2010 was a magical year in China. Among the world records: 18 million new vehicles sold. Due to unprecedented stimulus, sales had skyrocketed 33% that year and 54% in 2009—mind-boggling. It catapulted China to the number one new-vehicle market in the world, far ahead of the US which had never sold that many units in a single year. And it gave rise to a surge in production capacity. But now, the China auto bubble is emitting a sharp hiss.
While France is preoccupied with the legislative elections next weekend, Germany and Austria plunge into public soul searching about the euro, its meaning, its relevancy, the sheer and endlessly growing expense of maintaining it. To which are now added the $125 billion for bailing out Spain, the first in a series. Then there’s Italy. Like so many things that appear useful and sensible, the euro has become dangerous.
Josef Ackermann, Deutsche Bank’s CEO until a couple of weeks ago, who knows a thing or two about skeletons hidden in the bank’s vast closets, says that he is “grateful the US is pushing Europe to act faster.” Just like his US counterparts on Wall Street in 2008, he wants massive bailouts of the banks. He has “no doubt” that the German people would rescue the Eurozone, he says. But the German people aren’t so sure about that.
Since the lousy jobs report, there has been a veritable orgy of Fed Speak with juicy morsels and contradictions, interspersed with leaks and rumors, that climaxed today with Chairman Ben Bernanke’s words of wisdom. It whipped markets into a frenzy, drove the Dow up 500 points, knocked yields to historic lows, and caused gold, the safe-haven, to bounce up and down like a rubber ball. And everyone was eagerly waiting for the big lie.
On July 1, Cyprus, a tiny country on a divided island, will rotate into the Presidency of the Council of the mighty EU—one of those bitter European ironies because Cyprus will have to be bailed out, according to its Central Bank governor. Reality is now even staining the Teflon economy of Germany with a daily litany of suddenly awful data points. But a central banker pointed at an uplifting story of austerity and growth at the edge of Eurozone mayhem.
Dirt cheap natural gas has done wonders for America. Bene-ficiaries are scattered across the country: households with lower heating bills, industrial users, utilities, companies dreaming of building LNG export terminals to benefit from prices that are several times higher in the international markets. Yet it’s tearing up the very industry that is producing it, and capital destruction has reached epic proportions. But the bloody end is near.
Tourism, Greece’s second largest industry after the shipping industry, and already in a downdraft, is taking another hit as tour-bus drivers will go on strike; wage negotiations have deadlocked. Owners demand that drivers take a 50% cut in pay and benefits on top of the 20% cut they’ve already suffered! And Greece is the model for Spain and Italy.
The ugly jobs report gave Mitt Romney what he’d been waiting for: a huge boost. He’s out making hay, calling it “devastating news for American workers and families.” An army of Republican talking heads swarmed over the land and pummeled President Obama with the jobs report. And just as Republicans see victory edge closer, shrill voices are calling for the Fed to launch the next round of quantitative easing. Collision alert!
Not a day goes by when Germany isn’t under heavy fire from outside interests, including Barak Obama who is facing a tough reelection campaign; and the last thing he wants is any crap flying across the Atlantic and messing up his speeches. They all want Germany to agree to whatever it takes to bail out the Eurozone, beyond the hundreds of billions of euros it has already agreed to pick up. And now it has to decide, but timing couldn’t be worse.
The strongest and toughest creature out there, and maybe the smartest one, that no one has been able to subdue yet, the inexplicable American consumer has hit a wall. It showed up in a prosaic but ugly 8-K filing by Visa—a staggering and sudden shift that pundits tried to explain away somehow by referring to recent changes in debit card regulations. I mean, come on.