U.S. trade gap falls. Smaller surplus for China.

The U.S. economy saw a small boost last month with the trade balance gap decreasing, the balance down 13% from the $44.6 gap in September. However this gap is expected to widen again over the next year or two. At the same time China's trade gap is also narrowing, as China has recently been pressured to narrow it's export surplus by taking in more foreign goods. Narrowing their surplus and allowing the yuan to balance more with the dollar will be main points of discussion at the U.S.-China Joint Commission on Commerce and Trade meets next week.

Risky Borrowers Find Credit Available Again, at a Price

While getting credit is still difficult for people, it's getting a little easier. However, it does come at a price. Instead of every person being "pre-approved" like a few years ago, the group of people getting credit cards is more carefully selected and the cards come with higher rates and annual fees. In addition to this, there are new categories of borrowers such as “strategic defaulters,” “first-time defaulters,” and “sloppy payers." Hopefully, even with these new restrictions, the greater spending ability will help the economy recover a little more.

Economic Stimulus (Jobs Bills)

This article is one that relates to the lectures in class as well as Professor McLouds 2008 Financial Crisis presentation a few weeks back. With the economy being what it was in 2008, Congress sought to revitalize the economy with an economic stimulus. Those who are unfamiliar with the term, an economic stimulus is an effort to try and pump money into a financially struggling economy with spending, tax cuts, or interest rate reductions. In all, this is to pave the way to grow the economy. Some economists consider cuts in the Interest by the Federal Reserve to be the most effective form of a stimulus. On the other hand, there are always opposing views on the best way to regain growth for an troublesome economy.
With the US economy still continuing to sink in 2008 even after the Fed cut interest rates to almost zero, something was still not working. This put a lot more pressure on congress to create a new stimulus plan.
Prior to President Obama entering office, he began working on a new plan to get the economy out of the slump it was in. In all, congress approved a 787 billion dollar bill that was called the American Recovery and Reinvestment Act- this stimulus was not liked at all by the Republicans.
As the unemployment rate began to rise over the 10% level, a new stimulus was needed for the economy. This would cause some more political controversy.

Salvation Army Struggles

This article touches upon the recent struggles of Salvation Army. Giant stores have limited Salvation Army's privileges over other non profit organizations. Normally, Salvation Army has the entire month of December and some of November to ring the bell outside the store. This year, Giant decided to allow other organizations to get in the spotlight. Salvation Army's numbers have depleted by more than half over the last year. This, on top of the diminishing unemployment benefits, is putting families in a difficult place. Families are struggling to get jobs and survive in this economy, and unfortunately, Salvation Army is being forced to turn people away.

Tax reform -- not just cuts -- needed

Tax reform is suddenly getting a lot more attention as a way to fix the ailing U.S. economy, as well as address the problems with government deficits. That's because even with the lower tax rates, your tax bill might rise due to closing loopholes and the removal of deductions and credits."The tax code is very inefficient," said Federal Reserve Chairman Ben Bernanke said in an interview with "60 Minutes" this week. "Both the personal tax code and the corporate tax code. By closing loopholes and lowering rates, you could increase the efficiency of the tax code and create more incentives for people to invest." There are as many different ways to simplify the tax code as there are IRS forms. But the basics are likely to revolve around eliminating the huge range of deductions and income that gets special treatment under current law, allowing for lower tax rates across the board.While lowering income and corporate tax rates sounds like a boon for workers and companies, experts say the loss of breaks and deductions will mean that some people will have higher tax bills, significantly higher in some cases. Those who don't take advantage of some of the advantages of the current system, such as those who don't itemize, are more likely to have their tax bills cut in the process. Still, the current political environment, with a divided Congress and the looming presidential election, doesn't lend itself to the kind of compromise needed to accomplish such radical reform, according to most experts.
Although tax reform is backed by promising leading officials, only time will tell as we push forward from the current recession.

Estimate That 2-Year Dividend Tax Extension Will Save Investors $74.5 Billion

The proposed two-year extension for qualified dividends to be taxed at 15% would add an additional US$ 74.5 billion into the hands of individual investors, and bring the ten year tax savings to US$ 348.4 billion (which is $348 not collected by the government). The savings are for dividends paid to individuals in taxable accounts.

In the short run I believe the two-year extension reduces the immediate pressure to pay one-time extra dividends or to move up January payments to December. Longer term, the 15% lower tax rate becomes more attractive to investors, who currently have few alternatives (even at the higher tax rate yields were competitive). Boards which would have been more hesitant to issue and increase fully taxed dividends, and might have pushed for more buybacks, will now have a higher comfort level of the net return to shareholders, and one less reason not to pay dividends. I will be releasing a full dividend report later in the month (editors, compliance and product people, oh my): S&P 500 Dividends: Out Of The Night That Covers Me

Also, if the if the total write-off of equipment purchases passes in Congress, Capital Expenditures for the S&P 500 should increase substantially (Q3 was up 14% but it appeared that the increase was mostly maintenance, not expansion). However, having ‘lived’ (but not always invested) through several of these, my question is where will the equipment come from, and where might it create jobs - in the U.S. or abroad?

Home Market's Misery May Be 'Buy' Sign

The first-time home buyer's credit has dried up, and home prices are down 29 percent from their 2006 peak. On Dec. 9 the latest release of the Federal Reserve's Flow of Funds data shows the value of homeowner equity in the third quarter of this year at $6.4 trillion—52 percent lower than four years ago.Hanging over the market is an ominous combination of a weak economic recovery, near 10 percent unemployment rate, an inventory of 8 million or so distressed properties, and uncertainty over the legality of foreclosures by major mortgage loan servicers. But does that mean it's a bad idea to buy a home? I don't believe so, based on some dispassionate analysis. For the long-term homeowner (or patient investor), a home appears to be one of the better investments around, with minimal downside risk. "Housing is priced to earn its historic real rate of return of 0.5 percent to 1 percent and interest rates are low," says Morris Davis, professor of real estate and urban land economics at the University of Wisconsin-Madison. "Now may be a once-in-a-lifetime time to buy."

NFL ticket prices on the rise

Average NFL single game ticket sales have increased 4.5% from the 2009-2010 season - an average ticket will cost you $76.47. The New York fan base is hurting the most, as the average ticket for the New York Jets and New York Giants increased 38.1% and 26.0% respectively. Much of the increase can be contributed to the new $1.6 billion stadium built in New Jersey for the Jets and Giants to play in. However, 15 NFL teams have either decreased their rates or kept them steady from the year prior while only 9 NFL teams are above the league average in ticket prices. Moreover, some teams are softening the blow by lowering parking or concession prices. In a down economy, teams must avoid blackouts (an NFL game is blacked out in the market team's state if the game is not sold out 72 hours before kick off) as they tend to push their fan base even further away.

Professional sports can have a significant impact on local economies and in our current economic state, winning teams can have a critical impact on recessing cities. Hear that owners? Draft well, spend well, and implement the right personal to create a winning formula that can help slow the bleeding of this Great Recession.

A&P, Grocery Store Owner, Files for Bankruptcy as Competition Rises

As another sign of the times, the operator of nearly 400 supermarkets and other stores has filed for bankruptcy. A&P, whose history dates back to its founding 101 years ago, cited competition and the increased consumer share of sales in megastores as the reason to end its billion-dollar business. As a company that primarily owns smaller retail stores and supermarkets, the demise of A&P is indicative of a greater trend for consumers that are mainly shopping in larger stores rather than "mom and pop" businesses. Consumers, including myself, seem to be satisfied with the decision to shop in stores that offer a variety of different goods and services instead of shopping in specialized stores.

You don't want to be unemployed in Vermont

The unemployment benefits that Americans our counting on may be cut due to concessions with the Bush Tax Cuts. But even if there are extension of unemployment, seven states may not recieve extended benefits. Vermont's residents will see cuts for 86 weeks to 60 weeks. The reason for these cuts is an unemplyment rate decrease to 6%. This is great for those lucky enough to find work but does not provide much consolation for those who are still looking.

