Seven Days in July That Could Kill the Economy
[NOTE: This is a guest post by Dan Bischoff.]
When I took a quick forward look at scheduled economic news recently, it became immediately apparent that July will be the Month of the Long Knives for the U.S. economy. Here are seven days in July that, in the absence of a global deal on financial debt and bank security, threaten to drown the recovery like a kitten in a goldfish bowl.
(Yes, two of them are the same day. Sue me.)
July 1: QE2 (Quantitative Easing, part two), the Federal Reserve's monetary policy of buying bank assets with electronically created money, officially ends with on June 30. So we'll begin July 1 without the federal government's largest ongoing stimulus program, just as regulators around the globe are demanding higher cash reserves (up to 20%) for banks and the system overall faces sovereign defaults and sluggish to negative economic growth. Think of it as "cash for junkers" closing down.
July 1: The Chinese Communist Party celebrates its 90th birthday with an elaborate national party. It will try very hard to sidestep concerns about corruption, inflation, and a rising trade deficit. Most especially, it will want to lay to rest any doubts anyone anywhere might have about who's in charge.
But China's displays of disciplined order often have an unintended impact (remember those serried ranks of drummers and gymnasts at the 2008 Olympics that seemed so, well, Maoist?), and the celebrations may simply call attention to the nation's looming problems. All the noise can't hide the fact that China's really not so different from the U.S. -- as the cheery boys over at Zerohedge like to put it, both systems are "corrupt, rigged, crony-Capitalist, rely on phony statistics and propaganda, and operate with two sets of rules: One for the Elites, and another for the masses."
July 3: Eurozone governments are set to meet to work out the next bailout of Greece, for another 100 billion euros. Greek Prime Minister Georgios Papandreou is a Socialist (he's actually president of the 2nd Internationale this year), but in June he whipped a bill through the Greek parliament that started turning fundamental national assets over to the country's creditors -- part of a global epidemic of supposedly populist leaders (in Spain, Ireland, even here in the U.S.) who have tried to put the banks' bills on the backs of national economies. Icelandic referendum, anyone?
July 14: Elizabeth Warren will give House Republicans one more shot at discrediting her in hearings. Their ultimate target: Warren's demand for "plain vanilla financial products" for customers, with clear rules, rates, and dependable results. This could be the last full day that the mainstream media spends discussing meaningful financial regulation.
July 15: The Federal Election Commission will post second-quarter fundraising results for Republican presidential candidates; they should winnow the field if Mitt Romney shows as large an advantage as expected and fringe candidates acknowledge reality. If Romney assumes the mantle of unstoppable frontrunner, we could be looking at an outspoken advocate for a deregulated financial system vs. a -- well, what would you call the man who made Tim Geithner his Treasury secretary?
July 21: The Consumer Financial Protection Bureau opens for business, with or without Warren. Part of the Federal Reserve's charter will be officially repealed and the CFPB is supposed to take over regulatory enforcement of consumer banking, payday loan operations, credit servicing firms, debt collection agencies, and many other nonbank lenders and financial reporting companies. If the House Republicans let it have a budget, that is.
July 15: The biggest threat of all is the U.S. debt ceiling vote, originally set for May, then July 12, and now facing a drop-dead due date of Aug. 2 -- but the deal will almost certainly be struck in mid-July if any is struck at all. And it will almost certainly be bad news for the world economy: At least $2 trillion in domestic cuts are already being discussed, along with "revenue raisers" and, possibly, regressive tax hikes. And the Democrats will have endorsed every cut.
I may well have missed some important dates -- and if you'd care to set me straight, have at it in comments. Still, at this point it's hard to see any action in July that's likely to restore the consensual trust in the economy it so desperately needs to prosper. Warren might be made head of the CFPB, and the GOP might fund it fully...but, well, pigs might fly, too.
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Dan Bischoff writes about art for the Star-Ledger in New Jersey; he was European editor for World Business and National Affairs editor for the Village Voice.