Americans' Net Worth Falls Along With Stocks

Things are not looking bright for the average US household. Average wealth declined even further despite the fact that the market has been doing better in the recent past. Its also surprising because the average household has also been saving a lot more money lately. The average households have been saving up to 6 % this year, compared to 2007, where citizens were saving only 2 %. However, the Fed reported yesterday, that the household net worth has decreased to 53.5 billion dollars; a decrease of 2.8 % since last quarter. This can be attributed to the recent unexpected decline in stock investments, which came at a time when the markets were doing well. The problem lies in the uncertainty of the markets. People are not spending as much because of the erratic financial conditions and which in turn is pulling the economy down south even further.

2010, a Year of No Inflation

This article is interesting because inflation rates according to the Labor Department states that inflation is at a negative 0.7%- over the last 6 months that is. This is vital because this is a sign of a very weak economy. Furthermore, the Fed has what is known to be called a duel mission; this states that they are responsible for trying to maximize employment and to keep inflation contained. According to the article, they are not doing a good job because there are millions of jobs not available to maximize employment.

The Fed's gold problem

In the past few weeks, fears of a double-dip recession have ebbed. August retail sales were better than expected. The number of people filing for unemployment claims has fallen for two weeks in a row.

The trade deficit for July was much narrower than forecasts. That's crucial since a ballooning trade gap in June was the primary reason why the nation's gross domestic product in the second quarter was revised lower.

Still, the economy is not healthy. The latest bits of manufacturing data have been disappointing. The housing market may not have hit bottom yet. Builder Beazer Homes USA (BZH) lowered its forecast for new home orders on Wednesday.

And even with jobless claims falling, companies don't seem to be comfortable enough to start hiring again. Some are still getting rid of workers. FedEx (FDX, Fortune 500) said Thursday it was cutting 1,700 jobs.

For these reasons, the Fed is likely to stress -- as it has since March 2009 -- that it expects to keep interest rates "exceptionally low" for "an extended period of time." (Rates have been near 0% since December 2008.)

Companies Still Hoarding Tons of Cash

This article was taken from the New York Times and discusses companies hoarding cash in today's economy. On Sept. 17, 2010, the Federal Reserve reported their quarterly flow of funds report. This report showed total credit grew for the first time in over a year, federal government increased borrowing, and net household borrowing fell for the eighth straight quarter. Bussinesses are extremely reluctant to spend money in this economy, and many can be seen liquidating their assets. This makes sense because the bad economy has cause the cost of holding money to go way down.

What happened to Europe's collapse

Europes recovery has begun a lot sooner than economic analysts initially believed. There is a lot of confusion as to why the economy is experiencing a recovery so fast when they really have taken little initiative to do anything about the recession this summer. The euro is finally growing against the dollar. The primary focus of Europe is the strength of their currency. The expectations for the European economies were nowhere near as good as they have actually proven to be. This shows that the European economies appear to be built to take care of themselves. The proof is evident in this recent event and in the approach that the leaders in the economies took to prevent the recession.

How a touch of inflation could boost the economy

"Americans generally view rising prices as something to fear. But right now, a little inflation may be just what the economy needs."

This statement serves as the beginning of an article that attempts to demystify most of the general public's misconceptions about the role of inflation in the economy. Much like what we have been studying in class, increasing inflation cannot be addressed as a simple issue. Especially with this relatively new and very possible threat of deflation, an increase in inflation does hold some merit as a tool to improve the condition of the economy. Inflation could make the average debt of consumers more manageable and also encourage businesses to invest more. Further benefits can be seen from increasing inflation in the American economy, as we slowly continue our recovery.

U.S. Consumer Prices Remain Steady

Just days ahead of a Federal Reserve policy meeting, the Labor Department said the Consumer Price Index, rose 0.3 percent in August, compared with 0.3 percent in July, on a seasonally adjusted basis. We can see that Consumer Prices remained mostly flat in August. What is more, inflation is so tame that the economy has the risk of deflation. Compared with other years, this is the lowest pace in more than 50 years. Because short-term interest rates close to zero, Federal Open Market Committee voted to use proceeds from the Fed's mortgage bonds to buy long-term Treasury Securities. Under the risk of deflation, many economic strategists gave their opinions. They expected the Federal Reserve to start a second round of quantitative easing aimed at increasing the excess reserves of banks, and thus encouraging more lending. They also expect them to continue their "communications strategy" to convey the message that the central bank is ready to continue to provide support. Fed officials said deflation was "not a significant risk, and they would strongly resist deviations from price stability in the downward direction". But, before doing that, they want to wait out the data to see what happens.

