afghanistan

John Edwards In $2 Million Dispute

July 20, 2011

RALEIGH, N.C. — The Federal Election Commission is considering whether former North Carolina Sen. John Edwards’s 2008 presidential campaign should repay the treasury about $2.3 million. The FEC is scheduled to consider at its meeting Thursday whether to order the repayment. Federal auditors say all but about $200,000 of that sum came from matching funds. The campaign collected a total of nearly $13 million in matching funds after it was approved in December 2007. Edwards dropped out of the presidential race Jan. 30, 2008. FEC auditors say Edwards’s campaign understated its cash and overstated its expenses. At issue is how much Edwards’s campaign was entitled to receive as a result of qualifying for matching funds and the cost of winding down the effort. Edwards’s lawyers say the Democrat doesn’t owe anything.

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Gulf Oil Spill Claims Fund Will Be Audited To Speed Up Process

July 20, 2011

WASHINGTON — An independent audit will be performed on the $20 billion fund set up to compensate victims of last year’s BP oil spill in the Gulf of Mexico, Attorney General Eric Holder announced Wednesday. In a letter to the fund’s administrator, Kenneth Feinberg, Holder stressed that the goal is to balance the need for resolving claims quickly and fairly along with the need to start an audit before the end of the year. Holder said the fund’s “highest priority” should be to achieve speed and fairness. Holder made a June 30 trip to the Gulf Coast in which he heard concerns from Alabama officials and residents about the transparency of the claims process. In his letter, the attorney general said Feinberg agreed to an audit, a step that Holder has been urging for some time. In response, Feinberg said the audit will begin this year but won’t disrupt “the timely processing of claims.” He said the audit “is something we have always considered we would do.” To date, the fund has paid $4.7 billion to 198,475 claimants. The total number who have sought money stands at 522,506, many with multiple claims. In all, the fund has nearly 1 million claims and continues to receive thousands of claims each week. Feinberg also oversaw payouts from the victims compensation fund that was set up after the Sept. 11, 2001, terrorist attacks. The procedures to implement the 9/11 fund’s activities were audited, said Deborah Greenspan, the fund’s deputy. Feinberg said the 9/11 claims themselves were not audited, due to confidentiality requirements and proprietary information. He noted that the fund did issue a final report that laid out overhead costs and expenses related to claims. ___ Associated Press writer Harry Weber in Atlanta contributed to this report.

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Fernando Espuelas: Why Republicans Can’t Say Yes to Obama

July 20, 2011

So it’s not about the deficit after all. For months we’ve heard the increasingly shrill alarms being sounded by supposedly sober-minded Republican Congressional leaders that America is the next Greece — balancing carefully over a debt precipice, destruction inevitable unless radical action is taken. These alarms have been so effective that the true nature of our national crisis — chronic unemployment at unacceptably high levels, overall slack economic demand — has been relegated to a secondary plane of importance. Some 20 million people unemployed or under employed are not just a human tragedy but a major contributor to our still under-performing economy. The GOP trope that the federal government deficit is somehow responsible for high unemployment defies common sense and basic economics. Yet this fallacy is repeated often and loudly as if it were a proven fact. Meanwhile, the chairman of the Federal Reserve recently told Congress that the Fed is ready to take even more aggressive action — read some massive stimulus — if the economy falters. So we come to the intransigence of Republican “negotiators” trying to hammer out some compromise to raise the debt ceiling with the Democrats. It would seem that these elected leaders’ responsibility to the country, their oaths of office, is seemingly trumped by their religious oath to Grover Norquist, the founder of special interest group Americans for Tax Reform and the godfather of the “all taxes are evil” movement, to never raise taxes regardless of the economic conditions This fetishistic oath, seemingly sworn and signed in blood, has kept the Republicans from saying “yes” to President Obama’s offer for raising the nation’s debt ceiling — a deal that would whack some $4 trillion dollars from the national deficit. Charlie Cook, one of America’s most respected non-partisan political analysts, is brutal on the Republican’s stance on the debt ceiling — and thinks that it may cost them the support of Independent voters in 2012.  Cook writes in the National Journal : …What has happened is that the New Republican Party has come to hate taxes a lot more than it hates deficits and the country’s growing indebtedness. It has rewritten history to omit any acknowledgment that President Reagan, when it was necessary, went along with tax increases. The memory of Reagan accepting tax increases, however reluctantly, has been supplanted by President George H.W. Bush’s fateful decision to go along with tax increases in the 1990 budget negotiations. What the New Republican Party remembers is Bush losing reelection, not the fact that those tax increases were pivotal in eliminating the federal budget deficit under President Clinton and in the resulting period of strong economic growth. Bush’s loss is remembered, and the period of fiscal responsibility is forgotten. At least history will treat Bush 41 with more gratitude than his own party does… Why did the Congressional Republicans walk away from the biggest deficit reduction pact in history?   Based on a several recently published polls, Americans everywhere outside of Washington are befuddled by their elected leaders’ stance in these negotiations. A new CBSNews poll found that “only 21 percent of the people surveyed said they approved of Republicans’ handling of the negotiations, while 71 percent disapprove.” Other recent polls point to a similarly stark divide between Republican voters and their elected representatives. So why walk away from a great deal to shrink the government deficit?  Could the “of the 1%, by the 1%, for the 1%” be the reason?  A recent  article in Vanity Fair by Nobel-winning economist Joseph Stiglitz is as cogent as it is alarming: Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income — an inequality even the wealthy will come to regret. Stiglitz goes on to say that enlightened self-interest — the patriotic desire for the whole country to prosper, for the middle-class to thrive, so you too can be successful – should provoke the “1%” to support policies that improve the whole of society, not just those initiatives that dump tax benefits to the wealthiest Americans paid for by the middle class. Warren Buffett, the iconic self-made American man, is clear on this subject. No one has made a dime in this country without the unique advantages that America offers, he repeats and repeats. From an ethos of fairness, hard work and sacrifice, to a belief (at least in classical American mythology) that any kid can grow up to be president, the success of every American is tied to, as the U.S. Constitution states in its preamble “the general Welfare.” Stiglitz writes that the 1% no longer identify with the bottom 99% — and that this division is bad for all Americans, rich, middle class and poor. When the “1%” fund and elect elect representatives that are committed to the welfare of that “1%” at the expense of the 99%, we find ourselves in a dire situation with negatively profound implications to the future of America and our ability to remain the world’s leader. In fact, we find ourselves in a self-created, completely avoidable, national crisis that shatters Americans’ faith in their own government while also damaging America’s standing in the world.

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Republicans Introduce Bill Aimed At Crippling Labor Board

July 19, 2011

WASHINGTON — House Republicans introduced a bill Tuesday afternoon aimed directly at scuttling a controversial complaint issued by the National Labor Relations Board (NLRB) against The Boeing Company. Called the Protecting Jobs from Government Interference Act, the bill would prohibit the labor board from ordering any company to “close, relocate, or transfer employment under any circumstance,” severely weakening the board’s ability to enforce labor law. The maneuver is just the latest development in an escalating spat between conservatives and the labor board, which conservatives and business groups have decried as having a pro-union tilt under President Obama. Earlier this year, the board’s general counsel, Lafe Solomon, issued a complaint alleging that Boeing broke labor law when it created a production line for its 787 Dreamliner in South Carolina. Solomon said the move was retaliation against Boeing’s unionized employees in Washington state for having gone on strike in the past. If Boeing is deemed to have broken the law, it could feasibly have to move the production line to Washington. “No government board should have the authority to tell a private employer where it can run a business,” Rep. John Kline (R-Minn.) said in a statement on the bill. “Yet as the Boeing dispute has made disturbingly clear, the National Labor Relations Board is empowered to override the business decisions of American employers.” The bill may be more theater than substance, since it would seem to conflict with the National Labor Relations Act. The act authorizes the agency to issue complaints like the one filed against Boeing. If passed, the law as introduced would effectively gut the board’s remedy process when labor law has been broken. The bill was introduced by Rep. Tim Scott (R-S.C.) and co-sponsored by Kline along with Reps. Phil Roe (R-Tenn.), Joe Wilson (R-S.C.), and Trey Gowdy (R-S.C.). South Carolina Republicans, in particular, were incensed over the Boeing complaint, claiming it could cost the state jobs. Unions and labor activists, however, hailed the decision as a victory for workers, as well as an indication that the board was enforcing labor law in a manner not seen in the Bush years. In a statement, Rep. George Miller (D-Calif.) said he was “disappointed” in the Republicans decision to push a “far-reaching” bill through the education and workforce committee so quickly without a hearing. The bill is scheduled for a vote on Thursday. “A quick first read indicates that the Republican bill will make it easier to play American workers against each other in a race to the bottom and even easier to ship American jobs overseas,” Miller said. “It would create an open season for CEOs to punish workers for exercising their rights.” The labor board, an inconspicuous agency not known to many Americans, has been assaulted by Republicans ever since the Boeing complaint was issued in April. Last month, Republicans called a special oversight hearing in South Carolina, where Solomon was largely castigated for his decision to issue the complaint against Boeing. For the last two days, the NLRB has hosted public hearings on new rules it plans to issue that will streamline the union election process. Republicans have publicly assailed that decision as well, calling it a gift to unions.

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House Republican Freshmen Caught Between Rock And A Hard Place

July 19, 2011

WASHINGTON — House Republican freshmen are caught between rock-solid fiscal conservatism and a political hard place. The class of 2010 that lifted the GOP to its comfortable House majority pushed the leadership to a vote Tuesday on legislation that would slash spending by trillions of dollars and require a balanced budget constitutional amendment in exchange for an increase in the nation’s borrowing limit. At least a dozen freshmen spoke out for the bill during hours of House debate Tuesday. “Washington has a spending addiction,” insisted Rep. Rich Nugent, R-Fla. Securing a vote was a hard-won victory consistent with the campaign promises that helped get the 87 GOP members elected in November. But the measure’s chances are poor in the Senate, setting the stage for a backup plan from congressional leaders that would allow the government to avoid an unprecedented default on Aug. 2. That would force freshmen to back an increase in the $14.3 trillion debt ceiling, and several constituents are telling them not to do it. “I’m actually being accused of selling out back home,” Rep. Mick Mulvaney, R-S.C., said in an interview. “Some folks don’t want to raise it under any circumstances. I tried to explain to them that this is the one chance to actually change Washington, so most folks will come around after we have that discussion.” The former state lawmaker who ousted the chairman of the House Budget Committee, Democrat John Spratt, said he was hearing from the “extreme right wing.” Solid backing of tea partyers helped propel several freshmen to Washington, boosting the candidacy of citizen-lawmakers such as car dealers, pizza shop owners, farmers and businessmen. The Tea Party Express on Tuesday made it clear they better stay in line, threatening GOP primary challenges to Republicans who support Senate Minority Leader Mitch McConnell’s alternative plan to give President Barack Obama the power to order an increase in the debt limit of up to $2.5 trillion over the coming year. Another tea party group warned about the “disease of Republican compromise” infecting Washington and ceding to Obama’s demands. On the other side, freshmen Republicans face pressure from McConnell’s sober assessment that failure to raise the debt ceiling could be blamed on Republicans and ensure another term for Obama in 2012. Separately, House Republicans are hearing from business owners who echo the dire warnings from economists and financial analysts about the ramifications of a government default. The votes in the coming days could have widespread implications for GOP freshmen next year, determining whether they get a challenge from within the party in a primary or have to answer for their decisions in the general election. A new CBS poll found the public had soured on both Obama and congressional Republicans in the debt talks, but the GOP got lower marks than the president. Frustrated with the president, about 20 freshmen took a bus to the White House on Tuesday to press Obama to detail his deficit-cutting plan. “We don’t care about re-election. We’re here to do the work and we’re asking the president, `Put it in writing, let’s debate it,’” said Rep. Tom Reed, R-N.Y. “We thought it was so important, we came here physically.” Scoffing at claims of economic calamity if the debt ceiling isn’t raised, Rep. Mo Brooks, R-Ala., said such statements are “absolutely wrong” and “misleading the American people.” Brooks argued that the government would still have enough revenue to pay its creditors. “This is Barack Obama’s debt, this is Barack Obama’s debt ceiling,” Brooks said, adding that Obama had been “AWOL” on the issue. Neither Obama nor a White House official met with the group and they returned to the Capitol. Rep. Vicky Hartzler, R-Mo., who owns an agriculture business with her husband, said business owners, bankers and others in her district are pushing for deep spending cuts. “They understand this overwhelming debt is hurting our economy and impeding job creation so we need to rein in this runaway spending, get control of our debt so that we can grow and create jobs,” Hartzler said in an interview. The Missouri congresswoman said she hasn’t heard specifically from tea partyers, but added, “My district was tea party before tea party was cool.” It’s unclear how freshman Republicans will vote in the coming days if faced with a possible compromise that includes raising the debt limit. Hartzler said she would vote “no, at this point.” Mulvaney pointed out that for lawmakers who backed the so-called cut, cap and balance bill in the House, “there’s a lot of latitude in some of those things.” The GOP freshmen are hardly monolithic on budget issues. In April, most of the 87 relented and voted for the compromise worked out by Obama and House Speaker John Boehner to keep the government running. Sixty of the 87 supported the package that included spending cuts of $38 billion, far less than the $61 billion many had pushed for, while 27 of the freshmen opposed it. In February, House Republican freshmen led the charge in voting to cancel $450 million for an alternative engine for the next-generation F-35 fighter plane, going against Boehner and other House GOP leaders. Whatever the spending cuts in any deal, Mulvaney offered an assessment of Washington after more than a half year in office. “There’s more smoke and mirrors in this town than a Barnum & Bailey circus when it comes to counting,” he said. ___ Associated Press writer Erica Werner contributed to this report.

