| FEATURE ARTICLE |
| THE RIDER ON THE BLACK HORSE IS NOW GOING FORTH! |
| From Der Spiegel |
"And when he had opened the third seal, I heard the third beast say, Come and see. And I beheld, and lo a black horse; and he
that sat on him had a pair of balances in his hand.
And I heard a voice in the midst of the four beasts say, A measure of wheat for a penny, and three measures of barley for a
penny; and see thou hurt not the oil and the wine." (Revelation 6:5-6)
Economic Tempest Overtakes Europe
Spain, Ireland and Denmark are either in a recession or on the brink. France is weakening fast. And Germany is suddenly faltering, dashing
hopes that Europe could escape the upheaval in the United States.
Europe, which held the world’s economic storms at bay for the last year, has finally succumbed.
Spain, Ireland and Denmark are either in a recession or on the brink. Italy is stagnating. France is weakening fast. And Germany, the sturdy
locomotive of European growth, is suddenly faltering -- dashing most residual hopes that Europe could escape the upheaval in the United
States.
On Tuesday, an influential poll of German investors by the Center for European Economic Research in Mannheim found that confidence had
plummeted to its lowest level since the survey was started in 1991.
Shares in Spain swooned after that country’s housing crisis claimed its first big casualty: a property developer that filed for protection from
creditors. And in Britain, the inflation rate surged -- as it has elsewhere in Europe -- to 3.8 percent because of prices for food and fuel.
“We’ve seen a sea change in Europe,” said Thomas Mayer, the chief European economist at Deutsche Bank in London. “All the bad news
around the world has finally come to us.”
While most economists had predicted that Europe would suffer fallout from the financial market chaos and the broader American malaise,
the speed of the deterioration has been surprising.
As recently as June, Mr. Mayer noted, the European Central Bank was projecting only a modest dip in growth in the second quarter. Two
weeks ago, it raised interest rates, citing the risk of inflation. Now the risk is that Europe, as a whole, could face a shrinking economy this
summer.
In that sense, Europe finds itself on a precipice similar to that in the United States, which is already in or verging on a serious slump. But
given the historic resilience of the American economy, some economists give the Americans slightly better odds of avoiding a recession --
as usually defined, a period in which economic growth shrinks for two quarters in a row -- than the Europeans.
“It is not impossible that the euro zone will dip into recession while the US manages to skirt it,” said Holger Schmieding, the chief European
economist at Bank of America in London.
Such a statement would have been far-fetched four months ago, when investor confidence and industrial output were rising in Germany and
France, despite a buoyant currency that makes European exports more expensive in the United States and other dollar-linked markets.
One dynamic that has not changed since then is the euro, which hit a new high against the dollar Tuesday, rising to $1.6038, surpassing a
previous record of $1.6018 set April 22. It fell back to $1.5969.
The tense mood in the United States is pushing investors to sell dollars and seek refuge in the euro. For all the storm clouds here, Europe
still looks like a safe harbor in comparison to the United States, where fears about the solvency of the government-sponsored mortgage
giants Fannie Mae and Freddie Mac have rattled the broader market.
Still, the strong euro -- combined with high oil prices -- is exacting a toll on Europe’s export machine.
German exports slumped 3.2 percent in May from the previous month, the largest monthly decline since June 2004. The country’s once-
robust trade surplus shrank to 14.4 billion euros, or $23 billion, from 18.8 billion euros, according to government statistics.
“The Germans had full order books when this started,” Mr. Schmieding said, “but now they are emptying.”
Germany, experts said, was the last big European country to keep its momentum because of its role as a supplier of machinery and other
capital goods to China and other fast-growing economies.
As Americans have stopped buying television sets and other goods from China, however, the Chinese have begun to curtail their orders of
machinery from Germany, economists said.
For Germany, the biggest threat may not be a recession but an inflationary spiral that drives up wages. The German airline Lufthansa is at
odds with the union representing its cabin and ground staff over the union’s demand for a 9.8 percent pay increase this year.
Lufthansa offered 6.7 percent, which the union, Ver.di, rejected. Now it is collecting ballots for a strike, which it says could begin within
weeks.
The European Central Bank, in raising rates a quarter point this month, was trying to discourage that kind of behavior. But with inflation
running at 4 percent -- twice the threshold set by the bank -- economists said a one-time rate increase would have limited effect.
With Europe slowing so rapidly, economists believe it will be tough for the inflation fighters on the central bank’s governing board to marshal
the votes for any further rate increases.
In Britain, the worsening conditions had fanned expectations that the Bank of England would cut rates soon. Now, though, the surge in
inflation has doused those hopes, even though it comes amid reports of weaker housing prices.
The situation in Britain is still relatively benign compared with that in Spain. With its once-frothy housing market in a free fall, economists say
Spain will probably enter a recession later this year.
On Tuesday, a major property developer, Martinsa-Fadesa, declared insolvency after failing to refinance its debt. Average home prices fell
in the second quarter, for the first time in a decade, according to the Spanish government.
