Daily Show: Bill Clinton's Prescription for the Economy

Former President Clinton explains why 21 months hasn't been enough time for the Democrats to dig the U.S. out of the $3 trillion hole President Obama inherited. Obama is still facing heated criticism for the tough choices he made that were necessary to keep us out of a depression like unpopular $800 billion stimulus. Clinton also explains that the most important thing the government can do is invest in education (even though Republicans want to cut the education budget 25%) and intensive skills training programs in order to reduce frictional unemployment.

Bernanke Says Economy Recovering More Slowly Than Policy Makers Would Like

The recovery from the financial crisis is growing the US economy at a slower pace than policy makers hoped, despite the $1 trillion in bond purchases and reduced interest rates. The treasury plans to purchase more bonds this year. The sluggish growth, a 1.6 percent annual rate in the second quarter, has kept unemployment at 9 percent in every month this year. Inflation rose at a 1.4% rate in July. According to Ben Bernanke, new regulations should reduce the risk of future financial crises. Based on some of the articles I’ve read, I question the government’s bond purchases. It seems we are at a time when we need to increase our savings/investments. Should we allow interests rates to rise to encourage more saving?

Sign of another European Downturn?

After the Irish Euro Panic in 2008, the Irish economy had been slowly recovering. However today's growth rate was actually negative, indicating a contraction in the economy.

"Gross domestic product (GDP) fell 1.2%, the Central Statistics Office said. It also revised down its measure of growth in the first quarter to 2.2% from 2.7%.

Gross national product (GNP), seen by some as a more accurate barometer of the economy, fell by 0.3%.

The government has been seeking to reassure investors about the economy.

There have been concerns in the markets about the health of the Irish economy and government finances because of continued problems in the banking sector."

Looks like Ireland has a long way to go.

Gold Hits New Records

Inflation-wary investors bid gold prices up near $1,300 an ounce. Gold prices gained $4.20 settling on a record of $1,296.30 an ounce, building on gains it made after the Federal Reserve announced Tuesday it might take further steps to stimulate the economy. The article says investors buy gold when they want to protect themselves against inflation and that it appears the Fed’s statement stoked fears the dollar’s value will continue to fall. Gold prices have nearly doubled since 2008 when an economic panic shook global credit markets and central banks responded by flooding currency markets.

Recession's end 'doesn't mean everything is good'

The Great Recession ended in June of 2009, but this doesn’t mean the economy has improved. During the 18 month period, home values have drastically declined and over 7 million people wound up losing their jobs. Currently the unemployment rate is just under and nearing 10%, a big indicator that the US is still far from normal. Another downturn in the economy could spark a new, more serious recession. The Federal Reserve policymakers are meeting today to decide on how to stimulate economic growth.

Home Prices Down Again

Prices fell again on homes in the US for the second straight month in July, as the mortgage loan companies Fannie Mae and Freddie Mac both saw losses for the month. Being the second month that this has happened, are these signs of a double-dip recession with the overall "slow-but-steady" growth in domestic markets? Or just a continuation of the recession that has been going on for a couple years?

Unemployment on the Rise in 27 States

The Labor Department reported today that unemployment has risen in 27 states between July and August. The only two states that have reported a significant increase are Maryland and Florida. Nevada had the highest rate in August, which was 14.4 %. Following Nevada is Michigan, at 13.1% and California at 12.4%. North Dakota is staying strong with an unemployment rate of 3.7%. North Carolina created the most jobs in August, with 18,600 nonfarm payroll positions. At the other end of the scale, employers in Michigan cut the most jobs, slashing 50,300.

Since we are in a recession, here we see that the actual unemployment rate has risen above the natural rate of unemployment. Job search (fricitonal) and wage rigidity (structural) have to do with the high rates of unemployment that we still have. The states with high unemployment rates are dealing with about 7-9% of cyclical unemployment, when we don't want cyclical to be above 5%.

Are We There Yet?

This article, from The Economist, stresses the prevalence of America's economic recovery on the minds of the American people as we are about to go into the congressional mid-term elections in November.

Our unemployment still remains at about one out of every ten. The worst recession since 1930's ended a year ago but our GDP has only been growing at 1.6%.

However, whereas most articles I have read talk about how the economy is still failing, this article points out that although slow, the economy is recovering and worries that we will slump back into a recession are over exaggerated.
Unfortunately, most recessions in America's past have been because of tight monetary policy. Therefore, when the policy is relaxed, the economy bounces back. However, this recession was a fiscal crises.

They predict that because typically the period of debt reduction lasts 7 years, we will be OK again in 2014.


