According to the analysis of this article, the recent tax rising would probably not be able to increase as much savings as it predicted. First, it points out that tax is only one factor that influence stock values, whose impact on the market is limited.
Moreover, it is analyzed that the tax hikes will actually have a negative influence on the savings, because many investors may regard the threat of higher taxes as a catalyst to bail. And, to investors with a longer-term focus, the higher tax does not have a lot of sense to them. Also, the higher taxes are not likely to have a profound influence on market participants’ broad investing habits.
Saturday, April 3, 2010
Friday, April 2, 2010
March jobs report shows growth
This article is about the growth of jobs in the month of march. It was reported by the department of Labor that there was a gain of 162,000 jobs in the U.S. economy, which was just short of what they project at 184,000. Analysts said that one of the reasons for such an increase is because the Census Bureau has hired 48,000 people, which in the short run inflates the picture of the current job market. Since the start of the recession 8.2 million jobs have been lost and the current unemployment rate is at 9.7%. Despite these facts this is still relatively good news, this is the third increase in five months and people believe this might be the time when the job market is stabilizing.
Thursday, April 1, 2010
Will the Treasury call China a currency manipulator?
Will the Treasury call China a currency manipulator?
TO MOST people, to say that China holds down the value of its currency to boost its exports is to state the obvious. Not, though, to America’s Treasury Department. By law it must report twice a year on which countries fiddle their exchange rates at the world’s expense. China was last fingered in 1994. Ever since then, the Treasury has concluded that the designation would do more harm than good. Speculation is growing that it may decide differently in its next report, due on April 15th.
The mood in America resembles that in 2005, when the Senate voted to hit China with tariffs of 27.5% and the Treasury ratcheted up its rhetoric. China abruptly moved to a managed float for the yuan. It was allowed to appreciate by 20% over the next three years before a halt was called during the banking panic of 2008.
China seems more determined to resist pressure this time, though, and can rightly point out that its fiscal stimulus has halved its current-account surplus since 2007. America’s trade deficit with China has edged a bit lower (see chart), though further declines seem unlikely, now that its own recovery is under way.
Nonetheless, the weight of opinion in America is running heavily against China. Unemployment has doubled since 2005 and Barack Obama wants exports to lead the recovery. That will be harder if China sticks to its export-centric yuan policy.
Businesses have also become less reliable defenders of China, rankled by measures such as an edict last autumn which, according to American technology companies, virtually shuts them out of Chinese government procurement. The hacking attacks on Google and the trial of Rio Tinto executives have hardly helped. “A whole slew of multinationals I’ve talked to are increasingly fed up with how they are being dealt with on micro, industry, product-specific stuff,” says Fred Bergsten, director of the Peterson Institute for International Economics, a think-tank.
Charles Schumer, a Democratic senator, and Lindsey Graham, a Republican, authors of the 2005 China tariff bill that probably pushed China to move, have introduced a variant that would force the Treasury to make the designation and then seek redress through the International Monetary Fund, the World Trade Organisation, and unilateral duties. One manufacturing-union group has produced maps showing just how many jobs each congressional district and state has lost to China.
A popular view in Washington is that the Treasury could call China a manipulator to wrest control of the issue from hotheads in Congress. The practical consequences are small: it requires the United States only to consult with the offending country, something the two already do frequently. It would also fulfil Mr Obama’s promise to use America’s trade enforcement tools more vigorously. But Nicholas Lardy, also of the Peterson Institute, thinks that—far from restraining others—a Treasury designation of China as a manipulator would be “like throwing red meat to the Congress and enhancing the possibility they pass a currency bill.”
The administration’s best hope is that China moves of its own accord before events in Congress or elsewhere force a confrontation. Tim Geithner, the treasury secretary, is surprisingly confident that China will act. Sander Levin, the usually interventionist-minded chairman of the House Ways and Means Committee which oversees trade matters, advocates multilateral rather than unilateral pressure. So perhaps the administration will give China one last chance and seek a multilateral remedy at the G20 in June. If China still fails to respond, the Treasury, by the time of its autumn report, will no longer be able to deny the obvious.