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Steve Blank: The $10 Million Photo and Other VC Stories

July 19, 2011

While on vacation I had a phone interview with Kevin Ohannessian of Fast Company who wanted a few “funding stories.” Here are two of them. Apologies for the rambling stream of consciousness. The original interview in Fast Company can be seen here . Throw in the Photo and You Have a Deal When we were trying to raise money for E.piphany, my last startup, I was negotiating with a venture capital firm called Infinity Capital. They really wanted to invest, but it was the beginning of the bubble, and I wanted (what was then) an absurd valuation. All we had were six slides, and I wanted a $10 million post-money valuation. But it was my eighth startup and my partner Ben was even more experienced: ex VC, ex Harvard Computer Science professor, genius at building products and teams. I had sat on a board of an Electronic Design Automation company with this VC, and we had gotten to know each other. So when I wanted to start a company he wanted to fund us. We had gone back and forth with them on valuation, but this was a new firm and they wanted to close a deal with us. After about our fifth meeting I’m in their conference room. I say, “Why can’t you guys do a $10 million post money valuation?” Picking the biggest number I could think of for three founders without a product a semi-coherent idea and badly written slides. Finally they admitted, “Steve, we’re a new fund; everybody will think we are idiots if we do that.” I said, “All right. Can you do some other number close to my number?” So I stepped out of the room as they caucused, and they called me back in 10 minutes later and said, “So listen. We can do $9.99 million.” I’m trying to play poker with the deal, and one of the partners at the time was a great photographer-the firm had big prints of his on the walls. I was really in love with the one in the boardroom. So without thinking, when they made me that offer, trying to keep a straight face, I reached behind me, grabbed the photo off the wall and slammed it on the desk, and said, “If you throw this photo in, you got the deal!” The $10 Million Photo The look on their faces was utter astonishment. I was thinking it was because I was being creative by throwing the photo in, but then I noticed that this cloud of dust was settling around me. I turn around and looked at the wall and it turned out the photo had been bolted into the drywall. And there was now a hole — I literally ripped a part of their boardroom wall off as I was accepting the offer. Without missing a beat they said, “Yes, you can have the photo. But we’re going to have to deduct $500 to repair our wall.” And I said, “Deal.” And that’s how E.piphany got its Series A. Invest in the Team Before we closed our Series A with Infinity, I had called on Mohr, Davidow Ventures , the firm which had funded my last company, Rocket Science . The senior partner at the time was Bill Davidow , a marketing legend and a hero of mine who had also funded other Enterprise software companies. I went in and pitched Bill the idea about how to automate the marketing domain. He gave me 15 minutes, then as politely as he could do it, walked me out the door and said, “Stupidest idea I ever heard, Steve. Enterprise software means across the Enterprise. Marketing is just one very small department.” As he was walking me out, I remember as I physically crossed the threshold of the door that: A. He was right, and B. I figured out how to solve the problem of making our product useful across the entire enterprise. So E.piphany went from a bad idea to a good idea by being thrown out by a VC who gave me advice that made the company. He has reminded me since, “Sometimes you invest in the idea, but you should always be investing in the people. If I would’ve remembered who you were, I would’ve known you would figure it out.” (Kleiner Perkins would do the Series B round for E.piphany. After our IPO, Infinity’s and Kleiner Perkins’ investment in Epiphany would be worth $1 billion dollars to each of them.) I still have the photo. Back from vacation soon.

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What Will Happen To Markets If The U.S. Defaults?

July 17, 2011

NEW YORK — Time is running out for Washington to raise the country’s borrowing limit and avoid a default. Wall Street isn’t panicking yet. But if the unthinkable happens, a default could strike financial markets like an earthquake. “If we just get higher longer-term interest rates, we’d be lucky,” said John Briggs, Treasury strategist at the Royal Bank of Scotland. What might markets look like after a default? The tremors from even a short-lived default could take unpredictable paths. Stocks, bonds and the dollar would likely plummet in the immediate aftermath. There’s wide agreement among economists that a default would drive up borrowing costs for everybody. U.S. Treasury yields act like a floor for other lending rates, so raising them makes it more expensive for Americans to take out mortgages, for corporations to finance new spending and for local governments to borrow. But analysts say predicting exactly how a default would play out in stocks, bonds and currency in the hours and days following the Aug. 2. debt ceiling deadline is practically impossible. “If I were to draw a flow chart, it becomes so complex it’s impossible to analyze the impact of a default,” said Guy LaBas, chief fixed income strategist at Janney Montgomery Scott. When pressed, investors say the immediate aftermath could look like the financial crisis in September 2008. Stocks would lead the way down. In the month following Lehman Brothers’ bankruptcy, for instance, the Standard & Poor’s 500 index lost 28 percent. Gold may offer some refuge. Fear has driven traders into precious metals in droves in recent years, but gold is at a record $1,594 an ounce, without taking inflation into account. But two places where traders usually hide — the dollar and U.S. Treasurys — are likely to sink as the world’s investors flee the U.S. There would be few places to hide. A deeper fear is that a default could freeze the short-term lending markets that keep money moving throughout the global financial system. Treasurys and other government-backed debt are widely as used collateral for loans in these markets. A default and a downgrade of U.S. debt by rating agencies would shake the trust in that collateral, Briggs said. Lenders could respond by demanding borrowers to post more collateral, forcing them to sell other investments to meet those demands. A similar selling cycle spread turmoil across markets when Lehman Brothers collapsed in 2008. But the fallout from a U.S. default could be much worse. “I don’t even want to think of the ripple effects,” Briggs said. Indeed, most analysts agree that if the world’s largest economy reneges on its debts, the consequences would be catastrophic. That’s why so far they’ve trusted Congressional Republicans and President Barack Obama to reach a deal. Federal Reserve Chairman Ben Bernanke certainly drew a dire picture in testimony before the Senate Banking Committee on Thursday. He said a default would be a “calamitous outcome” and “create a severe financial shock.” The global financial system relies on Treasurys, backed by the world’s largest economy and long considered one of the world’s safest bets. “A default on those securities would throw the financial system potentially into chaos,” Bernanke said. The widespread selloff that might trigger could have one benefit, Briggs and others say. Panic-selling might force Washington to quickly agree to raise the debt limit. Think back to September 2008 for some historical perspective. After the House of Representatives voted down the bailout bill to create the Troubled Asset Relief Program on Sept. 29, the Dow Jones industrial average nosedived 777 points. Congress made an about face and four days later passed the TARP bill. President George W. Bush quickly signed it into law. “We’re setting up for a TARP-like moment,” said Neil Dutta, U.S. economist at Bank of America-Merrill Lynch. “The politicians don’t come to a resolution, but the market forces a resolution.” Traders are still banking on a deal to increase the borrowing limit before the Aug. 2 deadline. That’s one reason stocks and bond yields have remained relatively stable thus far, even after Moody’s and Standard & Poor’s warned they may soon take away the country’s top credit rating. “What would shock is if Washington failed to beat the deadline,” said Tony Crescenzi, market strategist at Pimco. Crescenzi and other investors believe the negotiations could drag on until the last minute. Markets would likely greet a deal with a “relief rally,” analysts say. The effect would be the reverse of a default: Stocks, corporate bonds and the dollar all jump. “The market will react well to it,” said David Kelly, chief market strategist at J.P. Morgan Funds. Kelly said a deal would lift the uncertainty hanging over investors, especially those too worried to buy stocks now. After President Bush signed the TARP into law in 2008, for instance, the Dow made large jumps, adding as many as 946 points in a week. When Washington finally agrees to raise the debt ceiling, Treasurys could drop because investors would be more willing to take risks in other investments, Kelly said. That’s how they normally trade: Good economic news pushes Treasury prices down and yields up. The relief may not last long. If the agreement leads to deep spending cuts, Wall Street economists say it will likely drag down economic growth. Similarly, in late 2008, the wild gains evaporated as the financial crisis took hold. The S&P bottomed out in March 2009. Federal spending makes up 8 percent of gross domestic product, a broad measure of the economy. Goldman Sachs economists estimate that a deal to cut $2 trillion in spending could take 0.8 percentage points off economic growth next year. The bank already predicts modest real GDP growth of 3.1 percent in 2012. Knock off a quarter of that and the economy won’t look much better than it does now.

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Credit Suisse Is ‘Target’ Of Inquiry

July 17, 2011

U.S. prosecutors are ratcheting up the pressure on Credit Suisse Group AG as part of an escalating tax-evasion probe.

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Taking A ‘Young & Reckless’ Approach To Business

July 17, 2011

Chris “Drama” Pfaff has spent his entire adult life under the watchful eye of an MTV camera. In 2007, fresh out of high school, he moved from the suburbs of Ohio to the Hollywood Hills, to become the assistant to his older cousin — professional skateboarder and soon-to-become reality star Rob Dyrdek. For three very successful seasons, Pfaff thanklessly washed clothes and looked after a miniature horse on Rob & Big, a buddy comedy chronicling the travails of Dyrdek and his 6-foot-6, 415-pound bodyguard, Christopher “Big Black” Boykin. While Pfaff served as the picked-on little brother, the experience served as an unlikely entrepreneurial apprenticeship.

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Janet Tavakoli: Mark Zuckerberg’s Value Problem: "My" Facebook Profile Was a Fraud, So Was "Warren Buffett’s"

