Unemployment is a staggering problem in Eurozone countries that are at the core of the debt crisis. Spain’s jobless rate jumped to 22.8%. Among 16-24 year-olds, it’s an unimaginable 51.4%. In Greece, youth unemployment reached 46.6%. In Portugal, it’s 30.7%, in Italy 30.1%. But highly educated young people are leaving in massive numbers—with harsh long-term consequences for their heavily indebted countries.
Apparently, Charles Plosser, president of the Philadelphia Fed, failed to check with his handlers when he said that the Fed might have to raise interest rates later this year—from practically zero to almost zero, I guess—though just last Thursday, the Fed had announced the extension of its zero-interest-rate policy through late 2014. The umpteenth extension since 2009. Now, the economy is addicted to free money, and the damage is severe.
Tokyo, April 1996. I sit on my tatami, Japanese textbook in my lap. Mr. Song is starting his morning routine—cooking rice, chopping veggies, and frying meat. Mr. Kim emerges from the toilet and turns on the TV. But before he sits down to watch it, which he does every morning to improve his listening comprehension, he makes one step toward my tatami and stops at the edge.
Hope is pervading the media that an agreement might be reached between Greece and private sector investors on a debt swap, maybe even this weekend, though everyone is hobnobbing at the World Economic Forum in Davos where all sorts of things have already been said and leaked between drinks. But now a horrible sign has appeared: German individual investors are gobbling up Greek sovereign bonds.
In her speech at the World Economic Forum, Chancellor Angela Merkel warned that Germany might be overwhelmed by its efforts to bail out the Eurozone. Germany must not make promises that it can’t keep, she said. It doesn’t make sense to demand a doubling or tripling of Germany’s contribution. “How long will that remain credible?” she asked. That reluctance has made Germany a favorite punching bag. And yet the numbers are staggering.
We finally have statistical proof that CEOs are … a confusing bunch. PWC’s survey shows that CEOs in 60 countries are exhibiting signs of gloom about the economy but not their own companies. German CEOs, facing the Eurozone debt crisis on a daily basis, aren’t feeling the pain, according to Ifo’s indices. The Empire State Manufacturing Survey points at spiking optimism. And all three show patterns of false hope.
“The case of Greece is hopeless,” Otmar Issing said today. He should know. He was a member of the Executive Board of the Bundesbank and of the Governing Council of the ECB. Another substantive voice in an increasingly loud chorus. But it’s legally impossible to kick Greece out of the Eurozone. So he suggested a procedure—a procedure that has been happening all along.
Treasury Secretary “Hank” Paulson was the trailblazer with his proposal for TARP in September 2008. He went to the Congress with a list of demands—unlimited powers to hand unlimited amounts of taxpayer money to whomever—and threatened that the whole world would collapse if his demands weren’t met. It worked. So Greek prime ministers imitated him. And now Christine Lagarde, managing director at the IMF, tried it too.
Tokyo, April 1996. I scour the alleys of the entertainment quarter of Takadanobaba for love hotels but still don’t know what to look for. Instead, I find a business hotel for the underlings of Japan Inc. It’s modern and impeccable. The rate is reasonable, and so I book a room for tonight. I’m elated, having accomplished something on my own. I’ll spend the night with Izumi. The logistics are in place.
There still are some economic numbers that aren’t seasonally adjusted or manipulated with fancy statistical footwork by governmental, quasi-governmental, or non-governmental number mongers. And they give us the true picture of the worldwide economy: beer, wine, mood, and San Francisco real estate—with more predictive power than is allowed by law.