Draghi drags his feet

This article tells how the European Central Bank decided after its policy meeting that from now on it will be the lender of last resort to the European Banks but not European Government. All this is being done to calm the markets down of possible Euro Banks failure hence regain investor confidence.
Any such development has positive impact on Dow Jones, S&P 500 and other indices hence help re boost the sluggish economy by regaining confidence. This also shows that although banks claim to have little exposure to European debt they actually have a lot of exposure and if big European banks fail, many American banks will be hit badly.

American Banks

This is a great article showing the effect of the European crisis on American Banks...

It tells us how much exposure each bank has to Europe and how it is safe to a certain extent.

Its great information and can help you invest in the bank based on your prediction of Europe

Too Big To Fail

The New York Times reviews the movie as being a very accurate portrayal of the events that occurred in 2008. The movie even stops to explain what credit default swaps were so that average people (people who are not taking NIBC class) can understand just exactly what was going on. I too was surprised that a movie portraying a recession could be rather thrilling and keep you wondering what was going to happen next, even though we are still living through the aftermath of the events.

Google Wallet and the Velocity of Money

Google has recently developed a new app called Google wallet, with which people can use their phone to shop with one touch of a button. Although Verizon Wireless declined to allow this application on their upcoming release of smartphones, this app could have a large effect on the macro economy. As discussed in class, an increase in the velocity of money would increase the supply of money and therefore shift the IS curve on our IS-LM model. How could this affect interest rate/output of the economy and how should the fed respond to this app if the velocity of money were to be increased?
Verizon Blocks Google Wallet

Italy’s Leader Unveils Radical Austerity Measures

The Prime Minister of Italy revealed yesterday new fiscal austerity measures that attempt to radically decrease the government deficit and increase long-term growth. Radical measures that would not be stomached in America, like closing of tax loopholes, increases in tax rates, and an increase in the retirement age, are being taken to help fix the ailing economy. Impressively, the Italian Prime Minister is claiming that these measures are needed because it is not the fault of the Eurozone, but Italy itself that has caused the current economic turmoil.

Although I am impressed by the Prime Minister's conviction in enacting these potentially unpopular measures, I am concerned about the short-term effect that this will enact. Cutting spending and raising taxes and retirement age may help in the long-run, but with the current state of the economy, it may not be the best option. It will cause a significant decrease in short-term aggregate demand, which at the moment may not be worth the benefit to the economy in the long-run.

For Angry Employees, Legal Cover for Rants

This is a very interesting article which talks about how employers fire their employees because of negative feedback they give about their companies or their bosses on social networking sites like Facebook and Twitter. Although employers argue that such "ranting" causes negative word of mouth, however the employees are now fighting their cases in accordance with the laws which protect them from being illegitimately fired.

The Dash for Cash

Europe banks are the ones now facing scrutiny before investors, companies and savers will lend them any cash. Faced with an investor strike, banks are putting a halt to new loans and selling or pawning all they can. Unless the investor strike lifts soon, Europe risks a credit crunch. At worst, there may even be bank runs and failures. For now, this is keeping the system ticking over, partly because a bank lending money overnight knows it may have to ask for the favour to be returned next week. Euro-area central banks are also leaning heavily on their biggest banks to keep supporting the smallest with interbank loans.

Into the Storm

The independent Office for Budget Responsibility (OBR) forecast assumes that the euro crisis can be resolved without too much fuss, which seems increasingly unlikely—and the uncertainty is pushing the euro zone towards recession fast. Across the continent banks are finding it hard to refinance their own debts cheaply. They are also shedding assets at an alarming rate in order to meet EU capital-adequacy targets by next June. Britain’s banks have lent heavily to businesses and governments in the euro zone’s worst trouble spots, as well as to German and French banks. The threat of a severe credit shortage will force businesses across Europe to conserve their cash and make them cautious about spending on new equipment or hiring new workers. Add in the ever more severe budget cuts planned by euro-zone countries and the picture gets even stormier.

Leaders Struggle for Deal to Keep Euro Intact

In the article, the problems with the euro and possible ideas to help solve the problems are discussed. A major issue is the disagreements between the countries that are in debt and those that are not. Those that are in debt want more help from the European Central Bank and for it to buy more of their loans. However those countries that are not in debt (Germany is the one that is discussed here) are completely against it, since it will in large part be their tax payers who are now on the hook for the debt of others.

Chancellor Angela Merkel of Germany is also calling for fiscal reforms in the countries of the euro zone. She believes the countries spending and level of debt should be most closely monitored and those that exceed the accepted level should have some sort of predetermined penalty.

Jobless Rate Dips to Lowest Level in More Than 2 Years

Even with the Euro crisis debt the unemployment rate drop to 8.6%, the lowest in 2.5 years. Part of the reason was that more than 120,000 jobs were created and 315,000 people simply stopped applying for jobs. 64% participated in the work force. Also companies have been taking more part time and temporary workers rather than hiring people and they cut low wages salary. Jobs in the retail sales and auto sales have increased and businesses are able to loan from banks.

With the tax cut more than 160 million middle class Americans received more money on their paychecks but the tax cut will expire soon this will slow down the job creation and output growth. This will affect the consumer spending. This is a good sign for Obama.