A Bold U.S. Plan to Help Struggling Homeowners

Thousands to lose jobless benefits April 5

The article describes the persistent problem of unemplyment which has been a crucial problem for the United States over the last few quarters. The jobless benefits which was extended some days ago is about to get expired on April 5. And the expiry date was not extended on friday by the Senate. This will cause 212000 job searching workers to lose their benefits and this inturn will cause the problem even more severe. The rate at which unemplyed finds a job has been decreasing. Therefore the unemplyment rate is in danger of rising once again.
Hope this article sheds light on the knowledge of unemployment and provide enough information to forcast the future of American economy.

Fed’s Sack Says Financial System Needs Leverage

Brian Sack, head of the markets group at New York Fed, said that leverage is essential for financial system to operate and he totally supports the securitization market as long as it is properly structured. He comments that although, subprime crisis led to almost 2 trillion dollars of writedowns, and is an important lesson to learn, US lawmakers, who are planning to make changes in regulation to prevent occurence of such a crisis, should understand that "securitization is a powerful tool that plays an important role in intermediation of credit in the economy."He says that it is size of too extensive securitized credits which caused the crisis, but is not the vechicle itself.

Health Care Reform Bill Summary: A Look At What's in the Bill

The health care bill will cost 940 dollars over the next ten years. The bill will cover 32 million Americans that are currently uninsured. It will include individuals and families that make between 100 and 400 percent of the federal poverty line. Paying for the bill will come from medicare payroll tax, excise tax, and a tanning tax. The medicare payroll tax will tax individuals that make more than 200,000 and families that make more than 250,000 by 3.8 percent. The excise tax means that insurance companies will pay 40 percent on high-end plans. The tanning tax means that indoor tanning services will pay 10 percent. Hopefully, the increase in government spending will be offset by the increases in taxes, and that national saving won't be affected to badly. However, we will find out what will happen in the future.

Digging out of debt

This article discusses the road ahead of most countries.Historically, recessions are followed by periods of deleveraging. This period differs from country to country because not all leverage is in the same place in every economy.In most economies private debt has dropped but government debt has risen, and once private deleveraging is "done" the public sector must cut back. However, according to the research firm collecting all this data, deleveraging has just begun. The firm believes this period of deleveraging will be worse than those in the past because data collected for their sample included Britain as having the highest debt ratio with almost 300%. Currently half the richest countries in the sample have more than 300% of GDP as debt. The article concludes saying that the worst part of deleveraging lies ahead.

Are the Brits headed for the PIGS sty?

According to this article the United Kingdom is in danger of becoming just like Italy, Portugal, Spain, and Greece. The worry is that the U.K. will go deeper in debt, "Government spending is on track to account for more than half of U.K. gross domestic product in 2010, while government debt is heading toward 64% of GDP next year, up from 44% in fiscal 2009." All of these governments currently are in trouble and have needed some sort of help financially. What sets the United Kingdom apart from everyone else is that they have a number of different ways to help themselves out. In the article they talk about some of U.K.'s options in terms of solving this problem, "Both are able to raise funds by selling debt denominated in their own currency, for instance, and have free floating currencies that can ease economic adjustments."

EU approves bailout loans for Greece, if needed

This article is based on how EU and IMF finally came to an agreement that each EU country and the IMF itself will bail out funds to get Greece out of the economic downfall. Though the amount is not precisely known, but it is estimated that it will be around $28.6 billion. Each country will share the fund according to their GDP and population. This combined effort to get Greece out of the downfall is certainly not the best of the solutions but this is politically sustainable solution. Ultimately it is the euro which would suffer, so the decision is best considering the time and situation. Hope this article will give the readers enough information about the bail-out fund and the rescue effort.

Saving Greece

Greece, in dire need of aid, will be getting help from the IMF, France, Germany and other euro zone countries. The funds are not only open to Greece, but all euro zone states as long as there is unanimous approval. The loans are at "non-concessional" rates in order to lure hibernating investors into the market. Of course, with such a huge payout, there are cries of implementing stricter regulations in the management of deficits so a crisis like this does not repeat itself.

The Perils of Pay Less, Get More

This article discusses the budget deficit in America, and the trend we are moving in concerning our debt. The main point in this article is that even though we are experiencing extreme budget deficit problems, Americans want lower taxes. Furthermore not only do we want lower taxes we are asking more of our government. Americans want, "a military to protect them, good schools for their children, comfortable retirement for the elderly, medical care even when it isn't profitable." All these amenities are unreasonable to ask of our government if we aren't willing to increase taxes to pay for some of them. In 2008 taxes fell to only 15.1 percent of GDP which is a 60 year low for this country. The biggest portion of government spending is because of Medicare and Social Security.

