33 states out of money to fund jobless benefits

This article deals with the welfare of the unemployed people during this recession. Jobless benefits funds have been drained in majority of states. These states have to borrow billions from the federal government to help out-of-work Americans.

A total of 33 states and the Virgin Islands have depleted their funds and borrowed more than $38.7 billion to provide a safety net, according to a report released Thursday by the National Employment Law Project. Four others are at the brink of insolvency.

Debt-challenged California has borrowed the most, totaling more than $8.4 billion, followed by Michigan and New York, which have loans worth more than $3 billion. Nine other states have borrowed at least $1 billion from the federal government.

"The nation's financing system for jobless benefits is under unprecedented stress," said Andrew Stettner, deputy director of the New York-based advocacy group for the unemployed. "While the recession has certainly made things worse, this funding crisis has been developing for years."

At the onset of the recession, only 19 states met the recommended funding level, which is one year of reserves equal to the highest amount of unemployment insurance paid out during prior recessions.

Financing experts suggest that states build up their jobless benefit coffers during strong economic times so that they can draw from them during downturns.

To fix deficit, Congress needs the will to cut

commission is supposed to examine policies to meaningfully improve the long-term fiscal outlook. It is analyzed that if the commission will make credible recommendations for these goals, it will have to establish deficit reduction as the primary goal; namely initiate substantial spending cuts or tax increases.

In the rest of this article, the author analyses this issue from both sides; he points that if the political polices are just for solving a short-run economic problems brought by the health care reform, these polices will never reach the goal. However, these policies would be insisted and carried out in a moderate level, it would bring benefits in the future. And he points out a feasible way to carry these policies is to have the commission and the public recognize that deficit reduction has itself become a “moral imperative.”

China and the yuan: What's at stake

This article is about the tension going on between US and China about the valuation of Chinese Yuan. U.S. Treasury Secretary Timothy Geithner's surprise visit to China this week hinted people of an agreement that China and US about the valuation of yuan. If there is an agreement, experts believe the exchange rate of Yuan will go up 2-3% immediately and 7% every year. This puts Chinese markets for goods in jeopardy becuase this will make their goods more expensive to global buyers and expose to worldwide competition. In many goods sector China had the monopoly becuase they had the least manufacturing cost with very hi-tech backward linkage. Now what we have to look for is how China manages to compete with other global players when it's currency appreciates and it doesn't get the advantage it used to have. This is I think quite similar to what happened when US lifted the quota system from the garments imported to the United States. Many other countries profited from that. Though it's a different issue but the truth is China if it is to keep up it's export and compete with other countries it has to keep it's currency exchange rate low.

China Sees First Trade Deficit in Years

China Sees First Trade Deficit in Years
By KEITH BRADSHER

HONG KONG — China announced on Saturday that it had a trade deficit of $7.24 billion last month, its first monthly trade deficit in nearly six years, as imports jumped along with a surging domestic economy while exports grew more modestly.

Chinese New Year came late this year, falling on Feb. 14, which hurt factory production on the coast in early March. Many migrant workers travel home for two weeks for the celebration, and they were slow to return to their coastal plants in large numbers because there are now many jobs available in construction, retailing and other industries in the country’s interior.

According to the official Xinhua news agency, China’s General Administration of Customs said the March reading was the first trade deficit since April 2004. China had a trade surplus of $7.6 billion in February and $14.2 billion in January.

Top commerce ministry officials in Beijing had warned repeatedly over the last three weeks that China would run a trade deficit in March. They cited the risk of a monthly deficit as part of their broader campaign to prevent the government from letting the country’s currency, known as the renminbi or yuan, rise against the dollar and other foreign currencies.

After letting the renminbi appreciate gradually against the dollar from 2005 to 2008, the government has kept the renminbi at about 6.83 to the dollar since July 2008, spending hundreds of billions of dollars on currency market intervention to prevent it from appreciating. The weakness of the renminbi has helped China capture a rising share of export markets in the United States, the European Union and elsewhere during the global downturn.

But the commerce ministry has lost its battle to preserve the renminbi’s informal peg to the dollar and the Chinese government will soon adopt a new currency policy, including a small rise in the renminbi against the dollar and wider day-to-day variation in the currency’s value, people familiar with the emerging consensus in Beijing said on Thursday and Friday.

These people, who insisted on anonymity because of the diplomatic and financial sensitivity of the issue, said that China would shift its currency policy in the coming days. But investment bank economists were generally skeptical on Friday, saying that any change would take weeks, not days.

The March deficit was much larger than the consensus estimate of Western economists, who had been anticipating a deficit of less than $1 billion. Chinese officials have long been wary of trade deficits, after monthly deficits in 1993 and early 1994 depleted the country’s foreign exchange reserves.

