More gems and brickbats from the world’s media and blogs gathered by Evan, with contributions from other blog members. Please keep those tips coming in to gfcwrap at gmail.com.

AUSTRALIAN-RELATED LINKS:

June 9, 2009: “A beautiful set of numbers tell only part of the economic story”, Tim Colebatch, The Age.
“How can anyone make sense of this? In the March quarter, the constant price GDP figure was $271 billion on the production data, but $277.5 billion on the expenditure figures. Current price GDP was $299 billion on the income data but $305 billion according to the expenditure data.
This means there will be some heavy revisions ahead, as new data comes in, old data is re-checked, and the bureau thumps the numbers to make them fit. My guess is that those revisions will ultimately decide that the economy was either flat or went backwards in the March quarter.”

June 9, 2009:  A beautiful set of numbers tell only part of the economic story, Tim Colebatch, The Age.

The best analysis of the GDP data published in the Australian media:

“How can anyone make sense of this? In the March quarter, the constant price GDP figure was $271 billion on the production data, but $277.5 billion on the expenditure figures. Current price GDP was $299 billion on the income data but $305 billion according to the expenditure data.

This means there will be some heavy revisions ahead, as new data comes in, old data is re-checked, and the bureau thumps the numbers to make them fit. My guess is that those revisions will ultimately decide that the economy was either flat or went backwards in the March quarter.”

http://www.businessday.com.au/recovery
An in-depth and unbiased look at the top stories used to convince people to re-invest in bubble assets. Just don’t mention the debt.

CommBank Lifts Rates In Surprise Move, SMH, 12 Jun
Surprise move for whom? First home buyers? “The CBA’s move marks the first increase in floating mortgage rates since the last cut in official cash rates by the Reserve Bank and reverses the reduction passed on by the Commonwealth at that time. That will see the rate of its main home loan product rise by 10 basis points from 5.64 per cent to 5.74 per cent.” The rest of the cartel is set to follow suit immediately.

First-home Buyers Reach Their Peak In March, SMH, 9 Jun
“The Australian Finance Group said loans to first-home buyers rose to 28.1 per cent of all mortgage purchases in March, on a total number of 8988 loans. Since then, the share of first home buyers has fallen to 27.7 per cent in April, on 8109 loans, and 24.8 per cent in May on 7236 loans.” The SMH contradicted this story the very next day citing ABS stats to claim that “The proportion of first-home buyers taking out loans rose to 28 per cent in April, the highest share to first-home owners since the data series began in 1991” in their breathlessly positive story captioned “First-home Buyers Rush In”? (Hat-tip “furbana” for pointing out problems with the previous commentary).

Housing Fear As Loans Hit New High, SMH, 11 Jun
No, in any Ponzi scheme the real panic begins when the loans STOP hitting new highs. “The average first-home loan in NSW has risen more than $50,000 in just over a year, climbing to $300,000 on the back of low interest rates and generous government grants.”

Ken Henry Dives For Ideas In The Super Pool, The Australian, 12 Jun
“Federal Treasury boss Ken Henry has established a departmental review to examine ways in which the superannuation savings pool can be directed to seed new markets and target specific areas, such as corporate debt and infrastructure.” Another looting exercise that will probably go unnoticed.

Business Confidence Surges, SMH, 9 Jun
The Greater Fool factory is back in production and taking orders. “Business confidence surged in May, posting its biggest monthly gain in eight years on the global sharemarket rally and an infrastructure spending boost… The index is now at the highest level since February of 2008, well before the acceleration of the global financial crisis.”

Jilted China Says Rio ‘Dishonourable’, John Garnaut, SMH, 9 Jun
Creditor nations should mind their manners or face the consequences. “Rio Tinto has behaved like ‘a dishonourable woman’ in spurning China’s white knight, Chinalco, according to the country’s official news agency, Xinhua, in the latest response to the failure of the pair’s $US19 billion ($24 billion) tie-up.”

[Which?] Bank ‘Linked’ System To Storm, SMH, 10 Jun
“The Commonwealth Bank devised a computer system that encouraged clients of Storm Financial to increase their borrowing, making them more vulnerable to a sharemarket plunge, according to a former senior manager of the collapsed financial planner.”

