ahead there will be continued aggressive
pressure on the dollar. The Rockefeller Cabal will have its hands full
moving its bucks around to retain value. Some loss is inevitable.
Expect at least 10% but be prepared for 50%.
10/30/06 "Information
Clearing House" -- -- The U.S. Dollar is kaput. Confidence in the
currency is eroding by the day.
A report in The Sydney Morning Herald stated, “Australia’s Treasurer Peter
Costello has called on East Asia’s central bankers to ‘telegraph’ their
intentions to diversify out of American investments and ensure an ‘orderly
adjustment’….Central banks in China, Japan, Taiwan, South Korea, and Hong
Kong have channeled immense foreign reserves into American government bonds,
helping to prop up the US dollar and hold down interest rates,’ said
Costello, but ‘the strategy has changed.’”
Indeed, the strategy has changed. The world has come to its senses and is
moving away from the green slip of paper that is currently mired in $8.3
trillion of debt.
The central banks now want to reduce their USD reserves while trying to do
as little damage to their own economies as possible. That’ll be difficult.
If a sell-off ensues, it will start a stampede for the exits.
There’s little hope of an “orderly adjustment” as Costello opines; that’s
just false optimism. When the greenback begins listing; things will turn
helter-skelter quickly.
In September, we saw early signs that the dollar was in trouble. The trade
deficit registered at $70 billion but the Net Foreign Security Purchases (NFSP)
came in at a paltry $33 billion. That means that our main trading partners
are no longer buying back our debt which puts downward pressure on the
greenback. The Fed had two choices; either raise interest rates
substantially or let the currency fall. Given the tenuous condition of the
housing bubble and the proximity of the midterm elections, the Fed did
neither.
A month later, in October, the trade deficit hit $69.9 billion but, then,
without warning, a miracle occurred. The Net Foreign Security Purchases
skyrocketed to a “historic high” of $116.8 billion; covering both months’
shortfalls almost to the penny.
Coincidence?
Not likely. Either the skittish central banks decided to “stock up” on their
dollar-denominated investments or the Federal Reserve (and their
banking-buddies) is buying back its own debt to float us through the
elections.
This is exactly the kind of hanky-panky that people expected when Greenspan
stopped publishing the M-3 last March keeping the rest of us in the dark
about what was really going on with the money supply.
Are we supposed to believe that the skeptical central banks suddenly doubled
up on their T-Bills while they’re (publicly) moaning about the dollar’s
weakness and threatening to diversify?
That’s a stretch.
According to the Wall Street Journal the Chinese Central-bank governor Zhou
Xiaochuan stated unequivocally that “We think we’ve got enough.” The Chinese
presently have nearly $1 trillion in USD and US Treasuries.
“Enough”?
The United States runs a $200 billion per year trade deficit with China. If
they’ve “got enough” we’re dead-ducks. After all, it doesn’t take a sell-off
to kill the dollar, just unwillingness on the part of the main players to
stop purchasing at the same rate.
Of course, everyone in Washington already knew that doomsday was
approaching. That’s the way the system was designed from the very beginning.
It’s all part of the madcap scheme to “starve the beast” and transfer the
nation’s wealth to a handful of western plutocrats. That’s explains why the
Fed and the White House whirred along like two spokes on the same wheel;
every policy calculated to thrust the country headlong toward disaster.
The administration never created a funding mechanism for the $400 million
tax cuts or for the 35% expansion of the Federal government. Defense
spending increased by leaps and bounds as did the “no-bid” contracts for
friends of the Bush clan. At the same time, interest rates were lowered to
rock-bottom to put as much money as possible into the hands of people who
couldn’t meet the traditional criteria for a mortgage. And, if gluttonous
waste, reckless overspending and “Mickey Mouse” loans were not enough; the
Fed capped it off by doubling the money supply in 7 years; a surefire
prescription for hyper-inflation.
So, which one of these policies was not deliberate?
The financial crisis that we now face was created by design. It is intended
to destroy the labor movement, crush the middle class, quash Medicare,
Medicaid and Social Security, reduce our foreign debt by 50 or 60%, force a
restructuring of America’s debt, privatize all public assets and resources,
and create a new regime of austerity measures which will divert more wealth
to the banking and corporate establishments.
The avatars of neoliberalism invariably use crooked politicians to spawn
enormous “unsustainable” debt so that the nations’ riches can be transferred
to ruling elites. It works the same everywhere. It’s a form of corporate
colonization, only this time the victim is the good old USA.
“The Phase of Impact”
According to Richard Daughty in his prescient article “The Phase of Impact”
the Federal Reserve and the Treasury Dept have already manned the
battle-stations. Here’s an excerpt:
“Mr. Paulson, the Secretary of the Treasury, is, by virtue of his ascension
to the throne, now the head of the shadowy President’s Working Group of
Financial Markets (which was created by Presidential Order 12631) and he is
insisting that they meet more often, namely every 6 weeks!
This whole Working Group thing was originally set up as a fallback, ad-hoc,
if-then defense to deal with possible economic emergencies, but now they are
routinely meeting every 6 weeks. He has even ordered Jim Wilkinson, his
chief of staff, to ‘oversee the creation of a Treasury Command Center to
track markets world-wide and serve as an operations base in a crisis”! (Wall
Street Journal) World-wide!! The American government is moving to take
control of the world-wide economy as the result of an anticipated crisis?
Yikes!”
Daughty goes on to say: “So a lot of the hubbub is obviously being caused by
some approaching upheaval, perhaps reflected in something sent to me by Phil
S., which is the Global Europe Anticipation Bulletin No8 which reminded us
that last May they predicted that the economy would have a ‘phase of
acceleration’ that would begin in June, and it “would be spread out over a
period of a maximum of 6 months’, which it subsequently did. They said then,
and are saying again now, that a ‘phase of impact will begin in November
2006’, and that this impact phase would be the ‘explosive phase of the
crisis’.
