Tax Cuts May Prove Better for Politicians Than for Economy

Debate over extending the Bush tax cuts continues on Capitol Hill. Republicans and a few democrats argue that we must extend the tax cuts to prevent harming small businesses and choking out the economy. Those arguing for the tax cuts believe this action will please the American Public and increase investment. When reviewing the Regain Deficit, we learned that increased government spending while decreasing taxes actually reduces saving, increases the interest rate, increases consumption and decreases investment. Essentially this is a supply-side remedy for a problem caused by lack of demand. President Obama instead hopes that his recent investment incentive plans will encourage businesses to invest thereby increasing demand. Republicans argue that Investment incentives coupled with a tax increase is not going to get the economy moving. We learned that when there’s an increase in taxes and government spending, we must see an equal decrease in another category of demand. When taxes are increased, disposable income is lowered, which also lowers consumption by MPC (y-deltaT). In turn, national savings increases by the amount consumption falls. As for increased government spending, we’ll see a continued decrease in investments which will force interest rates to rise. Maybe the solution is increasing taxes and decreasing government spending?

Obama Names Goolsbee to Lead White House Economy Panel

President Obama has appointed Austan Goolsbee to lead the Council of Economic Advisers. This is after Christina Romer left her position to return to teaching at the University of California at Berkeley. Goolsbee will lead President Obama’s economic team looking for ways to spur economic growth, especially in the area of employment. Despite some past clashing, many of Goolsbee’s colleagues feel he is the right person for the position. Leading the CEA is often the stepping-stone to other economic positions, including those on the Federal Reserve. Be prepared to see Goolsbee’s name regularly in economic headlines.

6-Figure Jobs...No Degree Required

In our generation of students, many of us are here at OWU to get our degrees, moving on to the real world, getting our big paychecks, and living our happy, wealthy lives. But, in this "real world" there are several jobs out there that require a high range of expertise, but also a very low interest from our generation. Not to mention, this "expertise" required for these jobs are more street-smart than book smart...more-so than any college campus can offer. Air-Traffic controllers, Fire Chiefs, Elevator Technicians, and Court Reporters are all analyzed in this article and all these professions have a median salary above $50,000, some well above that benchmark. How do people today make such a large amount of money without a college degree? It seems outrageous but in reality it makes perfect sense. Fire Chief, for example, is not a simple job. It requires a lot of hours in both an office and on the scene of events and emergencies that firefighters are needed. You may be saved the four years and expenses of college, but with these jobs, you'll certainly make the time up in the hours of labor you put in.

New Cheaper Brand Cuts Down Competitors in the Electric Car market

In this article the writer is discussing the newest trend of the electric car. Apparently, these cars are becoming highly sought after. The one turn off that has prevented the sale of these efficient automobiles is the price. These little golf cart-like 2 seated cars are expensive due to the technology used to make them. Take General Motors for example, due to their desire for these electric mini cars to run like modern day four doors, they have used technology that has yet to be perfected and it has driven the cost of these small cars to shoot up. General Motors latest version of the electric car is the Volt. The Volt, at standard price, is $41,000. In South Korea however, Auto firm CT&T, who has mainly been known for their production of electric golf carts, has developed a new electric car that specializes in low-speed, short-distance driving. They are aiming their product towards students who make short drives to class, housewives, and the elderly. They are planning on their release in Europe anytime soon and into the islands of Hawaii within the next two years. They hope to succeed were other firms like General Motors failed by pricing their electric car, the eZone, between $8,000 and $16,000. By pricing their product much lower than the competition CT&T looks to benefit from the cars efficiency and very low price compared to the competitors.

Obama tax breaks: Limited help for small biz

President Obama recently announced a $200 billion tax break for businesses that invest in plants and equipment. The tax cut will allow businesses to write-off up to $500,000 dollars in investments; doubling the $250,000 allowed by the 2008 stimulus package. Critics argue that the new plan may not help small businesses the way President Obama hopes. According to Todd McCracken, CEO of the National Association of Small Businesses, extending the Bush administration’s tax cuts could prove more useful to small businesses. Other observers say that small businesses need more credit before they can expend. Joe Sena, president of SphereWerx, would like to expand his labor force but tight credit is stifling his company’s growth.

