Martin Wolf on the growing reality that the consumption (US; UK) - welfare state (most of Continental Europe) - export (Japan, Germany, China) model of the global economy of the past quarter century is no longer sustainable. The shift will be awful for many reasons.

The real cost of those unfunded liabilities in the United Kingdom (we are no different). When your 99 weeks of unemployment insurance in the US runs out, what next? The optimists present the other side of the trade. Something's wrong in the state of France, Sarkozy's dark secret. Gold can be a good hedge against equities. News that scientists are rethinking what gravity is, in fact, in their view, gravity isn't. And did the Bank of Japan really appoint the first female branch manager ever, like, in 128 years?

Martin Wolf argues that the only reason that the US was able to maintain its absurd level of personal consumption plus housing as a percentage of GDP (76% at the peak in 2007) was due to elevated levels of government support particularly since incomes in the US were so unequal ("of every dollar of real income growth that was generated between 1976 and 2007, 58 cents went to the top 1 per cent of households"). And other scary insights.

It is nearly three years since the world became aware of the coming financial tremors. http://www.ft.com/cms/s/0/39c67712-8eb1-11df-8a67-00144feab49a.html

The argument for higher German wages to spark consumption. Won't they just save even more?

Prior to the introduction of the euro, European economies running big trade deficits routinely devalued their currencies against the Deutschmark and other currencies tied to it. http://www.nytimes.com/2010/07/14/opinion/14iht-edtilford.html?_r=1&nl=todaysheadlines&emc=a27

The UK does the math on its total debt exposure. Those unfunded pension and health liabilities do add up don't they?

The true scale of Britain's national indebtedness was laid bare by the Office for National Statistics yesterday: almost £4 trillion, or £4,000bn, about four times higher than previously acknowledged.  http://www.independent.co.uk/news/uk/politics/britainrsquos-debt-the-untold-story-2025979.html

Hey fiscal crises are just a way to say 'slowdown, cut the leverage'.

Much has changed in the world economy over the past three years, but then nothing has changed. http://www.ft.com/cms/s/0/580fa460-8e8d-11df-964e-00144feab49a.html

Portugal has discovered that 10 years of austerity does not mean improved outcomes without economic growth.

Indebted European countries from Greece and Italy to Spain have in recent weeks set off down a common path toward fiscal recovery, promising to slash spending and raise taxes. http://online.wsj.com/article/SB10001424052748704111704575355072331978794.html?mod=WSJ_hp_us_mostpop_read

Long-term unemployment benefits are about to be turned off for millions of Americans. One story.

Even before his unemployment checks ended, Dwight Michael Frazee's days were filled with the pursuit of any idea that could earn him a buck. But few are working out, and now his nights are filled with dread. http://www.washingtonpost.com/wp-dyn/content/article/2010/07/12/AR2010071205144.html?wpisrc=nl_most

The recent run up in markets may mean that all the double dipper doomsayers are wrong.

The other side of the trade.

As the mercury rises, most of us would prefer to hear the word "dip" only in relation to pools, lakes or beaches. Unfortunately, the doom-mongers have hijacked this word and incorporated it into their latest dark scenario: a double-dip recession.  http://online.wsj.com/article/SB127880219326915593.html

The power of the steep yield curve.

There have been whispers, or maybe it’s just wishful thinking, that the Federal Reserve might buy more long-term bonds, lowering interest rates and making housing more affordable.  http://www.businessweek.com/news/2010-07-13/double-dippers-are-all-wet-ignoring-yield-curve-caroline-baum.html

Our friend Ken from Tokyo and Hong Kong recently in South Africa sends news from Istanbul that the summer is getting very hot for French President Nicolas Sarkozy for all the wrong reasons.

Between the wooded parkland of the Bois de Boulogne and the first lazy bend of the river Seine, just to the west of Paris, there is an "island" of millionaires. http://www.independent.co.uk/news/world/europe/sarkozys-summer-of-scandal-2025764.html

Maybe gold is an asset class after all.

Yesterday, money manager and writer James Altucher wrote a column slamming gold, arguing that ultimately it was just a worthless rock. And to back it up, he cited various periods when gold didn't return that much.  http://www.businessinsider.com/chart-of-the-day-equities-vs-gold-2010-7

 

On a business trip from Tokyo about 15 years ago I spent a very long Saturday afternoon in London while recovering from jet lag trying to get through Stephen Hawking's A Brief History of Time another one of those books destined more to be talked about than read. There were certainly moments when I got it (whatever 'it' is supposed to be) but on turning the page the understanding evaporated.

News today that a scientist has a theory that there is no gravity, the one lesson in physics that I got (more or less).

It’s hard to imagine a more fundamental and ubiquitous aspect of life on the Earth than gravity, from the moment you first took a step and fell on your diapered bottom to the slow terminal sagging of flesh and dreams.  http://www.nytimes.com/2010/07/13/science/13gravity.html?_r=1

News flash -- The Bank of Japan appoints a female as a branch manager. 

After 128 years, the Bank of Japan has finally named a woman to head one of its branches, the bank announced Monday.  http://www.asahi.com/english/TKY201007120387.html

Related.

Although the government announced in June a growth strategy that emphasizes the creation of new industries in such fields as environment, nonfossil-fuel energy and health-related services, the big problem for Japan is that its middle class is waning. http://search.japantimes.co.jp/rss/ed20100714a2.html