Amid Bailout Dangers, Spain Poses the Greatest Risk

Greece's bailout has moreover been easily absorbed by the EU economy. The rescue proposed by Ireland this week is also predicted to be absorbed easily. Even if Portugal has to apply for a bailout, the size of the EU's economy will most likely ensure that a bailout would be possible.
However, the other country that is failing - Spain - is another problem all together.
Spain's economy is at least twice the size of any of the other three countries.
Luckily, Spain's government has done a good job of absorbing its deficit and their banks are mostly solid enough to take the bad loans. Spain's finance minister is also saying they will not need a bailout.
Spain's construction sector is in trouble.

White House Seeks Chinese Help With North Korea

The U.S. is pressuring China to 'rein in North Korea'. ( Another article I was emphasizing the importance of China's realtionship with North Korea - as their only friend, communist similarities, source of aid, etc.)
This is immediatly relevant to Americans because the U.S. has long held a military alliance and support with the R.O.K.
I have noticed that since this attack, which is agreed to be isolated, Americans have already begun to worry. Watch the markets in response to this.

F.B.I. Agents Raid 3 Hedge Fund Offices

Level Global Investors of New York and Diamondback Capital Management of Stamford, Conn. , two hedge funds managed by SAC Capital Advisors were raided by FBI agents for insider trading.
The third firm was not managed by SAC Capital Advisors - Loch Capital Management.
This raid was part of an ongoing investigation into insider trading and hopefully will be the last.
The firms are said to be voluntarily cooperating and are not accused of wrongdoing.
An interesting note - the use of search warrents and surprise raids instead of court ordered subpoenas to produce documents means the FBI is worried about the destruction of documents.

Kocherlakota Says Fed's Asset Purchases Won't Ignite `Inflationary Fire'

Many critics of the current Fed purchasing of assets have contended that this move is going to lead to dangerous inflation. Federal Reserve Bank of Minneapolis President, Narayana Kocherlakota, however said that "This basic logic isn’t valid in current circumstances." The reasoning behind his feelings towards the matter stem from the fact that the The Fed currently has $1 trillion is excess reserves scattered throughout the nation's banks.

Kocherlakota did however suggest a plan to mimic the effect of lowering the interest rate which already has been gravitating around 0 for the last year or so. He beleives that the combination of a consumption tax of 1 percent, a labor- income tax cut of 1 percentage point and an investment tax credit implemented in 2011 would have the equivalent impact of a 1 point interest-rate reduction by the central bank, Minneapolis Fed research shows.

Unfortunately I don't have the knowledge to evaluate this assumption however, it will be interesting to assess this plan next semester in macroeconomics.

Buffett: Rich should pay "a lot more taxes"

Billionaire Warren Buffett told ABC News that taxes for the lower, middle class and possibly upper middle class should be cut even further.

He said, "I think that people at the high end - people like myself - should be paying a lot more in taxes. We have it better than we've ever had it."

Buffett says the rich always insist that if their taxes are lower and they have more money in their pockets, they will spend it and then it will trickle down; but he says that hasn't happened for the last 10 years. Buffett's not the only super-wealthy person to advocate paying more taxes. A group of 45 people who call themselves "patriotic millionaires" agrees.They're asking President Obama to allow the Bush tax cuts to expire at the end of this year for incomes over $1 million.

Do you think that the rich should be paying more taxes? If they were to pay more, would it be more effective than now?

Thai economy back in recession: official data

After two consecutive contracting quarters, the Thai economy is officially back in a recession. This is due to the stronger Baht and a weak global economy, which has considerably lowered exports. While the economy withstood the blow of deadly political violence, it is not immune to the slowdown of the American and European economies. The Baht is at a 13-year high which undermines the competitiveness of Thai exports. Thailand has tried many things to curb the growing strength of the Baht. Monetary policy makers are due to meet again on December 1. Despite the recent contraction, however, the government upgraded its GDP forecast due to a strong start at the beginning of the year.

The Blur Between Spending and Taxes

In this article ,N Gregory Mankiw ( author of our very own macro econ book) argues that instead of haggling over what kind of fiscal policy needs to be employed to counter the deficit, it is better to reform the tax code. He states that there are traditionally two ways in which we can reduce the deficit; either cut government spending or raise taxes . However what we don't realize is that our tax code is full of tax credits which are actually "tax expenditures" or another disguised form of government spending.The tax code is full of tax expenditures like 'credit for hunting snipes",(made up example)and it is estimated that if we got rid of all of these we will save 1 trillion dollars a year. This is not a crazy idea. In fact, the chairmen of president Obama's commission on deficit reduction proposed this idea in their draft proposal. This approach will be equitable since tax expenditures enrich people's after tax income in the bottom quintile by 6 percent, but the people in the top 1% of income distribution receive twice that gain. This plan will also reduce tax rates, but it will widen the tax base, ultimately earning more revenue for the government but ensuring that the new tax laws are equitable.

After Months of Resisting, Ireland Applies for Bailout

Entirely contradicting my previously posted article (also from the new york times) Ireland has asked for a bailout from the EU.
The bailout is estimated to be around $100 billion. This is $10 billion less than the bailout given to Greece last spring.
This move caused stocks in the EU to rise and helped boost the global stock market. Also immediately, Irish bond prices dropped by 18 basis points.
Another surprising move is that England, although not part of the EU, has pledged to give about $11 billion.
Although Ireland has been trying to survive for months by implementing strict budget cuts, the main reason given for the country's failing is their banking system. Many banks will have to be bailed out .

One Way to Trim Deficit: Cultivate Growth

This article alludes to the effects of the late 1990's when the government implemented fiscal policy to expand the economy. On the other hand, to try and repair the deficit in todays time, the Fed implemented a policy in which taxes should be highered. This led to growth; people's income increased and it casued more tax revenue to flow into the Treasury. This article also relates to the Economic Outlook Conference held in Hamilton Williams- in regaurds to growth in the Midwest.

The Fed Did Its Job, Now Washington Needs To Come Through With Fiscal Policy

The tone of this article is fairly optimistic about the current direction of the United States. The author suggests that Bernanke's monetary policy has been exactly what the current state of the economy needed, and now it is up to U.S. fiscal policy to further the economy's recovery. Bernanke has limited the short-term effects of a slow economy, while not sacrificing the long-term economic growth potential. However, the author is pessimistic about the U.S. implementing an appropriate fiscal policy given Obama's track record in recent history; he goes onto suggest that the future fiscal policy should promote investing and business growth.