When Big Business Enjoys Being Small

The Democrats and Republicans have been debating expiring the tax cuts imposed during the Bush Administration. The Democrats argue that this has led to a higher deficit (which the US is not able to afford any more) and has not led to a significant increase in employment. Historical evidence and IRS reports show that the tax increase will affect only about 3% of small businesses. This is also because many businesses do not have enough income to be affected by the tax increase. Only the wealthiest Americans will really be taxed. The Republicans, however, argue that the small businesses will be hit hard by the tax cuts as their income is generated from their higher income owners. Thus, the small businesses can be considered 'pass through' entities (they don't pay taxes themselves but their taxes are paid by the owners). The debate is still on-going. According to critics, the rise of untaxed corporations is giving companies set up as small businesses an unfair advantage.
It is reasonable to say the Democratic approach is to increase taxes to the wealthiest Americans and thus reduce deficit. This will not affect the small businesses and thus will not affect the rate at which they hire. By reducing the deficit, there is an increase in national savings, leading to a decline in interest rates and thus encourage investment. Also, it is likely that businesses (such as the restaurant business) will still hire the same amount of labor it needs to serve customers but may cut down on other costs like paving parking lots, technology etc.
However, another perspective to take into account is that firms of all sizes contribute to the welfare of the economy, not just small businesses. So to tax larger firms will eventually affect the smaller businesses too.

Personal savings rate: worse than we thought

The long decline of the savings rate in the United States has been widely discussed, yet every revisit of the data brings new cause for alarm. Hedgeye recently provided its clients a chart showing savings as a percentage of GDP. In the 1970s and 1980s savings were in the 5 - 7% range. In the decades since, personal savings have declined to the 1 - 3% range.

Many pundits suggest the decline in savings is a non-issue, while others, more on the extreme, believe that it one of the primary economic issues currently facing the United States. While the implications can be debated, the fact remains that the savings rate has declined dramatically over the past few decades and is among the lowest of any modern nation state.

Inflation rate flat amid price confusion

Deflation? Inflation? Which is it?

Overall, food and energy costs drove consumer prices up -- albeit very slowly -- over the last 12 months, but stripping out those components, prices are flat year-over-year, the government said Friday.

Household worth in U.S fell in second quarter

Economic recovery is at a standstill with Americans increasing their savings and spending their money to pay off debts. According to the Federal Open Market Committee, household spending is increasing sluggishly due to low income growth, high unemployment rates, a decrease in household wealth and tight credit. The decline in household wealth has been attributed to a drop in share prices (e.g the S&P's 500), which in turn is mainly due to the European debt crisis. According to the FOMC report, consumer spending will further be slashed by the expiration of the home buyer tax credit in April 2010.
Another issue that was brought up is that although the percentage of mortgage borrowing and consumer credits has decreased, large companies are still able to obtain credits by selling public bonds while small businesses are experiencing more difficulties in getting credits from banks due to their past record of unsteady revenues.

Tax Increase Would Hit Few Small Businesses

President Obama and Congress are debating on whether to allow the Bush Tax Cuts to expire for the top 2% of income earners. Opponents argue that the tax increase would be detrimental to hundreds of thousand of small business and prevent them from creating jobs that would help pull the economy out of the recession. However, the IRS says that only 3% of businesses will be subject to the tax increase. That is 97% of small businesses don't earn enough to be subject to the tax increase. House speaker Nancy Pelosi said that tax breaks have not added jobs to the economy, only increased the deficit. However, Charles Grassley, Republican Iowa, says that the tax increase could prevent businesses from expanding just as they begin to grow.

The Black-White Pay Gap

The median income last year was $49,777, which is a decrease in .7% from 2008 which was $50,112. This is the lowest it has been since the 1970s. The number of hours worked along with the hourly pay of the individual is what contributes to the households income. He says that the unemployment rate gap between blacks and whites has increased over the past three years, and they are more less likely to have 2 adult workers per household than white households. However, the gap of in hourly wages has decreased. Blacks made 59.8% as much as the medium non - Hispanic households and and in 1975 it was 59.6%.

Crisis panel to hear from Bernanke, Lehman's Fuld

This Wednesday and Thursday The Financial Crisis Inquiry Commission heard testimonies from high figure individuals close to the financial crisis that occurred. The specific topic they were hoping to get a better grasp on is that of "Too big to fail" or the idea that some companies are so big that they have an implicit government backstop. They hoped to determine: 1) if this is an actual phenomena and 2) if this is a good practice for the economy.