U.S. Trade Deficit Narrowed in July as Exports Rose

The trade deficit narrowed by 14 percent in July as exports by American companies rose by about $2.8 billion, according to government figures released on Thursday. The figures suggested that trade would have less of a drag on growth in the months ahead than it did in the second quarter.

The Department of Commerce statistics showed that exports totaled $153.3 billion in July, up from $150.6 billion in June. A $2.3 billion increase in capital goods, most of it civilian aircraft, accounted for the bulk of the export increase. Industrial supplies and materials, and food and beverages also rose.

The trade deficit narrowed to $42.8 billion, down from a revised $49.8 billion in June, the department said. Imports totaled $196.1 billion in July, $4.2 billion less than June. Most of the decline, $1.9 billion, came from fewer consumer goods being brought into the country.

Economists said that the smaller trade deficit in July suggested there would be less of an impact on the third-quarter gross domestic product than the deficit had in the second quarter. G.D.P. was revised downward to 1.6 percent from 2.4 percent for the second quarter, partly because of the expanded June trade deficit, which had a 3.4 percentage point drag on growth that quarter.

The outlook depended on whether consumer demand picked up in the months ahead, an uncertainty because of the weak job market. The decline in imports suggested that American consumers were still focused on increasing savings rather than on spending.

Do unemployment checks keep the jobless at home?

Is unemployment compensation keeping the unemployment rate up? According to Harvard University Professor, Robert Barro, in some way, people are getting paid for being unemployed. Thus, they have no incentive to look for jobs.

Pentagon Cuts Has Suppliers Shedding Workers

One-quarter of Lockheed Martin’s executives have applied for buyouts as the company cut costs. Lockheed is the world’s largest military company. It’s said that most of the 600 executives who applied for the buyout were at or near retirement age. The 600 requests are expected to be granted. This coincides with the news that the long surge in military spending has come to an end. Lockheed has reduced its work force by 10,000 since the beginning of last year, to a total of 136,000. Other military companies are also eliminating jobs. These loss of jobs comes as the defense secretary has canceled or restructured nearly three dozen weapons programs since last year. The defense secretary is pushing for more overhead cuts and greater efficiency to free money for the most important programs.

Economy looks better in four spots

Progress is slowly happening in our economy and in the places where the recession hit the most. The recovery is happening slowly, but surely and it is bringing an impact on these four spots discussed in this article. The first is the agriculture/farming recovery. American farmers will export $107.5 billion in agricultural products this fiscal year that ends Sept. 30, the second highest ever after the 2008 record of $115.3 billion, the New York Times reported, citing federal estimates of farm trade and income. China has been driving most of the U.S. agricultural exports (most likely surpassing Mexico next year as the second largest foreign buyer of American products). The second spot looked at was the U.S. Corporate buying. Last August was the busiest month for mergers and acquisitions volume world wide, and the $286 billion worth of deals was the highest monthly level since 2008. The third spot looked at was Detroit and the auto industry. Detroit was an economic bright spot before the auto industry ran into trouble. Ford Motors, General Motors, and Chrysler are slightly improving. Ford churned more money in the first six months of this year than in the previous five years combined. GM, which received a $50 billion taxpayer bailout following its bankruptcy in June 2009, has filed for one of the biggest public stock offerings in U.S. history. And Chrysler is hiring new workers. The fourth spot looked at was the manufacturing growth. It has expanded very fast as factories have been adding workers and raising production to restock inventory and respond to demands from markets overseas. he Institute for Supply Management's factory index rose to a three-month high of 56.3 from 55.5 in July. Most economists predicted it would fall to 52.8 or worse. A reading of more than 50 generally signals growth. Since manufacturing is 11% of the U.S. economy, it will need to continue to help the U.S. out of the recession.