Few Of Us Living Beyond Our Means, The Autralian, 10 Jun
“Australians have been well-served by their willingness to take on private debt over the past 40 years and relatively few households were carrying more than they could handle before the global financial downturn.” We beg to differ. If you can find any data that underpin the claims in this article then please let us know. Otherwise, check out Steve Keen’s “Deeper In Debt” and make up your own mind. Contributed by blog member Steve.

GLOBAL ECONOMY / BANKING / FINANCE:

Bernanke Conundrum Threatens Housing on Mortgage Rate, Bloomberg, 8 Jun
The story of the week. Despite unprecedented money printing by the US Fed, rising US treasury yields over the last month are pushing up retail mortgage rates. This reduces the size of loans available to prospective property buyers and therefore threatens to kill off the so-called improvements in the US housing market. “The more rates go up, the more we need home prices to go down to equalize consumers’ payments.” Another article, Bond-market rout lifts mortgage cost, explains the dynamic further including the impact of big spending plans. “That’s the Catch-22 threatening to make an awful housing market potentially worse and keep the economy stuck in a funk. Kick-starting the economy requires higher spending, but rising rates mean fewer Americans will be able to refinance their home loans. And some potential buyers will be shut out of the market by higher monthly payments they won’t be able to afford.”

The Still Over-leveraged Consumer, The Big Picture, 9 Jun
“Despite spending less time at the mall, throttling back consumption, and increasing their savings rate, the US consumer still finds themselves with too much debt and too little savings. Even worse (at least for the economy), they lack the income or the equity to fund their previous lifestyles.”

Inland Southern California: Prices At 20 Year Low, Calculated Risk, 10 Jun
Wow. Just one example: “John A. Beatrice, 55, bought his spacious two-story Spanish-style house there brand-new for $120,000 in 1989. It was a price he could comfortably afford, and he planned on staying through retirement, so he wasn’t worried about price swings… But he never imagined his neighborhood would drop off the charts. In April, a slightly larger home two doors away sold for $66,500. That’s just over half the $130,000 it went for new in 1992. In 2005, that house sold for $330,000.” Calculated Risk also reports that foreclosure activity may hit 1.8 million by mid-year and commercial mortgage defaults seen rising to a 17-year high.

The Fed: Bankrupt, Denninger, 10 Jun
Interesting 12 minute interview with Jim Grant, a bond trader and editor of a business journal. He discloses his views on the US Fed and the possible results of zero rate interest policies.

Latvia’s Currency Crisis Is A Rerun Of Argentina’s, Noriel Roubini, FT, 10 Jun
“Of course, as in Argentina, letting the currency depreciate would lead to massive negative balance-sheet effects. The large foreign liabilities of households, companies and banks are in foreign currency; the real value in local currency of such debts would increase sharply after a devaluation.”… as intended.

Chinese imports in May dropped 25% and exports 26%, MercoPress, 12 Jun
“Chinese exports dropped by a record amount in May as demand for its goods from the US and Europe slumped. Exports fell 26.4% from the same month earlier, more than February’s previous record drop and imports declined by 25.2%.” Note how the FT spun these depression-like drops: Positive signs in China despite trade fall. In a separate attack on those green shoots, China’s electric consumption does not support official growth statistics: “China’s power consumption in May continued to decline… Zhao Bingren, ex-chairman of China Electricity Regulatory Commission, expressed his doubt on economic statistics reported by some areas.” (Contributed by Macca.)

Counter-cyclical or Counter-productive?, Doug Noland, 5 Jun
[Scroll to the bottom section.] “We’re witnessing the same analytical errors today that were made in the post-tech Bubble analysis:  the willingness to inflate an even greater Bubble for the cause of mitigating the pain from the so-called deflationary risks associated with a bursting of THE Bubble.  And with each reflation comes a heightened governmental role in both the markets and real economy – to the point where Washington is essentially backstopping the financial and economic systems.”