TO MOST people, to say that China holds down the value of its currency to boost its exports is to state the obvious. Not, though, to America’s Treasury Department. By law it must report twice a year on which countries fiddle their exchange rates at the world’s expense. China was last fingered in 1994. Ever since then, the Treasury has concluded that the designation would do more harm than good. Speculation is growing that it may decide differently in its next report, due on April 15th.
The mood in America resembles that in 2005, when the Senate voted to hit China with tariffs of 27.5% and the Treasury ratcheted up its rhetoric. China abruptly moved to a managed float for the yuan. It was allowed to appreciate by 20% over the next three years before a halt was called during the banking panic of 2008.
China seems more determined to resist pressure this time, though, and can rightly point out that its fiscal stimulus has halved its current-account surplus since 2007. America’s trade deficit with China has edged a bit lower (see chart), though further declines seem unlikely, now that its own recovery is under way.
Nonetheless, the weight of opinion in America is running heavily against China. Unemployment has doubled since 2005 and Barack Obama wants exports to lead the recovery. That will be harder if China sticks to its export-centric yuan policy.
Businesses have also become less reliable defenders of China, rankled by measures such as an edict last autumn which, according to American technology companies, virtually shuts them out of Chinese government procurement. The hacking attacks on Google and the trial of Rio Tinto executives have hardly helped. “A whole slew of multinationals I’ve talked to are increasingly fed up with how they are being dealt with on micro, industry, product-specific stuff,” says Fred Bergsten, director of the Peterson Institute for International Economics, a think-tank.
Charles Schumer, a Democratic senator, and Lindsey Graham, a Republican, authors of the 2005 China tariff bill that probably pushed China to move, have introduced a variant that would force the Treasury to make the designation and then seek redress through the International Monetary Fund, the World Trade Organisation, and unilateral duties. One manufacturing-union group has produced maps showing just how many jobs each congressional district and state has lost to China.
A popular view in Washington is that the Treasury could call China a manipulator to wrest control of the issue from hotheads in Congress. The practical consequences are small: it requires the United States only to consult with the offending country, something the two already do frequently. It would also fulfil Mr Obama’s promise to use America’s trade enforcement tools more vigorously. But Nicholas Lardy, also of the Peterson Institute, thinks that—far from restraining others—a Treasury designation of China as a manipulator would be “like throwing red meat to the Congress and enhancing the possibility they pass a currency bill.”
The administration’s best hope is that China moves of its own accord before events in Congress or elsewhere force a confrontation. Tim Geithner, the treasury secretary, is surprisingly confident that China will act. Sander Levin, the usually interventionist-minded chairman of the House Ways and Means Committee which oversees trade matters, advocates multilateral rather than unilateral pressure. So perhaps the administration will give China one last chance and seek a multilateral remedy at the G20 in June. If China still fails to respond, the Treasury, by the time of its autumn report, will no longer be able to deny the obvious.
Automakers Report Rise in Sales, Helped by Incentives
This article is discussing the rise in sales for automakers that was reported for the month of March. Toyota offered large discounts in an effort to overcome the damage to its reputation, which increased sales all around for the entire industry. Nearly all automakers reported increases for March, and several analysts projected that total sales for the industry increased by about 30 percent from a year ago. Analysts expected the industry’s retail selling rate (excluding bulk sales) to be at the highest level since 2008, aside from the months in 2009 when the government’s cash-for-clunkers program suddenly increased demand.
Wednesday, March 31, 2010
Haiti Aid
Governments have pledged over 5.3 billion dollars to the immediate reconstruction of Haiti, out pledging the UN's request for 4 billion dollars in a strong sign of support for Haiti. The aid is intended to help the Haitian government rebuild infrastructure and jobs around the country while simultaneously providing immediate relief to those in need. There is a strong emphasis in the article of the need to work with instead of around Haiti's government.
The coming inflation wave
This is an interesting article about the "coming inflation" debate. Some believe we are not seeing inflation, while others say its here and going to be a huge problem. The article points out many indicators that would cause us to believe inflation is here. I think most people agree with this, but what I found interesting was the part in the article saying the US government has changed the way it calculates CPI 9 times since 1996, presumably to reduce the expenditures on entitlement programs.