4 surprise bright spots in the economy

FORTUNE -- Good economic news has been hard to come by lately, but not all is doom and gloom in America these days. The end of summer ushered in a few signs of progress in some of the unlikeliest corners of the economy. They are no guarantee that the good times are around the corner, but they do provide a helpful reminder that this slow recovery is exactly that: a recovery.

Fortune highlights four bright spots, and assesses what kind of a lasting impact they might have on the economy.

Obama Will Not Extend Bush-Era Tax Cuts to Wealthy

President Obama on Wednesday will rule out any compromise that would extend the Bush-era tax cuts for the wealthy beyond this year, officials said, adding a populist twist to an election-season economic package that is otherwise designed to entice support from big businesses and their Republican allies.

Mr. Obama’s opposition to allowing the high-end tax cuts to remain in place for even another year or two would be the signal many Congressional Democrats have been awaiting as they prepare for a showdown with Republicans on the issue and ends speculation that the White House might be open to an extension. Democrats say only the president can rally wavering lawmakers who, amid the party’s weakened poll numbers, feel increasingly vulnerable to Republican attacks if they let the top rates lapse at the end of this year as scheduled.

It is not clear that Mr. Obama can prevail given his own diminished popularity, the tepid economic recovery and the divisions within his party. But by proposing to extend the rates for the 98 percent of households with income below $250,000 for couples and $200,000 for individuals — and insisting that federal income tax rates in 2011 go back to their pre-2001 levels for income above those cutoffs — he intends to cast the issue as a choice between supporting the middle class or giving breaks to the wealthy.

Kansas City, Dallas Feds Called for Rate Increase

Two of the Feds (Kansas city and Dallas) have been trying to increase interest rates charged to banks on emergency loans even though the slump in the economy still exists. They tried to increase the interest rate to 1% but the central banks did not allow for this because they still wanted banks to be able to borrow money freely.

The directors wish for the current monetary stance to be maintained as inflation just started to dip. They are waiting for the economy to stabilize.

Some questions to think about:

Why do these two Feds in particular want to increase interest rates (this is their second attempt at doing so)?

What could be the repercussions of such an event?

Afghanistan Economics Part 2

In response to the rapid decline of the Kabul Bank, the assets of the shareholders of the bank have been frozen. Many of the political elite are major shareowners of the bank. Including the brother of the president. Meanwhile a run on the bank has started with many Afghans lining up to withdraw their savings from the failing bank.

Economic Pain failed to ease in July

Americans' economic struggles persisted in July, largely unchanged from the previous month, according to The Associated Press' monthly analysis of conditions around the country. Nationally, unemployment, foreclosure and bankruptcy rates didn't budge from June. Yet the economic pain varied among localities, depending on their economic bases. Stress eased in counties whose work forces lean toward areas like agriculture, mining, wholesale trade and finance. I thought this is an interesting article to read because each state is scored using the measurement of "economic stress". According to the article, Nevada was the most stressed state meanwhile North Dakota is top one leading as the healthiest state. It is interesting to know that the Western states are the most stressed economically-wise. Also, I wonder how did the economists calculate that it would take years for the unemployment rate to drop down to 5%.

Startling facts behind the unemployment rate

It seems that there is a grim reality that not many people have accounted for when gauging the severity of those in America without jobs. Although the unemployment rate in itself is truely startling at 9.6 percent some people have been finding solice in the fact that it has declined from last year in August when it hit a high of 9.7 percent. I hate to be the "Debbie Downer" for those that are feeling optimistic but in fact America's adult population has grown by 2 million since last August but the number of people without jobs has actual GROWN by 180,000. The reason that the unemployment rate has dropped is due to the fact that about 2.3 million workers became so discouraged that they gave up on trying to find a job and dropped out of the labor force all together. A more accurate assessment lies with the rate of employment which actually slid down to 58.5 percent from 59.1 percent last year.

