The indebted ones

Student-loan systems in America and elsewhere are often badly designed for an extended period of high unemployment. In contrast to the housing crash, the risk from student debt is not of a sudden explosion in losses but of gradual financial suffocation. The pressure needs to be eased. Changes would lead to a repricing of student debt. That would be a bad thing for taxpayers, but a good thing overall. Just as borrowers need to understand the risks they are exposing themselves to, voters need to understand the liabilities that governments are taking on when they subsidize students.

Rising from the ruins

American economic recoveries can be seen from two places: the first is that the housing sector traditionally leads the economy out of recession. The second is that there is no chance of the housing sector leading the present economy anywhere, except deeper into the mire. The housing market still looks grim, but the rental side hints at recovery. Rising house values boost confidence and spending, and home construction is more labor-intensive than other sectors. A housing recovery should also give monetary policy more traction; low interest rates do less to perk up the economy when housing markets are depressed.

9% Unemployment

This article talks about the small decrease in the level of unemployment from 9.1% to 9%. This decrease has come about because of a slight increase of 80,000 jobs during the month of October. The article then speaks of the generally feeling of "it could have been worse" with respect to the change in unemployment. This comes up because of the prediction the Obama administration had made in 2009, declaring that the $787 billion stimulus package would help to cut unemployment to 6% by this year. Because of this great difference in goal and reality, Obama's chances of re-election may be considerably less.
The increase in jobs this year was barely enough to cover the loss in jobs that have occurred during the same time period. With this slight change in the unemployment level and the effects of the European financial crisis on the global economy the chances of financial stability being achieved anytime soon seems rather slim.

The medium made the message

This is an interesting article that explores how a company really changed the shape of entire industries - music, computer, phones - and how it did it.

The answer: Simplicity. Apple products really do focus on simplicity. There products are intuitive and easy to use. People who learned how to "copy" and "paste" within the past five years, now have iPad. And knows how to use it. These technologies really are so easy to use, even without reading the instructions, that people all over the world now have access to new worlds of information and new sources of connection. But is this a good thing? Apple is definitely one of the leading promoters of having technology at your fingertips, but why do we need it all the time? So much is being lost in this technological age. People send texts, emails, and sit in chat rooms rather than meeting face to face. Communication skills are being lost. People can no longer live in the moment, but must live in everyone else's moments through constant updates on Facebook and twitter and endless text messaging. Apple has made technology easier to use, and that's a blessing as well as a problem. Look around next time you're out and notice how many people have their eyes glued to their iPhones. Apple has advanced our technological society so much, but how much is too much?

Small Banks Gain from Occupy Wall Street

This article doesn't directly address the Occupy Wall Street movement, but instead looks at the implications that the movement is having on the banking industry. People are frustrated by the big banks and that frustration is manifesting itself across the financial industry. For example, that $5 a month fee Bank of American was planning on charging debit card users created a firestorm big enough to force many banks to temporarily halt a lot of plans for new fees. These banks are even more worried about an even bigger threat - losing customers. People who are tired of the giant banks are now flocking to smaller local ones. But smaller banks have their downsides too. It should be interesting to see if this trend lasts or if the big banks will eventually win back the trust of their customers.

Student loans in America. "Nope, just debt." The next big credit bubble?

This newly updated article in Economist talked about the Student loans in US.

It begins with talking about President Lyndon Johnson's act in late 1965, which sent $1.9m from the federal government to states which could then leverage it ten-to-one to back student loans of up to $1,000 for 25,000 people. As he promised, that act “will help young people enter business, trade, and technical schools—institutions which play a vital role in providing the skills our citizens must have to compete and contribute in our society.”

Come back to today, on October 25th the Obama administration added indebted students to the list of banks, car companies, homeowners, solar manufacturers and others that have benefited from a federal handout. Compared to the act 50 years ago, the result of education loans has a shifting, difficult landscape . For students, the task is much harder. Many students are overwhelmed, which is reflected by two things: First, the size of student debt is vast and lots of borrowers are struggling. Second, the total amount of debt is staggering.

As we read from the former news, that there were some changes announced this week, which are designed to ease the pressure on struggling graduates. Borrowers who qualify will get some payment relief. How will this relieve act going is still hard to tell.

ECB Cuts Interest Rates as New Chief Draghi Takes Bold Step

Mario Draghi wasted no time with new policy after recently being elected European Central Bank. In July, a controversial increase in the key interest rate from 1.25% to 1.50% was criticized because of the already weak economy in the Eurozone though counter acting inflation. Chief Draghi lowered the interest rate back down to 1.25% in his first meeting at Chief. This move seems like a bold decision to many, but lets see if bold decisions is what the Eurozone needs to climb out of this economic funk.

