THE “GRAND BARGAIN”…
Conservatives took aim at House Speaker Boehner’s deficit-reduction proposal in the fiscal cliff talks.
How Washington fools the public about spending ‘cuts.’
(…) The most absurd current example is Mr. Obama’s claim that his “$4 trillion” plan reduces the deficit by about $800 billion over 10 years by ending the wars in Iraq and Afghanistan. But those “savings,” as he calls them, are measured against a White House budget office spending baseline that is fictional. Those wars are already being unwound and everyone knows the money will never be spent. But they are called “savings” to gull the public and make the deficit reduction add up to a large-sounding $4 trillion. (…)
Republicans used to object to this game, but in recent years they seem to have given up. In an October 2010 speech at the American Enterprise Institute, House Speaker Boehner proposed that “we ought to start at square one” and rewrite the 1974 budget act. But he then dropped the idea, and in the current debate the GOP is putting itself at a major disadvantage by negotiating off the phony baseline. In a press release Tuesday, his own office advertised the need for “spending cuts” that aren’t even cuts.
The great divide: (Chart from Econbrowser)
(…) It’s an abrupt reversal from a year ago. In 2011, U.S. auto makers’ market shares, especially in compact cars, soared as gasoline prices jumped and Japanese auto makers struggled with back-to-back natural disasters. This year, production at Toyota Motor Corp. and Honda Motor Co. came roaring back. Both began offering deeper sales incentives, something they hadn’t done for many years. That has the Detroit Three in a quandary: Do they cut production or match incentives? (…)
GM started December with 788,194 unsold cars and trucks, and warned it won’t meet a target of finishing the month with a U.S. inventory of less than 670,000 new vehicles. GM executives said they were caught off guard by the heavy incentives offered by others and will idle two plants for an additional week in December. It may take more steps as needed.
GM also miscalculated demand for its pickup trucks. The industry norm for U.S. auto makers is between 60 days and 70 days of sales in inventory. GM had 138 days worth of Chevrolet Silverados at the start of this month. In passenger cars, its Chevrolet Cruze inventory jumped to 64,390 vehicles or 96 days. One of the two plants that GM will idle this month produces the Cruze. (…)
EUROZONE RETAIL SALES DECLINE ACCELERATES
Retail volume fell 1.2% in October after declining 0.6% and 0.2% in the previous 2 months. Core sales volume dropped 1.4%. German retail sales collapsed 2.8% in October! (Eurostat)
The economy will grow 1.2 percent next year and 2.0 percent in 2014, according to revised projections from the Office for Budget Responsibility, Osborne said. 2015 and 2016 forecasts were revised down to 2.3 and 2.7 percent respectively.
In March, the government’s forecasting body said the economy was set to grow 2.0 percent next year, and accelerate to 2.7 percent in 2014, and to 3.0 percent in the following two years.
A Reuters poll taken last month predicted growth of 1.1 percent next year and 1.7 percent in 2014.
Finnish Economy Joins Euro Area in Recession on Investments Finland’s economy unexpectedly joined the euro area in a recession in the third quarter as the region’s debt crisis weighed on business confidence and sapped investments.
Gross domestic product contracted 0.1 percent from the prior quarter, when it shrank 1.1 percent, Statistics Finland in Helsinki said on its website today.
Investments fell 1.1 percent from the previous quarter, with construction spending dropping 1.4 percent, and machinery and equipment investments contracting 2.5 percent.
Spain fell short of its targeted amount at a triple bond auction on Wednesday, prompting a rise in yields on the secondary market as investors await the government’s move to trigger European Central Bank bond-buying. (…)
“The sheer scale of issuance next year and the lack of demand from domestic investors suggest to me that it’s just a matter of time before Spain has to make an official bailout (request) but that’s a story for early 2013,” he said.
I bet you forgot the Spain bailout?
The push to repay the ECB is generating some concerns that the banks are moving prematurely and could be vulnerable if the euro-zone crisis intensifies again.
Based on a poll conducted by analysts at Morgan Stanley, European lenders are expected to repay a total of about €80 billion of the ECB loans in early 2013. Most of that is likely to come from northern European banks, the analysts said Tuesday.
(…) the chief financial officer of one of Europe’s largest banks said his bank is leaning toward repaying the billions of euros it borrowed in order to avoid even the possibility of being stained if rival banks also rush to the exits. (…)
The ECB’s latest survey of lending conditions, published in October, found banks have been getting especially wary about lending to small businesses and that the banks expect that trend to continue in coming months. (…)
Several large Chinese property developers reported stronger sales for November, in a fresh sign that the sector is on the mend even as Beijing vows to keep a firm grip on the market.
Land sales hit a 16-month high Land sales in China’s 10 major cities hit a 16-month high of 66.3 billion yuan ($10.6 billion) in November, a growth of 23 percent month-on-month and 0.4 percent year-on-year, a property report said.
(…) local governments will usually increase the supply of prime land plots at the end of the year to boost their revenue from land sales, partly stimulating the land transactions. (…)
Information from E-house China shows that China’s 10 major cities earned a total of 357.4 billion yuan through land sales during the first 11 months of this year, down 37 percent year-on-year.
Daily production averaged nearly 6.5 million barrels, the EIA said, an increase of 16%, or about 900,000 barrels, over September 2011. The EIA said the states with the largest increases were Texas, with its Eagle Ford formation, and North Dakota, at the center of the Bakken Shale region. For decades, North Dakota produced fewer than 150,000 barrels a day, but that figure started surging in 2007 and reached 728,000 barrels a day in September.