I'd really love to see the follow up article now that the meeting has actually occurred since one of the persons giving a testimony was Dick Fuld. This is significant because Fuld was one of the executives of Lehman Brothers which was one of the only huge corporations for which the government didn't provide bailout funds when the final crisis took it's toll.

Foreclosures Rise

It appears that the housing market is continuing to sour. Foreclosures in August rose from the levels in July.

"Overall, foreclosure fillings rose 4.18 percent in August from the previous month, and were down 5.48 percent from a year ago. In all, 338,836 properties were in the foreclosure process. One in 381 U.S. households received a foreclosure notice in August. (Foreclosure notices are defined as a default notice, auction sale notice or bank repossession.)"

It appears that the market will continue to sour.

10 Reasons To Buy a Home Enough with the doom and gloom about homeownership. Brett Arends explains why owning a home is a good thing.

Sure, maybe there's more pain to come in the housing market. But when Time magazine starts running covers that declare "Owning a home may no longer make economic sense," it's time to say: Enough is enough. This is what "capitulation" looks like. Everyone has given up.

After all, at the peak of the bubble five years ago, Time had a different take. "Home Sweet Home," declared its cover then, as it celebrated the boom and asked: "Will your house make you rich?"

But it's not enough just to be contrarian. So here are 10 reasons why it's good to buy a home.

Poverty in the U.S. spikes

The nation's poverty rate jumped to 14.3% in 2009, its highest level since 1994, and the 43.6 million Americans in need is the highest number in 51 years of record-keeping, the government said Thursday.

The Office of Management and Budget defined the poverty threshold level as less than $21,954 for a family of four in 2009. The poverty rate increased for all racial groups except Asians.

Geithner Calls China's Move on Yuan 'Too Slow'

WASHINGTON—China's move toward a more flexible exchange rate has been "too slow," Treasury Secretary Timothy Geithner said Thursday, even as U.S. lawmakers pushed for more aggressive action to respond to Beijing's policies.

"We are very concerned about the negative impact of these policies on our economic interests, and are pursuing a carefully designed, targeted approach to address these problems," Mr. Geithner said in the first of two appearances on Capitol Hill scheduled for Thursday.

However, he signaled that the Obama administration remains reluctant to formally label China a currency manipulator under U.S. law. While the U.S. feels the yuan is "significantly undervalued," a formal designation would "not be a particularly effective tool" for achieving U.S. goals.

Japan Pushes Down Yen

TOKYO—The Japanese government said it jumped into currency markets for the first time in more than six years Wednesday morning, intervening to try to stem the yen's sharp rise.

The announcement came as policy makers and Japanese business leaders have grown increasingly worried that the currency's ascent has endangered the fragile recovery of the export-led economy, risking pricing out of markets around the world. Yen worries have pushed the Nikkei Stock Average into bear market territory in recent weeks.

Tokyo stocks jumped nearly 2% Wednesday morning as traders started reporting the intervention, which was later confirmed at a press conference by Finance Minister Yoshihiko Noda. The rally was led by top exporters such as Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co., the stocks of which all rose 3% or more.

The dollar rose to almost 85 yen on the news, after having slipped earlier in the day below the 83 yen level for the first time in 15 years.

"Deflation is continuing, and we are in severe economic conditions," Mr. Noda told reporters. "Under those circumstances, recent movements [in the yen] will have adverse effects on the stability of economic and financial conditions, and we can't overlook them."

Mr. Noda made clear that more action could be coming, saying "we will continue to closely monitor movements in foreign-exchange markets and will take decisive steps, including intervention, when necessary."

Gold Rush Back Again in the Western US?

A prime example of the effects of our economy, a small construction business owner named John Brewer who lost his job as a result of our sour economy, found income through one of the oldest pastimes of the "Old West." Prospecting for gold. Through everything with our economy, gold (XAU=X 1268.65 -0.13%) has steadily rose in price and has kept a very high value and shows no signs of falling. At 1268.65, an ounce of gold is quite a "pretty penny" in the eyes of those struggling to keep their small businesses up on their feet, or their own lives stable. Though incredibly old-fashioned, prospecting has become a simple way to make a quick buck as it is rarely government-regulated outside designated mines and areas. This gives people a unique opportunity to gamble time away from their businesses and work that they may have lost to do what built up wealth in the West, searching for gold. When asked the prospectors find their gold, the only response that anyone could get from someone who knows what their doing is, "That's like asking an angler where his secret fishing spot is."