Financial Crisis Causes Older Population to Put Off Retirement

1.6 million older Americans are putting off retirement by remaining in or rejoining the labor force as a result of the financial crisis. Those coming close to retirement age are experiencing stock holdings worth less than they were in 2006, fixed-income investments offering little income and low house prices. As a result, older people trying to get back into the labor force are, not surprisingly, having a hard time finding jobs and ultimately increasing the unemployment rate. As of August, the unemployment rate for people 55 and older is averaging 7.3%, which is the highest level of unemployment since 1948.

Home values tumble 1.7 trillion in 2010

It is estimated that American home values have dropped 1.7 trillion dollars this year. This is a 63 % increase since 2009. Also they have dropped 9 trillion in value since 2006. The home buyer tax credit helped the market in the first half of 2010, but then housing prices decreased. Eventually, many people believe that the housing market will come back naturally, but who knows how long that could take. Luckily, many sectors are gradually coming out of the recession, which in turn could be a good sign for the housing market. The temporary fixes that the government is trying to impose is simply not working. Hopefully, the government can find some solution to the housing market.

No Jobs? Young Graduates Make Their Own

With unemployment still high, and jobs extremely tough to come by for recent graduates, some urge new graduates to start their own businesses. "Only 24.4 percent of 2010 graduates who applied for a job had one waiting for them after graduation." With numbers like these, a new group has been formed to aid young graduates in forming a new business. The Young Entrepreneur Council is a group of 80 or more young business owners willing to give advice to others their own age in starting a new business.

Mortgage Lenders Clamp Down on Lax Standards

Mortgage lenders are tightening their standards even more restrictively as economists are concerned that the housing sector will experience another downward trend in sales. Homebuyer tax credits that helped increase sales earlier in the year have expired and home sales decreased over 25% from last year. Since the U.S. has relied on development from the housing market to help with economic growth in the past, tightening credit standards at the bottom of the business cycle will slow recovery. In a time where borrowers are needed to fuel the economy, constricting the standards will only add to the vicious cycle and make it hard for the housing sector to dig itself out of the deep hole they are already in.

A Grim Record: One In Seven Americans Is On Food Stamps

As of September of this year almost 13 million people will be living off of food stamps. This trend of citizens needing food stamps is not a new concept and has been occurring at these very high since the beginning of the decade. Unfortunately, this year the US has hit the all time high. The qualifications for food stamps, set by SNAP, haven’t changed much since the early 90’s. SNAP is seeing a lot of new families taking advantage of the government-sponsored program.
This is a true testament of what a dire situation the jobless are in. Hopefully within the next few years we will rise from this devastating economic status.

Ford invests a billion dollars into United States manufacturing plants

The president of US Ford America talks about the improvement of business climate in the United States, which has allowed a 600 million dallor investment into the Louisville Ford Escape manufacturing plant. With the investment into the plant there will also be a hiring over 1,600 employees. Ford's president believes that American is becoming a more competitive place to build vehicles. Do you think this is linked to the current recession?

Warren Buffet Explains Credit to Kids

Warren Buffet is featured on an online cartoon called "Secret Millionaires Club" in which he gives business tips and explains to kids how they can be financially responsible. In this episode, Mr. Buffet explains how using credit can lead to debt but saving and investing can lead to bigger long-term gains. So in addition to your nifty economics courses, consider watching "Secret Millionaires Club" because as Warren Buffet says: "The more you learn, the more you'll earn!"

Risky Borrowers Find Credit Available Again, at a Price

The credit market is looking up again as banks started dishing out credit cards after a 3 year slow down. This slow down had happened because of credit extended to risky borrowers which had resulted in a 189 billion dollars loss to the banking system. This loss was a significant part of the 2 trillion dollars that the banks have lost since the start of this crisis. However the banks have a different strategy for extending credit this time. Previously the banks seemed to pre approve anybody.The housing market collapse resulted in a lot of losses to the banks as people simply walked away from their homes when the value of the house dropped below the mortgage value. But this time, the banks have moved away from the traditional criteria of a credit check only. This time around they are categorizing people according to their habits. So for example a person who is registered on a job site online is considered a better risk than a person of equal credit score. The goal is to find people whose credit scores might be blemished but have the capacity and the willingness( checked by the new behavioral criteria) to pay their bills. The catch however, is a higher interest rate and annual fees. This approach shows that the banks want to grow again but they are moving more cautiously in a field which resulted in nearly bringing the whole industry down.

Well-Being Index Stuck at 2010 Low

The well-being index is based off of 6 different things, life evaluation, emotional health, physical health, healthy behavior, work environment, and basic access to things like food and shelter. The biggest "hit" comes from the healthy behavior component. t was said that “significantly fewer Americans exercised for at least 30 minutes three or more days per week in November (50.5%) than did in May (53.6%).” For people that earn less than $1,000 a month, their well being has decreased the most.

Obama to meet with CEOs in Blair House session

President Obama will meet with 20 CEOs this Wednesday to discuss on the best way to accelerate job creation. This meeting will take place in the Blair House and it will extend from morning to lunch. The White House Deputy Communications Director Jen Psaki said that "the biggest challenge we face moving forward is … in making sure we are preparing the next generation to compete globally". This meeting will focus on investment in clean energy technology, reducing the federal deficit and also on increasing exports.

CPI Up 0.2 Percent; Core Prices Unchanged – Lowest Annual Change Since Before WWII

In October, the Consumer Price Index rose 0.2 percent. This was the fifth consecutive monthly increase in the index. As was the case in most recent months, the index was pushed upward by energy prices, but which rose 2.6 percent in October. The core index, which excludes prices of energy and food products, was unchanged for the third straight month.

From a year prior, the CPI was 1.2 percent higher, just barely above its recent low of 1.1 percent in September. The core CPI was up by just 0.6 percent from a year prior. This was lowest year-over-year change in the index’s history going back to the 1950s. Despite rising energy prices as of late, there is a very low level of underlying inflation. This number further supports the Fed’s view that inflationary pressure is currently very mild if not outright deflationary.

3 Reasons to Buy Chipotle

This article discusses reasons why Chipotle is a good company to buy stock in. The reason that relates to class says that Chipotle and other restaurants are great companies to invest in as a recession passes. This is because higher employment causes heavier lunch traffic. Also great disposable income can lead to eating out more. When hard economic times hit many people turn to eating out less as a way to save money. They pack lunches to work and eat at home for dinner more often. However, as we come out of these hard economic times a reverse effect takes place. People begin eating out more then they did when faced with rough economic times.

Housing Starts Fall 11.7 Percent, Single Family Starts Down 1.1 Percent

Housing starts continued to fall in October, decreasing by 11.7 percent over the month. This brings the annualized sales pace to 519,000 units, the lowest level since April, 2009. Housing starts have been very volatile over the past few months; however, this has mostly been due to large swings in multi-family unit starts. In October, this category fell 43.5 percent. Single family starts fell by a much lesser 1.1 percent. Single family starts have essentially been flat for the past four months at an annualized pace of around 440,000. Still, this is a very slow pace and shows that building activity remains depressed.

“The excess inventory of existing homes continues to be a drag on housing starts. Until this inventory is absorbed, housing starts will stay at near historic low levels.” said Jim Chessen, ABA’s Chief Economist. Both single family and total housing starts have been in a range for this past year that is lower than any period since prior to WWII.

From a year prior, total starts were down 4.5 percent. Single family starts were down by a lesser 1.1 percent when compared to a year ago.

New building permits, which tend to lead future starts, rose by a modest 0.5 percent over the month. Single family permits rose 1.0 percent, which was the first increase since March. Meanwhile, multi-family unit permits continued to decline, falling 0.7 percent.

Gasoline Prices Rise to 2-Year High

Oil is a hard asset which is priced in U.S dollars around the world, and when the value of the dollar falls, global investors tend to shoot up the oil prices. One of the reasons for the weakening of the dollar has been the recent Fed’s Quantitative Easing, which led to the decrease in value of the dollar, and ultimately increase in oil price.

The Gasoline prices reached a two-year high last week with $2.98 per gallon; 35 cents more compared to last year, which could be traced to the weakening dollar and increase in imports by China. The Oil Price Information Service estimates that consumers will be spending $6.4 billion more in oil prices compared to last year, amount which could have been spend on holiday shopping.