Obama Announces $50bn Infrastructure Plan to Jump-Start Economy

President Obama announced today that he is supporting the investment of $50 billion on infrastructure to decrease America's unemployment rate and jump-start the economy. Government agencies and the American Society of Civil Engineers have concluded that the country's roads and public transport have not been well-maintained in recent years and are in sore need of repairs. Obama's plan would put thousands of Americans to work upgrading roads, railways, and airports over the next 6 years. But first it must be passed by Congress, a potentially challenging task because Republicans don't want Democrats to succeed in lowering the unemployment rate and claim that the proposal would result in raised taxes and an increased deficit. White House officials counter that money could be raised by closing tax breaks for oil and gas companies. Do you think the government should spend money to make improvements to infrastructure and decrease the unemployment rate?

Where the jobs are now, and where they'll be next

U.S. companies modestly added jobs in August, easing concerns that the nation might slip back into a recession. The latest jobs report released by the Labor Department today is better than expected. Employment in the private sector rose by 67,000 payrolls, after a revised 107,000 increase in July that was more than originally estimated. The report immediately sent stocks rallying, despite the fact that overall employment dropped and the unemployment rate climbed to 9.6% from 9.5%, as more people actively searched for jobs.

The report is neither good or bad news. It will certainly take a while before unemployment falls to pre-recession levels.

Joblessness In America: A Stickier Problem

The article suggested a possible problem faced by the economy with respect to the unemployment issue: high unemployment now comprises of a higher portion of 'structural unemployment' such that stimulus could not alone be the cure.

Reading through the lines of the article, I found several questions that are open for discussions:

1. Why is it that after a number of stimuli, fiscally or monetarily, the recovery is still slow and unemployment rate is still high. If this is the 'lag' for the stimuli to take effects, how long would such 'lag' be - or how much more stimuli should we employ in order to cope with our problem of unemployment? Otherwise, is the question whether such stimuli are not effective in this situation valid?

2. One main point from the article is about the reduced efficiency of the Labor Market that is followed by the housing and financial bust and, recently, is exacerbated by the reduced incentives to seek for job thanks to better unemployment benefits, raising the 'natural' unemployment rate of the US.

First of all, what effects are left after the housing and financial bust that makes people less likely to be employed, increasing the 'structural' unemployment rate? Another question that comes up along this line is that: how would a "more determined effort to help those trapped in "negative equity" to restructure the mortgages on their homes" work out? (one of the strategy suggested by the article to add to the list of things combating unemployment)

Second, taking for granted that the article is right about making labor market more efficient by creating incentives to seek for jobs, how could such "overhaul scheme" be designed?

Gulf of Mexico Oil Spill (2010)

The BP Oil spill has been in the papers for months, and often the time has been on the front page of all major Newspapers. BP's oil spill has effected the ecosystem and marine biologists are predicting that the leak is going to effect the ecosystems for months, even years to come!

Jobless Filings Decline for a Second Week, Lifting the Economy

The latest reports on the US economy indicate a slight lift as unemployment rate decreases and the number of unemployment benefit applications declined by about 6000 to a seasonally adjusted 472,000. The article suggests that this decline could be due to the fewer layoffs as company's are no longer laying off in the panic-stage of the recession cycle. Also, the demand for labor increased as productivity dramatically declined as firms realized they could no longer squeeze work out of the smaller labor force for a lower wage. The decline in applications for unemployment benefits could be due to the extended benefits contracts many workers are on. I believe another reason is the increase in 'discouraged workers' as they leave the unemployed label. The labor costs have increased as workers need more incentive to continue to be productive. This increase in demand, alongside the calmer attitude of the firms regarding hiring and layoffs, should help increase job openings and thus lower unemployment in a way where productivity is increased and the economy benefits too. The housing sector still remains weak as demand has still not picked up even though the mortgage rates are the lowest they have been since 1971. The manufacturing industry is also moving slow, even though the transportation sector is doing comparatively better than other sectors in the industry. The consumers are still in fear of the recession and the consumer spending is slow which is can be harmful to the growth and stimulation of the economy. A great factor that would help the economy is if the FEAR of investors, consumers, firms and shareholders would shift to focus on reviving the economy.
In my opinion, the government tax cuts to stimulate investment are a good idea to help the economy. Greater investment is likely to lead to more jobs, hence increase the purchasing power of consumers.

