Nothing particularly new this morning. The meta-story about the Federal Reserve (Fed) getting closer to more stimulus shows up on page A1 of the New York Times (NYT) with “Fed Leaning Closer to New Stimulus if No Growth is Seen” and on page A1 of the Wall Street Journal (WSJ) with “Fed Moves Closer to Action.” The articles seem to deal mostly with what the Fed could do, in a tone that suggests that this is all speculation. Interesting that it shows up in both papers in similar ways. This is probably a leading indicator of future policy, but it’s not hard news as yet.

Europe continues to simmer, although the Europeans themselves don’t seem to be all that worried. The Financial Times (FT) has two articles, “Brussels patient despite Spain’s pressures” and “ECB stands firm on Spain’s pleas,” that talk about how European officials are not planning further action at this point—and are even going on summer vacation. This insouciance would be reassuring, maybe, if it weren’t contradicted by other articles from the FT like “Rome places spending controls on Sicily” and “German private sector woes mount” and by articles from the WSJ such as “Downturn Deepens in Euro-Zone Economy” and “European Crisis Seen Spreading to Russia,” both from page A8. The Europeans still don’t seem to get it, which is mind-boggling.

Two big themes in the papers today—Europe’s continuing weakness and China’s growing assertiveness in the world.

Europe first. Spain is the big news, with yields rising even higher into unsustainable territory, driven by the regions, as I discussed yesterday. The Financial Times (FT) leads on page 1 with “Spain costs stoke bailout fears” and follows on page 4 with “Madrid in duel with regions for aid.” Spain will end up in a bailout, probably pretty shortly, and, as the fourth largest economy in Europe, this is going to strain the system—maybe to the breaking point.

There were no significant single financial events over the weekend, but there was continued fallout. The Financial Times (FT) led with “Deteriorating outlook drives Spain’s borrowing costs near euro-era highs.” Despite the bailout, bond yields are well above 7 percent—an unsustainable level—and appear likely to stay that way, according to the story on page B16 in the Wall Street Journal (WSJ), “Bailing on Spain’s Bailout.” Greece is also back in the news, on page 3 of the FT with “ECB raises pressure on Athens over debt collateral” and on page A8 of the WSJ with “ECB Adds to Pressure on Greece.” The European story is not over yet, and it may erupt back into the headlines in short order.

The U.S. picture in the press is a bit more mixed. The WSJ ran “Unemployment Rises in Six of 10 Battleground States” on page A3 on Saturday and “Price Check: Drought May Hit Grocery Tab” on page B1, but on Monday, page B1 had “As Homes Go, So Do Pickups,” which pointed out a recovery in truck sales and home sales. The weight of the coverage is still negative—note “Bleak jobs outlook raises heat on the Fed” on page 1 of Monday’s FT—but some nuance is creeping into coverage of the U.S. Maybe it is a leading indicator.

The papers this morning really only have two stories in common. The first is the U.S. drought and its effect on food prices; it’s covered on page 1 of the Financial Times (FT) in “U.S. Drought Triggers World Food Crisis Alert” and on page A1 (picture) and A11 of the New York Times (NYT) with “Widespread Drought is Likely to Worsen.” The FT compares the situation to 2008, when price peaks set off riots in 30 countries, noting that corn and soya prices are above the 2007–2008 levels and that wheat is up more than 50 percent in five weeks. The NYT reports that this is the most widespread drought in more than a half century; one-third of the nation’s counties have been declared federal disaster areas because of the drought, covering more than half of the continental U.S.

This means food prices will be increasing around the world—an annoyance in the U.S. but a critical problem in poorer countries where food is a significant part of the total budget for most families. We can expect to see bumps in inflation rates around the world, which may present a particular problem for China. One more story to keep an eye on over the next couple of months.

I went looking for the actual sausage factory quotation from Otto von Bismarck, but apparently he was not the person who originally said it, and even the misattributed versions don’t say exactly what I want to say. So let’s take a big step down from Otto to the Urban Dictionary for a definition of a sausage factory.

“An unpleasant process, especially one that is hidden from public view, that is used to produce a widely consumed product: lots of people like sausage, but few would enjoy watching leftover animal parts ground up to make it.”

