Blog posts tagged with 'debt'

Poll shows Americans' pessimism on economy growing
http://news.yahoo.com/poll-shows-americans-pessimism-economy-growing-211021976.html
Most of the increasing pessimism on the economy is coming from democrats who are beginning to realize that the present people running the government are doing a poor job.

Jobless Americans to lose unemployment benefits
http://finance.yahoo.com/news/jobless-americans-lose-unemployment-benefits-094500875.html?l=1
50% of the people who loose there benefits will get a job immediately.

Oil pares loss on upbeat U.S. consumer data
http://finance.yahoo.com/news/oil-falls-below-96-dollar-014622808.html?l=1
U.S. private sector (70% of the U.S. GDP) is recovering.

Banks prepare for the return of the drachma
http://finance.yahoo.com/news/banks-prepare-return-drachma-083804551.html
Greece negotiated the right off of half their debt in exchange for promising austerity cuts. They will now weasel out of the austerity cuts, move back to the drachma and devalue their way out of the other half of their debt.

Spanish bank reform disappoints investors
http://news.yahoo.com/spain-approve-banks-cleanup-tough-talks-065021869--finance.html
6 countries are broke in Europe. France owns the majority of the debt from these 6 countries. The other 10 countries in the Euro Zone are doing ok.

The U.S. economy faces another threat to economic recovery if scheduled spending cuts take place.  The economy saw modest growth during the third quarter despite the Eurozone debt crisis and fear of a second recession. Deep spending cuts may jeopardize economic recovery if a congressional panel can’t decide on how to decrease the deficit by Thanksgiving. 

Analysts are also concerned that Congress may let emergency unemployment aid and a Social Security tax cut expire at the end of the year. Either scenario could stall growth and negatively affect the global markets. 

Despite concern by many analysts, some say that the economy and markets won’t be crippled by either outcome. “There’s no doomsday scenario in reducing government spending,” said David Kelly of JP Morgan Funds. 

The panel which appears to be at a stalemate must make a decision before the Thanksgiving holiday to delay the automatic spending cuts.

See Link: http://finance.yahoo.com/news/automatic-spending-cuts-threat-us-080312061.html?l=1

The possibility of the Italian government not being able to pay its creditors raises fear of a global recession. Italy has the 8th largest economy in the world, and with its $2.6 trillion dollars in sovereign debt, a bailout is highly unlikely. 

The reality of an Italian default could mean the subsequent default of Spain, Portugal, and Ireland. 

The sovereign debt accumulated by Italy has reached a point that economists say is unsustainable.  “It would take $1 trillion to rescue Italy, but the European Financial Stability Facility – EU’s bailout fund – has as little as $340 billion left in it,” according to economist John Higgins.

In the case of Italy defaulting, to pay off its debt analysts say the country may have to abandon the euro to repay its creditors on a one-to-one exchange. “The currency would then ‘float’ [sink],” says The Economist. 

The magnitude of losses from a drop in value of the euro would determine the effect on Europe’s entire financial system.  The chaos could, “send shockwaves around the world,” according to Michael Schumann at TIME. 

The U.S. economy would also suffer from a failure of Italy to repay its debt. “Over $400 billion of U.S. exports in 2010 went to the European Union, and U.S. firms have over $1 trillion of direct investment in the European Union,” according to Douglas Elliot of the Brookings Institution.

While the future of the Eurozone debt crisis remains uncertain, analysts agree that a domino effect of defaulting European countries would send the global economy into turmoil.

See Link:http://beta.finance.yahoo.com/news/italy-definitely-too-big-fail-103200417.html
See Link: http://news.yahoo.com/italys-debt-crisis-why-everyone-panicking-113700719.html