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Generational Dynamics Web Log for 20-Aug-2010
20-Aug-10 News -- Bad economic news stuns investors

Web Log - August, 2010

20-Aug-10 News -- Bad economic news stuns investors

Arab states cut financial aid to Palestinians

Investors 'stunned' by bad economic news on Thursday

Investors were "stunned" on Thursday by a bunch of job news stories that indicate that the economy is spiraling downward.

The first shock was that more people filed claims for unemployment benefits last week than at any time since November, according to the Washington Post. Forecasters had expected the number of claims to fall to 450,000 or so, but instead they rose to 500,000 last week, heading back toward the record 640,000 per week that was reached in March, 2009.

Manufacturing activity in the mid-Atlantic region has fallen sharply in August. A growth index published by the Federal Reserve of Philadelphia was predicted to rise to 7.2 this month from 5.1 in July, but instead it fell to a negative value, -7.7, indicating contraction instead of growth, according to Bloomberg.

The yields (interest rates) on two-year notes issued by the U.S. Treasury fell to a historically low level -- 0.48% on Thursday, according to Bloomberg. Yields on 10 year and 30 year bonds are also at record low levels. This means that financial institutions are putting as much money as possible into safe Treasuries, rather than risking the stock market, where they might hope to get returns higher than 0.48% per year.

Similarly, yields on "safe" German bonds fell to historically low levels, while yields on Greek bonds have risen to the crisis levels of May, prior to the European bailout, according to the Telegraph. As we've reported several times, Greece's economy is in a death spiral, as businesses close and unemployment skyrockets. The high yields on Greek bonds indicate that investors believe that Greece will default.

In June, I posted a report about an apparent worldwide decline in economies around the world, and that we appeared to be headed once again to a worldwide freeze in trade and transportation, just as happened at the end of 2008. (See "7-Jun-10 News -- Globally, May was a month of ominous events.")

Since then, I've reported on one trend after another that confirms that trend. It seems increasingly certain that things will be pretty bad in the fall.

From the point of view of Generational Dynamics, the worst is yet to come, including a major stock market crash and financial crisis.

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Arab states have cut financial aid to the Palestinian Authority (PA), and countries like Saudi Arabia are not fulfilling their promises. The PA will face a serious liquidity crisis in September, and will have difficulty paying salaries. Reuters

Russia and Belarus have been on bitterly disagreeable terms since the breakup of the Soviet Union in 1991, but relations may improve after the coming presidential elections, since they may result in the defeat of Belarus president Alexander Lukashenko after 16 years in power. Spiegel

The U.S. State Dept. said on Thursday that a new agreement for the start of direct peace talks between Israel and the Palestinians is close to completion. I wonder how long it will be before someone pisses someone off again, and the whole thing collapses? VOA

(Comments: For reader comments, questions and discussion, see the 20-Aug-10 News -- Bad economic news stuns investors thread of the Generational Dynamics forum. Comments may be posted anonymously.) (20-Aug-2010) Permanent Link
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Generational Dynamics Web Log for 20-Aug-2010 20-Aug-10 News -- Bad economic news stuns investors

Investors 'stunned' by bad economic news on Thursday

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Generational Dynamics Web Log for 20-Aug-2010
20-Aug-10 News -- Bad economic news stuns investors