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 These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The European summit this week will feature a standoff between German Chancellor Angela Merkel advocating austerity and French President Francois Hollande promoting stimulus to boost growth.

Neither position is without merit, but neither by itself will solve what ails Greece and other failing European nations. Sadly, none of the leaders involved, including the insurgent left most likely to win the next Greek elections, appear willing to accept that a successful strategy to put Europe back on track will require abandoning the euro and returning to national currencies.

After the single currency was introduced in 1999, productivity growth was slower and prices rose faster in southern Europe than in Germany and other northern states owing to both cultural and immutable geographic conditions. Consequently, the north enjoyed growing trade surpluses at the expense of deficits in the south.

Trade deficits can instigate high unemployment and curb tax revenue, and to support employment and social programs on a par with their northern neighbors, the Greek, Italian and Portuguese governments borrowed too much.

In Spain, northern Europeans purchasing second homes and vacationing in its sunny climate instigated a rush of foreign funds into its banks to build dwellings and hotels. Spain actually had budget surpluses prior to the 2008 global financial crisis, and its trade deficits were financed by bank borrowing from foreign sources and questionable loans to homeowners: the U.S. model of excess. Continue reading…

A reader in Bangalore, India, responds to Alex Frangos’s column “HEARD ON THE STREET: India’s Woes Make China Look Rosy”:

Good analysis by Alex. However, I have a somewhat different view on one point, which is increasing government spending.

India can’t afford to further increase its budget deficit. I think a better solution is to bring a fresh round of policy reforms, which are now long overdue. India needs to attract FDI, which would bring dollars and would ease some pressure off the rupee. Foreign investors’ confidence is at a low due to policy paralysis.

Some areas that immediately need reforms are FDI in multibrand retail, aviation and some other areas, a land acquisition bill, labor policy, and policy to attract private investment in infrastructure development. Infrastructure continues to remain poor and create supply bottlenecks.

(TALK BACK comments may well be submitted by readers who have a financial interest in securities that are being discussed.)

(TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at TalkbackAmericas@dowjones.com. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments. Talk Back comments can be found under the N/TLK code.) Continue reading…

 These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

J.P. Morgan Chase & Co.’s (JPM) $2 billion loss from betting on corporate bonds will embolden advocates of the Volcker Rule–a provision of the 2010 Dodd-Frank law that will prohibit banks from trading on their own account. Unfortunately for federal regulators, trading in securities is essential to modern banking, and busting up the big Wall Street financial houses may be the only way to better ensure financial stability.

The Glass Steagall Act of 1933 separated commercial banking–taking deposits and making loans to finance businesses, homes and the like–from investment banking–selling stocks, bonds and other securities, and making markets for investors to buy and sell those assets quickly. That separation was repealed during the final years of the Clinton Administration, and Wall Street institutions like J.P. Morgan now perform both roles.

Modern commercial banking simply won’t tolerate such an absolute separation, because banks cannot finance all the demand for loans from deposits. In recent decades, too many savers have found they can earn higher returns than at the bank by investing in money market funds, bond funds and directly buying bonds. Continue reading…

 These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The Commerce Department reported the deficit on international trade in goods and services was $51.8 billion in March. This was up from $45.4 billion in February, thanks to weakening conditions in Europe and chronic deficits with China and in petroleum.

The $620 billion annual deficit is the most significant barrier to economic recovery and creating jobs, and consumer goods from China and oil account for virtually the entire problem.

Economists agree the pace of economic recovery has been too slow, because of too little demand for what Americans make.

Consumers are spending again, the process of winding down household debt that followed the Great Recession; however, too many consumer dollars go abroad to purchase Middle East oil and Chinese consumer goods but do not return to buy U.S. exports. Consequently, businesses can’t justify expanding U.S. facilities and hiring workers.

Since the economic recovery began in June 2009, the trade deficit has doubled and GDP growth has averaged a disappointing 2.4% a year. Unemployment has fallen from above 10% to 8.1% mostly because Americans have quit looking for work, not found jobs. Continue reading…

A reader responds to a recent column, “FX MATH: Bright Skies And Foreign Flows, If Italy Avoided The Euro”:

“Vincent Cignarella and Stephen Bernard’s article is highly interesting and shows the insanity of the common currency since the same is probably true for Greece.

