State governments are borrowing heavily from the federal government to keep paying unemployment-insurance benefits and, even with the weak job market, most states are raising payroll taxes to pay off the loans.
Thirty one states, their unemployment-insurance funds empty, have borrowed nearly $41 billion from the federal government. California alone has borrowed nearly $8.8 billion as of mid-November, according to the Labor Department.
Sunday, November 21, 2010
China raises reserve requirement again
The People's Bank of China raised the reserve requirement ratio for its banks by a half-percentage point on Friday in an attempt to control the flow of new money and combat inflation. I wonder how Bernanke feels about this. China's increase is the second such move in days.
Bernanke: Fed's right on stimulus, China
Bernanke's appears to be putting the pressure on China. Bernanke stressed at a recent conference that nations need to work together to correct the global economic issues at hand. He also defended the need for the $600 billion money supply increase against critics, including officials from Germany. He emphasized the high rates of unemployment were a significant problem that might helped by the money pump. Also, he reminded everyone that the FED also has the tools to scale back the expansionary policy when things improve. Certain foreign countries accused the U.S. as being somewhat hypocritical as their manipulation of the money supply causes the same results as China's policies. Nations need to cooperate as these situations become stickier and stickier.
flying for the holidays won't be cheap
If you are thinking about waitng for the last minute to book tickets for airlines, that is not such a good idea this christmas. Some experts are calculating the airline travel to be a 17 % increase this year as opposed to last year. The last couple of years, many people could buy cheap tickets at the last minute due to the demand of air travel being down. This may be an indicator of how the economy is on the rise. People obviously have more money, and are more willing to spend it. Air travel usually is not a need, so any time a luxury item increases, it can be good for the holiday. People are starting to spend more money, and that is a good sign.
U.S. Is Said to Pursue Broad Insider Trading Inquiry
There is an investigation of insider trading that can lead to criminal charges on Wall Street. It is not clear whether or not the investigation is a "sweep" of everything or individual charges. This is apparently being looked at as a big case that will be charging people in the double digits. The Wall Street Journal said on Friday that the charges " “could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders and analysts across the nation.” So far 23 people have been charged in this investigation, and Goldman Sachs is one under investigation.
T.S.A. Grants Airline Pilots an Exception to Screenings
Pilots in their uniforms are not being subjected to the new screening processes at airports. Passengers have not been very positive about the new processes and are angry about the invasiveness of the new process. For the pilots, they just have to go through the metal detectors and show 2 forms of identification. Unions for pilots have been lobbying for 2 years because "their members had already been through extensive background checks by federal law enforcement officials, there was no need for the added security searches." Flight attendants have been arguing that they should also be allowed to skip the pat downs and invasive security processes.
Study supports U.S. auto bailout
Was the bailout of the auto industry the right thing to do? Did it help or hurt the economy? Well one study shows that the bailout was a better plan than doing absolutely nothing. According to this study, more than 1.4 million jobs would have been lost if it wasn't for the government bailing the auto companies out. And, even though the economy was not in very good shape, if there was no bailout the economy would have been even worse. This is because 1 auto worker creates jobs for 10 people. But also, if these auto companies went under and were liquified, there would have been a loss of about 121 billion in personal income. So, it shows that the bailout did help the economy. This makes sense because the auto industry is a big part of the United States economy.
New Lending Guidelines From Fannie Mae
Take a look at the graph at the beginning of this article.....
Recap -- Fannie Mae is the now government owned company that sets lending standards and buys mortgages from lenders. Also heavily blamed for the real estate crisis and resulting recession.
Previously lenders had to put 5% down of their own money and could use gifts and grants from non profits for more of a down payment. Their was an exception for those who made a down payment of 20% - all the funds could be from a non profit.
Now, since many require a 10% down payment minimum, people are finding it harder to raise funds.
There is a limit on the properties one can use this new exception for - single family homes, condominiums, etc. and a limit on how high the loan balance can be.
Fannie Mae is also getting tougher on the debt to equity ratio accepted - down to 45% from 55%. - This is excellent. In Financial Management (EMAN 361 with Prof. MacLeod) we learned to evaluate a company based on ratios and found that the debt to equity ratio is one of the most important. A high ratio means that the company has more debt than equity for financing and is therefore riskier (debt payment must be paid and are a major liability. equity payments (dividends) can be waved in a year the company is not doing well and therefore will not default).
Recap -- Fannie Mae is the now government owned company that sets lending standards and buys mortgages from lenders. Also heavily blamed for the real estate crisis and resulting recession.
Previously lenders had to put 5% down of their own money and could use gifts and grants from non profits for more of a down payment. Their was an exception for those who made a down payment of 20% - all the funds could be from a non profit.
Now, since many require a 10% down payment minimum, people are finding it harder to raise funds.
There is a limit on the properties one can use this new exception for - single family homes, condominiums, etc. and a limit on how high the loan balance can be.
Fannie Mae is also getting tougher on the debt to equity ratio accepted - down to 45% from 55%. - This is excellent. In Financial Management (EMAN 361 with Prof. MacLeod) we learned to evaluate a company based on ratios and found that the debt to equity ratio is one of the most important. A high ratio means that the company has more debt than equity for financing and is therefore riskier (debt payment must be paid and are a major liability. equity payments (dividends) can be waved in a year the company is not doing well and therefore will not default).
Irish Prime Minister Says Budget Plans Are Already in Place
Although many see Ireland next on track for a large EU bailout, the Irish Prime Minister Cowen is claiming that they will not need one.
Cowen assures us that the low corporate tax rate and the four year plan to reduce the budget would not be changed. However, other leaders are extremely skeptic. How can no change in their policies bring about a change in their financial situation ?
An interesting point - if Ireland does need a bailout, French President Sarkozy promised that raiding their corporate tax rate (now at 12.5 %) would not be a condition of their bailout. This is interesting because Greece is currently battling political instability as many of their citizens are protesting the forced changes that Greece submitted to when they received their bailout.
Irish officials are still holding meetings with the IMF and the World Bank.
A specific claim that the Irish people are most concerned about is simply lifting restrictions that limit the amount of salmon they can catch in the surrounding waters.
Cowen assures us that the low corporate tax rate and the four year plan to reduce the budget would not be changed. However, other leaders are extremely skeptic. How can no change in their policies bring about a change in their financial situation ?
An interesting point - if Ireland does need a bailout, French President Sarkozy promised that raiding their corporate tax rate (now at 12.5 %) would not be a condition of their bailout. This is interesting because Greece is currently battling political instability as many of their citizens are protesting the forced changes that Greece submitted to when they received their bailout.
Irish officials are still holding meetings with the IMF and the World Bank.
A specific claim that the Irish people are most concerned about is simply lifting restrictions that limit the amount of salmon they can catch in the surrounding waters.
Bernanke: stop calling it QE!
According to Chairman Bernanke, the use of the term ‘quantitative easing’ is erroneous since it involves policies geared towards changing the quantity of bank reserves and, that is not exactly what the Fed is targeting. The precise term would be ‘securities purchases’, which are transactions that will affect the yield on those securities and on other assets as a result of substitution effects on investors’ portfolio.
The use of the term QE might generate negative reactions because of its failure in Japan. About a decade ago, Bank of Japan pumped money into commercial banks to combat deflation. However, the banks ended up keeping the money back, causing deflation rates to remain unchanged.
The use of the term QE might generate negative reactions because of its failure in Japan. About a decade ago, Bank of Japan pumped money into commercial banks to combat deflation. However, the banks ended up keeping the money back, causing deflation rates to remain unchanged.
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