“The hard landing in Spain is very similar to the one in the US, but in Spain, it is happening much faster,” said José Carlos Diez, chief
economist at the brokerage firm InterMoney in Madrid.
that sat on him had a pair of balances in his hand.
And I heard a voice in the midst of the four beasts say, A measure of wheat for a penny, and three measures of barley for a
penny; and see thou hurt not the oil and the wine." (Revelation 6:5-6)
Economic Tempest Overtakes Europe
Spain, Ireland and Denmark are either in a recession or on the brink. France is weakening fast. And Germany is suddenly faltering, dashing
hopes that Europe could escape the upheaval in the United States.
Europe, which held the world’s economic storms at bay for the last year, has finally succumbed.
Spain, Ireland and Denmark are either in a recession or on the brink. Italy is stagnating. France is weakening fast. And Germany, the sturdy
locomotive of European growth, is suddenly faltering -- dashing most residual hopes that Europe could escape the upheaval in the United
States.
On Tuesday, an influential poll of German investors by the Center for European Economic Research in Mannheim found that confidence had
plummeted to its lowest level since the survey was started in 1991.
Shares in Spain swooned after that country’s housing crisis claimed its first big casualty: a property developer that filed for protection from
creditors. And in Britain, the inflation rate surged -- as it has elsewhere in Europe -- to 3.8 percent because of prices for food and fuel.
“We’ve seen a sea change in Europe,” said Thomas Mayer, the chief European economist at Deutsche Bank in London. “All the bad news
around the world has finally come to us.”
While most economists had predicted that Europe would suffer fallout from the financial market chaos and the broader American malaise,
the speed of the deterioration has been surprising.
As recently as June, Mr. Mayer noted, the European Central Bank was projecting only a modest dip in growth in the second quarter. Two
weeks ago, it raised interest rates, citing the risk of inflation. Now the risk is that Europe, as a whole, could face a shrinking economy this
summer.
In that sense, Europe finds itself on a precipice similar to that in the United States, which is already in or verging on a serious slump. But
given the historic resilience of the American economy, some economists give the Americans slightly better odds of avoiding a recession --
as usually defined, a period in which economic growth shrinks for two quarters in a row -- than the Europeans.
“It is not impossible that the euro zone will dip into recession while the US manages to skirt it,” said Holger Schmieding, the chief European
economist at Bank of America in London.
Such a statement would have been far-fetched four months ago, when investor confidence and industrial output were rising in Germany and
France, despite a buoyant currency that makes European exports more expensive in the United States and other dollar-linked markets.
One dynamic that has not changed since then is the euro, which hit a new high against the dollar Tuesday, rising to $1.6038, surpassing a
previous record of $1.6018 set April 22. It fell back to $1.5969.
The tense mood in the United States is pushing investors to sell dollars and seek refuge in the euro. For all the storm clouds here, Europe
still looks like a safe harbor in comparison to the United States, where fears about the solvency of the government-sponsored mortgage
giants Fannie Mae and Freddie Mac have rattled the broader market.
Still, the strong euro -- combined with high oil prices -- is exacting a toll on Europe’s export machine.
German exports slumped 3.2 percent in May from the previous month, the largest monthly decline since June 2004. The country’s once-
robust trade surplus shrank to 14.4 billion euros, or $23 billion, from 18.8 billion euros, according to government statistics.
“The Germans had full order books when this started,” Mr. Schmieding said, “but now they are emptying.”
Germany, experts said, was the last big European country to keep its momentum because of its role as a supplier of machinery and other
capital goods to China and other fast-growing economies.
As Americans have stopped buying television sets and other goods from China, however, the Chinese have begun to curtail their orders of
machinery from Germany, economists said.
For Germany, the biggest threat may not be a recession but an inflationary spiral that drives up wages. The German airline Lufthansa is at
odds with the union representing its cabin and ground staff over the union’s demand for a 9.8 percent pay increase this year.
Lufthansa offered 6.7 percent, which the union, Ver.di, rejected. Now it is collecting ballots for a strike, which it says could begin within
weeks.
The European Central Bank, in raising rates a quarter point this month, was trying to discourage that kind of behavior. But with inflation
running at 4 percent -- twice the threshold set by the bank -- economists said a one-time rate increase would have limited effect.
With Europe slowing so rapidly, economists believe it will be tough for the inflation fighters on the central bank’s governing board to marshal
the votes for any further rate increases.
In Britain, the worsening conditions had fanned expectations that the Bank of England would cut rates soon. Now, though, the surge in
inflation has doused those hopes, even though it comes amid reports of weaker housing prices.
The situation in Britain is still relatively benign compared with that in Spain. With its once-frothy housing market in a free fall, economists say
Spain will probably enter a recession later this year.
On Tuesday, a major property developer, Martinsa-Fadesa, declared insolvency after failing to refinance its debt. Average home prices fell
in the second quarter, for the first time in a decade, according to the Spanish government.
“The hard landing in Spain is very similar to the one in the US, but in Spain, it is happening much faster,” said José Carlos Diez, chief
economist at the brokerage firm InterMoney in Madrid.