This ‘phase of impact’ that is due to begin momentarily is, they explain, ‘a
period when a series of brutal crises starts affecting by contamination the
total system. This explosive phase of the crisis, which will last 6 months
to one year, will affect directly and very strongly financial players and
markets, the owners of investment schemes with fixed incomes in dollars,
pension funds and the strategic relations between the United States on the
one side, and Europe and Asia on the other.” (Richard Daughty; “The Phase of
Impact” Kitco.com)
Predictions, of course, are rarely reliable and Daughty’s scenario may be a
bit too apocalyptic for many. But if we accept the premise that the tax
cuts, the expansion of the federal government, the doubling of the money
supply, and the $10 trillion that was sluiced into the housing bubble were
not merely “honest mistakes” made by “supply side” enthusiasts; then we must
assume that this is all part of a loony plan to demolish the economic
foundation-blocks of the current system and remake society from the ground
up.
Domestically, that plan appears to involve the activation of the police
state.
In the last few weeks the Bush administration has passed the Military
Commissions Act of 2006 which allows the president to arrest and torture
whomever he chooses without charging him with a crime. Also, unbeknownst to
most Americans, Bush signed into law a provision which, according to Senator
Patrick Leahy, will allow the president to unilaterally declare martial law.
By changing The Insurrection Act, Bush has essentially overturned the Posse
Comitatus Act which bars the president from deploying troops with the United
States. The John Warner Defense Authorization Act of 2007 (as it is called)
also allows Bush to take control of the National Guard which has always been
under the purview of the state governors. Bush now has absolute power over
all armed troops within the country, a state of affairs which the
constitution purposely tried to prevent. The administration’s dream of
militarizing the country under the sole authority of the executive has now
been achieved although the public still has no idea that a coup that has
taken place.
Internationally, the falling dollar means that America’s debt will be
reduced proportionate to the percentage-loss of the dollar in relation to
other currencies. This is a great deal for the U.S. First the Fed prints
fiat money to buy valuable resources and manufactured goods and then it nabs
a discount by depreciating its currency. It’s a “win-win” situation for
Washington, although it will undoubtedly cheat unwitting foreign-creditors
out of their hard-earned profits. It’s doubtful that their interests will
weigh very heavily on the money-lenders at the US Treasury or the Federal
Reserve.
The dollar faces a second crisis at home which is bound to play out
throughout 2007. The $10 trillion dollar housing bubble is quickly losing
air causing a precipitous drop in GDP. The housing industry is seeing its
steepest decline in 30 years and home equity is beginning to shrivel.
Housing has been the one bright spot in an otherwise bleak economic
landscape. With the housing market slowing down and prices decreasing, the
$600 billion of consumer spending which was extracted in 2005 from home
equity will quickly evaporate triggering an overall slowdown in the economy.
(Consumer spending is 70% of GDP)
By the Fed’s own calculations; “The total amount of residential housing
wealth in the US just about doubled between 1999 and 2006 up from $10.4
trillion to $20.4 trillion. (“Times Online”) If these figures are accurate
than we can assume that much of America’s “perceived” growth has been
nothing more than the expansion of debt. In fact, that seems to be the case.
Wages have been stagnant since the 1970s, 3 million manufacturing jobs have
been outsourced, savings have shrunk to below 0%, and personal debt is
soaring. We have become an “asset-based” society and when the principle
asset begins to loose its value, we are in deep trouble. As housing prices
continue to decline through 2007 we can expect a full-blown recession. If
energy prices rear their ugly head again, (were they lowered for the
elections?) it will just be that much worse.
So, how will recession affect the dollar?
Capital has no loyalties. It follows the markets. When America’s bustling
consumer market stalls, we’ll undergo capital flight just like everywhere
else. The 3 million lost manufacturing jobs, the 200,000 lost high-paying
high-tech jobs, the tax incentives for major corporations doing business
outside the country; all signal that corporate America has already loaded
the boats and is headed for more promising markets in Asia and Europe. A
sluggish consumer market could further weaken the dollar and force Americans
to begin saving again but, (and here’s the surprising part) the
decision-makers at the Federal Reserve and the Treasury Dept don’t really
care if the face-value of the greenback goes down anyway.
What really matters is that the dollar retains its position as the world’s
reserve currency. That allows the Federal Reserve to continue to print the
money, set the interest rates, and control the global economic system. The
dollar presently accounts for 66% of foreign currency reserves in central
banks across the globe, an increase of nearly 10% in one decade alone. The
dollar has become the international currency, a de-facto monopoly. This is
the goal of the globalists and the American ruling elite who dream of one
system, the dollar-system; with us running it.
So, how will this cadre of plutocrats coerce the other nations to continue
to use the dollar while it plummets from its perch?
Oil.
As long as oil is denominated in dollars, the central banks will be forced
to stockpile American scrip regardless of its value. It’s no different than
holding a gun to someone’s head. They will use our debt-plagued greenbacks
or their cars and trucks will sputter, their tractors and factories will
wheeze, and their economies will grind to a halt. It’s just that simple.
America cannot maintain its superpower status unless it continues to control
the global economic system. That means the linkage between the dollar and
oil must be preserved. The Bush troupe sees this as an existential issue
upon which the future of America’s ruling class depends. By 2020, 60% of the
world’s oil will come from the Middle East. Bush will do everything in his
power to control the resources of the Caspian Basin, thereby expanding US
dollar-hegemony and paving the way for a new American century.
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