Interestingly, the chief economist for the International Council of Shopping Centers, Michael P. Niemira, said that, “it doesn’t seem to matter much because we are getting accelerating economic activity, which is an offset”. But, he also predicts that the increase in oil prices will have a negative impact on the next year’s GDP as “when the bills come in after the Christmas shopping, there will be less disposable income in people’s pockets because of the increase in expenditures for oil, which they can’t avoid”.

Tax Reform --not just cuts -- Needed

Many people have started viewing tax reform as a way to fix the U.S. economy. A tremendous amount of attention has been drawn to this subject because even with the lower tax rates, tax bills might rise due to closing loopholes and the removal of deductions and credits. Ben Bernanke believes that the current tax code is not efficient and stated that, "By closing loopholes and lowering rates, you could increase the efficiency of the tax code and create more incentives for people to invest". There are a lot of people that believe tax reform is one of the largest factors in deficit reduction. This belief is justified by the thought that the best way to increase government revenue is to do so through a more efficient tax system.

Chinese inflation spikes on food costs

As China continues at a fantastic rate, some problems are beginning to trickle down and present themselves. One of those issues would be the high rates of inflation that has plagued the food market especially. Food prices have grown 11.7%. Yes, 11%! In order to stave off runaway inflation, China has committed to both raising its interest rates as soon as possible and to exercise a more "prudent" monetary policy starting in 2011.

Gift cards could get the cold shoulder this year

CNN.com- December 12,2010

This year, shoppers are going traditional. Instead of buying gift cards, they opt to buy an actual gift.

It costs them less. So instead of spending $100 on one single gift card, shoppers now can buy more than that with the same amount of money.

Retailers, after a dismal sale last year, also distribute bigger discount this year. They experienced a cheerful Black Friday this year generally, because sale shot up much better than last year. Still, consumers want to be more discrete in spending their money in the current economy, which only receives a few glances of recovery.

Yet, gift card sale slow-down does not worry much retailers.
""Only 10 to 15% of retail sales in January come out of gift card redemptions", according to the article. But it is a change for the better.

Oil demand to hit highest level ever

Due to rapid growth and development of certain nations over the past year. The worldwide demand for oil has increased to 88.3 million barrels per day. Yet, much to the relief of the American public especially, prices are not expected to spike as they did in 2007-2008, and consequently prices at the pump should remain relatively stable due to the increased production capacity of the world. China and India are largely responsible for the gross increase, as their oil consumption has increased by 11% and 10% respectively. Along the same lines, the figures on China's car consumption should indicate about a 32% increase in consumption over 2009.

Obama-Republican Deal Could Mean Tax Hike For One In Three Workers

The issue of tax cuts has become more political as time has passed. Citizens are arguing that the new deal reached between President Obama and the Republicans will only benefit those earning more than $20,000 (which is about 50million of the 150million population of the US). So technically, the poor citizens will be the one to suffer as these tax cuts will give them hardly any solace from the economic stress. Some claim that these tax cuts will benefit all citizens in a roundabout way as GDP growing by 1% will add about $2000 to the average American family. But everyone is aware of the unequal distribution of wealth. The higher-end people will get a much bigger tax cut than those who need it. At the end of this article is a table drawn out to illustrate the outcome of the extended tax cuts for the wealthiest in the next ten years.

Will rising mortgage rates spur home sales?

istorically low mortgage rates didn't encourage new home sales, but rising rates could finally push home-buying fence-sitters into the market.

Rates this week surged to a six-month high after President Barack Obama and congressional Republicans agreed to extend tax cuts for two years, including cuts for the wealthy. Though the deal is still being debated in Washington, financial markets interpreted the development as likely to accelerate the economic recovery but also swell the budget deficit. Though the yield on the benchmark 10-year bond has retreated some, it has still increased 21 basis points this week.

Because yields on Treasuries, especially the 10-year bond, largely influence mortgage rates, borrowing costs for mortgages have suddenly gone up. The average rate for a 30-year fix loan increased to 4.61% in the week ended Thursday from 4.46% the previous week, following a fourth week of increases, according to Freddie Mac(FMCC). The average 15-year rate rose to 3.96% from 3.81%. These rates are the highest they've been since June.

Euro will survive, said Merkel and Sarkozy

Germany and France told euro-area laggards to make their economies more competitive to help overcome the debt crisis, pledging to do whatever necessary to defend the currency at a European Union summit next week.

The euro traded at 1.3212, down 0.0027 cents, at 3:37 p.m. in Berlin. The single currency has fallen 7.8 percent this year.

The euro’s survival is “non-negotiable". “If the euro fails, Europe fails,” Merkel told reporters in the southwestern German town of Freiburg, calling for more economic “coherence” in the euro region. “We must find a way to overcome the gap in competitiveness,” she said. “It’s not a job for next Friday” at the EU summit “but for the future.”

They ruled out joint bonds and rejected any increase in the size of the 440 billion-euro ($583 billion) rescue fund set up in May. “Common bonds would make governments less responsible, when what we want to do is the opposite,” Sarkozy said. Both leaders also rejected any increase in the rescue fund set up to stem the contagion spreading from Greece.

“We will do what is necessary to defend the euro,” said Sarkozy.

China Pledges to Change Growth Model in 2011

China’s leaders pledged to accelerate a shift in the nation’s growth model in 2011 and also focus on stabilizing prices after an annual meeting in Beijing to set economic policy guidelines. The government is seeking to shift from dependence on investment in industry and exports to bolstering private consumption and service industries, a move that could also aid the world economy. The nation is tightening monetary policy to cool inflation that accelerated to 5.1 percent in November, the fastest pace in 28 months.
The government will seek to boost revenue and “resolutely” cut spending. Officials aim to balance “stable and relatively fast” growth with adjusting the economic structure and managing inflation expectations, the report said. The nation needs to strengthen consumption as part of speeding change in the growth model. The China central bank raised lenders’ reserve requirements on Dec. 10 as part of efforts to tame liquidity and cool prices. The government will “further prioritize overall price stability,” Xinhua reported.
In 2011, the main tasks will include strengthening macro-economic controls; ensuring the supply of agricultural goods; altering the growth model; improving basic public services; and continuing to “open up” and promote global cooperation, the report said.
U.S. lawmakers and officials say a stronger Chinese currency would help to reduce global trade imbalances, boost private consumption and contain inflation.

Mortgage rates up...house market in for more trouble

For the fourth week in a row mortgage rates have increased and many real estate professionals fear the fragile market will only hit more trouble. The rise in mortgage rates have already seen a lowered interest in homeowners refinancing and many fear that it will keep potential home buyers on the sidelines. With less buyers in the market many fear that it could ruin the stability in the residential real-estate market as the cost of overall cost of homeowner ships raises and it will force houses prices to lower to compensate.

Tax cuts...are they worth it?

President Obama's deal with the Republicans include extending the Bush era tax cuts as well as unemployment benefits. The only socialist in the congress Bernie Sanders is threatening a filibuster as he objects to allow tax cuts for the most wealthy 1% of the nation. For Sanders he sees the tax cuts as reckless government spending. Looking at the Bush tax cuts subjectively we know that will see there effects very quickly but they will only be effective as the MPC of people that receive the rebate. In economic times like this people are less likely to spend they did in the 2004, 2005 and 2006 when they first received these checks. Therefore the boost to the economy will have less impact, so Sen. Sanders does have point in this respect. What do you think?

No Jobs? Young Graduates Make Their Own

The traditional path of “Go to college, get good grades and then get a job,” is no longer guaranteed to work, given the current economic crisis. According to the National Association of Colleges and Employers, only 24.4% of the 2010 batch of college graduates who applied for a job was able to get one. A promising solution to this problem is entrepreneurship.
The article features a few success stories about how college graduates started out their business ventures. It also includes a few tips and resources for those who are seriously thinking of boosting the economy by becoming entrepreneurs.