The Great Unwinding, David Brooks, NYT, 11 Jun
“For about a generation, the U.S. surfed on a growing wave of debt… Charts that mark these trends are truly horrifying. There is a steady level of debt through most of the 20th century, until the mid-1980s. Then there is a steep accelerating rise to today’s epic levels.” Contributed by ak.

German Exports Fall 29% In April, BBC, 9 Jun
News not widely reported in the anglo financial press.

IMF Tells Europe To Come Clean On Bank Losses, Telegraph [UK], 8 Jun
More hypocritical contradictions. The US runs scam stress tests and presents the predetermined and fraudulent results as a cause for optimism, helping to spark a stock market rally. The US, who basically run the IMF, then tells Europe by proxy to come clean on their bank losses. The next day the WSJ reports that Tim Geithner backed up the team by asking Europe to “put their banks through more rigorous public stress tests to help ensure that the institutions survive if the economy slips from bad to worse”.

TARP Panel Chair Suggest Running Stress Tests Again, CNBC, 9 Jun
Elizabeth Warren, told CNBC Tuesday: “We actually make recommendations to do it all over again right now… We’ve already blown past the worst-case scenario on unemployment”. Denninger chips in.

Alabama County Set to Halt Services, Shut Buildings Over Budget, Bloomberg, 5 Jun
“Alabama’s most populous county is preparing to stop road maintenance, close courthouses and shutter services for the elderly after a court struck down taxes that pay for about 35 percent of its budget.” More of this to come.

Bank Profits From Accounting Rules Masking Looming Loan Losses, Bloomberg, 5 Jun
“The new accounting rules, the stress tests: They’re all part of a major effort to put lipstick on a pig.” “The accounting rule changes that matter most for the banks came on April 2, when the Financial Accounting Standards Board gave companies greater latitude in how they establish the fair value of assets.” “Along with that change, FASB also let companies recognize losses on the value of some debt securities on their balance sheets without counting the writedowns against earnings. If banks plan to hold the debt until maturity, they can avoid hurting the bottom line.”

[US] Payroll Data In Perspective, Zero Hedge, 5 Jun
Note that the US jobs story, as originally spun, was presented as good news in the Australian media. “It is difficult to rejoice over an employment data that is consistent with real GDP still declining anywhere from a 2% to 4% at an annual rate. Now here we are, close to nine months after the Lehman collapse, and we are still printing employment numbers that are double what they were before pre-Lehman. That is the bigger picture. “The internals of today’s report, in a word, were awful. if companies had held hours worked constant in May instead of cutting them, to achieve the total labour input they achieved last month would have required — get this — a 927,000 payroll cut.” Also see, temp work covers up depth of unemployment.

Fed Intends to Hire [ex-Enron] Lobbyist in Campaign to Buttress Its Image, Bloomberg, 5 Jun
You couldn’t make this up. “’People have been asking whether the Fed is capable of getting its job done right,’ said Lynn Turner, a former chief accountant at the Securities and Exchange Commission. ‘Hiring a former lobbyist from Enron will surely make one wonder.’”

Senators Want Homebuyer Tax Credit to Rise to $15,000, Bloomberg, 10 Jun
“Lawmakers are pushing to revive legislation in the Senate that would almost double an $8,000 tax credit for first-time homebuyers and expand the program to all borrowers.” America searches for a new class of sub-prime borrower and decides to follow Australia’s successful model.

Under The Surface, New York Has A Desperation I Have Not Seen Before, SMH, 13 Jun
Excellent, anecdote-filled article on doom and gloom in the Big Apple.

A Tale of Two Depressions, Voxeu.org, 4 Jun
Contributed by Greg. Detailed comparisons between the current GFC and the last big one. It’s hard to see how this could all be turning around so soon, isn’t it?

North Korea jails US journalists, BBC, 8 Jun
A blog reader notes that one of the jailed journalists, Laura Ling, had created the “Lost Vegas” video featured in the Pool Room two weeks ago. Strange. Maybe that’s what happens when journalists get out of line.

Place Your Wages, Financial Sense, 5 Jun
Excellent article analysing the impact of unemployment and falling wages on the US economy (and hence the global economy). Contributed by Macca.

