Death Star Economics



Bad at budgeting, countries and airlines edition

The US Congressional Budget Office estimates that the US will enter a recession come 2013, with the budget deficit reaching $1.1tn (t-r-i-l-l-i-o-n), government debt totalling 73% of GDPunemployment moving towards 9% and economic output declining 0.5%. That would push the debt to GDP ratio beyond the levels of the 50s and about double as high as five years ago. According to Bloomberg:

Congressional leaders have said they probably won’t consider until after the election the Bush-era tax cuts set to expire Dec. 31 or $1 trillion in automatic spending cuts that would begin taking effect in January. There is no sign of an agreement to avoid a so-called fiscal cliff, and the CBO report prompted partisan finger-pointing.

Enter the minutes taken at the FOMC (Federal Open Market Committee) meeting on 31 July/1 August. In a nutshell, the note show agreement that as things are still shit (see above) despite stronger retail sales and lower jobless claims, some QE is still in order. Everybody go back to being excited. read article

Meanwhile, Qantas as canceled an $8.5bn order for 35 Dreamliners, making it the largest cancellation of aircraft ever. Kind of a blow for Boeing, which has been behind schedule since the idea of the B787-9 Dreamliner has been put on paper for the first time. Its first order by All Nippon Airways was delayed by more than three years. China Eastern Airlines had canceled the order of 24 Dreamliners in fall of last year. After paying a cancellation fee, Qantas will be get $433m in refunds. The company will need it; in the year leading up to June 30, it lost AUD245m, marking a fall in profits of almost AUD500m from the year prior. read article

Otherwise, the Chinese flash PMI came in at its lowest since November 2011, supporting the more-QE-from-the-PBC thesis, while the French PMI outperformed expectations in terms of manufacturing and services. The German and overall eurozone PMI were meh, i.e. mixed, but as usual pointing towards the worse.

Finally, NYT Dealbook explains the dynamics of sovereign debt restructurings (literally any, but mostly Belize) by the example of the Maltese Falconread article

So long.

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