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High student debt is dragging down the U.S. economy - (www.bloomberg.com) Nowadays, younger Americans are becoming less likely to take out loans
to buy a house or a car. One possible reason? They’re too overloaded with
student debt. That’s one takeaway, at least, from some interesting new research by
the Federal Reserve Bank of New York, flagged by Doug Henwood. The
paper starts by noting that student debt has grown dramatically over the last
decade — some 43 percent of Americans under the age of 25 had student debt
in 2012, with the average debt burden now $20,326. By contrast, back in 2003,
just 25 percent of younger Americans had debt, and the average burden was
$10,649. What’s particularly notable is that these student loans appear to be
crowding out other types of borrowing. For a long time, younger Americans with
student debt were more likely to own homes than those without — largely
because college grads are likelier to have higher earnings. But that trend has
reversed:
Credit Crunch Broadens European Business Rifts - (online.wsj.com) Central banks around the world are flooding the market with liquidity in
order to spark growth in the global economy. But that hasn't helped Spaniard
José Blasco. Banks have cut credit lines to Mr. Blasco's sofa-bed maker
Confortec SL to €100,000 ($131,000), compared with €500,000 several years ago.
And while the Spanish state now borrows at around 5%, the 22-employee company
would need to pay as much as 14% to get a bank loan—an option Mr. Blasco
rejected. Over the past three years, the European Central Bank has pumped €1
trillion of cheap loans into the euro zone's financial system, helping shore up
banks and sending government borrowing rates spiraling downward. Yet large
swaths of European small and midsize businesses—which employ three-quarters of
the euro zone's workers—have received precious little of this liquidity. And
instead of reviving growth, the money has deepened the fault lines that
separate Northern and Southern Europe, as well as big companies and small ones.
IMF: Euro-zone companies face massive ‘debt overhang’ - (www.bloomberg.com) Euro-zone companies face a massive “debt overhang” that could prolong
the region’s downturn and risk a return to a more acute crisis, the
International Monetary Fund warned Wednesday in a sobering report on
risks that may be accumulating in the world financial system. The IMF estimated
that as much as one-fifth of the corporate bonds and loans issued by major
European corporations are “unsustainable” and will force the firms to default
or scale back, cutting capital expenditures, eliminating shareholder dividends
or taking other steps to conserve cash to make debt payments. Either
alternative could create problems — with defaults damaging the banks or others
who have lent money or bought corporate bonds, and capital investment cuts or
other spending reductions affecting the ailing economy. “The slump in Europe is
worrisome,” said IMF chief economist Olivier Blanchard, who suggested that
European banks be allowed to bundle loans to small businesses into marketable
securities to encourage them to lend.
The region has been consumed for three years
in a crisis revolving around debt, and it is reeling from the subsequent
“fiscal consolidation,” as nations cut spending or raise taxes to stabilize
finances.
Is
Mark Zandi a good choice to run the GSEs? - (www.ochousingnews.com) My hero, Ed DeMarco, is on his way out as head of the FHFA that runs
Fannie Mae and Freddie Mac, the GSEs. Ed DeMarco is a tragic figure who showed
how difficult it is in Washington to do the right thing (see: Head of GSEs Edward DeMarco faces
replacement, unfortunately). His actions in looking out for the best
interests of taxpayers put him in the firing line of pandering politicians on
both sides of the aisle. The left assailed him for refusing to give free money
to loan owners. His opposition to principal reduction prevented politicians
from buying votes with taxpayer money. The right wanted him removed because he
vigorously pursued banks for buy-backs on the bad loans they wrote. The
too-big-to-fail banks that donate heavily to right-wing politicians didn’t want
to face the repercussions for their actions. With both the left and the right
opposed to his actions, it was only a matter of time before Congress found a
milquetoast replacement palatable to both sides. Mark Zandi is being considered
for the job of Ed DeMarco’s replacement. The Wall Street Journal has an
excellent article reviewing Mark Zandi’s positions on key housing issues by
looking through quotes from recent public appearances. It should give us a fair
indication of how he would act if he gets the job.
Fed and Bank of Japan caused gold crash - (www.telegraph.co.uk) Commodity prices have been falling since September, culminating in a
rout over the past two weeks. That is a classic warning for the global economy.
My view is that the US Federal Reserve and the Bank of Japan "caused"
the gold crash. The rest is noise. The Fed assault began in February when it
published a paper warning that the longer quantitative easing continues, the
harder it will be for the bank to extricate itself. The report was co-written
by former Fed governor Frederic Mishkin, often deemed Ben Bernanke's
"alter ego". It said the Fed's capital base could be wiped out
"several times" once borrowing costs climb. The window will start
shutting by 2014, with trouble then compounding at a "dramatic" pace.
This was a shock. It suggested that the Fed has lost its nerve, and will think
long and hard before launching a fresh blitz of money if growth falters. Then
came last week's Fed Minutes, with hints of tapering off QE earlier that
expected. That was the next shock. What they seemed to be saying is that the US
economy is groping it way back to normality, that the era of silly money is
over, that the dollar will stand tall again.
Jobless Claims Little Changed as U.S. Job Market Stabilizes
- (www.bloomberg.com)
G-20 Draft Affirms Pledge to Avoid Competitive Devaluations - (www.bloomberg.com)
G-20 Draft Affirms Pledge to Avoid Competitive Devaluations - (www.bloomberg.com)
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