Economists Saw Danger Signs, But Failed At Disclosure, The Age, 27 May
“Most of them failed to see the weaknesses in financial markets. But they were not only blind. They rejected the possibility of unparalleled disaster because it did not fit their model of rational and efficient markets, of financial innovation effectively transferring risk, of market prices reflecting the state of the world and self-regulation being more appropriate than heavy-handed government intervention.“

Poking Holes in a Theory on Markets, NYT, 5 Jun
Contributed by Michael. “In the last decade, the efficient market hypothesis, which had been near dogma since the early 1970s, has taken some serious body blows… These days, you would be hard-pressed to find anybody, even on the University of Chicago campus, who would claim that the market is perfectly efficient.”

Break The Banks, For The Good Of The People, Joseph Stiglitz, The Age, 10 Jun
“With all the talk of “green shoots” of economic recovery, America’s banks are resisting efforts to regulate them. While politicians talk about their commitment to regulatory reform to prevent a recurrence of the crisis, this is one area where the devil really is in the details – and the banks will muster what muscle they have left to ensure that they have ample room to continue as they have in the past.”

GEOPOLITICAL:

CCIC Beats Goldman As China Banks Join Top Ranks In Asia Bonds, Bloomberg, 11 Jun
The world stopped buying US manufactured goods decades ago.  Now it doesn’t need US financial services.

US Securities Seized From Japanese Nationals, Asianews.it, 8 Jun
Fascinating. There’s lots of talk of naked shorting bonds… now the electronic counterfeiting may have turned physical. “Italy’s financial police has seized US bonds worth US 134.5 billion from two Japanese nationals… on the border between Italy and Switzerland. They include 249 US Federal Reserve bonds worth US$ 500 million each, plus ten Kennedy bonds and other US government securities worth a billion dollar each.” Denninger speculates that this could be a sovereign attempting to covertly dump $140 billion in debt.

Crowded Debt Sales Risks Causing ‘Auction Fatigue’, FT, 4 Jun
Excellent article. “But make no mistake: the potential for an accident is rising, as the auction calendar fills. Fingers crossed that the phrase “government bond auction fatigue” is not something that ever hits the headlines of the mainstream press this year. Even – or especially – in those dangerous summer months.”

Top Chinese Banker Calls For Wider Use of Yuan, UK Telegraph, 8 Jun
“Guo Shuqing, the chairman of state-controlled China Construction Bank (CCB), also said he is exploring the possibility of issuing loans to trading companies in yuan, allowing Chinese and foreign companies to settle their bills in yuan rather than in dollars.”

Treasuries Tumble After Auction, Russian Threat To Cut Holdings, Bloomberg, 10 Jun
“Russia’s central bank may switch some of its reserves from Treasuries to International Monetary Fund bonds, the bank’s first deputy chairman, Alexei Ulyukayev, said in Moscow today.” “While leaders of the nations of Brazil, Russia, India and China talk about substituting the dollar, the so-called BRIC countries have increased foreign reserves at the fastest pace since September.” In a separate article, Russia’s president warns against relying on the dollar.

30y Bond Results: Beware, Denninger, 11 Jun
“If you think hyperinflation is coming, or even serious inflation, you’re going to get your head cut off on a 4.6% 30y bond.” “There is only one reason for the FCBs to want this sort of exposure: they expect a ramp in the dollar and crushing DEFLATION, as this is the only way that bet will pay off.”

Ecuador Celebrates Sovereign “Defaulted” Bonds Repurchase, MercoPress, 12 Jun
“Ecuador announced Thursday it had bought back 91% of its ‘defaulted’ bonds via an international auction with drastic rebates of 65% to 70%… President Rafael Correa called the debt buyback a “resounding victory” and the start of a new era in international markets that he says are at fault for the global financial crisis hurting poor nations.” Hooray!

Brazil Considers G8 Is No Longer A Valid Political Decision Group, MercoPress, 12 Jun
It’s amazing what you find outside of the anglo MSM. “’G8 is over as a political decision group’ since ‘it represents nothing at all’ and ‘it’s not a valid instrument to address the reform of the global financial system’, said Brazil’s Foreign Affairs minister.”