Greenspan Calls Rise in Treasury Yields ‘Canary in the Mine’

This article describes Alen Greenspan's view on the current treasury yields. Green span says, “I’m very much concerned about the fiscal situation,”. His concerns also lie in the recovery of the housing sector. The increase in long term interest rates that is expected “will make the housing recovery very difficult to implement and put a dampening on capital investment as well.” The article also gives a snap shot of other current rates in our economy.

China will not adjust the exchange rate for its currency.

This is an interesting article and looks like it ties the loose ends about whether or not China will do anything about their monetary policy. China will no adjust the exchange rate for its currency. With their lowered currency, Chinese goods have been bought, thus making China the largest exporter in the world. Adjusting the exchange rate would cause appreciation to their currency, which would lower net exports.
The United States is trying to pass a bill through Congress giving it the Commerce Department the right impose tariffs on Chinese goods. Although, it seems some congressmen are fully aware of how imposing tariffs will not affect net exports, but instead cause appreciation of the American dollar. Other options include multilateral talks through the G-20 pressing China from different nations instead of just one nation.

Chinese currency manipulation cost jobs. Will it be an obstacle for the US economy?

It is not a new topics recently but I wonder whether it is time for a new policy to deal with the problems.
Compared to the U.S dollar, China yen is said to be undervalued from 25% to 40%.
In this article, Laurie Moncrieff, a small business owner cite her business problems:
" She described a global playing field that had become so uneven that Chinese goods were not just cheaper than comparable ones her company made, but often cost less than the price of the raw materials she used."
“It does me no good to hire people if I cannot sell my goods,” Moncrieff said.
Currency manipulation also acts like a tariff – or a tax -- on U.S. exports to China.
While Chinese currency manipulation is not new, Krugman, a Nobel Prize-winning economist said it has reached unprecedented levels. “These surpluses do come at the expense of jobs,” he said. He estimated that currency manipulation has displaced as many as three million U.S. jobs and argued that the U.S. needed to adopt a tougher trade policy.
Other scholar have the same argument. C. Fred Bergsten, Director of the Peterson Institute for International Economics regard currency manipulation as a policy of “exporting unemployment.”
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And about us? What do you guys think?

~~ Trung Pham

China Officials Wrestle Publicly Over Currency

This article describes the current conflict in China between the Chinese central bank and the commerce ministry over whether or not to let the remnimbi rise against the dollar. China has been accused by the United States of keeping their currency artificially low against the dollar to keep their export industry competitive, which hurts other economies. This economic issue has been turned into a political issue, with the Chinese feeling as though the United States is interferring too much with Chinese economic policy.

Starting Over Solo

Roughly 7% of workers in the U.S today are self-employed. This is the story of two people who lost their jobs and created their own job to continue making money. Many say they landed in this position due to unexpected financial hardships. Starting a business, on average, has a 20% failure rate within the first year.

Jobless claims slide

Each week, the number of people filing new claims for unemployment insurance is reported. The number of claims fell last week to the lowest level in six weeks. This shows that perhaps more people are getting jobs, and/or not as many people are losing their jobs and having to file for UI.

We are headed in the right direction.

How Bad Is It, Really?

This article talks about how unreliable unemployment rates can be due to the poor methods used to determine them. It gives details of the problems involved in the surveys that are conducted. It says that employment is more dependent on race, class and education.

Bernanke: Record-Low Rates Needed to Aid Economy

Bernanke told Congress on Thursday that we still need extremely low interest rates to help our recovery economy. He pointed out that with the low inflation rates the Fed can easily keep the interest rate near zero.
He did not say anything specifically about when the Fed would begin to raise interest rates - only saying it would be "when expansion matures". This will be the most important decision the Bernanke will have to make as it will determine the entire economy's well being. If the interest rate is raised too soon, the recovery will not be complete. However, if the interest rate is kept low longer than needed for the recovery, inflation will rise and 'bubbles' could happen.
This article also says that the Fed is keeping the interest rate low for unemployment reasons as well. It quotes that our unemployment rate is 9.7%. This is the worst economic crisis since the 1930s.

Crumbs from the BRICs-man's table

This is a good article talking about trade and FDI between emerging countries (China, India, Russia, and such) taking the spot of rich countries in aiding poor countries in Africa and the middle east. It talks about what types of aid, such as lending or generous commodity prices, these emerging countries have given to poor countries over the past decade and specifically during the recession. It also mentions some of the negatives of such policies.