Taxes, benefits and the deficit: Kicking down the can down the road

The article summarized what happen to the tax cut deal between the president and the Republicans. They reach a further compromise: the Bush tax cut will be extended for two more years. In return, Republicans agreed to further extend the unemployment benefit, payroll tax cut and several other benefits for the poor, students and parents.

Several analyses and reports about the impact of the tax cut are also discussed. But as a matter of fact, the compromise will further deepen the deficit for about $ 300 billion next year, pushing the deficit forecast over a trillion dollars.

Quantitative Easing

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Obama to meet with CEOs in Blair House session

In order to better understand what will help job creation, Obama is sitting down with 20 CEOs. He wants to discuss how the next generation will be prepared to be more global. He also wants to build stronger partnerships in the business community. The session will focus on export promotion, investment in green energy, and tackling the deficit.

Are Americans as Poor as they feel?

The cost of living between 1980-2010 shows that nominal income rose more than overall consumer prices. When you look at the price tags on consumer goods, it would seem that costs have skyrocketed over the last 30 years. If you adjust for inflation, however, the relative cost of items such as food, manufactured goods, and energy has fallen since 1980, while prices for other necessities such as housing, education, and health care have increased significantly.

Article that compares prices of expenditures from the 1980s to now:

Computers: -80.8%

Coffee: -55.9%

Coca-Cola: -54.9%

Sugar: -50.4%

Tennis Balls: -43%

Movie theater ticket: +1.1%

Bread: +3.4%

Home Price: 3.4%

Household income: +8%

Man's haircut: +8.5%

Senator Bernie Sanders Speaks Against Tax Cuts for over 8 Hours

This is a video clip from the 8.5-hour speech against tax cuts for the wealthy by Senator Bernie Sanders (I-Vermont) in which he refers to the rich as crybabies, refers to wealth as an addiction, and asks "When is enough, enough?" His argument is that tax cuts for the rich will unnecessarily increase the debt by rewarding greed at a time when the country is suffering, while 1/4 of American children are being raised in poverty.

U.S. Trade Deficit Narrowed in October

The United States trade gap was $38.7 billion in October, the lowest level since early this year, with exports to China hitting a high. Imports declined 0.5 percent, while exports rose 3.2 percent, the highest level in more than a year.
Steven Blitz, a senior economist for ITG Investment Research, said:"Building a recovery around export growth and the capital investment needed to bolster that sector is necessary for the U.S. economy to have a well-balanced and sustainable growth path."
The increase in American exports in October reflected a rise in sales of a variety of goods abroad. And exports swelled to record highs with two important U.S. trading partners -- Mexico and China.
"The United States is always looking to balance the consumer goods that we import from Asia with commodities that we can export to them," Mr. Blitz said.

The Seven-Year Recessionary Itch

This article relates and increase in divorce rates to the struggling economy. Divorce rates tend to increase the most for people who have been married for more than 5 years but less than 10. It is said that a recession will cause financial strain and puts more tension on the relationship, while in times of economic booms marriages do well while neither spouse feels the strain of the economy. For couples who have been married for more than ten years it is believed that money has less to do with their stresses, plus a divorce would be more expensive to them.

Will rising mortgage rates spur home sales?

Historically, low mortgage interest rates have not spurred home buying - it is the increase from the low benchmark that stirs up investing. Consumers notice the mortgage price increase which helps speed up decisions. Naturally, consumers will hold off buying a commodity/good/service if they are eying decreasing prices. They will hold off in hopes that the price will continue to decrease. Once a good bottoms out and starts to increase again, consumers jump in. The average rate for a 30-year fix loan increased to 4.61% in the week ended Thursday from 4.46% the previous week, following a fourth week of increases, According to Freddie Mac. The average 15-year rate rose to 3.96% from 3.81%. These rates are the highest they've been since June. The author also explains how it is ironic that the Fed just issued QE2 and now mortgage rates are increasing. Capital was made cheaper and now mortgage rates respond by increasing. Economic thinking can be a funny thing, and like politics, there is no right answer. There are many left and right theories but we find ourselves in trouble when we start to enact opposing policies.

Madoff son found dead in NYC in apparent suicide

The son of Bernie Madoff apparently committed suicide in his appartment. Bernie Madoff ran one the biggest ponzi scheme's in United States history. He stole billions of dollars from investors over a course of 20 years. Mark Madoff was the one who reported to the authorities about his dads crimes. Mark has never been criminally charged linking him to his father, but indirectly, he did work for his father. Bernie Madoff is serving a 150 year prison sentence in North Caroline, and it is unclear whether he knows about his son's death.

Top 10 States People are Fleeing

The top 10 states people are fleeing are below and the reasons for this occurring are economic issues: depressed job market, high cost of living, states' tax structures, loss of manufacturing jobs, BP oil spill....and on and on.

1. New York

2. Illinois

3. Ohio

4. Nebraska

5. Kansas

Louisiana and Mississippi are also on the list.

Trade Deficit Falls with Increased Demand for U.S. Goods

With the U.S. dollar failing, demand for American goods is on the rise and exports were at their highest level since August 2008 as of October. Exports rose 3.2 percent to $158.7 billion with purchases of American-made machinery, farm products and cars leading the way and the U.S. trade deficit fell to $38.7 billion, 13.2 percent below the deficit in September ($44.6 billion). The rise in exports is expected to boost economic growth in U.S. export markets and help with the Obama administration’s goal of doubling U.S. exports to combat high unemployment rates. However, the trade deficit with China continues to grow as China keeps the Yuan considerably undervalued against the dollar. This unfair trade practice, as critics call it, is making it cheap to buy Chinese products meanwhile increasing the price of U.S. goods in China. Overall, the U.S. trade deficit is at an annual rate of $504.8 billion up from $374.9 billion dollars in 2009, but economists expected the increase would happen as U.S. economy recovered. It is their hope that with a decline in the dollar, global demand for U.S. goods will make exports competitive and offset some of the increase in imports.

Bill Clinton: Tax deal the best we can reach

Bill Clinton still studies economics an hour a day. With the new Administration proposal pending, Clinton says that the single most influential tax cut in the current economy will be the payroll tax holiday - not the extension of the Bush tax cuts. Clinton believes that the payroll tax holiday will lower create jobs and contribute to lowering the unemployment rate.

Democrats declared Thursday they opposed the package because it would extend the lower Bush-era tax rates for millionaires. But Senate Republicans have refused to accept any difference in tax treatment for the wealthy, demanding that all current rates be extended. I am in favor of extending the bill and, for the first time ever, the Democratic party is not in favor of their President.

Limiting Bonuses

More restrictions have been placed on European banks.

"European regulators have confirmed tough restrictions on the bonuses that banks can pay their staff.

Only 20-30% of bonuses can be paid in upfront cash, according to new guidelines announced by the Committee of European Banking Supervisors (CEBS).

The rules are much tougher than those agreed by the G20 countries, raising fears that bankers may emigrate to more lightly regulated countries."

However...

"Some European banks have warned that the rules create an added incentive for their employees to relocate to Asian cities such as Singapore that have looser bonus rules, as well as lower tax rates and access to Asia's booming economies."

Looks like some loopholes need to filed.

Trade deficits narrows to 9-month low in October

WASHINGTON (AP) -- The U.S. trade deficit fell to its lowest level in nine months, as growing demand for American goods overseas and a falling dollar pushed exports to their highest level in more than two years.

The trade deficit narrowed to $38.7 billion in October, the Commerce Department reported Friday. The figure was 13.2 percent below September's deficit of $44.6 billion...

Remember in class about an open economy? Well, according to the article, the U.S. exports rose roughly 3.2% and the imports dipped .5% in October. This would indicate that we have a lower exchange rate in terms of currency towards other nations, which is why the exports rose more than the imports. Could this be the beginning phase to balance the trade but at the same time, devaluing our dollar?

$860 billion tax-cut deal: Cost breakdown

Well, a compromise has been made for the future tax-cut plan. The price tag is an estimated $860 billion, and things were going smoothly. That is until the bill was brought to the Senate. As Democrats still control the Senate, they have shown resistance to the current version of the bill. It includes multi billion dollar commitments to unemployment insurance, the previous Bush tax cuts, and various tax beaks for social security and businesses. Yet, people are worried about the short term stimulus that is necessary for these plans. I agree that debt reduction should be part of the plan as well.