Consumer's mood improves but outlook is gloomy

The focus of this article was on the recent Consumer Confidence Report, which measures how consumers feel about business conditions, the job market, and the next six months. In a healthy economy, the Consumer Confidence index is above 90%. The USA CCI raised from 51% in July to 53% in August. Although the numbers may look like the USA is coming out of the recession, the reason for the increase is mostly a result of consumers confidence in the next 6 months. The consumers confidence for the next six months is 72% while the confidence in the current economy is still at a measly 26%. I just wonder if this feeling of assurance in our economy could cause complacency.

Existing Home Sales Plunge 27.2 Percent; Single-Family Home Sales - Slowest Pace Since 1995

The article talks about how existing home sales fell by 27.2% in July, which is the slowest pace of sales since 1999. Single family homes are even harder to sell apparently because they are at an low point that has not been reached since 1995. "July’s decline was the third consecutive monthly drop following the expiration of the home-buyer tax credit."
With the decrease in sales the months supply of homes rose from 8.9 to 12.5, the average is normally 5 months of supply. Ratios well above this level are historically correlated with short term price declines. Until the sales pace increases and/or the supply of inventory gets further worked off, price stability is unlikely. In July however, prices were relatively stable. The median sales price declined 0.2 percent to $182,600, ending a four month trend of price appreciation. From a year earlier, prices were up 0.7 percent.

What Might Make the Fed Flinch?

The economy is finally moving in a better direction, however it is growing very slowly. The Fed is put into a tough position because Ben Bernanke said that he would not hesitate to offer more support if the economy did not improve, but nothing was said about what would happen if it was growing very slowly. The economy is currently in a "growth recession." This means that while the economy is growing, unemployment is rising. The Fed is put in a difficult position as far as how to aid the economy and factors such as the tax cuts are something over which they are not in control.

Bernanke: Fed will take action if economy falters

In this article Ben Bernanke says that the Federal Reserve will take steps to avoid the nation going into a "self-reinforcing price decline". The article specifies that there are three ways that the fed could prevent this. One is that the Fed could purchase more long-term securities. The second is that they could keep their benchmark interest rate near zero, and convince investors that it would stay there for a long period of time. And finally they could reduce the interest rates they pay banks to keep reserves.

U.S. Lost 131,000 Jobs as Governments Cut Back

Government is implementing a contractionary fiscal policy-trying to limit the amount of government spending. UR in the month of July were at an unbelievable 9.5%. Economists are predicting that the recession is going to "double-dip" and that the Obama administration's stakes are on the line. Although UR did not worsen, this is partly contributed to the fact that people started to leave the Labor Force. Although this a good this because this is lessening the UR, we have to stay conscious that if people don't only want to come back into the LF, but need to rather, than these Unemployment numbers can go back dramatically- and at an increasing rate.

Three Reasons Why We Are Not Going To Become Japan

This short article touches on the notion that the economy of the United States is showing some resemblances to Japan's economy in that the same kind of double-dip recession that Japan went through about 20 years ago. A double-dip recession is a recession followed by a short-term recovery, followed by another recession. In Japan's case, they suffered two bubbles in the real estate and equity markets that put prices at ridiculous levels and completely out of proportion. The Imperial Palace in Tokyo, which is near 5 miles around, was valued the same as the State of California. That one instance, although not your run-of-the-mill home in Japan, shows the magnitude of the spike in prices. The United States had a bubble in prices in 2007, but nowhere near that proportion, and really only effected the commercial real estate market. Japan suffered a heavy deflationary period also because they have an essentially mono-cultural society. A younger, more culturally diverse work force that the United States boasts creates industrial growth, and also huge foreign investments. But, probably the most important reason the US economy won't be plagued with huge deflation like Japan's was is the US monetary policy. Japan's economy really dropped the ball and didn't realize how serious their issues were, and were too slow to cut rates before it was too late. The Fed, starting in 2008, has aggressively been working on cutting rates and getting on smaller, struggling banks to raise some capital before they step in and take it over. This has kept everything relatively "in check" and is going through the necessary steps to repair the US economy.