July 15, 2011

I don’t use Facebook. Neither does Warren Buffett, but phonies have used his name on Facebook. Earlier this month, an imposter created “my” profile on Facebook. In order to get the fake removed, Facebook required an uploaded scan of a government issued I.D. that shows a photo and birth date (for example, a driver’s license or passport). Facebook suggests one black out the most sensitive information and claims it will delete this scanned information from its servers once identity has been verified. In other words, after an impostor faked my identity, I was the one who had to put myself further at risk by providing a verifiable scanned government I.D. to prove I had the right to complain about the fraud enabled by Facebook. The Antisocial Network There was no mechanism to email a human, who could have easily verified my identity without the need for me to upload a scan of a government issued I.D. There was also no way to even submit the report using the “Reports” link without the upload. Christopher Soghoian, a privacy advocate at the Center for Applied Cybersecurity Research at Indiana University told the Wall Street Journal : “People do not like Facebook. They do not trust Facebook. Facebook gets people to give up information under the claim that it’s private and then it’s made public. And your only option is to shut down your account.” I now completely agree with Mr. Soghoian. I don’t like Facebook, and I don’t trust Facebook. You don’t even need an account to be punked by Facebook. When you’ve been impersonated, Facebook asks for private information and claims it will delete it from its servers, but given that it has failed to protect private information in the past, why should anyone trust this claim? Yet I had no choice but to supply the information in order to get cooperation from Facebook to take down the fraudulent profile. The Facebook Team responded three days later reporting it had removed the profile. If you expect niceties such as “sorry for the inconvenience,” forget it. That might be fine if you are imposing on Facebook, but when Facebook’s protocol has imposed on you, something more is required, if Facebook ever wants to be taken seriously as a valuable business. Investors Should Take Note of Phony “Users” Mark Zuckerberg said that Facebook is “free” and always will be. But it isn’t true for all of its users. Facebook claims “750 million active users,” and some, the “whales,” must eventually provide profitable business. Facebook requires revenues, and it requires an eventual demonstration of ongoing profits to keep investors happy. That means it needs users to buy goods and services so that Facebook gets a cut of the action. It’s an indirect cost imposed on the Facebook users that support the network. If Facebook loses those willing buyers, it loses the whole ballgame. Eventually investors will want to know the number of profiles of people in the demographic sectors that are most likely to buy goods and services. If one had a mind for mischief, then one could mislead investors by, intentionally or otherwise, allowing phony profiles of whales. In my case, Facebook did just that. Investors should ask if this is a habit. Reasonable Questions What is Facebook’s strategy? Where is its audited balance sheet? Which users provide the most revenue? Of target demographic profiles, how many are fakes? How many authentic users does Facebook actually have? Does Facebook know how many user profiles are genuine, and if so, how does it know? Based on my experience, Facebook doesn’t know who is real and who isn’t real. Many people may not even be aware there is an impostor profile of them on Facebook, and if they are aware, they may resent the hoops they have to jump through to get it removed. I know I was tempted to shrug and let it go, but I didn’t. Investors should take that into account when evaluating Facebook’s “users” and the potential for revenues they represent. The “Social Network” Broke the Social Contract If you eat in a cafeteria that asks you to dispose of your trash and put away your tray after you eat, you cooperate, because you are holding up your end of the social contract. You clean up for the next person, whom you’ve never met. You trust that others understand and honor this social contract, too. You trust that someone who has never met you will have the courtesy to clean the table before you arrive for your next meal. It doesn’t make you superior. It just means you understand the utility of honoring the social contract. On your next visit, you won’t have to carry your tray to a table covered with trash. But if others break this social contract, you’ll find another place to eat where the people are smart enough to cooperate with the social contract, because it is a nicer place to hang out. Facebook may think it’s too cool to honor the web’s social contract. It may believe its image says “we are the Borg,” but to me it says “we are the slobs,” and we’re not interested in running a business. Facebook’s attitude is futile, and I won’t be assimilated. Users who believe they’re getting something free may tolerate it, but people who spend money, actual customers, will find a better place to hang out as soon as an alternative becomes available. As I mentioned in an earlier commentary, ” The Biggest Headache for Groupon and Facebook ,” bright young people are doing interesting things on the web that may one day challenge Facebook on features alone. If newcomers are trustworthy and courteous, Facebook will lose its revenue generators. Facebook will have a hard time keeping its inflated stock market valuation — currently roughly $84 billion for its privately traded shares — once investors face up to its flawed business model. For my part, I can say that if you ever see a profile of “me” on Facebook, it will be another impostor.

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Azeem Ibrahim: Saving Greece or Saving the Euro?

July 11, 2011

The EU’s bailout is simply postponing the inevitable. Greece is about 300 billion Euros in debt, with a jobless rate of 16% (42.5% for youth) and its budget deficit is more than four times the Eurozone limit at 13.6% of GDP. Greece is nominally insolvent with a newly imposed austerity program which may or may not work and a disaffected population taking to the streets and squares in violent reaction. Only time will tell if Greece has been “saved” and there is considerable doubt about the future of the Euro. Greece has reached this point through years of mismanagement and profligacy; its reporting to the EU consisted of “severe irregularities” based on “submission of incorrect data.” Yet rescue has come in the form of an EU bailout plus the added contribution from the International Monetary Fund which provides a stringent monitor less prone to political pressures than a European institution might be. Greece has responded by passing the first of a series of austerity measures in its Parliament, ending immediate worries about a Greek debt default. Pressure is now intense to put together a second bailout package, as the markets respond with what Sweden’s Finance Minister, Anders Borg, has called “wolf pack behavior.” Speculators and credit rating agencies are being blamed for trying to break up the monetary union to eliminate it as a potential rival to the US dollar as international reserve currency. As the crisis deepens, Jean-Claude Trichet, President of the European Central Bank, is calling for a single Euro Finance Ministry to be formed to oversee fiscal and competitive policies and direct responsibilities for countries “in fiscal distress.” This is seen as taking one step closer to a United States of Europe with a central fiscal policy, putting an end to the latitude in monetary affairs that has caused the recent crisis. The unpalatable truth becomes glaringly obvious — the EU simply cannot afford to keep bailing out insolvent members, even with the help of the IMF. IMF members will soon get restless if their new head, Christine Lagarde, is too euro-centric in her funding allocations. The Greek crisis has revealed a fault line so deep that it can no longer be ignored. The hypothesis of European convergence has failed to materialize. The imbalance between the Northern countries (Germany, France, etc) and the Southern (Spain, Greece, etc) is growing rather than shrinking. Since the introduction of the euro in 1999, GDP averages have drifted apart by as much as 11% and distinct groups of debtor and creditor countries have emerged. The dream of European monetary convergence has soured, and a Greek EU Commissioner, Maria Damanaki, said on May 25, 2011, “The scenario of removing Greece from the euro is now on the table.” This was contradicted by Greece’s Prime Minister, George Papandreou, who insisted he was determined to keep Greece in the Eurozone, but the issue is still very much alive. However, with France and Germany committed to bailing out the weaker countries, a breakup of the Euro does not look likely in the short term. How important to Europe is the survival of the Euro? The European Union existed for decades before the Euro and a number of successful EU countries have refused to join the Eurozone, notably Great Britain, Sweden and Denmark. One alternative is to forget about convergence and return to an “asymmetric architecture” with Germany as the benchmark economy. Germany’s trade surplus has already caught the attention of Christine Lagarde, the new IMF head, who warned in a Financial Times article on March 15, 2010, that Germany’s position could be unsustainable. If Germany’s strength has become a problem, as is Greece’s weakness, then it emphasizes again the difficulty of creating a one-size-fits-all fiscal and monetary policy for 16 countries. Perhaps it is time for the EU to not just swallow its pride and ask the IMF for help, but to take a deeper swallow and allow the weaker economies to secede from the Eurozone, releasing the others from their obligation to keep bailing them out. But this is not the overruling concern of the IMF. “The IMF does no t bail out poor nations. It bails out banks in rich nations that have made imprudent loans to poor nations.” The French and German banks that made those loans to Greece, Portugal and Ireland have to be protected and it is the survival of the banks, not the welfare of the people of the EU, that is the primary goal of both the EU and the IMF. EC President Jose Manuel Barosso, said in his first State of the Union address on September 7, 2010, “Europe must show that it is more than 27 different national solutions. We must swim together, or sink separately.” Somebody should look more closely to see whether the Euro is still swimming or instead, drowning. Dr Azeem Ibrahim is a Fellow and Member of the Board of Directors at the Institute of Social Policy and Understanding and a former Research Scholar at the Kennedy School of Government at Harvard and World Fellow at Yale. More writings here: www.azeemibrahim.com

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Veteran Unemployment Rate Soars

July 11, 2011

Unemployment among recently returned veterans, already in double digits, is poised to get worse as more soldiers return from Iraq and Afghanistan.

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Paper Says China Has Legal, Moral Right To Curb ‘Rare Earth’

July 7, 2011

BEIJING (Reuters) – China is well within its rights, legally and morally, to limit rare earth exports, argued an article in Chinese state media on Thursday, days after the World Trade Organization ruled against China on its curbs of raw materials exports. The People’s Daily, the mouthpiece of China’s ruling Communist Party, said claims by countries that China’s export curbs on the minerals threatened their economic and national security were “groundless.” “It’s not that other countries don’t have their own supplies, it is just that they have hidden them away,” it said. “China’s handling does not violate international rules and is not contrary to its WTO accession promises,” the paper said. The WTO ruled on Tuesday that China had violated its rules when it curbed exports of coveted raw materials such as bauxite, coke and magnesium used in the production of steel, electronics and medicines. That ruling, initiated by complaints filed by the United States, the European Union and Mexico in 2009, was seen as a possible precedent for a future case on China’s rare earth export quotas. In its ruling, the WTO panel said China’s domestic policies fell short of demonstrating that its export duties on raw materials were to curtail pollution or conserve exhaustible natural resources — reasons also offered for its rare earth quotas. China is widely expected to appeal the ruling. It has taken steps to consolidate and rein in its polluting rare earths industry, which may bolster its case should rare earth quotas be the target of a similar WTO challenge. The central government slashed rare earth export quotas by 35 percent for the first half of 2011, building on previous quota cuts. That move choked off global supplies, boosted prices and angered China’s trading partners. China produces 97 percent of the world’s supplies of rare earths, a group of 17 minerals used in electronics and defense and renewable energy industries. Aside from reiterating China’s stance, the report cited experts who highlighted United Nations declarations on sovereignty over resources and WTO rules that would allow China to make exceptions with its rare earth quotas under trade law. “Western countries cite WTO clauses to criticize China … but there are always exceptions to the WTO legal provisions,” the paper quoted prominent Tsinghua University scholar Zhou Shijian as saying. “For example, article 20 of the General Agreement on Tariffs and Trade expressly stipulates that contracted parties may, for certain special purposes, limit imports and exports,” the paper said. The WTO did not permit those general exceptions on the raw materials decision. (Reporting by Michael Martina; Editing by Sugita Katyal) Copyright 2011 Thomson Reuters. Click for Restrictions

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Moisés Naím: Malthus, Marx, and Markets

July 7, 2011

I’ve just got back from China. Like most other regular visitors, I am amazed at the lightning speed of the changes in that country. My last visit was not that long ago and yet this time I noticed further enormous changes. This is what happens when a giant economy grows by 10 percent every year. I visited China for the first time in 1978, when its economic reforms were just being introduced. Cars were rare and the streets were packed with swarms of cyclists, all dressed in a uniform of either navy or olive green. Today those same streets are lined with skyscrapers with the world’s boldest architecture, crammed with cars, and people are dressed in every color and style imaginable. On my first trip, China’s economy was only 40 percent of that of the Soviet Union. Today it is four times larger. While it remains to be seen how sustainable China’s economic boom ultimately is, some of its consequences will endure. The most fundamental change is that millions of Chinese have escaped poverty, thus joining a middle class that while much poorer than in Europe or the United States, has for the first time the means to consume more food, medicine, electricity, cell phones, or toys. While an economic crisis or a slowdown will shrink it, it will not wipe it out completely. This is not a China-only phenomenon: the expansion of the middle-class in fast-growing poor countries is a global trend . India, Turkey, Vietnam, and Brazil are just a few in a long list of nations that now have a middle class larger than ever before. But will the ascent of the new middle class come with unbearable environmental and social pressures? There are three ways to answer this question. The first was offered by Thomas Malthus. In 1798 he argued that if the population grows faster than food production, inevitably famine, disease, and wars will “rebalance” the situation. A 1972 book titled The Limits to Growth predicted that oil would be exhausted by 1992 and a major Malthusian catastrophe would occur around 2000. Obviously, Malthus and his followers underestimate the impact of new technologies. The green revolution in agriculture, for example, meant that grain production in poor countries doubled in just 20 years. In general, more food per capita is produced today than ever before and more technologies enable the exploitation of natural resources that until recently were inaccessible. The second answer is that the problem is not about production but distribution. A minority consumes far too much and the majority of the world consumes too little. For example, the United States, with only 4.6 percent of the world’s population, consumes 25 percent of the yearly global energy output. Each German uses nearly nine times more energy than every Indian, and 30 times more than a Bangladeshi. From this perspective, Marx was right: consumption should be more equitably distributed and the state has to intervene to ensure that this happens. The third is a market-based response: prices and incentives will solve the problem. If there are shortages, prices go up and consumption is thus forced to go down as less people can afford the same quantities as they did when prices were lower. Moreover, higher prices create incentives to both be more efficient and to invent technologies that enable more production at a lower cost. If the price of oil continues to rise, wind, sun, and sea can compete with hydrocarbons for the generation of energy . If cotton prices go up, more farmers will be stimulated to plant more cotton. This, in fact is already taking place and in many areas we have witnessed almost miraculous growth of supply. And new technologies are creating more efficient and environmentally friendly manufacturing processes. The problem, however, is that market adjustments are brutal and are a threat to the poorest consumers for whom any decrease in consumption (forced by higher prices) means going hungry. Neither does it solve the problem of global market failures: the oceans are deteriorating at an unprecedented rate due to overfishing and their indiscriminate and largely unregulated exploitation. And we know what is happening with the CO2 emissions warming up the planet. Markets alone will not solve these problems. Neither Malthus nor Marx nor the market give us adequate answers to the difficult questions posed by the explosive growth of countries like China, the expansion of the middle-class in many of them, and the resulting increase in global consumption. Technological responses stimulated by the market may be too late to avoid serious social and environmental damage. Excessive state intervention to correct inequalities can end up fatally distorting markets and stifling the innovations we badly need. And, without state intervention, market failures may make the planet unlivable. Rigid ideological attachments will not help us find the solutions. We must draw on all the ideas, invent new ones, and give free rein to pragmatism and experimentation. In the past, humans managed to find solutions to unprecedented problems. There is no reason to assume that we will not be able do it again. Moisés Naím is a senior associate in the International Economics Program at the Carnegie Endowment for International Peace. He tweets at @moisesnaim.