Home values tumble $1.7 trillion in 2010

It's certainly not a sellers market any longer. Home prices have decreased substantially amounting to $1.7 trillion. Yes, trillion! That is more than a 50% increase over last year. The market is continuing to stabilize itself. The government's efforts to help those homeowner's out have proven effective, but only for a limited amount of time. They offered a tax credit for those people who invested new homes, but the prices still decreased. Analysts have stated that it will not become better in the near future, as foreclosures are at an all time high. New York and Los Angeles homes were the biggest losers as their cumulative prices have decreased by $103.7 billion and $38.6 billion respectively. A passive policy will hopefully cure these ailments.

Oil demand rises on global economic recovery, says IEA

The International Energy Agency increased demand for oil for the next year and raised its projections on consumption to 2015-a sign for growth in the US.
This increased consumption and predicted consumption has raised oil prices. The IEA report said that although the economy seems to be on the downside, the demand for oil is still increasing. This is because of the increase in the world demand for oil.

Furthermore, the OPEC is meant to meet soon to discuss quotas but analysts believe output will remain the same. Next year however the article says that OPEC will be pressured into increasing supply to meet demands.

Where do you think this increased demand is coming from if other articles comment on low consumer confidence and high unemployment rates?

US trade deficit narrows unexpectedly

The US trade deficit has reduced for the month of October however the overall trade deficit for 2010 has been risen. This fall in the deficit has been due to lower imports from lower spending and an increase in exports by 3.5%.
Even though this is the case, the future for the trade deficit looks poor. It is expected to rise to $500bn for the year from $346bn in 2009.

Beware $90 oil

Oil price climbed up to above $90 on Tuesday this week; futures rose by 1.5% to trade as high as $90.76 in New York. The rise could put another damper on consumer spending and add to factors slowing the economic recovery, and hurt the U.S. auto industry significantly.
Moreover, analysts predict that the commodity will hit $100 a barrel sometime next year as demand rises from China and other emerging economies. But various factors might send prices down as well, as the spread of Europe's debt crisis could strengthen the U.S. dollar and send prices for the dollar-denominate commodity downward.

Fed critic to take reins of House oversight panel

Ron Paul, a well known libertarian politician, has been chosen by House Republicans to lead the panel that oversees the actions of the Federal Reserve. As someone who has very strong and opinionated views on the mere existence of the Fed and overall monetary policy, this appointment has far reaching consequences. With many of Ron Paul's personal beliefs involving the dismantling of numerous government institutions, his libertarian outlook may change the ability of the Fed to conduct monetary policy. Ron Paul has previously written a book called "End the Fed" and is also an advocate of the gold standard. Whether or not this is indicative of a trend against the autonomy of financial institutions remains to be seen.

Chase Responds to Lehman Suit

We recently discussed in class how fall of the Lehman Brother's bank was one of the origin for the 2008 crisis. During early summer this year, Lehman had filed a suit against JPMorgran
Chase of "illegally siphoning $8.6 billion in collateral four business days before" Lehman's bankruptcy. But only few days ago, JPMorgan counter-sued Lehman Brothers stating Lehman committed fraud and left JPMorgan in more than $25 billion of unpaid loans which were backed by Lehman's most toxic securities.

According to the JPMorgan's statement, Lehman was provided with more than $70 billion on Sep 18, 2008 on the basis that Lehman will repay it back after it (Lehman) gets bought by Barclays Bank. JPMorgan further states that Barclays did not buy all of Lehman's debt that Lehman had guaranteed. Also, JPMorgan's countersuit includes higher Lehman executives which it accuses of accepting lucrative job offers at Barclays in return for allowing Barclays to "cherry-pick" the securities to be bought. A trial is not expected to start until 2012 and JPMorgan "is seeking unspecified damages".

Unemployment still a problem

Although we are through the worst of the recession (hopefully), the unemployment rate is till high and not changing recently. Gains in wages have been slowing down everywhere leaving one to question how to fix it. What can be the possible solutions in order to turn the corner and start making things better? Possible lowering unemployment benefits could give more incentive for people to gain skills to attain jobs.

Germany's Inflated

The German rate of inflation has hit "reasonable" levels after a surge in oil and food prices.

"Germany's inflation rate hit 1.5% in November, the fastest pace in more than two years, thanks to the increased cost of food and energy.

In September and October, the inflation rate had been 1.3%, according to the official figures from Destatis.

Despite the rise in prices, inflation remains below the 2% threshold the statistics agency sees as representing an unhealthy rise in prices."

"With food and energy taken out of the calculation, inflation would have stood at 0.9%, it added.

Germany is currently the growth-engine in Europe, experiencing strong expansion when many of its neighbours' economies are struggling to recover from the downturn."

Hopefully Germany can help Europe out of the economic stagnation.

What's hot for 2011: Mortgage-backed Securities?

Remember those toxic assets that nearly wrecked the U.S. financial system back in 2008? They're back, even though housing isn't

It seems like only yesterday that virtually everyone thought mortgage-backed securities were evil. After all, the securities – backed by mortgages including subprime home loans – helped put the country's largest banks on the brink and the global economy into a dizzying downward spiral after the housing bust started.

In the years leading up to the financial crisis, as credit boomed in tandem with home sales, Wall Street shored up on mortgage-backed securities. At the time, at least, it was almost easy to see the appeal of betting on securities whose values depended on mortgage payments and housing prices. But when things went awry, these securities were akin to the plague – not just for Wall Street who reported big losses, but the folks on Main Street who linked the complex financial instruments with their economic woes.

It's true things are looking better today relative to what they did then, when Lehman Brothers went under and Bank of America (BAC) swept up Merrill Lynch in a panic. But the housing market isn't exactly rebounding, and the rate of foreclosures hasn't improved much. The latest Case Schiller Index reported that home prices nationwide declined 2% during the three months ending in September, after having risen 2.4% during the previous quarter. According to Zillow, home prices have lost $1.7 trillion in value in the past year.

Despite the gloom, a modest bright spot linked to housing is emerging on Wall Street. In its 2011 outlook, UBS (UBS) strategists declared that mortgage-backed securities are poised to be an attractive investment. This doesn't necessarily signal that defaults and foreclosures on home loans will totally recover anytime soon, UBS says. Ironically, some of the factors working against the housing market today are helping make the securities more appealing to investors.

These days, mortgage-backed securities come with relatively less risk, since banks have enforced much stricter lending standards. Fewer people are taking out new home loans, even while mortgage rates have fallen to record lows.

What’s Wrong With Cutting Taxes?

The proposed tax cuts are argued to help stimulate the economy, create jobs and hopefully lead to economic recovery. the author of the article states that cutting taxes for the very rich is a very ineffective way to stimulate the economy. some people believe there are better actions that could be made. three more effective ways to support consumer demand and jobs would be to extend unemployment benefits, don't lay off teachers anywhere and start hiring more people.

Bond Markets Settle Down; U.S. Indexes Mixed

The recent Bond markets have settled down lately due to a couple reasons. one being that there had been an encouraging report on the labor market. another being that there is rising optimism about the american economy as well as the recent extension of the tax-cuts. European bonds and american treasuries have seen a slight increase as well lately. a down side of the situation is that people are fearing the deficit matters may worsen and that created a spike in treasury yields on Wednesday as investors dumped the bonds.

Morgan Stanley Aims to Rein In Executive Pay

Morgan Stanley is doing a lot to keep exaggerated pay in check for top executives.
They have had financial problems - like everyone- but also because they hoped that hiring more people would create revenue growth. However, they hired 2,000 people and have seen little growth in revenue.
This prompted complaints from shareholders about high wage payout costs and led to these cut backs. Instead of laying off the newly hired, Morgan Stanley will cut back the pay and bonuses of top executives.
However, Morgan Stanley promised that the employees that did well will still receive competitive pay yet the workers that have not done so well this year will see a cut in their pay.
The firm hopes these moves will help them in the long run and in the eyes of stockholders.