Their criticism is on the politicians who are reluctant to acknowledge that we are in it for the long haul. They suggest that most politicians are simply working on assigning blame instead of being realistic. Republicans claim that the recession was from 'big government' and proof that Obama;s stimulus plans did not work.

Democrats claim that the Wall Street excesses caused the problem and therefore high wage earners should be taxed heavier.


The overall suggestion to America is "medium-term tax reforms and spending cuts needed to get a grip on the budget, while leaving room to keep fiscal policy loose for the moment".
They also suggest extending all the Bush tax cuts until a later date when the economy will be strong enough to withstand a whole fiscal overhaul.
There was also an interesting suggestion that ties in with our discussion on unemployment - how helping workers mobility to get to new jobs would help lower the unemployment rate. The Professor's comment that right now many people cannot move to new jobs because they cannot sell their homes because of the state that the housing market is in. This was explicitly said in this article.
Also mentioned in class and suggested in this article are the pay roll tax cuts to help firms high more people.

Abbott Labs to Cut 3,000 Jobs in Integration of Solvay Unit

Abbott Laboratories said it would cut 3% of its work force in one of the largest layoff announcements in its history, as it tries to wring savings from its recent acquisition of Solvay's pharmaceutical unit.

The Abbott Park, Ill., maker of drugs and medical products had avoided the large-scale cost-cutting measures taken in recent years by rival drug companies that have faced more severe patent expirations and other pressures, though Abbott has made occasional small cutbacks. Abbott has seen revenue and profits grow steadily thanks to rising sales of the anti-inflammatory drug Humira and other products.

The cuts announced Tuesday show that the $6.1 billion Solvay purchase came with areas of overlap, and that Abbott took the opportunity to cut costs. Abbott executives have previously signaled that the deal had the potential for cost savings, but hadn't provided details.

Stocks Gain Traction after Fed Decision

NEW YORK (CNNMoney.com) -- Stocks recouped earlier losses, with the Dow moving into poisitive territory, after the Federal Reserve said it was 'prepared' to provide to take action to support the recovery, if needed.

The Dow Jones industrial average (INDU) gained 37 points, or 0.3%. The tech-heavy Nasdaq (COMP) and the S&P 500 (SPX) also recovered from earlier losses but hovered around the breakeven point.

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Stocks had been drifting lower for most of the session as investors awaited news from the Fed, which left interest rates unchanged.

Stocks had closed at their highest levels since mid-May on Monday as the S&P 500 index crossed technical levels after a key group of economists called an official end to the recession.

Fed holds rates: The Federal Reserve kept its benchmark interest rate at historic lows between 0% and 0.25%, where rates have been since December 2008.

But, as has been the case for nearly two years, investors focused on the outlook and looked for references to quantitative easing, the central bank's recent policy of buying bonds to stimulate the economy.

The Fed said recovery has "slowed" in recent months, but that it is "prepared to provide additional accommodation if needed to support the economic recovery."

That marks the first time the Fed has used quantitative easing type language, heartening investors.

World's most inept central bankers

At its previous meeting, the Federal Reserve was cautious about the recovery, saying it plans to reinvest its debt into longer-term Treasury securities.

Economy. The government released one of several readings on the housing market due this week.

Housing starts hit a four-month high, surging 10.5% to an annual rate of 598,000, the Commerce Department said. Economists were expecting the annual rate to rise by a modest 1.7%, according to consensus estimates from Briefing.com.

But investors shrugged off the better-than-expected news.

"Despite the positive report, it's clear that it will take a long time for housing market to really produce a sustainable recovery," Sheldon said.

Building permits also rose, edging up 1.8% to an annual rate of 569,000.

Companies: Hewlett-Packard said late Monday that it has settled its lawsuit against Mark Hurd, the company's ousted CEO, after the tech giant claimed he breached his separation agreement by taking a job at rival Oracle.

Hurd resigned from HP (HPQ, Fortune 500) in August after he was cleared of sexual harassment charges but accused of violating the company's code of ethics. Shares of HP edged lower in early trading.

World markets: European closed mixed. Britain's FTSE 100 0.1% lower, while the CAC 40 in France rose 0.2% and Germany's DAX gained 0.1%.

In Asia, the Hang Seng index in Hong Kong and Shanghai Composite finished the session slightly higher. Japan's Nikkei index fell about 0.3%.

Currencies and commodities: The dollar fell against the euro and the Japanese yen and was up slightly against the British pound.