U.S. Futures, European Shares Drop, Treasuries Rise on Jobs
The article gives information on the drop in equity markets due to the 23,000 job cuts this month. ASP Employer Services provided information on an expected increase of 40,000 positions. The S&P shed .04 percent along with other equity indices while treasuries advanced.
Tuesday, March 30, 2010
Personal spending rises in February
This article is about how consumer spending is still rising slowly, even though it is quickly outpacing the growth in income. This means that savings is decreasing. From the solow model we would assume that the US economy is above the steady-state.
Monday, March 29, 2010
Greece Raises $6.7 Billion in Bond Sale
Continuation of the situation overseas. Just days after European Union leaders agreed to stand behind Greece as it struggled to restore its public finances, the authorities in Athens put their new guarantee to the test Monday, selling 5 billion euros of seven-year bonds to refinance debt.
Tricky Dick and the dollar
This is an interesting article about how the United States wants to put pressure on China to increase the value of their currency. Obviously, this has been a hot topic for awhile now and through our discussions in class, we can see how this would affect the world economy.
U.S. Corporate Profits Kept Climbing at End of 2009
The government said profits grew for corporate earnings in the fourth quarter as the economy bounded from a deep recession.
The Commerce Department stated on Friday that the pretax profits rose 8% to a seasonally adjusted $1.5 trillion annual rate in the fourth quarter from the third quarter.
GDP grew at a 5.6% inflation-adjusted annual rate. The change in inflation was due to the construction spending decrease. Economists are expecting more modest growth for the first quarter, with most estimates around 2.8%.
While conditions continue to improve for companies, consumers are still not yet confident in the recovery. An index of consumer sentiment remained flat at 73.6 in March from the prior month.
Steven WOod, an Insight Economics LLC analyst reflected these thoughts about the consumer confidence level, ""It is unlikely that sentiment will improve to truly optimistic levels until robust job creation returns and home prices stabilize."
Thailand Improves
Thailand is slowly recovering from the global downturn after experiencing its first recession in 11 years. Thailand's export market was hit hard as the demand for its goods in major markets (like the U.S., Europe and Japan) decreased. Thailand's GDP increased 3.6% in the fourth quarter from the third, which is on pace for the fastest on-quarter in 10 years.
CLSA expects Thailand's GDP to exceed 6% this year as consumption demand has recovered and private investment is increasing. Exports have also rebounded strongly, while government spending is helping push growth.
Another Advantage for the Biggest Banks
This article is comparing the interest rates paid on deposits for different size banks as measured by amount in assets. Customer deposits are regarded as the cheapest and most stable source of funds for banks especially since the FDIC insures accounts up to 250,000. Average interest paid on deposits was 0.77 percent for banks holding $100 billion or more in assets; this is substantially less than the 1.73 percent, which is the average amount that banks holding less than 10 billion in assets must pay.
The 10 largest banks hold about $3.2 trillion of America’s $7.7 trillion of domestic deposits. Apply the differential in deposit interest rates, and those 10 appear be saving nearly $30 billion a year thanks to their size.
President Obama proposed that big banks pay a “crisis responsibility fee” that would cost them $9 billion a year for 10 years. According to this article he may have undershot the value of being too big to fail.
The 10 largest banks hold about $3.2 trillion of America’s $7.7 trillion of domestic deposits. Apply the differential in deposit interest rates, and those 10 appear be saving nearly $30 billion a year thanks to their size.
President Obama proposed that big banks pay a “crisis responsibility fee” that would cost them $9 billion a year for 10 years. According to this article he may have undershot the value of being too big to fail.
Obama to order fresh help for struggling homeowners
President Barack Obama's administration has set out to provide further assistance to the struggling homeowners currently being affected by unemployment and slumping house prices. As the economy continues to try and rebound from the recent recession, the recovery continues to be dragged down by weak housing and labor markets. Obama will order mortgage firms to help hard-hit homeowners to restructure their mortgage payments. This is particularly interesting considering some of the failures of the economy were attributed to the sub-prime mortgage crisis and it will be interesting to see how the President and his administration will handle this.
