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Current debt crisis is merely a warm-up act - (www.ft.com) It is sometimes possible to believe that
suffering is worthwhile, a way of paying for past sins. In this light, the age
of austerity in which we supposedly live has a sort of redemptive quality. Grit
our teeth and we’ll come out the other side, purified and ready for robust
economic recovery. However, after five years, we are in a worse place than when
we started. One would have thought that the recent deleveraging caused debt
ratios to collapse. Yet, after the financial maelstrom of the past five years,
debt ballooned to a weighted average of 417 per cent of gross domestic product
from 381 per cent in June 2007 in the 11 economies most under the market
microscope. Strikingly, in each of Canada, Germany, Greece, France, Ireland,
Italy, Japan, Spain, Portugal, the UK and the US, the ratio of total (public
and private) debt to gross domestic product is now higher than it was in 2007….
First, as deleveraging has not even started yet, the crisis of the world
economy has not begun either. All the perceived unpleasantness of the past few
years is merely a warm-up act for the greater crisis still to come. The need to
get debt levels down is as pronounced as ever in the eurozone, particularly
in southern Europe, but also in the US and Japan.
Iowa broker PFGBest collapses after hiding millions - (www.reuters.com) The U.S. futures industry reeled on Tuesday as
Iowa-based broker PFGBest collapsed after regulators accused it of
misappropriating customer funds for more than two years, dealing a new blow to
trader trust just months after MF Global's demise. The Commodity Futures
Trading Commission (CFTC), which along with industry regulators had given a
clean bill of health to dozens of brokers following spot checks in January,
alleged that the firm's regulated Peregrine Financial Group (PFG) unit and its
owner had defrauded customers and lied to regulators in order to hide a
shortfall that now exceeds $200 million. "The whereabouts of the funds is
currently unknown," the CFTC said in a complaint against PFG and its
founder and chairman, Russell R. Wasendorf Sr., whose suicide attempt on Monday
morning outside the firm's Cedar Falls, Iowa, offices appears to have
precipitated the crisis.
San Bernardino seeks bankruptcy protection - (www.latimes.com) San Bernardino, facing the
possibility of missing payroll, becomes California's third city in weeks to
authorize a bankruptcy filing. San Bernardino on Tuesday became the third
California city in less than a month to seek bankruptcy protection, with
officials saying the financial situation had become so dire that it could not
cover payroll through the summer. The unexpected vote came at the suggestion of
the interim city manager, who said the city faces a $46-million deficit and
depleted coffers. "We have an immediate cash flow issue," Andrea
Miller told the mayor and seven-member City Council. Mayor Patrick Morris
called the decision, passed on a 4-2 vote, a "stain" on the city. But
he said the only other option was "draconian cuts" to all city
services, including the police and fire departments. "It means the bills
will be paid," said a dejected Morris, who is not a voting member of the
council.
Pension deficits deepen in corporate Britain and U.S. - (www.reuters.com) Chronically weak stock
markets and record low bond yields have pushed company pension deficits in the
United States and Britain sharply higher, adding to the burden of retirees
living longer than ever before, reports said on Tuesday. In the United States
the aggregate deficit of S&P 1500 companies grew $59 billion in the first
half of the year to $543 billion, consultancy Mercer said. Corporate America is
sitting on total liabilities of $2.09 trillion against total assets of $1.55
trillion, Mercer added. The picture is no less bleak in Britain, where the
combined deficit of FTSE 100 companies more than doubled over the past year to
41 billion pounds ($64 billion), actuarial firm Lane, Clark & Peacock (LCP)
said in a separate report.
Italy faces another year of recession as capital drains - (www.washingtonpost.com) Italy will be stuck in
recession for at least another year and is facing some of the same developing
problems that have pushed other European countries to request outside aid, the
International Monetary Fund reported Tuesday in its latest review of
the country’s economy. The fund painted a muddled picture of the euro zone’s
third-largest economy. The government is enacting major changes to improve
growth and is getting public deficits under control. Yet investors are pulling
money from the country, banks are at risk from rising numbers of bad loans and
the economy continues to contract.
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