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The Rich Get Richer

July 2, 2011

WASHINGTON — This is one anniversary few feel like celebrating. Two years after economists say the Great Recession ended, the recovery has been the weakest and most lopsided of any since the 1930s. After previous recessions, people in all income groups tended to benefit. This time, ordinary Americans are struggling with job insecurity, too much debt and pay raises that haven’t kept up with prices at the grocery store and gas station. The economy’s meager gains are going mostly to the wealthiest. Workers’ wages and benefits make up 57.5 percent of the economy, an all-time low. Until the mid-2000s, that figure had been remarkably stable – about 64 percent through boom and bust alike. Executive pay is included in this figure, but rank-and-file workers are far more dependent on regular wages and benefits. A big chunk of the economy’s gains has gone to investors in the form of higher corporate profits. “The spoils have really gone to capital, to the shareholders,” says David Rosenberg, chief economist at Gluskin Sheff + Associates in Toronto. Corporate profits are up by almost half since the recession ended in June 2009. In the first two years after the recessions of 1991 and 2001, profits rose 11 percent and 28 percent, respectively. And an Associated Press analysis found that the typical CEO of a major company earned $9 million last year, up a fourth from 2009. Driven by higher profits, the Dow Jones industrial average has staged a breathtaking 90 percent rally since bottoming at 6,547 on March 9, 2009. Those stock market gains go disproportionately to the wealthiest 10 percent of Americans, who own more than 80 percent of outstanding stock, according to an analysis by Edward Wolff, an economist at Bard College. But if the Great Recession is long gone from Wall Street and corporate boardrooms, it lingers on Main Street: _ Unemployment has never been so high – 9.1 percent – this long after any recession since World War II. At the same point after the previous three recessions, unemployment averaged just 6.8 percent. _ The average worker’s hourly wages, after accounting for inflation, were 1.6 percent lower in May than a year earlier. Rising gasoline and food prices have devoured any pay raises for most Americans. _ The jobs that are being created pay less than the ones that vanished in the recession. Higher-paying jobs in the private sector, the ones that pay roughly $19 to $31 an hour, made up 40 percent of the jobs lost from January 2008 to February 2010 but only 27 percent of the jobs created since then. Kathleen Terry is one of those who had to settle for less. Before the recession, she spent 16 years working as a mortgage processor in Southern California, earning as much as $6,500 in a good month, a pace of about $78,000 a year. But her employer was buried in the housing crash. She found herself out of work for two and a half years. As her savings dwindled, the single mother had to move into a motel with her three daughters. They got by on welfare and help from their church and friends. Terry started taking a 90-minute bus ride to job training courses. Eventually, she found work as a secretary in the Riverside County, Calif., employment office. She likes the job, but earns just $27,000 a year. “It’s a humbling experience,” she says. Hard times have made Americans more dependent than ever on social programs, which accounted for a record 18 percent of personal income in the last three months of 2010 before coming down a bit this year. Almost 45 million Americans are on food stamps, another record. Ordinary Americans are suffering because of the way the economy ran into trouble and how companies responded when the Great Recession hit. Soaring housing prices in the mid-2000s made millions of Americans feel wealthier than they were. They borrowed against the inflated equity in their homes or traded up to bigger, more expensive houses. Their debts as a percentage of their annual after-tax income rose to a record 135 percent in 2007. Then housing prices started tumbling, helping cause a financial crisis in the fall of 2008. A recession that had begun in December 2007 turned into the deepest downturn since the Great Depression. Economists Kenneth Rogoff of Harvard University and Carmen Reinhart of the Peterson Institute for International Economics analyzed eight centuries of financial disasters around the world for their 2009 book “This Time Is Different.” They found that severe financial crises create deep recessions and stunt the recoveries that follow. This recovery “is absolutely following the script,” Rogoff says. Federal Reserve numbers crunched by Haver Analytics suggest that Americans have a long way to go before their finances will be strong enough to support robust spending: Despite cutting what they owe the past three years, the average household’s debts equal 119 percent of annual after-tax income. At the same point after the 1981-82 recession, debts were at 66 percent; after the 1990-91 recession, 85 percent; and after the 2001 recession, 114 percent. Because the labor market remains so weak, most workers can’t demand bigger raises or look for better jobs. “In an economic cycle that is turning up, a labor market that is healthy and vibrant, you’d see a large number of people quitting their jobs,” says Gluskin Sheff economist Rosenberg. “They quit because the grass is greener somewhere else.” Instead, workers are toughing it out, thankful they have jobs at all. Just 1.7 million workers have quit their job each month this year, down from 2.8 million a month in 2007. The toll of all this shows in consumer confidence, a measure of how good people feel about the economy. According to the Conference Board’s index, it’s at 58.5. Healthy is more like 90. By this point after the past three recessions, it was an average of 87. How gloomy are Americans? A USA Today/Gallup poll eight weeks ago found that 55 percent think the recession continues, even if the experts say it’s been over for two years. That includes the 29 percent who go even further – they say it feels more like a depression.

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Dominique Strauss-Kahn Case Reportedly Near Collapse

July 1, 2011

NEW YORK — Prosecutors have serious questions about the credibility of a hotel housekeeper who has accused former International Monetary Fund leader Dominique Strauss-Kahn of raping her, and they are taking the extraordinary step of seeking a substantial reduction in his pricey bail, a person familiar with the case said Thursday. The person, who spoke on condition of anonymity to discuss matters not yet made public in court, told The Associated Press that prosecutors have raised issues about the accuser’s credibility in the case against Strauss-Kahn, but would not elaborate on what those issues were. A separate law enforcement official who is familiar with the case, but not authorized to speak about it publicly, told the AP that the issue was not necessarily about the rape accusation itself, but about troubling questions surrounding the alleged victim’s background that could damage her credibility on the witness stand. The official refused to elaborate. The New York Police Department, which investigated the case, declined comment. The woman’s lawyer did not immediately return a telephone call seeking comment. Strauss-Kahn has been under armed guard in a Manhattan townhouse after posting a total of $6 million in cash bail and bond. He denies the allegations. Prosecutors with the Manhattan district attorney’s office had argued against his release in May, citing the violent nature of the alleged offenses and saying his wealth and international connections would make it easy for him to flee. “The proof against him is substantial. It is continuing to grow every day as the investigation continues,” Assistant District Attorney John “Artie” McConnell told the judge. “We have a man who, by his own conduct in this case, has shown a propensity for impulsive criminal conduct.” The New York Times first reported that investigators uncovered major inconsistences in the woman’s account of her background, citing two law enforcement officials. One of the officials told the Times that the woman has repeatedly lied since making the initial allegation May 14. The discoveries include issues stemming from the asylum application of the 32-year-old woman, who is from Guinea, and possible links to criminal activities such as drug dealing and money laundering, one of the officials told the newspaper. The Times reported that senior prosecutors and Strauss-Kahn’s lawyers are discussing whether to dismiss the felony charges against him. Another person familiar with the case, speaking on condition of anonymity for the same reason, said earlier Thursday that Strauss-Kahn may get his pricey bail and house arrest arrangement eased in the case at a court hearing scheduled for Friday. The person declined to detail what the new bail arrangements might be. Strauss-Kahn lawyer William W. Taylor would say only that the hearing was to review the bail plan. The district attorney’s office declined to comment. Strauss-Kahn was held without bail for nearly a week after his May arrest. His lawyers ultimately persuaded a judge to release him by agreeing to extensive – and expensive – conditions, including an ankle monitor, surveillance cameras and armed guards. He can leave for only for court, weekly religious services and visits to doctors and his lawyers, and prosecutors must be notified at least six hours before he goes anywhere. The security measures were estimated to cost him about $200,000 a month, on top of the $50,000-a-month rent on a town house in trendy TriBeCa. He settled there after a hasty and fraught househunt: A plan to rent an apartment in a tony building on Manhattan’s Upper East Side fell through after residents complained about the hubbub as reporters and police milled around the building. Under New York law, judges base bail decisions on factors including defendants’ characters, financial resources and criminal records, as well as the strength of the case against them – all intended to help gauge how likely they are to flee if released. Defendants and prosecutors can raise the issue of bail at any point in a case. It’s common, if asking a judge to revisit a bail decision, to argue that new information or new proposed conditions change how one or more of the factors should be viewed. The maid told police that Strauss-Kahn chased her down a hallway in his $3,000-a-night suite in the Sofitel hotel, tried to pull down her pantyhose and forced her to perform oral sex before she broke free. Strauss-Kahn’s lawyers have said the encounter wasn’t forcible, and that they have unreleased information that could “gravely undermine the credibility” of the housekeeper. The defense was using private investigators to aggressively check out the victim’s background and her story. Police Commissioner Raymond Kelly has said the detectives investigating the case found the maid’s story believable. “Obviously, the credibility of the complainant is a factor in cases of this nature,” Kelly said in May. “One of the things they’re trained to look for, and what was reported to me early on, was that the complainant was credible.” The woman’s lawyer has said she is prepared to testify despite a “smear campaign” against her. The Associated Press generally does not identify accusers in sex crime cases unless they agree to it. Strauss-Kahn, 62, was in New York on a personal trip. He left the hotel shortly after the alleged assault – to have lunch with a relative, his attorneys have said. During his initial bail hearings, prosecutors noted that Strauss-Kahn was arrested on a Paris-bound plane at John F. Kennedy International Airport, and that they could not compel his return from France if he fled. His lawyers have underscored that it was a long-planned flight, and they’ve said he wants to return to court to clear his name. He resigned his IMF post after his arrest. ___ Jennifer Peltz can be reached at http://twitter.com/jennpeltz ___ Associated Press writers Tom Hays and Colleen Long contributed to this report.

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Gregory C. Pappas: What Greece Really Needs From Us Right Now

July 1, 2011

An article I read on CNN.com prompted me to take stylus to iPad and begin writing this commentary. The article talked about Greek Americans to the rescue — organizing to help the homeland in her time of need.

 The headline was intriguing enough to warrant a click through from my Facebook newsfeed. Unfortunately, the story itself was not. Instead of a story about Greek American innovators, investors, entrepreneurs and old fashioned business people organizing to use their knowledge, resources and skills to help, I read about people planning their summer holidays to “go and spend their dollars in Greece” and not elsewhere. 

That’s just baloney. Or in the spirit of this story, loukaniko.

 A couple of thousand Greek Americans flying USAirways, Continental or worse yet Lufthansa… Staying with yiayia or Theia Marika in the village outside Tripoli, and dropping a few hundred euros (and later complaining about the cost) for a bottle of whiskey at the bouzoukia isn’t going to help Greece. 

No. Greece needs more than that right now.

 For starters, you can stop feeding the stereotype beast. And we are all guilty. Your cousin Niko might be lazy and sit in coffee shops all day drinking his frappe (or freddo if he’s hip) — but this is not a fair description of the vast, vast majority of Greeks.

 In fact, the Organization for Economic Cooperation and Development (OECD) ranks the Greeks second in the world — that’s right, the entire world and that includes the USA in it — as the second hardest working people after the South Koreans. If you don’t believe me, take it from Forbes .

 That would make your cousin Mitso in Astoria or on Halsted Street much lazier than cousin Niko — the one in the village back in Greece.

 Secondly, I’ve heard over and over again that the “coffee shops are full and the bouzoukia are jammed.” Yes, they very well might be — and no one’s saying that everyone in Greece is suffering and that some people can’t afford a cup of coffee or a night out, but the simple truth of the matter is there are less coffee shops today than there were a year ago. 

And with regards to the ubiquitous bouzoukia… At one time in Greece’s recent memory, a night out on the town could have meant a weekday. Today, you’re lucky to find open bouzoukia even on a Friday night, making the few clubs that are still operating full and “jamming” on a Saturday — the only night of the week they are probably working.

 Finally, enough with the jokes about Greeks not paying taxes. The truth is (and statistics prove it) that it’s the richest of the rich Greeks who don’t pay their taxes, not the average citizen. Unfortunately, the violations of these doctors, lawyers, nightclub singers and others in high society are so egregious that it’s their antics that make the front pages of the New York Times and soon — we all start fanning the rumors and start to believe that no Greeks pay taxes.