I feel that the US economy will eventually recover and that the Fed is taking the necessary steps to make sure that we don't go through a huge period of outrageous deflation like Japan did. Things may not happen for some time, but small steps in the right direction are much more favorable than several steps back like Japan had to face.

Housing's new nightmare

Despite the feeling that the recession is coming to an ending, the economy keeps getting worse, along with the housing market, which initially caused this crash. Late mortgage payments have increased since the last quarter from 3.31% to 3.51% of people paying late. Economists argue that the housing situation will only get better when unemployment lowers. The two being inextricably linked to one another. Without jobs, people cannot pay their mortgages. As the help from the government has worn off, the housing market has fallen again. This makes me question whether there is anything that can permanently lift the economy out of its current hole.

After Bargains of Recession, Air Fare Soars

During the recession, air fare went down substantially. People stopped taking as many vacations or just flying as much in general and so prices had to go down. However, in recent months, air fare has increased a lot and is now close to what it was pre-recession. This doesn't include the other charges airlines have implemented though, including meals that used to be in the cost of the flight are now for purchase additionally. Other things that have an outside cost are "sleep sets," flying standby, changing your flight, and for checking your bags. Checking bags is one of the biggest issues that many fliers have now, since it can cost $25 just for one bag. For leisure travelers, costs went up 20 to 30 percent, and for business fliers, only 12 percent in the first half of the year. The low fares put pressure on the airlines, and they've been trying to cut back on the amount of seats they offer, even though they have been offering just less, but more packed, flights lately. The price increase should encourage more people to plan their trips ahead of time so they can book flights before they go up even more.

Wall Street Surges After Good Reports

Growth in the United States and China helped boost stocks on Wednesday. Shortly after the market opened on Wednesday, it increased by more than 200 points and sustained gains to the closing on Wed. "The Dow Jones industrial average jumped 254.75 points, or 2.54 percent, to 10,269.47. The Standard & Poor’s 500-stock index rose 30.96 points, or 2.95 percent, to 1,080.29, while the Nasdaq composite index gained 62.81 points, or 2.97 percent, to 2,176.84." Interest rates were higher, and the manufacturing index rose. In order for the economy to keep growing, the manufacturing sector would also need to rely on construction, consumer spending and the export market (none of which has sustained growth). Also, ADP released data saying there was a decrease in the private sector by 10,000 jobs.

Unemployment increases...but so does the demand for labor?

It seems that everyone has noticed that unemployment has been on the rise. As the month of August came to an end, instead of going down with the increase in jobs unemployment rose by .1 percent. The writer describes this phenomenon to be caused by "the continued draw-down in temporary census employment." This set back erased more than 100 thousand jobs from the labor market report of august. Also the write reports that despite the increase in unemployment in august, private employment saw a relatively large growth. Private employment as been seeing growth since December of 2009. The writer states that our economy is producing enough jobs to rapidly bring down the unemployment rate, but instead it went up. He believes that "at this point of the business cycle, labor force growth in a positive sign. I agree, a growth in the business cycle is good for our economy and will help slow down the upward movement of the unemployment rate. There is growth in the labor market, but is it fast enough to combat the steadily increasing unemployment rate?

Prospering in a Recession, The Open Bucks a Trend

Over the past week, The United States Open tennis tournament has been ongoing. The US Open-one of the largest professional tennis tournaments-is held in Flushing Meadows, NY. One may expect the sales and attendance to be down this year, as the United States is in a recession and other sports teams and tournaments have not performed as well in comparison to previous years. However, this is not the case concerning the US Open, as all 140 box suites sold out four months ago. The US Open is performing as strongly as it ever has, for a variety of reasons. The first reason is sponsors. Surprisingly, the US Open has retained its main sponsors and has added six new sponsors. Surprisingly, this growth may have come from the recession, as many companies have ended sponsorships to focus on certain events that they feel are important to their brand image and audience. The second reason is timing. Tennis at the US Open stretches over a two week span, which allows fans who want to watch the event greater flexibility to do so. In addition, the US Open overlaps Labor Day weekend, when many families can travel to New York and watch high level tennis. For the most part the US Open has done well economically, but ticket resales have decreased by 39 %. This may not be due to the recession, but because many American players, like Andy Roddick, have lost early in the tournament.