MasterCard, Visa targeted in apparent cyberattack

The corporate websites of Visa and MasterCard were inaccessible at times Wednesday due to an apparent cyberattack by purported Wikileaks backers.

Banks boost stocks, but gains are modest

Stocks drifted higher Wednesday as a rebound in bank shares offset weakness in commodities and concerns about rising interest rates in the Treasury market.

Opening Bankruptcy Court to the States

Counties, municipalities, and and other subsidiary government entities can file for relief under Chapter 9 should be extended to states.
This is a future possibility and suggestion because states are struggling to cut more expenses and raise any more taxes.

I didn't quite understand the logistics of how this would work and I do not think the article went into enough detail of what would happen after the state filed for bankruptcy. Maybe somebody can read this and understand it better than I.

A Bond Rush as Treasury Prices Fall

The agreement to extend the Bush tax cuts led to a sharp decrease in prices of treasury bonds. Many people started buying and the equity markets rose slightly higher that day.
The reason people began buying the bonds is because the extension on the Bush tax cuts is seen as something that will raise the deficit and raise the price of borrowing.
-Remember, the Fed is selling $600 billion in bonds through June 2011.

AIG's Partially Back

AIG has repaid back some of the loan it received in the bailout.

"American International Group (AIG), the troubled giant US insurer, is to repay one of the emergency rescue loans it received during the financial crisis.

It will repay the remaining $21bn outstanding from a $91bn loan from the Federal Reserve Bank of New York.

The move will pave the way for the US Treasury to sell a fifth of the insurer on the stock exchange early next year."

Looks like a long and steady road of recovery.

Fed Says KC Region Economy Strengthens

The report from the Federal Reserve Bank of Kansas City said the regional economy strengthened this fall as consumers spent more money and production orders picked up. According to the Federal Reserve’s so-called Beige Book that reviews economic conditions in the Fed’s 12 regions, the new survey found that 10 of the Fed’s 12 regions reported economic growth at either a “slight to modest” pace or at a “somewhat stronger” pace. Only two regions, Philadelphia and St. Louis, reported mixed business results in the six-week period that covered October and early November. The survey said the recent gains in consumer spending have “boosted optimism for holiday sales among retailers and auto dealers” and that a “limited number of firms were hiring, primarily for specialized labor or seasonal workers”.

PPI: Headline Up 0.4 Percent; Core Prices Down 0.6 Percent

In October, the Producer Price Index for finished goods rose 0.4 percent for the third straight month. This was the fourth continuous monthly increase in the index. Recent moves in producer prices have largely been dominated be swings in energy prices. Energy product prices rose 3.7 percent in October.

In contrast, the core index, which does not include energy or food product prices, fell by a large 0.6 percent. This was the largest decline in the index since 2006. Much of the decline was due to an adjustment having to do with the year’s new models of cars and light trucks. A similar decline occurred in October of last year. However, this still illustrates very modest levels of underlying inflation in the system and adds to the Fed’s view of inflation being low relative to employment levels.

“The worries of deflation are once again front and center and could soften criticisms of QE2,” said Jim Chessen, Chief Economist for the American Bankers Association.

From a year prior, the core index was up 1.4 percent. The top line index, including all finished products, was 4.3 percent higher from a year prior.

Industrial Production Flat, but Manufacturing Output Up 0.5 Percent

In October, industrial production was unchanged, following a decline of 0.2 percent in September. As was the case in September, October’s weakness was primarily due to a large drop off in utilities output, which fell 3.4 percent over the month. In contrast, manufacturing output rose 0.5 percent, the strongest rise since July. The gain was led by auto production, which increased by 1.6 percent over the month. However, even without auto production, output rose 0.5 percent. The month’s solid growth in output is encouraging after two months of soft numbers. It suggests that manufacturing sector activity growth is no longer decelerating.

The capacity utilization rate remained flat at 74.8 percent. Though this is off of its lows of the cycle, it is still considerably low. A large amount of excess capacity continues to exist. Until this rate comes up further, significant amount of industrial sector investments will not be required.

Fed Misprints $110 Billion in New $100 notes

It was the "bill of the future". The new American $100 bill had 3D security ribbons and threads. Microprint text and watermark images were disguised across its surface. And the numbers changed color depending on the light and viewing angle. Lauded to the press in April, the bill was so sophisticated that no counterfeiter could hope to reliably print it.

The only problem, though, was that apparently the U.S. government couldn't reliably print it either. During the initial printing run, a flaw in the printing process was encountered, which led to a layer of the paper folding over after inking, revealing an uninked portion.

Approximately 30 percent of the the approximately $366B USD printed, or roughly $110B USD worth of bills, carry the flaw. That's a whopping 1.1 billion botched bills.

This is ironic since it's been the general belief that the US should raise the money supply, to keep inflation at a steady rate...and they misprint $110 billion of it in the process.

Is proposed tax plan a game-changer for the economy?

As the Republicans and Democrats agree on a bi-partisan tax plan, many foresee this compromise as wholly beneficial to the economy. The plan primarily deals with tax cuts, which are now either the same as the Bush tax cuts or have been cut even further across the board. Several small business owners have held back on spending recently in anticipation of tax increases, so the new of a tax cut may help stimulate investment. Some economists see this as something that will most likely improve economic recovery over the next year while others are wary about how much consumers will spend regardless of the tax cuts. This method of fiscal policy works in concert with the recent monetary policy of QE2. In simplest terms, I see this fiscal policy as aiming to stimulate consumption and investment, which would shift the LM curve and is also what the economy truly needs at this point.

House hunters are too scared to buy despite low prices

Most of the economic indicators are showing that the economy is on its way up. Unfortunately, the housing market is still in a decline, which is scary considering it's a pretty big sector of the economy. There are a couple of reasons why people aren't buying housing, even though there have been historical lows on interest rates and prices. The first is people are scared that they won't be able to make payments, which is part of the reason why the economy fell so hard in the first place. The second reason is that people are trying to see if they can get better deals on houses if they wait longer. The reality is that houses won't be that much cheaper, because they are already at historic lows. People need to start buying houses now to help the housing market.

Obama Defiant in Defending Tax-Cut Plan as ‘Good Deal’

Democrats have been expressing criticism over President Obama's recent acceptance of the Bush-Tax cuts. The Bush Tax-cuts have been extended for the next two years for all levels of income and the flow of unemployment benefits will continue. President Obama has done, tried to do or is still trying to do all he had promised in his campaign and retorted so to accusations and critics of his abandoning his principles. The tax-cuts however, only help about 36000 of the wealthiest American families and add about $25 billion to the deficit. Ms Pelosi said “The Democratic provisions will create jobs and help 155 million workers through tax cuts for the middle class, helping working families who are struggling and growing the economy. The Republican demands would provide tax cuts to the millionaires and billionaires, fail to create jobs and increase the deficit.”
Although, on the flip side, the tax-cuts are believed to help create jobs as the wealthiest Americans will be able to invest in firms and pass down that wealth to the working/middle class, there seems to be a larger population who believe these tax-cuts are not about to help the economy but rather deepen its troubles.

A Hint of Good Job Market News

Last Friday the Bureau of Labor Statistics measured the current unemployment rate at 9.8%, which to everyone's dismay, is the highest since April 2010. But a recent data released by Labor Department's Job Openings and Labor Turnover Survey suggests that the October job openings exceeded by 400,000 compared to September numbers. October had 3.4 million job openings compared to 3 million in September. Most of the job openings have been in the service, education, and health service industries. The article also states that ratio of unemployed workers to job openings was the lowest since 2009, indicating that more and more unemployed workers have started looking for jobs more aggressively.

Rich make out in tax deal

This week's tax-cut compromise will trim everyone's taxes. But surprise, surprise, it's an especially rich deal for the rich.

Australia Keeps Rates Steady, RBA Seen Sidelined Into 2011

SYDNEY—Australia's central bank left interest rates unchanged at 4.75% Tuesday and said it expects inflation to remained contained over the "next few quarters," signaling that the bank is likely to sit on the sidelines well into 2011.