 Besides, let’s see what happens when the role of the IRS is diminished in this country. Watch — just watch — how law-abiding taxpayers quickly become tax-evading lawbreakers. And how about all those Greek-owned cash businesses… Diners in New Jersey, restaurants in Chicago, donut shops in Boston… Are we naive enough to believe that all (Greek) Americans pay all of their (our) taxes? Who are we kidding? Furthermore — remove highway patrol from America’s roads and see how quickly they turn into the autobahn. It’s human nature, folks — Greeks are breaking the law because they can. They are evading taxes, and driving like madmen, and parking on sidewalks, and smoking in no-smoking areas — because they can. Because they know there is no fear of prosecution. I’m not becoming an apologist for Greece and Greeks. There are definitely problems and I’ll be the first to admit that Andreas Papandreou started a huge party that is now coming to an end and someone’s got to pay for it. Napoleon Linardatos talks about the party eloquently here. It’s definitely worth a read. And yes — the public sector is out of control, the entitlements, pensions, retirement age requirements are insane — to the point that an entire generation of people have been indoctrinated (brainwashed) into believing that this is normal that the government is there to take care of its citizens from cradle to grave. But again — I don’t blame the average citizenry. I blame the corrupt politicians vying for votes and the corrupt union bosses who lobbied for more, more, more to fuel their populist flames and increase their own unions’ membership ranks and power. It’s a sick and vicious cycle that ensnared common people by feeding them a sweet tasting fruit that was too good to say no to. That fruit was a job for life — stability for a son or daughter in exchange for a vote in an uncertain world. It’s a fruit that any vulnerable person would taste — Greek or non-Greek.

 What Greece really needs right now from the Diaspora — (and I’m tugging at your philotimo strings right now) — is a series of serious initiatives that are both possible (given our ingenuity and success), and realistic. A trust fund for our cultural heritage. Let’s gather the wealthiest Greeks in America and the world and the financial whiz kids that populate Wall Street — there are about a dozen billionaires I can name off the top of my head right now — and engage their expertise to create a revenue-generating fund to serve both as collateral and support for the Parthenon, the Palace of Knossos, the Akrotiri settlement on Santorini and other sites critical to Greece’s cultural heritage. A $100 million fund (owned and managed by the donors) per site could generate $5 million annually at 5% interest — enough to preserve the sites, keep them open with experienced, private staff — and out of the grasp of the public sector that is often subject to civil strife, strikes and shortages in staff and resources. A venture capital fund to support Greek entrepreneurs. Israel does it. India does it. And their diaspora communities are nothing compared to ours and the passion, love and dedication we have for our homeland. Let’s gather some of the nation’s top Greek American venture capitalists–and here too, I can name a dozen or so — to create a fund called Greece Future — because we believe in the future of Greece and we want to invest in the future of Greece. This fund could seek out the great Greek innovators and encourage them to stay and build their businesses in Greece and not be forced to re-locate to Silicon Valley or London. A real Diaspora Bond mechanism for low and high level investors to support the future of Greece Again, other diaspora communities of nations like Israel and India have a bond mechanism that allows average citizens to support their homelands with shares as low as $1,000. Why can’t we do this? The truth is, it was proposed already — by the Greek Government. The problem is that it’s the same, corrupt Greek government bureaucrats that got the country into this mess in the first place that want to the run this proposed “Diaspora Bond.” Message to the Ministers who propose this: When hell freezes over I’ll give you my hard-earned money to build your villa and buy your apartment overlooking the Acropolis. (You know who you are). What I propose is something like Israel Bonds. Supported primarily from U.S.-based Jews, the Development Corporation for Israel/State of Israel Bonds is one of the world’s most dependable economic financial vehicles with 60 years of success. Worldwide sales have exceeded $30 billion and proceeds have played a vital role in transforming Israel into a regional superpower with unparalleled infrastructure. The key to the success of this proposal: diaspora involvement in the investment and management of the fund. *** These are but three ideas — and certainly there are others. Of course, in order for any of these ideas to materialize, you need stability in Greece and a government willing to support the change that is necessary. Although I have a lot of faith in the conviction and dedication of the country’s current Prime Minister George Papandreou, it is those around him who I fear will be most resistant to change. What I know about Papandreou is that he cares about his country deeply. When he speaks, his passion for Greece is evident. Unlike his father, he appears not to have a corrupt bone in his body. I may be wrong — or I don’t know enough to offer a valid opinion. Of course, it’s easy for me to speak (or write this) from my apartment on Michigan Avenue in Chicago, where I look out the window and see the streets bustling with traffic, people on their way to work.

It’s easy for me to speak about Papandreou — without feeling the pain that so many Greeks have felt from the austerity measures that his government has passed; or to feel the burning of the tear gas that his police forces have lobbed at crowds who were merely there expressing their inalienable democratic rights. And I do apologize to the Greeks who might be offended by my simplistic opinion of their Prime Minister, which is based solely on what I see and read — primarily in the international media — that he is a forward-thinker, an internationalist and a product of a global upbringing who has a big picture approach to Greece and is making important decisions today, that will be written about in the history books a century from now. I want to believe that his decisions will be right for Greece — albeit a difficult pill for many already impoverished citizens to swallow. I should also note that my opinion is not one that is supporting the political party Pasok, or its socialist tendencies and policies, which I believe were the cause of Greece’s demise. My opinion is in support of an individual who I believe is “big” enough to realize that it was his own father’s policies that resulted in the Greece of 2011 and that he must stare the ghosts of the past in the face, tell them he is no longer afraid of them and create the new Greece. Something else I believe in is the spirit of Greece and the ultimate force that brings her people together in times of crisis and need. Anyone who doubts me need only read the last hundred years of this tiny nation’s history and its ability to not only reinvent itself, but to play an important role in the history of the entire world. Furthermore, I do believe that what Greece faces today is child’s play compared to the trials and tribulations of the earth-shattering events of 1922 when the humanitarian crisis in Asia Minor spilled into the Greek islands and mainland and millions of impoverished Greeks who fled war were sleeping amidst the ruins of the Parthenon and housed temporarily in theaters and other public buildings. Furthermore, Greece was again tested a few decades later during the German occupation and ensuing Civil War during which time one eighth of the entire population perished and over 3000 towns and villages were burned to the ground. Mark Mazower, the Columbia University historian and expert on Modern Greece said it much more eloquently than I ever will in his New York Times editorial . Yes, these are trying times, but Greece will prevail.

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On Obama, Wall Street Shows A Reluctance To Commit

June 28, 2011

President Obama’s $35,800-a-plate fund-raising dinner was the talk of Wall Street last week.

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Gemma Godfrey: How to Handle Hedge Fund Investing

June 27, 2011

Whilst at GAIM , the largest hedge fund conference in Europe, it was hard to ignore both the issues the hedge fund industry face and the opportunities from which they can profit. So how can you, as an investor, handle hedge fund investing? Be strategic, be sensible and speak up…. Fees — How can you challenge them? Bigger isn’t always better. Instead it was the larger funds that had trouble liquidating large positions to meet redemptions in 2008 and this was amplified in Fund of Funds structures. The resulting side pockets and gates , which locked up investor capital, burned bridges . Therefore, funds merely offering access to large ‘star’ fund managers with limited attention to downside and liquidity risks no longer appear to be as wise an investment as once perceived. A due diligence downfall. Some funds of hedge funds had exposure to Madoff and other hedge fund failures. Therefore, ‘outsourcing’ hedge fund investment to a dedicated fund manager did not always reduce risk. Strategy choice — Does it matter? A ‘typical’ hedge fund does not exist . A hedge fund index is an artificial averaging of a wide range of performance data. In fact, over the past couple of years, the best performing hedge fund strategy has generated 160% more return than the worst. Yes, 160%! Even year to year the rankings change. By investing in completely different assets, implementing vastly different investment processes, hedge funds can perform in entirely different directions in a variety of market conditions. Value – How can hedge fund investments benefit your portfolio? Well-equipped. With doubts over the sustainability of the ‘recovery’ in the developed world shaking equity markets ; turmoil in the middle east creating volatility in commodities and the sovereign debt crisis rocking the bond markets , having a wider range of tools to exploit the uncertainty is valuable A diversifier. Widespread fear and the increase of speculators in certain markets has resulted in heightened correlation between asset classes, for example, equities and commodities have been moving inline…. An active manager who can provide uncorrelated returns to diversify a portfolio and steady the return profile again is attractive Differentiating. In contrast, correlations between investments within each asset class are falling. The FT recently reported that the correlation between stocks in the S&P 500 index has fallen to levels not seen since June 2007 . This means there is a widening divergence between returns. Therefore, the ability to differentiate between opportunities within a subset is a strength of active over passive investing. So what can you co? Be strategic: Strategy choice matters so utilize your views on the macroeconomic environment to help determine which strategies in which to invest Be sensible: Ensure funds deserve the fees they are charging, e.g. are focused on portfolio construction, generating returns from niche strategies, and structured appropriately with the redemption frequency matching the liquidity of the underlying investments. Speak up: It is as important for BOTH sides to manage expectations to avoid redemptions from investors, and side pockets from funds.

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Top Republicans Firm On Taxes Ahead Of Obama Meeting

June 26, 2011

(Reuters) – The Senate’s top two Republicans on Sunday stood firm against including tax increases in any deal to raise the debt limit and shrink budget deficits one day before a meeting with President Barack Obama, but said the showdown need not go down to the “11th hour.” Obama is to meet separately with Senate Democratic and Republican leaders on Monday to try to revive negotiations that collapsed on Thursday when Republicans walked out over Democrats’ demands for tax increases. Sending a message to Obama in appearances on Sunday news interview shows, Senate Republican leader Mitch McConnell and Jon Kyl, his deputy in the leadership, presented a unified front demanding spending cuts and opposing tax hikes. “We have a spending problem. We don’t have a problem because we tax too little,” McConnell said on the ABC program “This Week.” “We need to quit borrowing, quit spending, and get us our trajectory heading in the right direction. Throwing more tax revenue into the mix is simply not going to produce a desirable result, and it won’t pass,” McConnell added. Obama said on Saturday he remained committed to working with Congress to solve the government’s debt problem, but the focus could not be only on spending cuts, as Republicans demand. The $14.3 trillion U.S. debt ceiling must be raised before August 2 or the Treasury Department will run out of money to pay the nation’s bills. A default on debt payments could send markets plunging globally and raise the risk of another U.S. recession. “One of the reasons we are meeting tomorrow (Monday) is that I think both the Democrats and the Republicans would like to come together and finish this negotiation and finish it sometime soon. It need not necessarily go to the 11th hour,” McConnell said. “We need to put something together that will actually pass and make a difference, impress Standard & Poor’s and Moody’s and the rating agencies that are about to downgrade the U.S. credit rating for the first time in our history,” he added. ‘KILL THE ECONOMY’ The U.S. federal deficit stands at $1.4 trillion, among the highest levels relative to the economy since World War Two. Speaking on “Fox News Sunday,” Kyl said “we have to try” to get a deal by August 2. “I think the president has to make a decision — which is more important to him: solving this problem, reducing spending somewhat, or making sure that we raise taxes on American economy?” Kyl said. “If you want to kill the economy, raise taxes. Are we going to vote to absolutely put another anchor around the neck of the economy, which is struggling to try to recover here? Absolutely not. It’s terrible policy,” Kyl added. Democrats have eased back from their insistence that personal income tax rates need to rise on the wealthiest Americans to focus instead on ending a wide range of tax breaks on everything from corporate jets to oil and gas subsidies. They have also proposed closing tax breaks that benefit the wealthy, such as limiting the deductions for households making more than $500,000 a year. Republicans control the House of Representatives while the Democrats control the Senate. Appearing on CNN’s “State of the Union” program, House Minority Leader Nancy Pelosi said Democrats must have a say in crafting an agreement, especially if Republicans in the chamber cannot generate enough support on their own to pass a final plan. Pelosi said any package that only cuts spending is unworkable, suggesting that closing what she and other Democrats call corporate “tax subsidies” for oil companies and other businesses should be included in any deal. “You cannot achieve what you set out to do if you say it’s just about cutting. It has to be about increasing the revenue stream as well. There are many things you can do in terms of special interest loopholes,” Pelosi said. Republican Senator Jim DeMint, a favorite of the conservative Tea Party movement advocating deep spending cuts, said he believes the United States would not default on its obligations if Congress fails to raise the debt ceiling. “If we add another $2 trillion to our debt without taking control of it, I think you’re going to see the markets respond in a much worse way,” DeMint said on CNN. (Reporting by John Crawley, Paul Simao, Paul Eckert and Lucia Mutikani; Writing by Will Dunham; Editing by Vicki Allen) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Google, Apple Bid For Last Shreds Of Nortel