Does anyone have any other reasons that they believe the US Open is performing beyond expectations this year, in addition to the ones previously stated?

European Finance Ministers Should Keep The Champagne On Ice

This blog entry from the Wall Street Journal's website begins with the author pointing out the numerous differences between economists in forecasting growth for Europe. It seems that with so many different authorities saying different things and citing different statistics, macroeconomics can be quite a confusing subject. For the most part, however, economists and finance ministers should be cautious and not too optimistic when forecasting the financial health of Europe. The article then addresses a lot of the economic success Germany has experienced when compared to other eurozone countries, maintaining its position as "Europe's growth engine." The rest of the countries in the European Union are experiencing a variety of increases and decreases in economic indicators, making it hard to judge exactly how the continent is doing as a whole. Countries like Germany have been reliable leaders during the course of the Great Recession, but it remains to be seen how nations like Greece and Portugal will deal with a slow recovery.

Grim Housing Choice: Help Today’s Owners or Future Ones

This article speaks about the difficult choices that policy makers will encounter concerning the housing market in the near future. The choice that they will have to make is to put more into helping the housing market or let the market take care of itself. This is an issue that policy makers have been avoiding and now they may have to start making these crucial decisions. Some economists say that we must help the market and put money into the market and others believe that letting the market work itself out is the best idea. Some even think that they should let the market fall completely, which to me seems like a very risky idea. What if the market doesn't recover like policy make.rs think it will. These issues are very crucial because the decisions made now will affect the home owners of today and the future

Banks Bought Bonds Amid Debt Crisis

Greece, Ireland, Spain, and Portugal have had scary economic problems for months and in general Germany and the other prosperous EU countries have been reluctant to take on the risk that would come with bailing them out. However, this article says that recently banks in the EU have been buying up bonds from risky banks. "the European Central Bank inadvertently encouraged institutions to increase their risk." The author suggest that this could be because the banks could use debt from these countries as collateral for loan interest loans from the European Central Bank.
This worries me. Overall, these transcations increase the risk that the EU is facing. Also, France is quoted as having "exposure to Greece alone as $111.6 billion, though only $27 billion of that was government debt". "German banks’ exposure to Greece totaled $51 billion, of which $23.1 billion was government debt." The article also posted figures fro the exposure in Ireland.
However, an official from the International Monetary Fund (IMF) is quoted saying " There are “obviously risks and challenges, but things seem to be moving more or less in the line with our forecasts", so maybe this is not as worrisome as I had originally thought.
Any thoughts or related articles anyone has found ?

Theories fail to accurately explain differences between rich-world economies

Theories about the productivity of rich-world economies outside the U.S. are skewed interpretations assumptions. Both the German and British economies are seeing higher GDP growth and lower unemployment rates than the United States. Hypothesized theories as to why these economies are doing better than the U.S. include variations in fiscal policies, exchange rates and debt levels. While promises to deal with budget deficits has lead to an increase in private spending in Britain, recent sudden spurts cannot accurately explain growth. Other theories deal with currencies. Growth for Germany, as seen in the second quarter, can be attributed to by the euro pushing down against the dollar and trade activity. However, the demand for exports from Germany doesn’t affect the exchange rate. Similarly, the weak pound might explain Britain’s recent growth but net trade barely had an effect on Britain’s growth last quarter. An important item to note is the fact that not all of these rich-world economies are at the same point in their business cycles. In general, European business cycles are behind America’s by one or two quarters, which could explain for the divergences. Also, differences in rich-world economies are better clarified by the type of recession each country has experienced. In the case of the United States, the road to recovery is far more advanced.

Great Recession was emotional 'Roller Coaster'

This article outlines some of the hardships faced by many Americans during the Great Recession starting in late 2007.

Great Recession was emotional 'roller coaster'

This article lays out some of the particulars about employment struggles within the U.S. during the "Great Recession".