Germany, France Back IMF Aid to Greece

this article talks about how the international monetary fund and the euro regions two biggest economies (france and germany) have agreed to help greece lower the borrowing cost of money to help reduce the amount of debt greece has. the article also is talking about setting deficit regulations on countries to help prevent another incident like this from happening.

US Stocks Climb, Pushing DJIA To 17-Month Closing High

This article gives a snap shot of some of the big movers yesterday in the markets. It claims that the move to the 17-month high the Dow Jones settled at was a result of the House's vote to approve the health-care overhaul bill. The article touches on a number of stocks that drove the market up. Some say there are fears of a "double dip recession". Only time will tell if these gains can be maintained.

Investment Banks Expand in Australia's Bond Sector

Security firms are looking into the global market in Australia, seeking higher returns on bonds. Australia's economic strength is surpassing that of Europe and the U.S. There has been an increasing interest from offshore investors in credit and government bonds. As a result, competition is increasing in Australia where banks are looking for the best talent, allowing the market to expand, and will continue to expand.

February existing home sales drop 0.6 percent

In this article, it explains how the housing market continues to decrease in many areas. This is said to have an effect on the so called "recovering market". Mostly, this can be accounted for by the still high unemployment rate. Many people who do not have a steady income are very reluctant to buy a house right now. Unfortunately this does not help housing markets.

Although, in other parts of the country, housing markets are beginning to increase. Areas such as the Midwest, and the northeast. In the south, they have experienced a decrease of about 1 percent. Even with an increase in some parts of the country, by no means does it mean that we are close to a recovery in the housing market. In the last month, the inventory of unsold homes rose from 312,000 to 3.59 million which is an unusual amount that lead to a push of unsold homes to 8.6 months. This continues to be an issue in our economy. Once we start to see an increase in the housing markets nation wide, we can start to feel better about a recovering economy.

Greek crisis may hit US economy: Fed regional chief

With all the problems Greece has been having, the value of the Euro will probably continue to depreciate against the dollar. European countries are also being wary about keeping public debt low. These two things together could mean that US exports will suffer big time. Not good news considering that Europe is the US's biggest export market and the US government is also trying to keep its debt under control.

Will Greece turn from euros to gyros?

This article is about speculations saying that Greece will leave the euro and create their own form of currency. Personally, I highly doubt that Greece will leave the euro. They are in need of help right now and leaving the euro zone would leave them all alone. That being said, they could be asked to leave.

Fed's Plosser: better rules needed to manage risk

Philadelphia Federal Reserve Bank President Charles Plosser reaffirmed the sentiments issued by Chairman Bernanke during his Testimony released in February to tighten regulation surrounding financial institutions that neglected discipline because of the "too big to fail" image that they carried.

Plosser specifically targeted non-banking financial institutions and highlighted insurance giant AIG as a type of firm that would need stricter regulation. The Senate Banking Committee has drafted a proposal to have the Federal Reserve oversee all banks and financial firms with assets excess of $50 billion. I think this is a very prudent move on the Fed's behalf as they attempt to regain control over the financial industry following the recent failures.

Sales of Existing Homes Fell Slightly in February

Despite low mortgage rates and tax incentives for buying homes, sales of existing homes fell .6% in February. Officials cite bad weather as one of the contributing factors to the fall of sales. This news supports the view that home prices have not yet stabilized, but officials are hoping that the April 30th deadline for qualifying for the home buyer tax credit will encourage more people to buy in the coming months.

New Plan to Reshape Mortgage Market

New Plan to Reshape Mortgage Market
BY NICK TIMIRAOS AND MICHAEL R. CRITTENDEN

Fannie Mae and Freddie Mac won't be allowed to return to a precrisis structure that rewarded shareholders with big profits for years but ultimately saddled taxpayers with massive losses, Treasury Secretary Timothy Geithner will tell a congressional panel on Tuesday.

The administration will outline broad principles for the future of the mortgage market at the hearing, including stronger consumer protections and explicit guarantees for any government backstop of mortgages.

"The housing-finance system cannot continue to operate as it has in the past," Mr. Geithner says in prepared testimony. The administration won't issue a detailed overhaul proposal until later this year.

Airlines in Europe Face Wave of Strikes

Another article about the strikes going on in Europe over British- Airways. We learned about unions and strikes in my Economic Systems class. Here is another similar article: http://www.nytimes.com/2010/03/22/business/global/22air.html?ref=business. It seems as if this has started a trend with other airlines now.

35 cities face unemployment of 15% or higher

In January, 35 cities in the United States face unemployment rates of over 15%, up 10 cities from the month before. 19 of the cities were in California, and 6 in Michigan.