June 26, 2011

THE CANADIAN PRESS — MONTREAL – The last of Nortel’s assets — patents for Internet search, mobile video and wireless networks that can be used in consumer technology — go up for auction Monday, ending an era for the bankrupt Canadian telecom company. Internet search engine giant Google has started the bidding at $US900 million. iPhone maker Apple, Swedish telecom company Ericsson and chipmaker Intel are also expected to bid on Nortel’s 6,000 patent and patent applications, which could fetch as much as $1.5 billion in the U.S. auction. “There was a lot of research and development going on at Nortel in its heyday,” said Mark Tauschek of Info-Tech Research Group in London, Ont. Nortel was prolific in getting patents for a “wide swath” of technologies they were working on or would be working to defend itself against patent infringement lawsuits, Tauschek said. “They were pretty savvy in that respect,” said Tauschek, director of research. “That’s why the portfolio is as valuable as it is.” The Nortel patents include advanced wireless network technology called Long-Term Evolution networks, which are starting to rollout globally and are able to handle lots of data for TV watching, music listening and video streaming. The LTE patents are considered jewels in the remaining Nortel assets due to the popularity of mobile devices like smartphones and computer tablets. The patents also include Wi-Fi technology that connects devices to the Internet when in range of a wireless network as well as data networking, Web search and social networking technology. The winning bidder will be able to defend itself against potential litigation from other companies who say they had a particular technology first and allege it’s being used without a licence, Tauschek said. Or the winner could licence the technology. Google, also a leading force in the smartphone business with its Android operating system, has said as much. The California company has said it views the acquisition of the Nortel patents as a defence against “an explosion” of patent litigation. Chinese telecom ZTE Corp. as well as U.S..-based RPX Corp., which could represent a consortium of companies possibly including Canada’s RIM (TSX:RIM), could also be bidders. Nortel had more than 10,000 employees devoted to research and development. At its height a decade ago, it was among the world’s most advanced developers of telecom equipment but was felled by numerous problems, including challenging market conditions, economic upheaval and an accounting scandal. Former Nortel executives didn’t respond to requests for interviews. Anne Clark-Stewart, spokeswoman for Nortel Retirees and Former Employees Protection Canada, said pensioners hope to get a chunk of proceeds from all of the sales of Nortel’s assets to help top up their underfunded company pensions. Sales of Nortel’s assets have totalled about $3.2 billion so far. Clark-Stewart noted most of Nortel’s technology was developed in Canada. It was, in the majority, developed by Canadian scientists and engineers,” she said from Ottawa. “And that money isn’t necessarily going to come back to help us.” Pensioner Leo Strawczynski, who developed a number of patents, said Nortel was involved in leading-edge research and worked in conjunction with universities and various standards bodies. “I spent most of my professional life at Nortel and it’s sort of sad to see it all waste away,” he said from Ottawa. “The companies that have acquired Nortel technology have done very well with it, by and large.” Over the last couple of years, Nortel has sold its wireless network business to Sweden’s Ericsson for $1.13 billion and its enterprise solutions business to U.S.-based Avaya Inc for $689 million, among others. Tauschek said Google is the strongest contender for the patents so far. He said Google would likely be interested in patents that apply to smartphones and smartphone applications. Google’s Android operating system runs in smartphones brands such as HTC, Samsung and Motorola and these phones are taking a bite out of RIM and even the iPhone’s popularity. He said if Google is the successful bidder, it could end up selling the wireless technology patents. “Whoever acquires the portfolio is not going to make a ton of money licensing it and getting royalties from it. I really think it’s more of a defensive kind of thing…so you can’t get sued.”

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Wisconsin State Supreme Court Justice Accuses Colleague Of Choking Her

June 26, 2011

MADISON, Wis. — A Wisconsin Supreme Court justice has accused another justice of choking her during an argument in her office earlier this month – a charge her colleague denied. Supreme Court Justice Ann Walsh Bradley told the Milwaukee Journal Sentinel that Justice David Prosser put her in a chokehold during the dispute. She contacted the newspaper late Saturday after Prosser denied rumors about the altercation. “The facts are that I was demanding that he get out of my office and he put his hands around my neck in anger in a chokehold,” Bradley told the newspaper. Prosser said in a statement the allegations “will be proven false” once a “proper review of the matter and the facts surrounding it are made clear.” Wisconsin Public Radio and the Wisconsin Center for Investigative Journalism, quoting anonymous sources, reported Saturday that the argument occurred before the Supreme Court’s decision earlier this month upholding Republican Gov. Scott Walker’s bill eliminating most of public employees’ collective bargaining rights. The argument allegedly took place in front of several members of the court. Messages that The Associated Press left with several justices and Capitol Police Chief Charles Tubbs were not returned. A divided Wisconsin Supreme Court, in a 4-3 decision that included a blistering dissent, ruled that Dane County Circuit Judge Maryann Sumi overstepped her authority when she declared the polarizing union law void. The fight over passage of Walker’s collective bargaining bill came in the weeks leading up to a hotly contested state Supreme Court election, which conservative incumbent Prosser eventually won after challenger JoAnne Kloppenburg conceded defeat in late May. Supporters of Walker largely backed Prosser in hopes he would uphold the union rights bill in a legal challenge.

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Former Egypt Bank Chairman Pleads Guilty To Sexually Abusing Maid

June 24, 2011

NEW YORK — A prominent Egyptian businessman admitted Friday to kissing and groping a hotel housekeeper who didn’t welcome his advances, pleading guilty as the woman sued him for $5 million. Mahmoud Abdel Salam Omar pleaded guilty to a misdemeanor sexual abuse charge, acknowledging he kissed the woman on the lips and neck and touched her breasts after she brought tissues to his room at the posh Pierre hotel. The 74-year-old chairman of state-run salt production firm El-Mex Salines Co. already has completed five days of community service in a soup kitchen, and his case will be closed without jail time or probation if he stays out of trouble for a year. After softly answering “yes” in English to questions from a judge and prosecutor, Omar declined to comment as he left a Manhattan courthouse. Arrested while in New York to pick up a salt-industry award for El-Mex Salines, he spent about four days behind bars before being released on bail earlier this month. His lawyer, Lori Cohen, called the case the result of a “big miscommunication” between the 44-year-old maid and Omar. While he acknowledged in court that he knew he didn’t have the woman’s consent for his advances, Cohen said he thought the housekeeper was receptive. “I believe he thought something was happening that wasn’t,” she said. “I think his lack of a great understanding of English, and her desire to file a multimillion-dollar lawsuit, led to these accusations.” The woman’s lawyer bristled at the suggestion that she embellished the encounter to try to reap money from the former bank chairman. “That’s just not true,” said the attorney, John P. Grill. “She didn’t know who he was.” Omar initially faced a felony sexual abuse charge that carried up to seven years in prison. After interviewing numerous witnesses and reviewing surveillance video and forensic evidence, prosecutors concluded the incident “did not rise to the level of forcible compulsion,” which would have to be proven for the felony charge, Manhattan assistant district attorney Nicole Blumberg said. Whatever his plea deal, the woman’s lawyer said, “it doesn’t change what happened.” The woman’s federal assault and false-imprisonment lawsuit says Omar also rubbed his groin against her legs and groped her buttocks. It was filed Friday so Omar could officially be served with a copy before he left the country, Grill said. Police Commissioner Raymond Kelly had said the case could be complicated to prosecute. Although the maid told a superior immediately that she had been attacked, the supervisor waited until the next morning to alert the hotel’s security director, who then told police. The hotel suspended the supervisor and promised to buy “panic buttons” for maids to alert managers if they are attacked. A spokeswoman for the hotel’s owner, Mumbai-based Taj Hotels Resorts and Palaces, didn’t immediately return a telephone call Friday. Omar’s lawyer said he might well have chosen to go to trial but was eager to get home to his wife, who has recently had surgery. “This was the most expeditious way for him to return home,” she said. Besides chairing the salt company, Omar has served as chairman of Egypt’s Bank of Alexandria, the Egyptian American Bank and the Federation of Egyptian Banks, according to a biography on his company’s website. He has led El-Mex Salines since 2009. Omar’s arrest came little more than two weeks after then-International Monetary Fund leader Dominique Strauss-Kahn was arrested on charges of attempting to rape a maid at a different hotel, charges Strauss-Kahn denies. Together, the cases drew attention to the potential dangers of hotel maids’ jobs. The New York Hotel and Motel Trades Council plans to call for panic buttons as part of its contract negotiations with 150 hotels next year, and a state legislator has proposed to require the devices statewide. ___ Associated Press writer Tom Hays contributed to this report. ___ Jennifer Peltz can be reached at http://twitter.com/jennpeltz

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New Hampshire Republicans Restrict Minimum Wage

June 23, 2011

New Hampshire legislators voted to override a veto by Democratic Gov. John Lynch on Wednesday, paving the way for a new law to restrict the state’s minimum wage. The bill, sponsored by Republican Rep. Carol McGuire and strongly backed by GOP leadership, automatically ties the state minimum wage to the federal minimum wage, assuring that New Hampshire’s rate is as low as it can legally be. With its minimum wage currently set at the federal rate of $7.25 per hour, New Hampshire is ensuring that it will continue to have the lowest minimum wage in all of New England. Maine, Vermont, Massachusetts, Rhode Island and Connecticut all have state minimum wages between $7.40 and $8.25 an hour. The fight over McGuire’s bill led to some unusual stances for New Hampshire politicians. McGuire has been honored by the libertarian-leaning New Hampshire Liberty Alliance and enjoyed Tea Party support, yet she essentially argued that the state should defer to the feds when it comes to the minimum wage. Meanwhile, the Democratic governor made a states’ rights argument for killing McGuire’s bill. Lynch said New Hampshire shouldn’t relinquish its right to set its own wage rate. The governor’s spokesman, Colin Manning, told HuffPost that as a result of the law New Hampshire now “cedes state control and authority” to the federal government. “New Hampshire has had a minimum wage law since 1949, and neither our citizens nor our businesses have called for its repeal,” Manning wrote in an email. “There is no need to undermine our state’s economic strategy or cede our state authority to the federal government, which is why the governor vetoed the bill.” Calls to McGuire and Republican House Speaker William O’Brien seeking comment were not returned. But in a statement after Lynch’s veto, O’Brien accused the governor of acting on “an anti-business philosophy” and “removing the ‘open for business’ sign” from New Hampshire by trying to maintain the current minimum wage flexibility. “There is no reason for New Hampshire to set ourselves higher than the national average and make ourselves less competitive for these workers who need to gain experience,” he said. Opponents of McGuire’s bill point out that the previous law did not set the New Hampshire minimum wage any higher than the federal rate — it only gave the state the option to do so if it pleased. Also, New Hampshire does not appear to have suffered from a competitive disadvantage, given that the minimum wages in neighboring states were already set higher. Several states have raised their minimum wage in recent years, but GOP leaders and business interests have assaulted some of those bumps as job killers. Missouri Republicans tried and failed to cap their state’s minimum wage earlier this year . Then in May, a Florida federal judge ruled that a state agency had been illegally suppressing its minimum wage. And business groups in Maine have lobbied for the creation of a ” training wage ” that would let companies pay teenagers less than the state minimum. The current federal minimum wage of $7.25 per hour translates into a $15,000 salary for a full-time worker. Many economists now say that higher minimum wages can provide a boost to the sluggish economic recovery. “Given the fact that minimum wage workers spend every penny they earn in their local businesses, a strong wage floor is also vital to stimulating the consumer spending necessary for real and lasting economic recovery,” said Christine Owens, executive director of the National Employment Law Project, in a statement decrying legislators’ override of Lynch’s veto. Earlier this year, Democratic Rep. Terie Norelli called McGuire’s bill “just the beginning of what I think is a real assault on New Hampshire workers and wages and irresponsible legislation.” Last month, Lynch vetoed a bill brought forth by Republicans that would have converted New Hampshire into a so-called right-to-work state. The bill would prohibit collective bargaining contracts that require workers to pay union dues if they are not union members. It would make New Hampshire the first right-to-work state in New England. O’Brien has said Republicans will try to override Lynch’s veto of that bill in the fall.

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Mitch McConnell: Slowing Down Financial Regulation Good For U.S.

