Roubini : Situation in Europe A Slow Motion Train Wreck

"Nouriel Roubini called the ongoing political turmoil in Europe a “slow motion train wreck.” Speaking to CNBC in Las Vegas on Tuesday, Roubini said he expects Greece to leave the euro zone by next year..."


at http://nourielroubini.blogspot.com/2012/05/roubini-situation-in-europe-slow-motion.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NourielRoubiniBlog+%28Nouriel+Roubini+Blog%29

NETHERLANDS – JUST THE FIRST DOMINO?

"If you’re still trying to piece together the events of the last 48 hours this note from Nomura might help.  They describe how the collapse of the government in the Netherlands could put increasing pressure on Germany to abandon support for the periphery.  A negative trend here is not far fetched at all.  If Sarkozy loses his re-election campaign the core will likely see increasing support for those who don’t want to continue bailing out the periphery countries.  I still think Germany will hold the line no matter what the costs, but the risks can’t be ignored as they grow.  Anyhow, here’s the Nomura commentary:

“As we reflected in our 13 April report EU: Now is the second summer of our discontent – Act 2, the PvdA has also signalled that it does not support the eurozone’s fiscal compact, Dutch ratification of which is now, we believe, seriously in jeopardy. Although failure by the Netherlands alone to ratify would not in theory spell the compact’s demise – only 12 out of 17 eurozone members need to ratify for it to come into force – it would at best significantly damage the compact’s credibility and at worst encourage other members to follow suit.

at  http://pragcap.com/netherlands-just-the-first-domino

The Impossibility of Defense Cuts

"Apparently the thing we need to keep ourselves safe is a fast, lightweight ship that can sweep mines, launch helicopters, fight submarines, and perform other assorted duties—but can’t withstand heavy combat. I don’t claim to know if we really need the Littoral Combat Ship to ensure our national security. According to an article in the Times, John McCain—the Republican Party’s last presidential nominees and one of the Navy’s more famous veterans—is critical, although other Republicans and the administration are in favor of it.
I do know that the Littoral Combat Ship is a classic example of why it’s so hard to reduce budget deficits. You have local politicians who want the jobs. You have a large group of representatives who are reflexively pro-military and will vote for anything the Pentagon wants, and even things the Pentagon doesn’t want. (You have Mitt Romney, who bemoans the fact that the Navy has only 285 ships, the fewest since 1917. Would he rather have the Royal Navy of 1812, which had 1,000 ships, or our navy, with eleven aircraft carrier groups—while no other country has more than one?) You have a procurement and development process that stretches on for years so that even when a weapons system turns out to be a dud, it has to be kept alive because it’s too big to fail—there is no other alternative. Both the Center for American Progress and the Project on Governmental Oversight have recommended cutbacks in the Littoral program. Yet there is no practical way to check its momentum.
An even better example is the V-22 Osprey vertical-takeoff plane, which the Times profiled late last year. Even renowned insider Dick Cheney opposed the Osprey when he was secretary of defense, to no avail. Not only CAP and the Project on Governmental Oversight called for Osprey cutbacks, but so did Simpson-Bowles and the arch-conservative (and generally principled) Senator Tom Coburn. In short, just about anyone who cares about the budget wants to cut back on the Osprey. Will it happen? Well, the Paul Ryan budget reverses the automatic defense spending cuts, so we know what he thinks about it. And I’m sure the Osprey has plenty of fans in the administration and the Democratic caucus as well.
In the end, defense spending plays out the same way as Social Security. If you want to reduce government spending, you obviously have to reduce defense spending: it’s basically the second biggest part of the budget after Social Security. But it’s almost impossible to cut any actual defense spending. Apparently politicians don’t realize that a whole is equal to the sum of its parts. Or they do realize it, and they hope that we don’t..."

at http://baselinescenario.com/2012/04/06/impossibility-of-defense-cuts/

El-Erian On The Bad Jobs Number: 'THE IMPLICATIONS GO BEYOND ECONOMICS'

"PIMCO CEO Mohamed El-Erian is shaken by today's disastrous jobs report.
Writing on FT.com, El-Erian listed off the disappointing metrics of the report, but he warns of much worse.

These disappointments partly reflect changing seasonal factors, including the prior impact of this winter’s unusually mild weather. But there is something much larger in play, and the implications go beyond economics; they influence key elements of the political narrative for the upcoming presidential and congressional elections.

The report demonstrates that firms "lack conviction" to hire for "expected future business."
Why? Uncertainty about everything, writes El-Erian:

American consumers, as a group, still carry too much debt and have to cope with higher oil prices. The prospects for exports, which have grown markedly, are gradually dimming now that the rest of the world is slowing. Meanwhile, policymakers have yet to find a way to deal properly with a year-end fiscal cliff, the result of Washington’s repeated inability to design coherent fiscal policy.

This demand uncertainty compounds worrisome structural impediments to growth.

His evidence that we already face structural problems: 5 million long-term unemployed; 9-month average time out of work; 25% unemployment for 16-19 year olds; and 12.6% unemployment for those without high school degrees..."

at http://www.businessinsider.com/el-erian-jobs-miss-2012-4?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+clusterstock+%28ClusterStock%29#ixzz1rIEleWaC

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Roubini : Without growth, the socio-political backlash will become overwhelming for some governments

"Nouriel Roubini : “There’s this vicious circle with the deficit that doing austerity makes the recession worse,” he said. “Without growth, the socio-political backlash will become overwhelming for some governments.” - in CNBC"

at http://nourielroubini.blogspot.com/2012/04/roubini-without-growth-socio-political.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NourielRoubiniBlog+%28Nouriel+Roubini+Blog%29

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Jim Rogers : Commodity prices still in a major uptrend

"Jim Rogers interviewed by the Indian ET Now 27 March 2012 : commodity prices have not been in a downturn , they may have been in a short term downturn , but long term commodity prices are still in a major uptrend , and that's going to continue , yes they have postponed Armageddon I am glad you put it that way , 2013 and 2014 are what I am most worried about , because this year everybody is trying to just get through the next election , there are 40 elections in 2012 Aisha , everybody is going to do their best to get us through their election " says legendary investor Jim Rogers"

at http://jimrogers1.blogspot.ca/2012/03/jim-rogers-commodity-prices-still-in.html#.T3MqLOPVFJ4.pingfm

The Rejection of Austerity Begins

"With national elections in Greece only a few weeks away, the coalition that rules the nation finds itself in trouble. Politicians who supported austerity measures as a means to get a bailout of the country’s finances face challenges from candidates who say the government went too far. The reaction is only natural. Many voters have been stripped of benefits, had salaries cut or have lost some form or another of their social safety nets. The upcoming election could sweep new members into parliament, and these new members may try to repeal or modify austerity agreements.
Greece is not the only nation that faces angry voters. Similar circumstances could affect elections in Portugal, Spain and even Italy. A referendum will be held in Ireland to seek support for the nation’s treaty with the European Union, a treaty that is the basis of Ireland’s bailout.
The rounds of national elections could be a year off or more, but this may make it more difficult for current leaders to keep their positions. Austerity’s bite could be felt the most in a few more quarters as governments cut expenses, which may push some nations into recessions, increase unemployment and cut the social services to the elderly..."

at http://247wallst.com/2012/03/28/the-rejection-of-austerity-begins/#ixzz1qQJlF5hd