Slow Economic Growth Ahead
This article talks about how some economists believe that the economy will grow by 3 percent in the first quarter of 2010 and no higher than 3.3 percent through 2011.
Also the GDP remained at around 5.6 percent which is the best since 2003. This was the second straight quarter of growth which reflects the belief that the recession started in December in 2007 and ended in the middle of last year.
For the full year GDP fell 2.4 percent which is the biggest decline since 1946.
Sunday, March 28, 2010
State jobless situation little changed
A total of 27 states reported rising unemployment rates in February, while rates decreased in seven states and the District of Columbia, according to a government report released Friday.
The White House announced new steps on Friday to help the unemployed and those who are "underwater" with a bigger mortgage than their home is worth. For some unemployed borrowers, the effort would require servicers to reduce or suspend monthly mortgage payments for up to six months.
Income Changes
The fact that personal income fell across much of the country in 2009 comes as no surprise. With lower incomes, people obviously cannot consume at the levels they once were. Lower consumption and consumer confidence have contributed to the poor retail sales experienced by many businesses. The article does mention that in the fourth quarter, as government aid kicked in and the economy attempted to recover, personal income increased in every state. It will be interesting to see what 2010 brings.
Germany Should Aid Greece With ‘Win-Win’ Wage Boost, Posen Says
this article talks about how Germany is expected to aid Greece but there are also being blamed for some of the problems that the euro area is experiencing. Since Germany is operating with a huge trade surplus and all the other countries have such large trade imbalances that are causing problems for the area. one reason they give for Germany's surplus is the fact that they have very low labor costs.
Is health law already hurting business? Maybe, maybe not.
This article is talking about how the republicans feel about the new healthcare system that Obama has just signed. It reports that the new bill will cause businesses to spend more money and let go of their benefits for their retirees. Many companies such as Verizon has had to send letters to retired and current workers saying that the new health-care will most likely affect this benefits since they will have to be spending more on taxes. This new law will also affect the efforts to a recovering economy. With the businesses spending more on taxes, they will likely have to let go of more workers which will hurt the rate of unemployment. All in all, the conservatives are not happy about the movement towards a new health-care system.
The EU and Greece--How to help
This article talks about how EU leaders come up with a plan to help Greece and to rescue Greece from a sovereign credit crunch.After joining the European single currency in 2001, the Greek government and people embarked on a borrowing and spending spree fuelled by the euro zone’s low interest rates, and cooked the books for years until the ghastly day last year when the incoming Socialist government announced that the country’s budget deficit was some 13%: twice as large as previously admitted.The mechanism agreed late on March 25th by the 16 countries that share the euro was harsh. At the insistence of Mrs Merkel, Greece will be able to tap into emergency help only if available market financing has been deemed “insufficient” by experts from the European Commission and European Central Bank. In a sign that something terribly serious had been agreed, the declaration used a Latin term, ultima ratio, to describe the last-ditch nature of the mechanism.IMF involvement is seen as a guarantee that financing would be subjected to tough conditions, but France strongly opposed the involving of IMF.The IMF is now part of the rescue mechanism, but a majority of the money in a rescue package would come from bilateral loans from the 15 other members of the euro zone. These would be offered at above average euro-area interest rates, to “set incentives” for recipients to “return to market financing as soon as possible”.
Washington to Run Student Loans
Congress recently passed a bill to boost need-based scholarships and cheap student loans. Starting on July 1, almost all federal backed student loans will come directly from the federal government. This prevents private lenders like Sallie Mae from making federally backed loans. This will save the federal budget $61 billion over 10 years. From that amount, about $36 billion will be put towards Pell grants to low-income students, and it is these low-income students that will benefit the most from this bill.