Where the jobs are now, and where they'll be next

FORTUNE -- U.S. companies modestly added jobs in August, easing concerns that the nation might slip back into a recession. The latest jobs report released by the Labor Department today is better than expected. Employment in the private sector rose by 67,000 payrolls, after a revised 107,000 increase in July that was more than originally estimated. The report immediately sent stocks rallying, despite the fact that overall employment dropped and the unemployment rate climbed to 9.6% from 9.5%, as more people actively searched for jobs.

The report is neither good or bad news. It will certainly take a while before unemployment falls to pre-recession levels. Adecco (AHEXY), the world's largest temporary employment company by sales, knows all too well the rough road workers have traveled throughout the recession and into the nation's slow economic recovery. The Zurich, Switzerland-based company's profits suffered last year but have bounced back this year -- it reported a second-quarter profit of 97 million euros (about $127 million) following a loss of 147 million euros ($188 million) during the same period last year. Revenues increased by 29%.

Why are wages rising

In a time of economic recession, when you would expect austerity to set in and wages to be slashed , the exact opposite is happening. The average hourly pay for workers in the US increased another six cents to $ 22.56. What is anomalous is that although unemployment is still rampant, the employed are reaping the rewards of working increasingly, something which did not happen at all during the previous recessions. The explanations of this phenomenon range from companies passing on the benefits of their slightly more productive businesses to their workers to simply inflation. Another probable answer to this riddle is that since costs of health care have gone up significantly, almost by $500 for an average family, the employers are compelled to increase wages in an attempt to offset this. However the employment cost index indicates that the total value of employment benefits has risen sharply, which includes health care. Therefore the most probable answers to this odd situation are productivity and inflation.

Personal consumption is increasing

n July, personal income grew 0.2 percent, following no growth in June. The increase was driven by greater wage and salary income, which grew 0.3 percent in July following a 0.1 percent decline in June. The reduction in Census workers subtracted $1.4 billion at an annual rate from July payrolls, improvement from the $3.4 billion that was subtracted in June. From a year-prior, incomes were 3.0 percent higher.

Personal consumption rebounded a modest 0.4 percent in July after flat or negative growth since April. Consumers grew more cautious in the spring, with April’s 0.1 percent contraction ending seven consecutive months of increases. Spending on both durables and non-durables rose in July, following three months of declines.

The increase in consumption came at the expense of the savings rate which declined to 5.9 percent in July, following over 6.0 percent readings in May and June. Despite the decline, the savings rate is trending near a high level not seen since the early 1990s. Consumers continue to bolster their balance sheets as the transition from government-supported income growth to growth driven by the private sector proves to be slow but present.

As measured by the PCE deflator, prices increased 0.2 percent after three months of negative or flat growth. Readings suggest inflation remains well-contained. From a year prior, the PCE deflator was 1.5 percent higher, the second consecutive month below 2.0 percent. The core PCE deflator, which excludes energy and food prices, was up 0.1 percent over the month and was 1.4 percent higher from the year prior.

Banking profits

The banking industry reported a second quarter profit of $21.6 billion, the highest earnings since the third quarter of 2007. Earnings were boosted by lower loan loss provisions and asset quality improvement. Net charge-offs totaled $49 billion in the second quarter, a $214 million decline from a year earlier and the first year-over-year decline since the fourth quarter of 2006. Further, non current loans declined by $19.6 billion during the second quarter, the first quarterly decline since the first quarter of 2006.

Equity capital increased $27.4 billion in the quarter to total $1.5 trillion. Assets declined for the fifth time in the last six quarters, falling $136.2 billion or one percent from the first quarter. All major loan categories reduced balances during the quarter. Equity to assets was 11.25 percent, the highest level for FDIC-insured institutions since 1938.

The Deposit Insurance Fund reduced its deficit for the second consecutive quarter, rising from -0.38 percent of insured deposits in the first quarter to -0.28 percent in the second quarter. The fund balance was -$15.25 billion at the end of the quarter. Insured deposits, at $5.4 trillion, were 12.9 percent higher than they were one year ago, but down $34 billion or 0.63 percent from the first quarter.