Bailout

For the past several years, Italy under Prime Minister Silvio Berlusconi resembled a political comic opera, with a larger-than-life character of ravenous appetites and tragic hubris. But the recent "political death" of Mr Berlusconi represents only the end of Act One. Two more acts remain, and this drama could turn from comedy to tragedy quickly.

After days of drama-filled meetings, in late October eurozone leaders announced the latest “comprehensive” rescue plan. Although it was an improvement over earlier efforts, this package, too, came up short in that it failed to calm the markets and offer the eurozone a path back to economic growth. And without growth, there will be many more months of crisis.

Notwithstanding repeated attempts at monetary and fiscal stimulus since 2009, the United States remains mired in what is by far its worst economic slump since that of the 1930s.¹  More than 25 million working-age Americans remain unemployed or underemployed, the employment-to-population ratio lingers at an historic low of 58.3 percent,² business investment continues at historically weak levels, and consumption expenditure remains weighed down by massive private sector debt overhang left by the bursting of the housing and credit bubble a bit over three years ago.

In putting forth his jobs program, President Obama faced a difficult dilemma: propose a program that could gain Republican support or a more ambitious program that would actually get the economy back on a path of recovery and job creation.

-- This is a guest post by Jay Pelosky, Principal, J2Z Advisory, LLC --

The economic and investment outlook for the second half of the year is rocky.  The European debt crisis, U.S. fiscal woes, and inflation in emerging economies remain a problem, and in some cases have taken a turn for the worse. Risks are rising of a major drop in stocks and possibly bonds (resulting in rising yields). The implication could well be a shrinking world economy.

The economic environment in America today is more dire than most of us have ever known. We are in the midst of an unemployment emergency, in essence a jobless recovery: notwithstanding recent marginal upticks in official U.S. jobs numbers, there will be no fundamental improvement in the unemployment picture unless major new national economic strategy initiatives are taken. Who will step up to drive them forward?

This is by far the most jobless of recent recoveries. Allen Sinai, a man known for describing numbers carefully, already wrote in November 2009:

“Never has business shed so many workers so fast, so many people failed to find work who are looking for work, and so many dropped out of the labor force as in the current circumstance.”

By that time, the stock market was already recovering but payrolls were not. Sinai wrote:

Unemployment over nine percent, the highest rate this far into a “recovery” in modern times, reflects only the surface of our problems. More troubling is that over six million American have been unemployed for more than six months, the largest number since the Census began tracking their numbers. The pool of “missing workers” – those neither employed nor counted as unemployed – has soared to over 4.4 million, according to the left-of-center Economic Policy Institute.

-- This is a guest post by Jay Pelosky, Principal, J2Z Advisory, LLC --

GLOBAL BACKDROP

Michele Wucker, president of the World Policy Institute and co-sponsor of the World Economic Roundtable, guest hosted Worldwide Exchange this morning and spoke about her recent paper advocating for a voluntary debt restructuring in Europe.