But after accumulating $2.4 trillion in foreign exchange reserves, trade deficits have become less of a monetary policy issue. Commerce ministry officials have warned, however, that if trade deficits reflect weak overseas demand and exports stumble, then layoffs at export factories could eventually increase unemployment and hurt social stability.

The Well-Off Are Spending Again — but Carefully

This is good news to hear, that the wealthy are starting to spend their money again. This could be the beginning of a recovery? Some experts contend that much of the high-end spending before the recession was fueled by money borrowed by people who were trying to live beyond their means. Today there is a trend to reducing risk by cutting debt. But even people who came out of the financial crisis relatively unscathed are pulling back. The possibility of losing their wealth has become more real.

Kohn Says Economy Operating "Well Below" Potential

This article is about the observations and predictions of the Federal Reserve Vice Chair, Donald Kohn. First of all, he says that interest rates are likely to stay low for an longer period of time; however, rates will have to be raised eventually. The key is when and how fast rates should rise, because there is a great fear of large inflation. Kohn believes that the economy is not being as productive as it could, given the unemployment rate, low prices, decreasing wages, and unused capacity. The way to achieve this higher productivity is through government/fiscal policy, and their ability to lower the debt volume.
I think that since expected inflation leads to higher interest rates, the case may be that interest rates will rise anyways. Also, I agree that the overall confidence of consumers and business is hampering the productivity. The government may have to keep trying to provide incentives to invest and produce more.

No loans! Major colleges pledge aid without debt

Given the increasing costs of education these days I found this article to be a bit refreshing. When you think of Ivy Leagues, you think highly selective, expensive institutions. However, they actually cost less than what most people think. These prestigious schools have huge endowments that they are able to give out hundreds of millions or billions of dollars of aid each year. The best part is that many of these schools limit or remove loans completely from their financial aid packages. Harvard, for example, costs over $50,000 a year, yet the average financial aid package is around $40,000.

China and the yuan: What's at stake

This article discusses the plan to boost the value of the yuan in order to make U.S. goods more competitive versus Chinese exports. This could bring a 2-3% rise in the yuan. The yuan may be undervalued anywhere from 15-40% and a more significant rise may be needed to help the undervaluation. A slow adjustment is necessary, otherwise comes the risk of inflating an asset bubble in China. A boom and a bust could lead to another global recession. Of course, there are risks of having a stronger yuan. A higher yuan means Chinese products will be more expensive for U.S. consumers. It could also mean higher interest rates and higher borrowing rates for U.S. homeowners and businesses.

Wholesale Inventories, Sales in U.S. Rose in February

We have recently learned about some leading economic indicators, which are variables that tend to fluctuate prior to the overall economy. While several economists are still quite pessimistic about this year economic prospect, it is interesting to see that these indicators, as being pointed out in the article, all indicate that our economy is experiencing strong recovery.

Inventories at U.S. wholesalers rose in February, a sign companies are ramping up orders as sales climbed to the highest level in more than a year. Sales increased by 0.8 percent, the eleventh consecutive rise. Many recent reports suggest that the replenishment of depleted stockpiles will lift production in the coming months. Moreover, stock prices rose on the mounting sign of economic expansion that began in mid-2009 will be sustained.

Oil prices plummet after jobless claims

This article states that the price of crude oil has been decreasing since unemployment claims in Europe are unstable, thus showing little improvement in the economy. On the other hand, oil companies have had increased inventories than what they need, therefore, this is another reason for lowered prices. While the US dollar has been getting stronger and the oil is backed by our green, therefore, oil is getting expensive for foreigners. All this leads to a lower price for oil.
Overall message from this article, the economy is still not recovering to go back to "normal" prices.

More than 200,000 jobless counting on an extension

In my last post we have seen how the law makers were not able to extend the date for unemployment insurance. The deadline has passed by and now more than 200000 Americans are awaiting for the extension of the deadline by the lawmakers. More than a million people could lose the benefit if the senate doesn't act swiftly. On such circumstance, senators are looking forward to monday to get the first vote to get the date extended until may. The final vote may come later next weeks. Just to keep updated, though the economy is recovering the unemployment is still stuck at 9.7% and the average unemployment duration is 31.2 weeks. Hope this article helps to follow up the preceding article.

10 Tax Tips for the Unemployed

There are still about 15 million people out of work. "Worries and misconceptions about taxes among the unemployed may be one reason the IRS statistics show returns are coming in slower this year." Some people without jobs may think that they don't have to file, but on the contrary if these people are receiving any type of income they must report it. That being said... "The silver lining is that a drop in income can make it possible to claim credits and deductions that were unavailable before, and could lead to a bigger refund than you expect."

