US forecast, China Slowdown, gold/bonds compared to 2008, and Germany / EU debt

All eyes on Germany in September.  Things are not looking good for Merkel or the German Economy.  Here are a bunch of different mini-posts that all point to the same outcome -> this Fall will be "interesting" for lack of a better term, and the next 3 years can be painful.

News from around the world:

U.S. forecast The normally upbeat economy.com dropped a downer a couple weeks ago. Their summary:

• A string of shocks through the spring and summer undermined business, consumer and investor confidence.

• Odds of a renewed recession over the next 12 months, already one in three, will increase if stock prices continue to fall.

• The economy's path depends on how swiftly and effectively policymakers act to shore up confidence.

• If confidence improves, the economy’s improving fundamentals can begin to build a foundation for better growth.

• We have lowered the forecast for U.S. real GDP growth to 2% annualized in the second half of 2011, and just over 3% in 2012.

The U.S. economy has suffered an extraordinary reversal of fortune. 

China Slowdown from Shanghai Daily:

UBS trims outlook for China's economy

UBS AG has joined other major banks in cutting the growth forecast for China's economy as it cites that weaker growth prospects in developed nations will affect the world's second-largest economy's exports.

The Swiss bank revised downwards growth in China's gross domestic product to 9 percent this year from an earlier projection of 9.3 percent. It also cut the growth estimate for 2012 to 8.3 percent from 9 percent.

Deutsche Bank and Morgan Stanley also cut their outlook as faltering economic growth in the United States and Europe as well as the eurozone's deepening debt crisis could affect demand for made-in-China goods such as clothes and electronic products from the world's largest exporter. 

UBS said it lowered the forecast for China's export growth by 3 percentage points in volume to about 6 percent in 2012, and forecast net exports to trim 1 percentage point from GDP growth next year.

"A sharp drop in export growth, which may start in the fourth quarter of 2011, is also likely to hit manufacturing investment and consumption," UBS' Hong Kong-based economist Wang Tao said yesterday.

UBS also cut its forecast for inflation next year from 4 percent to 3.5 percent. It said China may hike interest rates by one more time in the next 18 months.

Morgan Stanley last week cut China's economic growth forecast for 2012 to 8.7 percent from 9 percent. Deutsche Bank this week cut its view of economic growth this year to 8.9 percent from 9.1 percent and its outlook for 2012 to 8.3 percent from 8.6 percent.

GOLD From Zerohedge:

A Race In Opposite Directions:
How scary is it? The best illustration comes from the $US Gold price. The “price” of longer-term US Treasury debt has risen by 14.75 percent since the beginning of July. Over the same period, the $US price of Gold has risen from $US 1482 to its August 19 spot future close of $US 1852. That’s a rise of $US 370 or 25 percent. Yet US Treasury debt and Gold are polar opposites in any sane evaluation of the financial system. Treasury debt is the foundation of the global monetary system. Gold is the pariah of the global monetary system and has been locked out of it in any official form for four decades.

With all the comparisons to the events of 2008 which have been appearing in the mainstream financial media, this comparison has been all but totally overlooked. Cast your mind back to the carnage of late 2008. During that period, almost everything was sold off. While it is true that Gold did not fall nearly as far as did most of its fellow “commodities”, it is nonetheless a fact that in the two months between mid September and mid November 2008, Gold fell from about $US 920 to $US 700. That’s about 24 percent.

There were two financial assets which boomed in late 2008. One was Treasury debt, the other was the US Dollar. While Gold and everything else was falling out of bed, the trade-weighted US Dollar index - the USDX - soared 21 percent from 73 to 88.2 between early August and late November 2008.

Compare that to what is happening now. Treasuries are soaring but the US Dollar is, at best, flat. And Gold in terms of EVERY major paper currency has gone ballistic. This time, things do look different.

Germany EU bailout From the Telegraph:  (ESFS vote is 9/23)

Euro bail-out in doubt as 'hysteria' sweeps Germany

German Chancellor Angela Merkel no longer has enough coalition votes in the Bundestag to secure backing for Europe's revamped rescue machinery, threatening a consitutional crisis in Germany and a fresh eruption of the euro debt saga.

9/7, the German Constitutional court will rule on Germany's EU bailout package.  "If the court rules that the €440bn rescue fund (EFSF) breaches Treaty law or undermines German fiscal sovereignty, it risks setting off an instant brushfire across monetary union.

The seething discontent in Germany over Europe's debt crisis has spread to all the key institutions of the state. "Hysteria is sweeping Germany " said Klaus Regling, the EFSF's director.
...
Christian Wulff, Germany's president, stunned the country last week by accusing the European Central Bank of going "far beyond its mandate" with mass purchases of Spanish and Italian debt, and warning that the Europe's headlong rush towards fiscal union stikes at the "very core" of democracy. "Decisions have to be made in parliament in a liberal democracy. That is where legitimacy lies," he said.
...
The Bundestag is expected to decide late next month on the package, which empowers the EFSF to buy bonds pre-emptively and recapitalize banks. While the bill is likely to pass, the furious debate leaves no doubt that Germany will resist moves to boost the EFSF's firepower yet further. Most City banks say the fund needs €2 trillion to stop the crisis engulfing Spain and Italy.

Mrs Merkel's aides say she is facing "war on every front". The next month will decide her future, Germany's destiny, and the fate of monetary union."