June 23, 2011

WASHINGTON -(Dow Jones)- The senior Senate Republican voiced strong support for House Republican efforts to reduce the budgets of the primary federal financial regulators, saying any move to slow down the agencies’ ability to implement rules stemming from the Dodd-Frank law is good for the country.

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Marcelo Giugale: Give Africans a Stake in Their Own Wealth

June 23, 2011

When your government announces a big oil discovery, should you celebrate? A lot of sensible people will tell you that you shouldn’t. For them, natural resource wealth — large quantities of things like petroleum, gas or minerals — is actually a “curse,” not a blessing. How come? Well, “extractive industries” can flood your economy with foreign currency, make all your other industries uncompetitive, spoil your environment, and corrupt your politicians. The evidence is pretty suggestive: very few “commodities-rich” countries have done well, most have not. If that’s true, Africa has a problem. Not only is the continent rich in natural resources, but by some estimates it has only found a tenth of its riches. (Believe it or not, comprehensive geological maps of Africa do not exist). To make matters “worse,” commodity prices are projected to stay sky-high until at least 2015. The feeling of an imminent bonanza is already permeating the Congos, Gabon, Ghana, Guinea, Nigeria, Uganda and many others. Is there a way to avoid the curse? It will be easier on the economic and environmental sides — today’s central banks and NGOs know how to intervene quickly if local currencies appreciate too much or if large corporations pollute too much. The trickier issue is how to avoid the corruption usually associated with giving out licenses to explore and exploit, and with using the huge royalties that all this brings to governments. Fortunately, technology can help Africa avoid graft. Some 35 African countries already transfer cash directly to their poor — whether through smart-cards, debit cards, cellphones, or in person. This is getting cheaper and safer. The coverage of banking and cellular telephony services is expanding — the latter at viral speed. And biometric identification of individuals through mobile devices is rapidly catching up (Kenya is a good example). Logistically, there is nothing that prevents governments from transferring a part of the income coming from natural resources directly to each and every citizen, not just the poor. This kind of “direct dividend transfer” is of course not new — Alaska has been practicing it since the early 1980s. They will soon be possible in Africa too. Would putting money in Africans’ pockets, rather than in their governments’ treasuries, really reduce corruption? It probably will, for three reasons. First, it would intensify social monitoring. If you know your government is giving you ten percent of its new oil revenue, you will surely be interested in what it does with the other ninety percent. You will also want the company that explores, exploits and exports your natural resources to be managed competently — if it fails to find, extract and sell, you lose money. You will be less patient with the public monopolies that usually control those resources and behave as self-serving, unaccountable, states-within-the-state. In fact, you will begin to wonder whether your country should get rid of those public monopolies all together, and hire experienced, private operators to work for you. Second, direct dividend transfers would make politics more contestable. There is no question that the transfers would be popular. Social programs that deliver cash to the poor have survived presidential transitions everywhere — for example, in Chile, where the recent political alternation went from left to right, and in El Salvador, where it went from right to left. But incumbent governments may be reluctant to give up part of the easy revenue that comes from commodities — less money, less power. Democracy would take care of that, as politicians in opposition can only gain by proposing to give people real access to their nation’s wealth — “Vote for me and the oil is yours.” And third, alternative ways of transferring natural resource wealth are worse. Governments in resource-rich countries are always under political pressure to be seen as passing some of the “dividends” to the population. The usual means have been to give out tax breaks, sell fuel or food below their cost, or give away jobs in the civil service. All this has in practice been captured by the rich and the connected. (Rule of thumb: the average developing country spends more on subsidizing public college education for the rich than on primary schools for the poor). If anything, giving people a direct stake in their country’s riches can be an opportunity for — and can be funded by — the abolition of other inefficient, inequitable and morally-questionable transfers. You get a dividend, but you accept to pay full price for what you consume. Would transferring the same — probably small — amount of cash to all citizens be fair ? Optimally, one would want to means-test the transfer, that is, to give more to those who have less . However, trying to decide who is how rich in a developing country may prove politically impossible. But a uniform universal dividend would still be “progressive,” that is, it would be of more help to those who need help the most. Imagine: if the average African government decided to pass on a tenth of its resource revenues directly to its citizens, the dividend could be about $100 dollars per person per year. That may be peanuts for the better-off — they may not even bother to collect it — but it would be a huge game-changer for the two-thirds of Africans that live on two dollars a day or less. And if you are not just poor but also female, the transfer would carry a welcome dose of personal independence as well. More subtly, direct dividend transfers could help national unity. In countries where regional, racial or religious differences make it difficult to agree on how to share natural wealth — a problem that is all too common in Africa — the idea that everyone gets a cut of the riches, personally and individually, regardless of location, skin color or faith, just for being a citizen of the country, may be a useful source of national identity. (Yes, new biometric tools can take care of misidentification and fraud.) By now you are thinking: “If the institutions of government cannot be trusted with commodity revenue, should we not try to fix them instead of bypassing them?” True, and good progress is being made in getting civil society to participate in the management of public funds — Ghana is an African leader in that. But building institutions takes time and the new resources have started to come in. By sharing a portion of those resources with people early on , we may buy the time, and the political goodwill, necessary to construct more permanent tools for better governance.

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Corporate Tax Holiday Could Create Infrastructure Bank — But Devil Is In The Details

June 22, 2011

Rahm Emanuel has a proposition. A grand one, for big business, big unions, and Congress: let a corporate income tax holiday pay for a national infrastructure bank. Let multinationals bring their money home — the money that’s parked overseas, dodging Uncle Sam’s corporate income taxes — and the federal government can use some of it to pay for the infrastructure bank, the newly minted mayor of Chicago says. Unions, big corporations, and potentially members of both parties: a virtual rainbow coalition may be assembling in favor of the infrastructure bank. But corporate watchdogs charge there’s no difference between a tax holiday with a bank and a tax holiday without one. Under Emanuel’s plan, which he is developing with Rep. Rosa DeLauro (D-Conn.), the bank would build the bridges, roads and mass transit that America has been neglecting for decades. As these structures rust and fall apart, oftentimes nothing new is being built in their place. Yet money to improve infrastructure money will not be easy to come by in the midst of a protracted deficit debate; by including the tax holiday, Emanuel’s proposition aims to win over Republicans leery of adding to the deficit. The idea for the bank is not new — former Service Employees International Union President Andy Stern mooted it in an op-ed piece months ago — but it seems to be gaining renewed attention. Reed Hundt and Thomas Mann wrote about it in the Washington Post last week, Emanuel treated it as his own in a speech to the U.S. Conference of Mayors on Saturday, and now Sen. Chuck Schumer (D-N.Y.) is feeling out the Senate . For proponents, the hope is that the proposition could unite Democrats in the Senate and Republicans in the House. Emanuel said he thinks his grand compromise “brings the parties together.” The specific terms of the tax holiday, however, would be critical. Some Democrats don’t want to give multinationals a free pass, and Republicans don’t want to be too hard on corporate America. Without some sort of deal, it’s possible that money could continue to linger offshore — parked in anticipation of a better deal from a different Congress. That has been the situation since 2005, when another tax holiday was declared, premised on the idea that it would create jobs; it didn’t . Critics of any sort of tax holiday say that the infrastructure bank is just the latest twist on corporate blackmail. “Every one of these amnesties encourage greater holding offshore and Congress is being irresponsible even to say they are thinking about it,” said Calvin Johnson, a professor at the University of Texas School of Law who specializes in tax law. Former SEIU chief Andy Stern disagreed. “The problem is the money hasn’t come back, there’s no reason to believe it will ever come back,” said Stern, now a senior fellow at Georgetown University Public Policy Institute. “Details are appropriate and important — you know, what’s the tax rate? — but we’re now in the right framework,” he argued. In his speech to the mayors, Emanuel said he would like to see the tax rate lowered to 10 or 15 percent, down from its current 35 percent, for the tax holiday. The money the government raises from those taxes would then be directed only to the infrastructure bank, ensuring, in his view, that it would actually be used to create jobs. Such a cut on the corporate income tax rate, however, might not sit well with small businesses , who can’t use creative accounting to hide their profits overseas like the multinational corporations. And a cut to 10% might not be steep enough to win over Republicans in the House, who have been talking about taxing repatriated income at a rate in the low single digits. In the Senate, Schumer has reportedly suggested a 5% rate. Rep. DeLauro told HuffPost that she’s working with Emanuel to find a balance, and she is hopeful that Republicans can be convinced to sign on to their plan. DeLauro said she has been working on plans for an infrastructure bank for 14 years, and found the recent discussion of the idea “very encouraging.” “The concept of an infrastructure bank has wide support — from the U.S. Chamber, from labor unions, from a whole bunch of people in between,” she said. Robert McIntyre, director of Citizens for Tax Justice, isn’t one of those people. He said there was “no substantive difference” between a straight tax holiday and one that was combined with an infrastructure bank. “It’s just somebody’s wacky idea that the problem the world faces today is a lack of capital. Our problem is there’s not enough consumer demand. The government should be out there shoving money out the door and stimulating the economy.” “This bank is going to be just another bank — they could have given the money to SunTrust, you know?” he said. DeLauro said capitalizing the bank via a tax holiday was not her first choice, but she thought that it would be a good approach in the GOP-controlled House. “If we are going to have another repatriation holiday, the federal government should use the incoming revenue to capitalize a national infrastructure bank, and we do know that such an entity creates jobs, long-term economic growth,” DeLauro said. Tying the repatriation to a larger reform of corporate income taxes is also critical in her mind. “Any repatriation effort has got to be a bridge to broader corporate tax reform. We have to close tax loopholes,” she said. Her infrastructure bank plan would leverage money from corporations and the federal government to create projects that include public-private partnerships. Because of the federal backing, loans for the projects could be issued at low rates. Such arrangements are common overseas; some have pointed to the European Investment Bank as a model for what could be created here. The United States has relatively fewer infrastructure projects that are operated as public-private partnerships, and any ventures that smacked of privatization might prove controversial . A privately owned toll road created with lending from the infrastructure bank, for instance, might charge a high rate to pay off its government loan. Criticism might also arise if the arrangement’s big winners are the same multinationals benefiting from the tax holiday, as opposed to small businesses.

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Jeffrey Rubin: BP Report Shows Economic Growth Still Dependent on Oil

June 22, 2011

The relationship between energy and global economic growth has never been more clear than in BP’s World Energy Statistical Review for 2010 . No sooner had the global economy shaken off the shackles from the last recession than energy demand exploded. It grew by more than 5.5% last year, the largest annual increase in more than 30 years. Not surprisingly, oil played a center stage role in last year’s spectacular increase in global energy demand. It is, after all, the world’s single most important fuel, accounting for more than a third of all the global energy produced last year. What makes last year’s global oil numbers particularly interesting is the fact world oil demand had fallen in the two previous years — a victim to the global recession. They were the first annual declines in global annual oil consumption since 1983. Unfortunately, no sooner had the global economy regained its footing, did it regain its enormous appetite for oil. Not only was all of the much-touted demand destruction during the last recession reversed but world oil consumption grew by over 3% in 2010. This established a year-end new consumption record of almost 87.5 million barrels a day. What made the rebound even more impressive was the fact it happened amid the second highest oil prices on record. Brent averaged nearly $80 per barrel in 2010. Whether world oil consumption will continue to grow and reach BP’s forecast of a new pinnacle of more than 89 million barrels a day by the end of this year looks increasingly uncertain. Notwithstanding Saudi’s claim of being able to ramp production up to 10 million barrels per day, world crude supply hasn’t even made up for the loss of Libyan oil production, let alone shown any capacity to accommodate another couple million barrels a day or so of global demand growth. But global production may not need to grow by that much. As Congress and the Obama administration haggle over the size of the U.S. federal debt ceiling, vital fiscal stimulus in the world’s largest oil-consuming economy is rapidly coming to a close. So too is monetary stimulus with the end of the U.S. Reserve Board’s quantitative easing program. In Europe, meanwhile, Greece teeters on the brink of default, an event that will likely trigger similar defaults among fellow fiscal reprobates: Portugal, Ireland and, possibly, Spain. The Chinese economy, the world’s second largest oil-guzzling and largest overall energy consuming economy, faces the prospects of huge power blackouts this summer that could exact a sizable toll on its economic growth. The good news about the pending global economic slowdown is we may soon be burning less oil again in the second half of the year. But the bad news contained in BP’s recent energy review is global economic growth remains as oil dependent as ever.