72 and still working. How to retire?

This article is about Doris Partridge, a 72 year old woman who is still working. I chose this article because it is interesting to hear different peoples stories in this time of crisis. Partridge thought she would have been retired by now, but with the troubled economy, she doesn't think it would be wise to leave.

New college grads to make less $$$

This article talks about the fact that current college graduates are going to get paid less money compared to last year. The difference is that college grads this year are having more job opportunities but getting paid a lot less. The average salary for students who have Bachelors degrees are down 1.7% which equates to $47,673 compared to $48,515 in 2009. For students who have liberal arts degrees, there average salary declined the most with 8.9% which is around $33,540. When it comes to specific areas business management went down 8% to $42,094 and jobs in the marketing field are down 2.1% which is $42,710. On the more positive side technical degrees are in high demand with computer related degrees increasing to 5.8% to $58,745, as well as electrical engineering increasing 3% to $59,326. One surprise is both salary's for finance majors and accounting students are slowing increasing at 1.6% and 0.4%.

Big Banks Move to Mask Risk Levels

About 18 banks have found a way to better their image to customers by publicly releasing their debt data each quarter, which looks significantly lower compared to their boosted levels of debt in the successive quarters. Since banks excessive borrowing was one of the main causes of the financial crisis, banks have become very sensitive to their levels of debt because they are worried about their stock and credit ratings. Consumers are unaware of all the actions going on in the bank, and does this actually build up their ratings? Are banks risk levels still to high, not adapting to the financial crisis?

Unemployment and Inflation Rise in Europe

This article discusses the rise in some of the vital components of Europe's economy in the month of February. Countries included in this article are the 14 that currently use the Euro as their form of currency. These countries saw unemployment rise to 10 percent in February, which is high even for U.S. standards. Also these countries saw an increase in inflation which economists believed had to due with an increase in food and oil prices. This makes sense in the cold months of February because demand for oil increases, and the cost of transporting fresh fruits and other foods increases.
As far as the unemployment rate goes the highest rate of a European country was in Spain where unemployment was 19 percent. The lowest country was the Netherlands which was at four percent.

Bernanke says Nation Must Take Action Soon to Shape Fiscal Future

Chairman Bernanke expressed his concerns this week about the aging populace and what it will mean for the economy. He comments on the fiscal side of economics and warns that something will have to be done in order to sustain the older generation. Bernanke spoke about the dangers of Social Security and Medicare to the national deficit over the years.I think that our generation will not be able to rely on Social Security or Medicare for our life after retirement.
Another major concern of Bernanke's was the amount of time the unemployed have been without jobs. He worries that the longer people are out of work, the more their skills deteriorate, and the less likely they will get hired at a later date.
The last major part of this article was about not allowing companies become too big to fail, and using the Federal Reserve to prevent asset bubbles such as the housing market. The problem with this is that asset bubbles are hard to predict and so I believe that the Federal Reserve is limited in how much they can help protect the economy from a collapsing asset bubble.

Geithner Leaves Beijing After Talks With Vice Premier

This article provides views of U.S. Treasury Secretary Timothy Geithner on the valuation of the Chinese yuan. The exchange of options between Geithner and vice premier Wang Qishan were related to the May meeting which will discuss the valuation of the Chinese yuan. If the Chinese currency is allowed to be valued by market demands, it most likely will have global repercussion.

China's currency--Bending, not bowing

This article is about the Chinese currency policy issue.

On April 3rd Tim Geithner, America’s treasury secretary, tactfully postponed a report due this month that might have condemned China for manipulating its currency, keeping it weak to favour its exporters. Mr Geithner, who made an unscheduled trip to Beijing this week, said he would rather press America’s case at its regular “Strategic and Economic Dialogue” with China in May and at the G20 summit in Canada in June. The delay puts America’s diplomatic account with China briefly in surplus.America’s Treasury is willing to bide its time. But its patience is not shared by members of Congress. Last month 130 of them wrote to Mr Geithner urging tougher action against China. After the currency report was postponed, Chuck Schumer, a New York senator, said he would push his bill to slap anti-dumping duties on some Chinese goods and countervailing tariffs on all of them if China does not allow its currency to strengthen.

For me, I think it is unwise for the congress to push China too hard on its currency issue. Because of the expectation of a stronger Chinese Yuan, the incentives for capital inflows to Chinese market have been very strong. Chinese government insists to keep the exchange rate stable for the sake of its own interest. Therefore, a radical request to appreciate the Yuan will not receive much positive response from Chiese government. Maybe a gradual appreciation of Chinese currency will be the best solution to this problem.