Back to the Drachma?

With Greeks many financial troubles with the euro, many are beginning to wonder the future that it has in the Greek economy. The idea is that after the initial default, the long run with the drachma would look much brighter. One key idea brought up in the article is that if Greece once again has its own currency, it would have the ability to print money. Upon the switch, would the onset of "apocalyptic" panic prove too much for the Greek economy, and society as a whole?

Many point to Argentina to argue their case for the drachma."..Argentina’s case when it broke its peg with the dollar in 2002, the export boom ignited by a cheaper currency and the ability to control the drachma would eventually work in Greece’s favor."

Yuan Hits Hurdle on Road to Wider Use—U.S. Businesses

This article tells how US firms are now using Chinese Yuan as a reserve currency instead of US dollar. This transition is brought about by China's effort to make the yuan a global reserve currency by debilitating the controls it previously had on its currency and making it readily available to local companies. 
Will the Chinese Yuan take over US Dollar? only time will tell.

Greek Vote Rattles World Market

This article talks about the expected results that may happen based on the investors reaction to news that Greek voters will get to hold a national referndum on bailout deal aimed at preventing a default on the country's sovereign debt. The announcement raises doubts about the EU debt deal that would wipe out up to half of Greece's loan payments, but still require unpopular austerity measures by the Greek government.
This goes along with what we have been studying in class with the affects from countries policies and what that means for the rest of the world.

Consumer Prices up 0.3% in September

Even though inflation wasn't that high prices for food and gas increase last month.

Small amount of inflation is good because it encourages businesses and consumers to spend the money rather than saving it. I agree with this statement since consumption is key in an economy. Food and gas prices will increase and with around 9% unemployment rate this is not going to really help the people well being. Besides hiring rate is also low. People are more careful in what they spend therefore the overall growth is small. Food prices rose 0.4 % and gas prices rose 2.9% due to increase of the food prices thats why inflation jumped 3.9%. The US economy is still struggling.

Government in Greece Nears Collapse over Referendum

This article is about the latest installment of the Greece debt saga. The Prime Minister this week called for a last-resort debt deal referendum in the hopes of regaining a last bit of political support. He was met with fierce backlash from other political leaders, who are calling for his resignation. His party is losing support in the Parliament and the population. On the world stage, this most recent flare has caused falls around 4% in other European markets, significantly affecting international financial stability as well as domestic matters.

This article, as well as the entire Greek financial crisis, has shown how important the connection between politics and financial markets are. Changes in one will always create changes in the other, due to attitudes and predictions about the future. The Greece crisis should be taken as a warning for Obama, about how important fixing the economic situation is to maintaining political support.

US-JPN Exchange Rates

Japan’s Finance sector recently had to intervene in order to prevent the Yen value from hurting the US economy. The Yen had US dollar had reached a record low of 75.31 yen but since actions by the Finance minister has increased to 78.55 yen. The report by Reuters suggests that this record high in the value of the yen is being fueled by the inflow of money to Japan as a safe haven due to the uncertainty in Europe controlling its debt crisis. The Minister of Finance for Japan, Jun Azumi, reported that Japan would continue to intervene until it saw fit.

Though the US economy is recovering at an increasing rate right now other economies are doing better, which in turn could adversely affect America’s recovery efforts. However, with efforts in place in other economies to facilitate the growth of this economy things may not be as bad as they could be.

Ben Bernanke Needs a Volcker Moment

This NYT article explains the parallels between the state of our current economy, and that of the late 1970's, and mid 1930's depression era. The article suggests that Bernanke needs to make bold decisions, as well as bold promises, just like Chairman of the fed Volcker did in 1979, as did FDR in during the 1930's.

This article explores the Reagan-era inflation drop due to Volcker's firm choices as chairman, as well as the Great-Depression era fiscal policies which effectively did away with deflation. Many could agree that these two past events in history easily rival what is happening right now in the economy (perhaps we are currently undergoing our third "depression" ? Although, we are technically in a "recession", nowhere near an economic depression.)

We live in an era where politics overshadow, and control most of our monetary policy. While power is still held by those in the top positions (president, chairman of the fed), it seems that any move one of the top-dogs make always lands as much praise as it does criticism. What this article is suggesting is that Bernanke use all the power he has to sway the financial decisions of both everyday Americans, and big-time investors.