Econowatch

A monthly scorecard on the state of the economy in North America and beyond

Markets are sinking; foreclosures are rising; and the fiscal cliff is looming. The United States is in pretty rough shape again. Right on cue, the Occupy Wall Street movement is back, with a new campaign launched last week called Rolling Jubilee. Described as “a bailout of the people by the people” it buys up distressed household debt (like credit card debt) that’s normally sold by lenders to collection agencies for a fraction of its original value. Rather than try to collect on it, Rolling Jubilee forgives the debt. As of last week, it had raised $285,000 in donations, enough to buy $5.7-million worth of defaulted loans.

Rolling Jubilee has received almost unanimously positive attention (even Forbes praised the idea). It uses private donations, and the way the distressed debt is sold means those lucky enough to have their debts forgiven are chosen at random. More importantly, it’s a creative, free-market response to what is still a serious problem dogging America’s economy, and one that could soon blow the bottom out of Canada’s.

Last week, a Bank of Canada official warned yet again that household indebtedness is the biggest risk facing the economy—bigger than a U.S. recession, Europe’s debt crisis or falling demand for commodities. Interest rates aren’t going anywhere (except maybe down), either, so indebtedness is only going to keep growing. (It’s fair to say the central bank’s debt warnings over the years have been useless, and now border on disingenuous).

It’s also clear the housing market is now going in the wrong direction (with starts and sales falling, and prices surely not far behind), which should make anyone with a big, fat mortgage pretty nervous. Here’s hoping this Rolling Jubilee effort takes off in a big way. It could come in handy.

The good news

Americans may be panicked about the fiscal cliff, but businesses are confident consumers will keep spending. Inventories rose 0.7 per cent in September.

In the first 24 hours after its release, the video game Call of Duty took in $500 million worldwide—the biggest box-office opening ever. Nerds rule.

North American airlines got a lift when the European Commission delayed a decision to hit carriers with costly levies for carbon emissions on flights to the continent

Home Depot reported a third-quarter profit of $947 million, with sales up 4.6 per cent—a sign the U.S. housing market is back on solid ground

Canadian exports rose 1.9 per cent, to $38 billion in September. Exports to countries other than the U.S. were up 3.6 per cent to $10.2 billion

Manufacturing sales in Canada grew for the second straight month in September, up 0.4 per cent. The aerospace and parts industry led with a 43 per cent jump.

The bad news

The Canadian economy will grow at less than two per cent until mid-2013, when (if) U.S. demand picks up, says BMO. A recovery on life support.

U.S. retail sales fell 0.3 per cent in October—worse than analysts expected. Blame goes partly to the impact of hurricane Sandy.

New home construction fell 8.9 per cent in Canada in October, to 204,100 units. Nine of 10 provinces saw declines, led by Quebec with a 17 per cent drop.

The S&P/TSX composite index was in steady decline last week, slipping below 11,800 points. It opened the year at close to 12,000.

Hostess Brands Inc. filed for bankruptcy, prompting a run on Twinkies in the U.S. The company entered last-ditch talks with striking workers this week.

The dreaded double-dip hit the eurozone, which has been in recession since the end of 2011, new data shows. The recovery that followed the previous recession lasted only 10 months.

‘We are not going to permanently cripple ourselves just because 535 people can’t get along’

Warren Buffett

The billionaire investor, who has been an advocate of raising taxes for the wealthiest, argues that even if Congress fails to resolve the fiscal cliff by year’s end, America’s resilient economy won’t be thrown into a tailspin.

Signs of the Times

A big boat to nowhere

Investors may not be pleased with Apple, whose shares continued to fall last week, but its employees likely are. The company is introducing perks for workers, like discounts on Apple products, that were not part of the corporate culture under Steve Jobs.

When a country is going to the dogs, it’s not necessarily a bad thing. A new study by Euromonitor International shows that dog ownership has risen the most since 2007 in places where economic prosperity is also on the rise: India, Brazil and Russia, for instance. Dog ownership has been on the decline in Greece, France and Japan.

Mining company Vale spent about $2 billion building new supersized freighters to ship ore to China. Now China is barring them from its ports, citing safety concerns. Observers say the move is really designed to protect China’s state-owned shipping industry. Foreign shippers have also recently been banned from China’s rivers.

Attention retailers: don’t mess with America’s favourite holiday. Target ran afoul of not just customers but some of its big investors over plans to launch holiday sales on Thanksgiving Day, rather than on the traditional day after, Black Friday.

By the numbers

11 per cent The amount Canadians plan to cut their holiday spending by this year, according to a RBC survey.

70 Number of new partners named by Goldman Sachs, the lowest in a decade. Only 10 are female.

500 Number of jobs cut by Sun Media Corp., Canada’s biggest newspaper chain, in an effort to slash costs by $45 million.

2.8 million Number of cars included in Toyota’s latest global recall.

49.7 million Number of Americans living in poverty, according to a new census report—3.5 million more than earlier estimates.

$4.5 billion The record settlement that BP will pay to the U.S. over the 2010 Gulf of Mexico oil spill.




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