EC urges loans for Greece

A while back, the Greek government stated that it did not need financial help, just time and support. However the European Commission has urged European governments to grant loans to Greece to help resolve its dept crisis. European nations have yet to decide on a way to best helo Greece, and some governments strictly refuse to help.

Healthcare

According to the Congressional Budget Office, the final version of the Democrats' healthcare plan will cut the federal deficit by $138bn (£92bn) over 10 years. The non-partisan body said the proposed legislation would cost about $940bn (£626bn) over a decade. The reforms will increase insurance coverage through tax credits for the middle class and expansion of the Medicaid programme for the poor. They represent the biggest change in the US healthcare system since the creation in the 1960s of Medicare, the government-run scheme for Americans aged 65 or over.

Washington region's unemployment rate hits 6.9% in January, 20-year record

Last Friday the government released that the unemployment rate in the Washington D.C. area has soared to 6.9%. This is the area’s highest rate in the 20 years of record keeping. The January data showed that long-term unemployment saw signs of economic recovery and reentered the labor force. But many job losses continued to grow in such sectors as construction, retail and financial markets.

Back in style

It is reported that Hilfiger, a clothing company, is purchased by Phillips-Van Heusen(PVH), a company that markets over a dozen fashionable brands. The reason I chose this article is because I think it is a good example about the national trade. The reason of PVH purchase Hilfiger is not only because the sales of Hilfiger were constant increased even during the recession, but also because Hilfiger’s sale range has reached global. According to the report, 50% of Hilfiger’s sales are in Europe and 10% are in Japan. That is, owing Hilfiger equals to have a stronger role of the global market.

Bernanke: Fed should oversee all banks

http://money.cnn.com/2010/03/20/news/economy/bernanke_small_banks/index.htm

As Congress considers limiting the Federal Reserve's regulatory authority to just the country's largest bank holding companies, Fed Chairman Ben Bernanke reiterated on Saturday that the central bank should retain power over banks of all sizes.

Inflation up at 2.1% annual rate

http://money.cnn.com/2010/03/18/news/economy/consumer_prices_February/index.htm

Consumer prices in February rose from a year ago amid higher energy costs, but the pace of price increases slowed for the second straight month. The Consumer Price Index, the government's key inflation measure, rose 2.1% over the past 12 months, driven by a 37% climb in gasoline costs during the period.

Gas prices expected to flatten

The gas prices are expected to level off, according to cnn.com. The last few weeks the gas prices have been increasing, an 18.2 cent increase over the last month. But, the prices are expected to remain relatively constant for the next few weeks due to the large supply of crude oil and gasoline. Also, the demand will remain to be lower than usual due to the economic conditions.

The Lehman report: Beancounters in a Bind

In the 2,200-page report on the Lehman Brothers’ downfall by its court-appointed bankruptcy examiner, it paints a detailed picture of Lehman's ex-boss, Dick Fuid, and the executives around him. Lehman’s former leaders are not the only ones facing the blame. Some of its counterparty banks are also taking heat for changing the terms of their collateral demands.  One specific firm is Ernst & Young for failing to “question and challenge improper or inadequate disclosures."  Lehman is unlikely to be an isolated case because according to the article, “the guards are in bed with the prisoners.”

Hey, Big Spender: You Need a Surtax

This article plays with the idea of families that spend more than $500,000 should be charged with a surtax. With the unemployment rate at still a high 10%, this plan is supposed to help lower that number. A progressive consumption surtax would produce immediate, off-budget economic stimulus by giving wealthy families powerful incentives to accelerate future spending. For example, a family that had been planning to build a new wing onto its mansion, or buy a yacht, would want to make those purchases now rather than be taxed on them later.

When Not to Pay Down a Mortgage

By RON LIEBER March 19, 2010

This article evaluates options when considering extra mortgage payments to pay off debt before the loan period ends. Since the Federal Reserve announced it will not buy any more mortgage-backed securities the mortgage rate is not likely to sink lower and interest rates are only going up from where they are today. The author of this article first looks at the amount of money people get back in the form of tax deduction, which makes the “real” interest rate on a mortgage actually lower than the stated rate. When looking at the interest rate on a mortgage after adjusting for tax deduction it can be more profitable to look at placing the extra income in interest bearing accounts that are higher than the interest rate of a mortgage rather than lowering the balance of a mortgage. According to this article many people sometimes don’t think about this and choose to make extra payments because the idea of retiring with zero debt is more appealing. People who are approaching retirement are the ones who look fondly on the idea of having zero debt and thus begin paying higher mortgage payments because they believe later on they will sleep better at night.