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Jan. 21, 2013 at 7:22 PM
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In Europe, complacency creeping in

BRUSSELS, Jan. 21 (UPI) -- It is too early for European leaders to declare work on their economic rescue over despite the temptation to do so, U.S. economists say.

"The risk is that complacency takes hold because there is no more urgency in the crisis, and that everything that has been done up until now will be deemed sufficient," The New York Times quoted Peterson Institute for International Economics senior fellow Jacob Kirkegaard as saying.

"Europe will turn into the next Japan, and become a permanently depressed or stagnating economic area," he said.

The effort to integrate financial systems in Europe should not be over yet, Harvard University economist Kenneth Rogoff told Monday's Times.

"They need to integrate more fully, or they will fall apart," he said.

Rogoff also said complacency was an issue.

"Some European policy makers who visited the United States recently were delighted to see that because of the 'fiscal cliff,' Europe wasn't on every [news] channel," Rogoff said.

"There is an ecstasy over the fact that they won't blow apart tomorrow," he added.

On the plus side, panic in Europe over the demise of the eurozone has largely evaporated. European Central Bank President Mario Draghi calmed the bond market by saying the ECB would do whatever was needed to support the euro. That lowered yields on bonds in Italy and Spain that were considered unsustainable.

Although the economy in Greece has yet to pick up steam, talks of Greece being forced to leave the eurozone have calmed down while talk of Germany leaving the eurozone because the region was holding it back also has quieted considerably, the Times said.

Fixing the financial system may be only half the problem. After that, the European economy must also move forward, economists said.

But there are some tricky turns in the road ahead.

In Germany, elections will take place in September that could displace Chancellor Angela Merkel, who has been given much of the credit as the architect of the rescue efforts so far.

Merkel has managed to keep the focus of the rescue on fiscal discipline and has been walking a tight line by trying not to inflame passions among German taxpayers who have largely foot the bill for the rescue.

Italians are also headed to the polls this year. In France, President Francois Hollande is struggling to meet economic goals. In Britain, Prime Minister David Cameron was to deliver a speech last week that said, "The danger is that Europe will fail and that the British people will drift toward the exit." The speech was postponed, however, by the Algerian hostage crisis.

Fed in 2007 slow on the uptake

WASHINGTON, Jan. 21 (UPI) -- U.S. Federal Reserve officials tried to steer clear of the word recession at policy meetings through much of 2007, meeting transcripts show.

The official start of the greatest economic downturn since the Great Depression -- frequently referred to as the Great Recession -- was December 2007.

In the months leading to that point, officials had discussed the symptoms of the recession. But the word "recession" does not appear in transcripts until the summer of 2007, The Washington Post reported Monday.

One official referred to it as "the R word," reflecting the idea that acknowledging an economic contraction was difficult.

When it became clearer that the economy was in trouble, Fed officials then discussed whether or not they should use the word publicly, given the point that a declaration from the Fed could have been premature and seriously jolted the investment community.

"The best guidance would be that we must not ourselves become a tripwire. I rather liked the reference to the Hippocratic oath earlier, 'Do no harm,'" said Dallas Fed President Richard Fisher at the August 2007 policy meeting.

Some officials were becoming increasingly concerned. Janet Yellen, the San Francisco Fed president at the time, said in December her optimism was "severely shaken."

Frederic Mishkin, who was a Fed governor at that time, said he was "very, very worried." And Eric Rosengren, who was then a Fed governor, said he had agreed with Yellen. He joked that he and Yellen had taken a "pessimism pill," the newspaper reported.

Fed Chairman Ben Bernanke, who has said he was slow to recognize how severe the downturn would be, said in December, "You can tell that I am quite conflicted about it [about making a large interest rate cut], and I think there's a good chance we may have to move further in subsequent meetings."

A large interest rate cut would show "more concern ... about the economy that we in fact don't necessarily have," he said.

Small grocer, Magruder's, wraps it up

ROCKVILLE, Md., Jan. 21 (UPI) -- Maryland grocery chain Magruder's, family owned for generations, is calling it quits, the company said without citing a reason.

"Now is the right time for our family to move on," company Vice President Gary Bortnick said.

Analysts said the company likely was overrun by the massive grocery chains that dominate the industry.

Magruder's has been family owned since its start in 1875, The Washington Post reported Monday. At its peak, it operated 10 stores. This week, the company said it had sold one location, leaving four others and those were also up for sale.

"There is just too much competition to try to take on the big-box stores, because they can kill you on prices and variety. Unless you happen to be in a very unique location, in order to survive I think these small stores are going to have to be specialized," said Geoff Brown, principal at accounting firm Bond Beebe.

Not only is it hard to compete with the purchasing power of chains like Wegmans, but even larger retailers, such as Walmart and Target are jumping into the grocery business.

Some of the smaller upstarts are hanging on. Scott Nash, the founder of Mom's Organic Market, now a chain of 10 stores, said his company was expanding because of its organic food niche and changing habits of shoppers.

"People seem to be making many more shopping visits, going one place for their favorite butcher ... then going somewhere else because they have the best produce," Nash said.

Nonetheless, others say it is tough for a mom-and-pop store to go toe-to-toe with a national chain.

"It's just an outdated model, and its time has come and gone," said Barry Scher, formerly a spokesman for Giant, referring to the family grocer.

Germany to move gold reserves back home

FRANKFURT, Germany, Jan. 21 (UPI) -- How Germany plans to move 700 tons of gold from New York and Paris to Frankfurt is none of your business, a bank spokesman said.

"For security reasons we can't discuss that, partly to protect the gold, partly to protect the staff that will be carrying out the transfer," said Moritz August Raasch, spokesman for the Bundesbank, the central bank of Germany.

Germany plans to move an eyebrow-raising $36 billion worth of gold from New York (300 tons) and Paris (another 374 tons) to Frankfurt over the next eight years, The Detroit Free Press reported Monday.

It was kept out of the country to wait out the Cold War years in safety, the newspaper said.

"But, of course, since we transport large sums of money around Germany every day, we've got a certain amount of experience with this," Raasch said.

"Of course, the transports are insured," he added.

During the Cold War, Germany feared its gold reserves would be taken by Russia, if it were ever invaded. The gold was also kept in New York, Paris and London to be close to the trading markets.

In 2012, the German Federal Auditors' Office was critical of Bundesbank for failing oversee its gold reserves and suggested it make periodic trips to inspect its holdings.

In response, the bank said, "There is no doubt about the integrity of the foreign storage sites." But there was a political cry for Germany to bring its gold back home.

Bundesbank has already brought home the gold it stored in London, moving 850 tons between 1998 and 2001.

In total, Germany owns 3,400 tons of reserve gold worth about $183 billion. After the move, Frankfurt will be the home of about half of Germany's gold.

Where is the rest? You know too much already.

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