CNN-Money Sept 15, 2010
Three Stocks that beat the recession

They include McDonald, Campbell Soup, and Pacific Gas & Electric. Since McDonald is taking advantage of the recession, thus demand for inferior goods rises, by offering healthier menus, its stock value has risen by 36% in the past year. It doesn't hurt after all to have a box of delicious 50 chicken nuggets in this tough time anyway. Same case with Campbell soup. PGE has surprising statistics since it compensated for the last in California last week in San Bruno, according to CNN-Money.

Gold Rises to Record as Dollar Weakens

Many investors have found Gold to be the best place to invest in these uncertain times. These investors justify there investment due to the low intrest rates and the easy monetary policy which can rise inflation rates. With Gold being viewed as a commodity money and having real value compared to fiat money, it is viewed as a hedge to the threat of inflation . With Gold hitting a new record it continues to show that there is a lack of confidence in the United States economy. This rush to Gold is best summed up by Mr. Ross in the article saying "People aren't sure where to put there money" and this is why Gold rises as it viewed as a low risk place to store capital for the short and long term.

Gold price hits new record high

The price of gold (which is classified as commodity money) has reached a record high. The article mentions many reasons for this: one being that people invest in gold in times of economic uncertainty (which is now) and thus the increasing demand has driven prices up.

"On the physical market, demand for both bullion and jewelry has risen ahead of the seasonal Indian wedding period and the Hindu religious festivals that begin September" that have also caused the increase in prices.

They give another more technical reason for the increase: "gold is priced in dollars, and any fall in the dollar makes it cheaper to buyers using other currencies".

What are the consequences of this? Will the dollar keep dropping in value and will this lead U.S exports to rise?

What are your thoughts on using gold as a medium of exchange?

More To Unemployment Than Low Demand

Why isn't unemployment bouncing back yet? Americans tend to expect immediate economic recovery, and in the past they have in essence gotten it. Why is this recession different? Some of the explanation is simple - this recession was worse. Decreases in GDP were the largest experienced in the post-war period. But economists are becoming worried that the high unemployment may be in part not due to low demand/GDP problems but rather that it is structural. Rising GDP had not led to a correlating decrease in unemployment as predicted by Okun's law. Unemployment is not decreasing even with increasing job openings. Jobseekers may simply not have the skills demanded by employers. Many industries such as construction are still down, and will likely remain so for some time. Thus these workers cannot get jobs in that sector, and they are not skilled for other jobs. Has the recession permanently restructured the economy? Only time will tell.

Intel CEO: Stimulus didn't work

Intel's CEO talks about the Obama Administration's recent stimulus package and how it hasn't helped created and sustain jobs for Americans. Otellini makes some great points in this interview. First, he suggests that Washington needs to stop their stimulus package right now and rethink their strategy. There is no point in wasting government money on something that doesn't seem to be working. he suggests that Obama needs to focus on America's future businesses, mostly technology, and stop investing in things like agriculture, which is a thing of the past. This point ties into his assertion that until Washignton creates circumstances that are favorable to big businesses to produce and manufacture in the United States, such as tax incentives, big business corporations will continue to build their main plants on foreign soil. I think that this is a great idea. Many people argue that the main reason America's economy is falling apart is because no one is investing domestically. If we can flip this around, there will also be a greater incentive for foreign companies to invest in America, further increasing RGDP.

Gold glitters at record high

Gold surged to a new record high Tuesday, as uncertainties about the global economy sent some investors flocking to the save-haven precious metal.

Gold futures for December delivery, the most actively traded contract, rose $28.80, or 2.31% to $1,275.80 an ounce, in midday trading.

Cuba Unveils Huge Layoffs in Tilt Toward Free Market

Cuba remains the only communist country in this hemisphere. Their centrally planned economy is nearly bankrupt so they are trying to shift towards a more market oriented system. The government plans to lay off more than a half million state workers and encourage them to seek jobs in the private sector (although Cuba's private sector is incredibly small as 85% of Cuba's 5.5 million workers are state employees).
This will be the biggest step towards a freer economy since Cuba scrambled to stay afloat after the Soviet Union collapsed ( the Soviets were Cuba's main benefactor). This will also be President Raul Castro's first effort to revive the economy since he took over for his brother Fidel Castro.
The elder Castro had said in an interview that "the Cuban model no longer worked for any country, much less Cuba". However, later he said he was misunderstood and that it was capitalism that didn't work. Although it remains unclear whether Fidel has given his approval on this move, many believe that he will not be an obstacle in the move to capitalism.