The decision left few surprised after data last week showed the economy grew at its slowest quarterly pace in two years in the September quarter and Reserve Bank of Australia Gov. Glenn Stevens said he was content with the level of interest rates.

Still, some economists were forecasting the Reserve Bank would raise rates again relatively soon in 2011. That timeline now looks to have been pushed back substantially. After the statement, financial markets moved the timing of the next rate increase from late 2011 into 2012.

"They are telling us they are comfortable for at least the next few quarters," said Rob Henderson, head of Australian Economics at the National Australia Bank. "There is no rush to hike rates."

A decision by major banks to sharply raise their mortgage lending rates in November, citing rising funding costs, also played a role in keeping the central bank's powder dry in December. The high Australian dollar has further tightened monetary conditions.

"Following the board's decision last month to lift the cash rate, and the subsequent increases by financial institutions, lending rates in the economy are now a little above average. The board views this setting of monetary policy as appropriate for the economic outlook," Mr. Stevens said in a statement.

Recent data on the economy have also showed shopkeepers are heading into a disappointing end-year sales period, adding to concerns about growth as government economic stimulus is withdrawn. Australian consumers have been cautious for some time, depressing retail sales.

Data earlier Tuesday showed a slump in construction stretching into a sixth consecutive month. The Australian Industry Group's Performance of Construction Index fell 1.8 points to 42.2 in November from October. An index reading below 50 points indicates contracting activity.

"[The RBA] are still very much focusing on medium-term outlook, but I think they believe they have done enough for a time and can sit on their hands," said Josh Williamson, senior economist at Citigroup.

Still, the Reserve Bank has retained a tightening bias, albeit one it looks unlikely to use for a while, economists said.

Wage pressures are growing but forward indicators of the job market suggest some slowdown in hiring is likely, Mr. Stevens said. Over the next few quarters, inflation is expected to be little changed, though it is likely to increase somewhat over the medium term if the economy grows as expected, he added.

Inflation in Australia remains within the Reserve Bank's 2% to 3% target band.

The Reserve Bank has led other central banks in tightening monetary policy, raising the cash rate target seven times since October 2009.

Despite recent soft data, the Australian economy is expected to grow strongly in 2011 as mining investment gathers traction and consumers throw off recent caution that has seen household savings rates soar.

The resources boom now engulfing the economy is the biggest in more than 100 years, with demand for exports of coal and iron ore surging on the back of strong demand from China, and elsewhere in Asia.

The Australian dollar was slightly weaker after the statement. At 4:30 GMT, it was trading at 99.02 U.S. cents, down from 99.10 U.S. cents just prior.

Asia's Inflation Worries Damp Holiday Shopping Cheer

By ALEX FRANGOS

HONG KONG—A cheerful holiday shopping season in the U.S. and Europe could be too much of a good thing for fast-growing Asia's exporters, complicating the region's efforts to fight inflation.

Early indications are that Americans are digging deeper into their pockets than expected to buy televisions, tablet computers and toys, most of which come from Asia. Export figures from Asia have been stronger than expected, confirming a possible bounce in activity. Air freighters from Hong Kong to the U.S. and Europe have been running full loads.

What sounds like good news for a region that derives much of its economic growth from exports could end up being a challenge. Central bankers have kept interest rates low on expectations that consumer demand in the West would stay sluggish. But a boost in growth could be enough to turn a small inflation problem into a bigger one.

"If exports to the U.S. hold up, then Asia is running out of any spare capacity and will quickly find itself with escalating price pressures," says Frederic Neumann, Asia economist for HSBC in Hong Kong. "To keep a lid on prices, Asia needs the West to languish a little while longer."

Unlike in the West, which is fighting deflationary pressures, prices in Asia are on the rise. Food prices and rents are increasing. Factories are running close to or above capacity, and unemployment is low, driving wages higher.

As inflationary expectations in Asia creep up, some are concerned that central banks have been too slow to raise interest rates. China raised benchmark interest rates in October and recently modified its monetary policy stance from "moderately loose" to "prudent," leading to expectations that further rate increases are imminent.

The Asian Development Bank on Tuesday raised its current-year forecast for growth in Asia, saying the recovery "appears to be even stronger than envisaged" in September, when it last published growth forecasts. It predicted the region, excluding Japan, will grow 8.6%, rather than 8.2%. The Manila-based bank credited strong private spending and exports holding up better than expected.

Much will depend on how Asian exports perform in the coming months. Early signs are hopeful from places that specialize in high-tech gadgets that the U.S. and Europe love to buy. Taiwan's exports rose 21.8% in November from a year earlier, to $24.37 billion, driven by strong demand for the island's electronic products, its Ministry of Finance said Tuesday.

South Korea last week also reported strong November export growth. Both Taiwan and South Korea are the first Asian economies to report trade figures each month and are seen as leading indicators for global trade. Their high-tech components are used to assemble telephones and televisions in mainland Chinese factories, and later sold to consumers in the U.S. and Europe.

Stocks of technology companies, such as Taiwan computer maker Acer Inc. and China's Lenovo Group Ltd. have risen on the heightened expectations. Japanese videogame maker Nintendo Co. said it sold 1.5 million consoles and hand-held gaming systems in the last week of November, more than analysts expected.

A consumer rebound in the U.S. is far from a sure thing. Unemployment is stubbornly high at 9.8%. Inventories of goods on store shelves are rising, usually an indicator that retailers will begin to scale back their purchases, fearful of holding too much stock.

Central banks in the region aren't counting on a big burst of economic activity in the U.S., and are keeping interest rates low partially as a buffer against a sluggish 2011. They figure the restocking of U.S. and European warehouses after the financial crisis is over, and now the debt-laden, underemployed consumer sectors will be cautious. Reflecting that view, the Asian Development Bank forecasts growth will slow in developing Asia next year to 7.3%.

Some Asian companies that rely on demand in the U.S. and Europe, having been fooled in the past by good starts to holiday shopping that eventually peter out, aren't convinced yet that the U.S. is really on the rebound.

"It's too soon to say" whether a new wave of buying will come in 2011, according to Stanley Lau, managing director for Renley Watch Manufacturing Co. His company, with factories in Hong Kong, China and Switzerland, produces 1.5 million watches a year for high-end Western brands that sell in the U.S. and Europe. "The next one month will be crucial for our exporters to see the performance of the Christmas sales," he said.

The more optimistic view is that the holiday shopping season will draw down those inventories and new orders will appear in the new year.

Economic-activity signs in the U.S. have been surprisingly healthy, despite the disappointing November jobs report released last week. Major retailers in the U.S. reported a 6.5% increase in sales in November from a year earlier, according to Thomson Reuters. Consumer confidence is at its highest level since May.

There is also good news out of Europe, which is a bigger market than the U.S. for some Asian exporters, including China. Despite fears of Greek and Irish debt woes, German unemployment is at an 18-year low and Nordic countries, such as Norway and Sweden are enjoying solid growth.

Edward Lau, managing director for TNT Express in Hong Kong, says use of the air-shippers' planes between China and Europe over the final weeks of the holiday rush have been "very healthy." TNT recently added service between Chinese interior city Chongqing and Europe, and augmented service from Hong Kong and Shanghai.

Read more: http://online.wsj.com/article/SB10001424052748704250704576005002708945750.html#ixzz17SdIPIAp

U.S. Mortgage Delinquency Rate Could Fall to 5% in '11

The percentage of U.S. consumers who are delinquent on their mortgages could fall to about 5% by the end of 2011, from an expected 6.2% at the end of this year, according to a leading credit bureau.

Even so, the proportion of consumers who are 60 or more days overdue on their mortgages would still be sharply higher than the historical range of 1.5% to 2%, according to TransUnion LLC, which analyzed about 27 million randomly selected consumer records from its database. The Chicago credit bureau first started tracking these statistics in 1992.

In data released Tuesday, TransUnion forecasts that mortgage delinquencies will fall to 4.98% in the fourth quarter of 2011 from 6.21% at the end of this year. According to TransUnion, this delinquency rate peaked at 6.89% in fourth quarter of 2009, as lenders tightened underwriting standards.

A decrease in mortgage delinquencies, traditionally a precursor to foreclosure, could boost the faltering recovery in the U.S. economy and the residential real-estate market.

