Financial trouble in Europe has grown again, at least for a day. That is how the markets view news from the region for now. National leaders there and the International Monetary Fund have a solution to foreign debt problems one day. Those solutions are ruined by credit agency downgrades or battles between Greece’s creditors and the nation’s leaders the next. The most recent development is that private creditors and Greece are no closer to a deal to set what kind of write-down those creditors will take on a refinancing of the nation’s balance sheet. The World Bank has sharply cut GDP forecasts for the region. A Fitch executive said that Italy could be downgraded by two levels. The pendulum has swung back in the direction of despair.
Chinese Housing Bubble
China’s home property market has worsened rapidly. Data released by the government show that home prices rose in only two of the 70 urban areas measured. They fell in 52. There is a general assumption that the rise in real estate values, which is several years old, was fuel for China’s consumer spending activity. It is likely that a contraction in value would have the effect of a drawback in consumer activity. China does not rely as much on the consumer for GDP as the U.S. does. It has a large enough manufacturing base to balance the consumer. But recent factory production data show that part of the Chinese economy is slowing, too.
World Bank Forecast
The World Bank sharply cut forecasts for GDP growth in every region around the globe. It also warned that a disaster in Europe’s finances and its major economies would spill over to developing nations. The potential is described by the agency as possibly “Lehman like.” Most forecasts from other agencies, like the IMF, have been slightly more sanguine. And many economists believe, for now, that the crisis in Europe would slow GDP growth in nations like the U.S. and China. The warning from the World Bank is sobering, but may be too severe.
Internet Protest
Several websites have posted protests to SOPA and PIPA legislation that they believe would hamper free use of the internet. But the protests are modest, and they show that most large websites put revenue before support of the movement. Wikipedia has shuttered its English language site, but it is operated by a nonprofit. Google has added a black banner to its home page — hardly something that will affect users. Major news sites and portals have done nearly nothing at all. It is not much of a protest.
Douglas A. McIntyre
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