Although in theory the move towards a free market is believed to help a country, Cuba is making a mistake. Laying off so many workers and supposedly encouraging them to join the private sector will not turn out well. Cuba has no private sector to absorb these workers. The immense number of unemployed individuals will most likely just become angry and retaliate.

Business Inventories and Retail Sales rise in the month of July

Despite a relatively tepid progression in the US economic recovery over the summer, US businesses have increased their inventories and business sales in the month of July, according to government reports. Inventories have increased 1 percent in the last month, and business sales have increased 0.4 percent in the same period. Both of these increases are poised to make a substantial increase in GDP in the third quarter. This news comes amidst growing concerns of a US double dip recession and an alarmingly challenging unemployment rate of over 9 percent. Still, some are concerned that these benefits are merely temporary, and are among the last remnants of the fading economic stimulus passed in early 2009 that seems to be phasing itself out of the US economy.

Yahoo-Finance. Sept 14 2010

-Things to buy generic-
http://finance.yahoo.com/family-home/article/110637/7-things-you-should-always-buy-generic?mod=family-love_money

Okay. So you're interested in saving some money to put in the bank and increase your private saving. Touché. All of the generic things listed in this article are commodities, so obviously I think there is no argument that buying a regular my-neighbor-john-made-it bar of butter is literally the same as buying that of a brand-name. The thing that surprises me a lot is the 342% price difference between a name- and a store-name bottle of spices.

So you see, knowing some principles of economics helps you fiance your family budget better.

McConnell Offers Bill to Keep Bush-Era Tax Rates

The Senate Republican leader proposed legislation on Monday to continue all of the Bush-era tax cuts indefinitely, testing the willingness of Democrats to allow a tax increase on the wealthiest Americans in a weak economy and making clear that a partisan fight will extend deep into the campaign season if not beyond.

The proposal by the Senate leader, Mitch McConnell of Kentucky, came a day after the House Republican leader, John A. Boehnerof Ohio, suggested a potential compromise, saying he would vote for President Obama's plan to extend the cuts only for households earning less than $250,000 if he had no other choice.

In part, Mr. McConnell’s proposal illustrated the greater leverage that Republicans enjoy in the Senate, where they control 41 seats — enough to filibuster and block any bill. While Mr. Boehner cannot stop House Democrats from forcing a vote on the president’s favored tax plan, Mr. McConnell made clear that he would have a say and that he wanted to put a handful of wavering Senate Democrats on the spot.

Democrats immediately dismissed Mr. McConnell’s plan, noting that he had not offered any way to make up the $700 billion in lost revenue over 10 years that extending the tax breaks at the highest income levels would cost the government.

Democrats need time to draft the tax bill, and also line up their votes. In addition, Mr. McConnell’s stance increases the likelihood that the tax fight could be drawn out, and Democrats have other crucial work to do before the sessions ends, including a temporary spending measure to finance the government until after the election.

Regulators Back New Bank Rules to Avert Crises

Some of the world's top bank regulators met in Switzerland to discuss new potential banking regulations intended to make the global banking industry safer in addition to protecting nation's economies from disasters in the future.

The proposed set of rules will be presented to officials in nations across the globe with a deadline of January 1st, 2013 to begin phasing in the new rules simply known as Basel III. The group of rules seeks to almost triple the amount of capital that banks must hold in reserve, an effort to move banks toward more conservative positions and force them to maintain a larger degree of protection against potential incidents that might arise.

Personally I view this as a strong progressive move in the right direction because it was due to America's banks not holding enough reserves in the first place that forced the government to release bailout funds in the first place. What are others' thoughts?

New Year, No Federal Budget

NEW YORK (CNNMoney.com) -- On Oct. 1, just three weeks after lawmakers return from their summer break on Tuesday, fiscal year 2011 will begin. But Congress will not have a new budget in place by then. And it may not materialize anytime soon.

It won't be the first time. In fact, tardy federal budgets have been par for the course for most of the past 35 years.

Warren Buffett: "No Double Dip Recession"

Speaking today by video to the Montana Economic Development Summit, the AP quotes him as telling those attending: "I am a huge bull on this country. We are not going to have a double-dip recession at all. I see our businesses coming back across the board."