"We think that the mortgage industry isn't out of the woods yet, but it's starting to move in a better direction," said Steve Chaouki, a group vice president in TransUnion's financial-services unit.

Protracted and high unemployment and depressed home values are contributing to the elevated delinquency rate.

TransUnion also forecast that credit-card delinquencies, an important gauge of future losses for lenders, will continue to fall, though not nearly as sharply. By the end of this year, the ratio of credit-card borrowers who are 90 days or more delinquent on one or more of their credit cards is expected to reach 0.75%—below the levels at the beginning of 2007, at the peak of the credit boom, according to TransUnion.

As credit quality improves, this delinquency rate is expected to fall to 0.67% by the end of 2011. Credit-card delinquencies are lower than mortgage delinquencies in part because credit-card lenders have more ways to control the potential losses, such as reducing customers' credit lines.

IMF Chief Criticizes Euro Crisis Response

ATHENS—The head of the International Monetary Fund on Tuesday urged European countries to find a comprehensive solution to the region's debt crisis, faulting their approach to date as ad hoc and too slow.

Dominique Strauss-Kahn spoke as European finance ministers met in Brussels to debate enlarging the temporary fund for euro-zone members in need of emergency loans, as well as how to set up a permanent funding vehicle.

But those talks so far have been marred by sharp disagreements among various euro-zone governments over the details of future bailouts.

As European nations grapple with debt issues, the Federal Reserve is buying bonds. Video courtesy Fox News.

"My view is very simple—the euro zone must find a comprehensive solution to this problem," the IMF managing director said. "It is not a good approach that for every country we find a separate solution."

European leaders set up the €750 billion ($998.55 billion) European Financial Stability Facility in May, soon after they had put together a €110 billion financial rescue package to help Greece cope with its debt crisis, and have since extended a further €85 billion loan to Ireland.

The stability facility was created as a temporary measure to try to stem worries about the rising indebtedness of other euro-zone countries. Combined, the euro-zone countries have provided €440 billion to the total, the IMF has contributed €250 billion, with the remaining €60 billion coming from European Union contingency funds.

However, there have been disagreements over whether the size of the temporary fund should be expanded, while there are also disputes over how its successor facility should be financed and structured.

In his remarks, Mr. Strauss-Kahn likened Europe's expanding debt crisis to the financial turmoil that rocked the U.S. two years earlier. But he criticized Europe for its slow response and said the lessons learned from the American crisis called for a speedy and comprehensive solution.

"The institutional organs of the European system likely need some improvement so as to react more quickly," he said. "They were not created to deal with crisis, they were created for more peaceful times."

In the U.S., the effects of a widening crisis were first transmitted from bank to bank by a collapse of confidence in the interbank market.

In the past three months in Europe, investor fears that the EU and IMF may soon have to help Portugal and Spain have pressured the sovereign bonds of indebted euro-zone states and raised the cost of borrowing for those countries, further aggravating existing debt problems.

"Clearly the euro zone has a problem of high debt among some of its members. It is not a tremendous problem for the euro zone—I don't agree with the view with those who say that the future of the euro zone is at risk—but it is a problem and it must be addressed," Mr. Strauss-Kahn said. "And for it to be addressed effectively it must be addressed in a complete and comprehensive manner."

Mr. Strauss-Kahn was in Athens to discuss with Greek Prime Minister George Papandreou the country's continuing reform efforts as well as negotiate an extension to the period in which Greece must pay off its EU and IMF loans.

At a joint press conference, he said he was "impressed" with Greece's efforts to narrow its budget deficit, but said Greeks still faced a long road of difficult, structural reforms ahead.

Since May, Greece has narrowed its budget deficit from a record 15.4% of gross domestic product in 2009, to a projected 9.4% of GDP this year. For next year, it aims to reduce the deficit to 7.5% of GDP.

However, Greece still faces high borrowing costs on international markets, in part because of investor jitters over the country's ability to service a €70 billion-a-year in loan repayments in 2014 and 2015.

To ease some of those concerns, Mr. Strauss-Kahn publicly floated the idea of extending Greece's loan repayment schedule in October. And last month European finance ministers decided to consider extending the repayment period until 2024 from 2018, to bring it in line with Ireland's emergency loan.

"It is not an urgent issue, but we shouldn't wait too long about it," Mr. Strauss-Kahn said. "From our side, we are ready to do it. We'll see with our European partners how that should happen."

Late Tuesday, Greek public sector umbrella union ADEDY and the Communist-backed PAME union held protest rallies outside parliament to coincide with the IMF chief's visit.

South Korea and U.S. Reach Deal on Trade

The US and South Korea reached a free trade agreement which will eliminate most tariffs for US exports and help solidify the relationship between the two countries. This is the largest free trade agreement that the US has established since NAFTA. This deal is expected to usher in 10 billion dollars worth of revenue to the US and create "tens of thousands" of jobs. US negotiators had failed to reach this deal just three weeks earlier but after the recent friction with North korea, South Korea seemed eager to close the deal. This deal was lauded by both the republicans and democrats and even the US chamber of commerce which hailed it as a great victory for US exports. Even earlier dissenters such as the Ford motor Company have thrown their support behind the agreement. This agreement is going to positively affect the struggling auto industry as Korea is a large importer of US autos.

G.E. and JPMorgan Got Lots of Fed Help in ’08

New records show that during the financial crisis of 2008, GE and JPMorgan Chase, recieved huge amounts of aid from the Fed even as their CEO's served on the nine member board of the Federal Reserve Bank Of New York. Now even though the CEO's of both these companies were not involved in the creation of the emergency loans program,which was approved in Washington, this information shows that they got really cheap loans. This conflict of interests has come under scrutiny recently. A government acoountability office is looking into this potential conflict of interests at the Fed.

Poland’s Currency Lifts Economy

Foreign investment is pouring into Poland and investment opportunities are all over - all while many other European countries are struggling.
Without the euro, Poland is prospering.
"One of the big lessons of the European debt crisis, Polish leaders say, is that countries should not adopt the euro until their economies and labor markets are flexible enough to compensate for the loss of control over exchange rates."
The Polish zloty has fallen 18% against the Euro but has therefore helped Polish goods and isolated them from the European crisis.

Tax Deal Suggests New Path for Obama

To go along with the article I posted yesterday ---
Monday Obama announced a tentative deal with the republicans in congress over the Bush tax cuts. Obama and the democrats will agree to extend the tax cuts to all income levels (although they wanted to only extend them for the middle class bracket).
Therefore, the republicans agree to raise the aid to the long term unemployed and to cut payroll taxes for all workers for a year.
The debate between the parties over the Bush tax cuts has been the first standoff since the midterm elections. Although the newly elected republicans are not overriding the democrats, Obama appears to be struggling with his own party as he pushes to get things done and maintains his very liberal mindset.
This package will cost about $900 million over the next two years.

Interesting for us - this will continue a college tuition tax credit for some families.

We Lost 8 Million Jobs. Only 1 Million Came Back

In late December of 2009, 8 million jobs bit the dust. Not even 4 years earlier the economy employed over 138 million jobs. Over the last year the economy has slowly been recovering despite its miserable high unemployment rate of nearing 10%. Fortunately, over the last year there has been a growth of 1 million jobs. Many of these jobs can be attributed to a great demand in geriatric health care.
At last we can see some recovery in terms of job availability. Unfortunately, the job openings aren't enough but at least we are seeing some progress toward a healthier economy.

Debt, deficits and delays

The National Commission on Fiscal Responsibility and Reform has developed a plan for reducing the national debt and federal budget deficit. Only 11 of the 18 panelists, however, supported the plan, leaving the vote short of passing by 3.

The plan proposed a cut in projected spending by $2.2 trillion between 2012 and 2020 while raising revenue by almost $1 trillion. The failure to pass the policy is not shocking and shows how challenging it will be to develop a plan that has the support of both parties.

It may be a good thing the plan was rejected since November’s unemployment numbers continued to rise. The unemployment report suggests that passing this plan now may put the brakes on the economy before we are really start moving forward again.