“I would be highly interested in a similar analysis for the French, who have got a pretty good savings rate, as far as I know, but obviously very bad public spending habits, which could get worse if Hollande were to win the election and to get a comfortable majority in Parliament, events that I believe are likely to happen.

“Many thanks for your attention.”

Werner Strohmeier Continue reading…

 A reader in California responds to Jared A. Favole and Tennille Tracy’s story “WSJE(4/18) Obama Seeks Oil-Market Curbs”:

President Barack Obama doesn’t realize that raising margin requirements outright would also make it more difficult for short sellers in the oil market.

Having traded oil futures for over 10 years, I understand how leverage and margin can affect the ability to create new positions in futures markets. If Obama wishes to limit the speculation that is pushing prices upward, he should only increase trading margin requirements on speculative long positions, not on short positions. This would give the advantage to short sellers, the ammunition they need to overpower the bulls.

If we’re going to pick winners and losers, for the sake of the country, the Commodity Futures Trading Commission must have policies favoring short sellers, as long as the price of oil remains above $100 and as long as large speculative noncommercial traders hold a net long position in oil futures contracts. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Thursday, the U.S. Commerce Department is expected to report the deficit on international trade in goods and services was $51.7 billion in February, down just slightly from January.

The $620 billion annual trade gap is the most significant barrier to more robust growth and jobs creation, and oil and subsidized imports from China are the culprits.

Jobs Creation

In March, the economy added 120,000 jobs, but 362,000 jobs must be created each month for three years to lower unemployment to 6%.

Unemployment is down to 8.2% from 10% in October 2009, largely because working-aged adults are dropping out of the labor market–they are neither employed, nor seeking work. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The economy added only 120,000 jobs in March–not even enough to keep up with normal population growth. Unemployment rate fell to 8.2%, simply because many unemployed adults became discouraged and quit looking for work.

Fourth-quarter economic growth was exceptionally strong as the global economy recovered from first half disruptions such as the earthquake in Japan, but first-quarter growth has been slower. Construction–both commercial and single-unit residential have been hard hit–and now auto sales are slipping.

Manufacturing added 37,000 jobs, but that sector’s strong recovery should be generating more gains. Elsewhere jobs gains were weak and generally down from February. Continue reading…

 These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

On Friday, forecasters expect the U.S. Labor Department to report the economy added 201,000 jobs in March, down from 227,000 in February but in line with the moderate pace of economic recovery.

The economy as measured by gross domestic product expanded at a 3.0% annual pace in the fourth quarter and 1.7% for all of 2011. Recent consumer spending and other data indicate growth slowed a bit in the first quarter to 2% or 2.5%. If productivity gains are only modest, this pace will support job gains in the range of 200,000 a month through the spring.

Two hundred thousand a month is hardly enough to replace all those jobs lost during the Great Recession and provide opportunities for new graduates looking for work. Unemployment is expected to remain at about 8.3% and could begin creeping up again this summer.

Over the past three years, the percentage of adults participating in the labor force–those employed, self-employed, or unemployed but looking for work–declined significantly. If the adult participation rate was the same today as when Barak Obama became president, unemployment would be 10.8%.

Continue reading…

Gasoline prices are zooming past $4 a gallon, and the nation is hardly freer from the grip of imported oil or closer to robust economic recovery. With his approval ratings dropping precipitously, President Barack Obama is blaming speculators and investigating fraud and at the pump, when this mess is the direct result of failed federal energy policies.

By word and deed, the Obama administration has sought to limit off-shore oil exploration and development, and hasten the commercial viability of solar, wind and alternative vehicle technologies.

All this is based on two erroneous, but strongly-held beliefs among liberal policy makers, academics and pundits–increasing oil U.S. production would do little to lower U.S. gas prices, and but for the vested interests of multinational oil companies, mankind would have long ago harnessed renewable energy sources and freed itself from the sin of burning hydrocarbons. Continue reading…