The expiring October oil futures contract fell $1.06 to $73.80 a barrel. Oil futures for November delivery, which will be the active contract beginning Wednesday, fell 40 cents to $75.79 a barrel.

Gold for December delivery fell $7.60 to $1,273.20 an ounce. Gold continues to break records, settling at a record-high close at $1,280.80 an ounce on Monday.

Bonds: The yield on the benchmark 10-year note fell to 2.68% from 2.72% late Monday as prices moved higher. Treasury prices and yields move in opposite directions.

CNNMoney.com- September 21, 2010

Stocks struggle ahead of Fed

The Fed is planning on additional stimulus measures, which makes stock investors hesitant.

Change in stimulus package can affect the interest rate in the market. If there is more money out there, interest rate will go down, and that is the right time to invest.

Housing: surges to a 10.5%, which supersedes any other statistics in the past four months. However, it is not a sign to be so optimistic about. We still have to wait.

World Market; receives mixed closings.

Gold continues to go high, even though in the past week, it has dropped by almost 5 dollars per ounce.

Publish Post

U.S. Unemployment to Linger, OECD Says

The Organization for Economic Cooperation and Development speculates that the still-inflated U.S. unemployment figure is unlikely to return to precrisis levels until 2013, at best. The report encouraged continued efforts by policy makers to support the labor market and applauded the stimulus efforts and accommodating monetary policy for turning the economy around. Challenges that still remain include replacing the lost net worth and reducing the debt levels. In the shorter term, this may require an increase in interest rates. In the longer term we’ll see a rise in taxes and an effort to balance the deficit by 2015. It seems that the decades of consuming more than we produced are over. The next few years and possibly decades may require us to produce more than we consume to regain our net worth. It is time to start saving and investing.

Recession Officially Ended In June 2009

The recession has officially ended! The 18-month recession was the longest since the Great Depression, and it will take years for the Economy to recover fully.

The 18-month recession was the longest since the Great depression, and it will take years for the economy to recover fully.

Wall Street’s Profit Engines Slow Down

Even after the bailout and gradually improving profits and business, big banks are still not making as much as they had hoped. Because of this, analysts are now rethinking their expectations for 2010. Trading stocks and bonds is down significantly from last year, and one expert "predicts that annual revenue from Wall Street’s main businesses will drop 25 percent, to around $42 billion in 2010, from $56 billion last year." Expectations are low for this third fiscal quarter. Various profit estimates for large businesses like Goldman-Sachs are down and institutions as a whole are scaling back their involvement in areas. One expert even believes employee compensation will drop.
However, this is not quite as dire as it seems. While profits are down this quarter, they are still just that- profits. Businesses on Wall Street as a whole are still making money and definitely not losing any again just yet.

Economists: Extend Bush tax cuts for everyone

The discussion about what the government should do to recover the economy. A recent survey was made what would be the consequence if the government would chose to keep the tax cuts for low income individuals but increase for those that make $200,000 a year or couples earning $250,000 or more. This limited increase would raise an estimated $700 billion over the next 10 years. But there are still economists that say that this is not the way the government should go. Alan Greenspan debates that “the size of U.S. budget deficit, the government can't afford to extend anyone's tax break”. The future is still uncertain, one thing is certain; the economy needs a big boost.

Dollar and commodities steady as markets await Fed

The value of the dollar is decreasing. However, the value of gold is on the rise. The Fed has yet to put into place a new monetary policy, but they are meeting on Tuesday. Recent statistics show that the US is not falling back into a recession.

Why not extend Obama's stimulus tax cuts?

This op-ed piece discusses much of the controversy and debate surrounding the current status of George Bush's tax cuts. The author also mentions the lack of attention surrounding the progressive tax cuts that Obama included in his stimulus package. For the most part, he chastises Democrats for their timidity in having a strong stance against Bush's tax cuts and letting Republicans dominate the discussion and claim the moral high ground. Bush's tax cuts mainly benefit millionaires and people in the high income-bracket while Obama's tax cuts are more focused on the middle-class. The author decries the disproportionate attention being placed on only one of two very important tax policies. Democrats are missing an opportunity not only to gain political capital, but also to benefit more middle-class and lower-class Americans.

August's rise in gas prices lifts consumer price index 0.3%

The article goes over the low increases in cpi percentages over the since the recession hit and how core inflation is almost zero. The article goes on to discuss the opinion that deflation may be what people should be concerned about deflation. Prices are starting to slowly rise, but it is certainly not a heavy increase. CPI increased .3% in August. Ben Bernanke, the fed Chair, promised that if deflation continues to be a problem that the Fed will take steps to battle it.