Housing Market's Recovery Appears at Risk
This article is about the sudden drop in the housing market in February after it had appeared to be recovering. Part of the reason for this is that the federal aid is beginning to slow down and will soon be gone. The Federal Reserve has been implementing a program to keep mortgage rates down, but that is supposed to end very soon. On a more positive note, Bank of America is the first lender to announce a plan to help some of their borrowers avoid forclosure.
One of the major concerns here is what this downturn will do to the construction business. If they cannot get new home contracts, then they will have to cut jobs, which will increase unemployment even more. It is very interesting how many different industries the housing market affects. Hopefully there will be better news in the future.
One of the major concerns here is what this downturn will do to the construction business. If they cannot get new home contracts, then they will have to cut jobs, which will increase unemployment even more. It is very interesting how many different industries the housing market affects. Hopefully there will be better news in the future.
Google In China
This article discusses the decision made by Google to effectively withdraw from operations in China. Although it is a primarily political/sociological analysis of the issue, it does get briefly into the economics of the situation and it is a thorough analysis that I found very enlightening. This move by google obviously has huge implications for their future operations, and it also highlights the sometimes thin line between political and economic policy in China.
Why a $14/hour employee costs $20
This article talks about how a worker making about $14 an hour actually has a cost of about $19.63 an hour. This higher rate includes fixed expenses as well as soft costs like the costs of hiring a new worker. With that being said, it's hard to convince business owners to hire no matter what incentives the government offers to try to reduce the unemployment rate. Payroll for workers is extremely expensive. A new hire actually decreases sales in the short run as they learn the job.
A Bold U.S. Plan to Help Struggling Homeowners
This article discusses the recent plan announced by the financial policy makers at the White House to help people who are still struggling with the mortgage on their house. This plan focuses not only on the seven million people who are behind on their mortgage, but it also helps people who owe more than their house is worth. This plan is designed to help people make payments that they can afford, and it consciously aims to keep people out of debt. The problem with some of the previous plans is after a few months homeowners have ended up right back where they started. These plans also try to keep people in their houses instead of assisting them with selling their house and starting over. The plan is expected to cost 50 billion, but officials stressed that this money will come from funds already set aside for housing relief. None of this money is expected to come from additional tax payers dollars. I think this plan is more promising than some of the other previously proposed because it is more realistic in what it is trying to offer. It isn't thought as an instant fix to our problem, but it slowly and more efficiently assists troubled homeowners.
Not so fast: Slower economic growth ahead
The article discusses about the GDP growth of the US economy. Many economists forcasted that the GDP growth will slow down in the next few years. And according to the report released on friday by the commerce department provide the evidence of the slow growth. The GDP grew at 5.6% in the last quarter slower than the previous quarter in which it grew at 5.9%. So the assumption of slow economic growth is proving to be right. At this moment time is probably the best healer and we should wait until the time when the economy starts growing again.
Personal Income Drops Across the Country
This article talks about how 42 states have reported personal income drops of between 5 and one percent. Some states increased government benefits to off set the loss that there would be otherwise. However there is a light side to this news, personal income was in fact higher in the forth quarter for people in all 50 states then in the previous quarter.
Fed's emergency loans decline further
This article discusses the Fed's recent activity, including their interest rates and several housing programs. At the peak of the financial crisis emergency borrowing from the Fed averaged around $100 billion. Recently that number has dropped to around $11.5 billion and just this past weak it dropped almost 10% more to less than $11 billion, emphasizing how far we've come and that we are still making progress. Along these same lines, the Fed made a decision last week to keep the discount rate between 0 and .25%. The Fed has also decided to put an end to many programs formed during the height of the financial crisis, citing their balance sheet report for justification. Many of the programs have slowed to the point of not being worthwhile. Among the programs being shut down is purchase program for mortgage-backed securities. The Fed's plan to purchase more than $1 trillion of these securities has almost been realized. Many people speculate that the program needs to continue, and many think it has done its job. Just in case, though, the Fed has said that if the housing industry needs more help the program can be reopened.
Chinese Company to Buy Volvo
Ford Motor reached an agreement on Sunday to sell its Volvo subsidiary to a Chinese conglomerate, in the clearest confirmation yet of China’s global ambitions in the auto industry.
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