Crisis: Spain; EU rescues banks, not country, Krugman.

Crisis: Spain; EU rescues banks, not country, Krugman.(ANSAmed) - MADRID - "Yet again the economy slides, unemployment soars, banks get into trouble, governments rush to the rescue - but somehow it's only the banks that get rescued, not the unemployed." This statement was made by Paul Krugman, U.S. winner of the 2008 Nobel Prize for the Economy, in an opinion article in the New York Times, cited today by El Pais. The article regards the bailout of the Spanish banking system with 100 billion euros, agreed by the Euro Group and Spain. According to the economist, the bailout is necessary, but is ''not the solution Spain needs. "There's nothing necessarily wrong with this latest bailout (although a lot depends on the details). What's striking, is that even as European leaders were putting together this rescue, they were signaling strongly that they have no intention of changing the policies that have left almost a quarter of Spain's workers - and more than half its young people - jobless." Krugman complains that the European authorities ''are always ready to spring into action to defend the banks, but otherwise completely unwilling to admit that its policies are failing the people the economy is supposed to serve." He also reproaches the European Central Bank for refusing to lower interest rates. ''Unemployment in the euro area has soared,'' Krugman writes, ''and all indications are that the Continent is entering a new recession. Meanwhile, inflation is slowing, and market expectations of future inflation have plunged. By any of the usual rules of monetary policy, the situation calls for aggressive rate cuts. But the central bank won't move." The economist heavily criticises the eurozone's paralysis and concludes: ''it's becoming increasingly clear that it will take utter catastrophe to get any real policy action that goes beyond bank bailouts. But don't despair: at the rate things are going, especially in Europe, utter catastrophe may be just around the corner."Read the full story here.

Why the presidential election could be over at 8:30 a.m., October 26.

Why the presidential election could be over at 8:30 a.m., October 26.(American).This may be as good as it gets. Sputter-speed growth of around 2% and a moribund labor market. As the above chart suggests, the recovery is losing momentum. Here’s Goldman economist Jan Hatzius:

Goldman Sachs is turning increasingly bearish on the U.S. economy, expecting the nation to have added only 125,000 new jobs in April, as the effects of a warm winter, which buoyed employment late last year, wear off.
The forecast is far lower than the Reuters estimate of 170,000, and the average 177,250 jobs created every month from December to March. According to a report by the bank’s Chief U.S. Economist Jan Hatzius, the jobs report will be a further sign of a weakening economy, where inventory accumulation has accelerated and final demand growth remains sluggish.
“Real income growth remains soft, partly because of higher energy prices, wealth effects are not yet particularly positive, consumer confidence remains modest, and again some of the recent strength in retail sales probably reflects weather effects,” Hatzius said.

And this from Goldman market strategist Abby Joseph Cohen is equally as gloomy:

She said she agrees with Goldman economist Jan Hatzius’s forecast of the second half being more “difficult” than the first. “We have seen some deceleration in economic activity” after a mild winter that might have “puffed up” seasonal growth in the first quarter, she said.

Wait, the second half will be “more difficult” than the first? We might be lucky to have 2% growth in the first half. The econ team at Citigroup seems equally as sober: “The 1Q GDP data, a month of rising jobless claims, and likely back-to-back moderate gains in non-farm employment should dampen remaining optimism that 2013 would be the year of decisive growth acceleration in the U.S. Why should any other quarter in 2012 be markedly better than 1Q?”
And given the reluctance of big banks to make U.S. recession calls, I have to think that plenty of these folks are worrying we might get a negative quarter at some point this year. Imagine the political shock wave if, say, the third quarter dipped even a smidgen. To use President Obama’s favorite analogy, the U.S. economy would be back in the ditch. And that report would be released by the Commerce Department on Oct. 26, just 11 days before the election.Hmmmm.......Obama: "All the Choices We've Made Have Been the Right Ones".Read the full story here.