Bloomberg feels the same way, in that all businesses are making a slow comeback and we should not be faced with any deflationary period that the double-dip recession entails. It seems that the general feeling towards the economy through some of our top economic figures in this country have no real concern for our ailing economy and see it getting better in the foreseeable future.

Student loan default rate creeps higher

CNN reported today that defaults on student loans for fiscal 2008 are the highest they have been in over 10 years. The rates jumped from 6.7% in fiscal 2007 to 8.0% in fiscal 2008. The rates are the highest for graduates of for-profit schools, followed by public then private institutions. This growth in default rates only reaffirms that the economic recession is making job placement and retention no easy task; students that have newly entered the labor force simply can not find ways to pay back their debt. It would be interesting to see how this rise in default rates would effect the Cobb-Douglas production function we studied last Friday in which the three inputs (labor, capital, and human capital) effect MPL and MPH. Would the rise in default rates make having a college degree less valuable? Would it cause a decrease in MPL for unskilled workers because more people with college degrees would enter the unskilled work force, taking whatever jobs they could find?

We Need Demand, Not Protectionism

The author of this article discusses the importance of demand in our economy. Total spending was broken down into four categories: consumption, investment, government and exports. With consumption accounting for roughly 70% of total spending; the fact that consumers are saving more than usual in response to the weakened economy is further slowing any progress of immediate recovery. As a result, businesses are reluctant to invest out of fear that consumer spending is going to continue down this road. The government is not making things any easier for investment to increase because of the strict regulations and high taxes imposed on businesses.

The author also calls attention to the large trade deficit that the United States has been experiencing recently. While we are generating domestic income from exporting goods and services, the amount of importing goods and services immediately offsets this gain. The author remains optimistic in saying that eventually these foreign entities that are becoming wealthier with each transaction will most likely invest these dollars back into the United States. He also believes that the trade deficit is a self correcting problem that will eventually straighten itself out.

China Inflation rises
CNNMoney- Sept 12, 2010

China CPI rises to 3.5% in August from 3.3% in July this year. This is almost 3 folds that of the US, which rises only 1.2% over the twelve-month period ending in July.

Inflation is good indicator of economic growth, however, growing at a breaking 3.5% in August might need to be met with some caution.

According to the site, food prices in China have risen 7.5%., which demands for a rise in workers' wages to accommodate the high price shoot in necessary goods.

Economic analysts says that China may rise its interest rate, but more symbolically than substantially to match its economic growth.

High interest rate will encourage saving and deter investment, thus slowing down the economy. However, I don't understand how raising the interest rate will help, will somebody help me?

Timothy Geithner and the Economy

"Mr. Geithner said the biggest challenge facing the economy right now was Washington paralysis. He urged Congress to take up the White House's recent proposals to give tax incentives to business and fund new infrastructure projects.

"If the government does nothing going forward, then the impact of policy in Washington will shift from supporting economic growth to hurting economic growth," Mr. Geithner said during an interview with The Wall Street Journal in his U.S. Treasury office, citing the example of countries who "shift too quickly to premature restraint" after a crisis, including the U.S. in the 1930s."

Trade Deficit Narrows By 14.1 Percent; Exports Up, Imports Down

The article from the census bureau bodes well for the United States' GDP growth. It relates that United States exports are increasing while imports are decreasing.
In July, exports grew 1.8 percent, after falling 1.3 percent in June. Over the month, the trade deficit narrowed considerably, falling 14.1 percent to a monthly pace of $42.8 billion. This drop in net-exports was a major drag on Q2 GDP growth. In contrast, the narrowing of the gap in July bodes well for Q3 GDP growth. The trade gap had expanded greatly in June to a pace of $49.8 billion per month. Imports fell 2.1 percent, following two months of strong growth. From a year prior, exports were up 19.9 percent, while imports were up 22.7 percent.
Hopefully this decrease in the United States trade deficit will continue and this will spur on United States companies to increase our GDP.

World Panel Backs Rules to Avert Banking Crises

World banking leaders met today and agreed on new international banking rules that will hopefully prevent financial disasters. The biggest change was requiring the amount in reserve for each bank to be almost three times higher. Previously, the required rate was 2% - it will now be raised to 7% or higher. The new regulations will be phased in by 2015.
The president of the European Central Bank served as chairman of the group. Bernanke, the chairman of the Fed also served as leadership for the discussion. Financial leaders from 27 countries attended.
This is a concern because now these funds cannot be lent out and will decrease the overall available investment funds.