This is the theme of the news today. The ultimate goal, of course, is fiscal stability and economic recovery, but getting there is proving to be tough. Government is getting hit in many ways. From the Wall Street Journal (WSJ), we have “Post Office Might Miss Retirees’ Payment” on page A2 and “House Votes to Require Detailing of Budget Cuts,” while the New York Times (NYT) has “Years of Unraveling, Then Bankruptcy for a City” on the front page, as well as “South Carolina Governor’s Budget Ax is Blunted by Legislature,” “Detroit Mayor Confirms Cuts to Workers’ Pay and Benefits,” and “Maine Debate Hints at Rift on Medicaid After Ruling.” These headlines concern all levels of government—federal, state, and municipal—and both major parties, as well as both spending increases and spending cuts. The one theme is that limitations on available resources are now hitting.

Businesses are facing the same types of constraints. Some are facing them more or less voluntarily, as in “Big Banks Prepare Another Round of Cuts” from C1 in the NYT, and some involuntarily, as in “Four Banks Targeted in Euribor Probe” from page 1 of the Financial Times (FT) and “In Its First Action, Consumer Bureau Takes Aim at Capital One” from page B1 of the WSJ. Some are starting to fight against particular problems—see “Utilities Fear Approach of Fiscal Cliff” from page 5 of the FT, which describes how utilities and other dividend-paying companies are planning to fight the pending increase in dividend taxes from 15 percent to more than 43 percent.

Finally, individuals are facing the same problems, both at high levels, as in “Economic Fears Hurting Obama, Poll Indicates” from the front page of the NYT,and at middle class levels, as in “Uncomfortable Accounting: Retirees Wrestle with a Pension Buyout from GM.”

In the absence of breaking news, the consistent story here is that choices are being made across the board about how to raise more and spend less, and it isn’t pretty. But the factory has to keep rolling, so expect to see a lot more of this going forward.

I have mentioned a couple of times in the past few days that I think regulators and banks will be scrambling to deal with the LIBOR scandal. Said scramble seems to have started.

After a tough weekend and Monday for finance, we have a slow day. There are no articles of particularly new financial or economic interest on any of the front pages—nice to see that for a change.

There are a couple of themes though. In the business section of the New York Times (NYT), three articles highlight conflicts between regulators and financial companies. On the front page are “British Bank Fighting Bid for Data in Rate Case,” which is about the LIBOR scandal, and “Regulators and HSBC Are Faulted by Senate,” which discusses the money laundering scandal. On page 3 is “U. S. Consumer Bureau to Oversee Companies That Handle Credit Reports.” On page C1 of the Wall Street Journal (WSJ), you’ll see “Senate Probe Faults HSBC” and “Banker Accounts on LIBOR Conflict.” And on its front page, the Financial Times (FT) has “Regulator hits out at Diamond over Libor”—but that’s not really new.

For both the weekend and this morning, the headlines are uniformly anti-financial. Let’s take a look at the front pages:

Financial Times

It’s Friday the 13th, widely considered a bad-luck day, and if the Financial Times (FT) lead—which states that banks face a $22 billion bill for LIBOR-related misdeeds—is correct, it certainly is bad luck for them. U.S. regulators are trying to get their side of the LIBOR story out, with reports in the business section of the New York Times (NYT) and on page C3 of the Wall Street Journal (WSJ) that Tim Geithner, then-president of the New York Fed, is said to have noted problems with the LIBOR rate-setting process and attempted to correct them. Apparently, the problems were not corrected, as we are finding out, but the Fed wants us to know that at least Geithner tried. The story just keeps getting more interesting by the day.

Other than that, economic reporting is actually rather upbeat for a change. Page 1 of the NYT reports that economists see signs of a pick-up. Not a fast pick-up, as the article notes, but renewed growth in the second half of the year. On page 4 of the FT, an optimistic take on China’s growth is reported, and on page 3, Ireland seems to be on track with its bailout requirements. Finally, the first page of the NYT business section reports that California municipal bankruptcies are not seen as a trend, despite three in the past couple of weeks. Good to know.

Another day without front-page crisis news—a good thing. The New York Times (NYT) did not have any economic or financial articles of note in the front section, while the lead articles in the Wall Street Journal (WSJ) had the Fed weighing more stimulus—old news. The Financial Times (FT) noted the yield record for U.S. Treasury sales—1.459 percent for the 10-year, the lowest ever. Kind of surprising this did not make either the WSJ or NYT.

The economic slowdown implied by record-low U.S. Treasury yields was consistent with the stories deeper in the papers. The NYT led the business section with the pending year-end fiscal cliff and the effect on the economy of related business uncertainty; reported to have gone up by more than half since April, business uncertainty could knock up to 0.5 percent off of growth this year. The effect of the disquiet over the lifting of the debt ceiling last year was given as an example of how uncertainty can postpone business decisions, including hiring. The NYT also had an article on how the Fed is divided over additional stimulus, creating even more uncertainty.