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Peri Pakroo: Systematize One Process at a Time

June 20, 2011

It can seem like such an insurmountable burden to develop business systems, operational policies and procedures — including finalizing them in writing, which is an essential step — but the thing is, you don’t need to do this for every single aspect of your business. Here are some quick tips about how to tackle a little system-building without feeling overwhelmed. Start with your overall personal goals and get clear on how much time you want to spend on the business. The less hours you want to work, the more efficient you’ll have to be, right? Exactly. Next, look at what aspects of the business are taking you the most time — especially things that really seem they shouldn’t take so much time. Focus on these. Set a goal of how many systems you’re going to develop. My advice? Start with one or two. The point is mostly to stop ignoring this task altogether. Start small! Starting with the most time-consuming/inefficient/vexing area, focus on figuring out where things get complicated, duplicated, where errors tend to crop up, or in general things go wack. Talk with others (if any) in your biz to flush out where the problems lurk — make it a long business lunch at a swell restaurant where you can spread out for a few hours. Have wine with lunch! In other words, this doesn’t need to be a dour business meeting. (Bear in mind your partner/spouse might also have insight, so if business conversations are kosher between you two (with some couples, business talk can be bad news), ask her/him for any ideas on improving your process(es).) Come up with some simple procedures (checklists are great) to avoid the problems you identified. For example, if you’re constantly having to call clients on the phone to get information that should have been collected in the first place, develop a 7-point checklist for what information to collect from a new customer, and what information to provide to them. Or if you’re fielding endless questions from your office assistant about bookkeeping issues, write out a step-by-step description of how certain types of expenses should be entered into your bookkeeping software. The point here is to focus on the things that take the most time and/or tend to be “problem” areas of your business. You don’t need an encyclopedic operations manual — not at all! Just a few simple checklists and step-by-step procedures, kept in a slim binder with enough copies for key staff and managers, can make a major difference in how efficiently your business runs. Depending on lots of different factors you might decide to give copies to all staff, or just let the department manager decide how to train staff on the procedures. But Step 1 is coming up with the procedure in the first place. And don’t feel bad if you have your head in the sand about tackling these sorts of system/organizational issues. Tons of small business owners blow this stuff off for years. (But these are the owners who tend to be the ones still working too much, many years into business.) Hopefully by following the advice above and focusing just on one or two areas, the whole concept of “systems” will no longer freak you out. And believe me, once you get a system or two implemented, you’ll start feeling all tingly and freer almost immediately. Quick note: I’m not talking about an employee handbook here, which would include important information and policies about sick leave, vacation, employee reviews, grievance procedures, etc. And with an employee manual, all staff should get a copy, not just key managers. Nolo has great resources on employee handbooks; go to www.nolo.com and search for “employee handbook”.

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Eric Farnsworth: Supporting U.S. Interests by Expanding Hemispheric Trade

June 20, 2011

The administration’s announcement June 13 that Colombia has met the commitments necessary to enact the trade agreement signed in 2006 could potentially pave the way for much-needed job creation here in the United States. Instead, budget politics continue to overwhelm the Colombia agreement as well as pending agreements with Panama and South Korea. These agreements are stalled — again — by a dispute between the White House and Republican Congress over reauthorization of the Trade Adjustment Assistance program. TAA, as it is commonly known, was originally designed to offer benefits to workers displaced by international trade, and has generally been reauthorized for decades on a bipartisan basis without too much fuss. Not this time. Republicans in Congress question the program’s effectiveness and roughly $1 billion annual cost, and see it as an example of a program that the United States, with a $14 trillion deficit increasing by a trillion dollars each year, simply can no longer afford. For its part, the White House has said that TAA will have to come before the pending trade agreements are submitted. Negotiations are ongoing. In the meantime, further delay will make it increasingly difficult to pass the trade agreements by the time Congress adjourns for the summer at the end of July. If we miss this window, the presidential primary season will intrude and it’s quite possible that they will then languish further. As recently as June 1, Secretary of State Hillary Clinton told Colombia’s foreign minister Maria Angela Holguin in Washington that she was confident the agreements would be passed by the end of this year. Meeting this deadline is possible, and, given receding US political and commercial influence in the hemisphere, increasingly urgent. Doing so, however, will require that Washington soon cut the political Gordian knot tying up trade policy. Knowing this tight timing, opponents of US job creation through trade expansion see opportunity, particularly on Colombia, by pushing the line that Colombia remains a uniquely dangerous, rogue nation unable to protect its citizens or promote labor rights. They argue, as in a recent Congressional hearing, that support for US values requires that the agreement be rejected — as if job creation at home during a period of sluggish economic growth, economic development and poverty alleviation abroad, support for Latin American democracies, and promotion of US national interests in a region where close friends of the United States are scarce, are somehow not US values. Nonetheless, allegations of previous human rights abuses and political corruption are being packaged together and laid at the feet of the current government in Bogota in an attempt to obfuscate facts and delay the agreement further. This is not at all to say that credible allegations of abuses should not continue to be investigated and wrong-doers brought to justice. They should and they must, if necessary through extradition to the United States. Ironically, however, failure to pass the agreement signed in 2006 undercuts our ability to promote human rights by showing us to be an unreliable partner even as Colombia increasingly has new options to pursue, including China. Those who want to delay passage of the agreement in support of the US values therefore have it exactly backward. In the meantime, additional efforts should be undertaken to expand hemispheric trade, even under current political conditions. One area in particular cries out for attention: supporting a regional desire to build meaningful and effective links to the global economy in a manner that also supports broader US interests. As both Colombia’s Holguin and Costa Rica’s president Laura Chinchilla have said in Washington recently, for example, they want to expand their links to Asia through membership in APEC and also the Trans Pacific Partnership. With the United States set to host the next APEC meeting November in President Obama’s home state of Hawaii, this would be a natural initiative for the United States to pursue. Besides supporting US interests in Latin America, it would cost the US taxpayer nothing. In a world of budget politics, this is perhaps the most compelling argument of all.

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Union Hyatt Regency Workers Hold One-Day Strike

June 20, 2011

Union workers at Chicago’s Hyatt Regency launched a one-day strike Monday at the 151 E. Wacker Drive location as they called for better working conditions and a better sense of job security. As the Chicago Sun-Times reported, the strike began at 4 a.m. and was currently scheduled to continue until 8 p.m. It had not caused any service interruptions, though the hotel’s union represents some 600 housekeepers, bell staff, restaurant staff and others. Annemarie Strassel, a spokeswoman for Unite Here Local 1, which represents a total of some 1,800 Hyatt hotel employees in the Chicago area, told the Sun-Times the strikers current biggest concerns are the housekeepers’ working conditions and the hotel’s usage of subcontracting. The workers’ contract expired just short of two years ago and in that time, the union has held other demonstrations against the hotel chain, including a September 2010 one-day strike at the O’Hare hotel and a May 2010 walkout. The Hyatt has, in response, called the strike a “production” intended to increase the union’s membership and dues , according to NBC Chicago . The hotel chain has, according to a spokesperson, proposed to match the benefit and pay package the union had agreed to with other similar hotels in the area. Nevertheless one protester who has worked at the Hyatt for just under three decades still said he and his fellow picketers remain “sick and tired of all the disrespect we’re getting from the Hyatt hotels.” “Hyatt is one of the most abusive hotels in their treatment of housekeepers and has the worst record on subcontracting,” added Henry Tamarin, Local 1′s president in a news release . “They refuse to budge on these important issues, and now workers have hit a boiling point.” Last Tuesday, several thousand protesters showed up to a rally protesting bank bailouts and tax cuts for the wealthy in a rally sponsored by Stand Up! Chicago at the same location. The Hyatt Regency was host to the Chicagoland Chamber of Commerce’s annual Chicago Executive Summit. Twenty-four individuals were arrested during that protest while, at press time, no arrests have been reported from the Unite Here Local 1 strike. Unionized Hyatt hotel workers have recently waged similar demonstrations in other parts of the country, most notably picketers at seventeen separate hotels who called for a boycott of the chain in a coordinated effort last Friday.

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José Viñals: Tough Political Decisions Needed to Fix the Financial System

June 20, 2011

It was fitting that I should present our latest assessment of global financial stability in Sao Paulo, the financial center of one of the leading emerging economies. In common with many of its peers in Latin America, Brazil is recovering strongly from the crisis. But new financial stability challenges are emerging in this, and other fast-growing regions. Let me start with three key messages: First, financial risks have increased since April Second, as a result, policymakers in both advanced and emerging economies need to step up their efforts to preserve financial stability and safeguard the recovery. And third, we have entered into a new phase of the crisis — a political phase — when tough political decisions will need to be made, because the window for substantial policy action is closing. Time is of the essence. Let me delve into the details of the increased financial stability risks, which have kept policymakers and investors on the edge of their seats. First, a string of negative surprises in recent economic data is prompting investors to reassess the sustainability of the economic recovery. While a global recovery remains the most likely scenario, downside risks to this forecast have increased. Any weakening in the economic outlook will threaten to stall — and possibly reverse — improvements in the balance sheets of banks and households. Second, there are increasing concerns about the political resolve to support the adjustment efforts in Europe. The lack of a comprehensive solution to this problem has led to increased financial market pressures on some European governments, and has rekindled worries about potential contagion within and beyond Europe. In the United States, there are increased financial market concerns, due to the continuing political stalemate over the debt ceiling and the longer-term fiscal path. And Japan’s medium-term fiscal adjustment targets may have become even more challenging because of the impact of the recent earthquake and tsunami. And third, we are concerned about the effects of a prolonged period of low interest rates. Accommodative monetary policies remain necessary in advanced economies, partly because of the limited progress in resolving structural problems. But a prolonged period of low interest rates may lead investors to underestimate risk in their search for yield. This could promote the buildup of financial imbalances. We have noticed two trends: The declining cost of debt is prompting some companies and investors to rediscover their appetite for financial leverage. There is evidence of such re-leveraging in the market for corporate high-yield bonds and leveraged loans Investors’ search for yield has also spurred strong capital inflows into some key emerging markets, although such flows have recently eased. For example, buoyant foreign demand has led to a recent surge in international corporate bond issuance, notably from Latin America, and a decline in corporate bond yields. Policy priorities Given these risks, policymakers need to increase their efforts to tackle longstanding financial challenges once and for all. In Europe, there is a need to finally cut the Gordian knot of mutually reinforcing financial exposures between banks and governments, which has fueled worries about potential contagion. To reduce the contagion risk, policymakers need to follow a two-pronged approach — (i) push for a comprehensive plan to repair the financial system and (ii) reduce sovereign risk through credible medium-term fiscal consolidation. Financial System. So far, there has been insufficient progress in strengthening bank funding and capital positions in some European Union countries. The forthcoming stress tests by the European Banking Authority will be a decisive opportunity to enhance transparency and address the weak tail of undercapitalized banks. Governments. Political resolve is required to address medium-term fiscal adjustment needs in several advanced countries, including the United States and Japan, which have yet to take decisive action in this area. In short, when it comes to financial systems and governments, advanced economies need an orderly de-leveraging, which means they would cut back on the amount they borrow. By contrast, emerging economies need to focus on orderly re-leveraging. They should do so by guarding against overheating and the buildup of financial imbalances — with strong credit growth, rising inflation, and surging capital inflows. Corporate leverage is also rising, and weaker firms are now accessing international capital markets. This could make corporate balance sheets more vulnerable to external shocks. With strong domestic demand pressures — especially in emerging Asia and Latin America — macroeconomic measures are needed to avoid overheating, accumulating financial risks, and undermining policy credibility. Macroprudential tools, such as higher reserve requirements, and, in some cases, a limited use of capital controls, can play a supportive role in managing capital flows and their effects. However, they cannot substitute for appropriate macroeconomic policies. Policymakers continue to face potentially large future shocks to the financial system, at a time when its resilience is not yet assured. And there is less room for maneuver to counter these shocks through traditional fiscal and monetary policies. Moreover, in increasingly gridlocked political systems, policymakers may find it progressively harder to take substantial policy action to address sovereign and financial risks. We are now in a new phase of the crisis — the political phase — and tough political decisions need to be made. Time is of the essence. From iMFdirect blog

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Tang Sales Double In 4 Years

June 20, 2011

Tang sales have almost doubled in the past four years . The powdered drink now grosses about $1 billion annually. Despite Tang’s association with astronauts , much of the brand’s recent success can be attributed to placing the drink in emerging markets such as Argentina, Brazil, Mexico, the Philippines and the Middle East. In order to stay relevant in these markets, Tang has expanded beyond its well-known orange flavor and now comes in much more exotic flavors such as tamarind, soursop, horchata, ponkan (a citrus fruit) and lemon pepper. Last year, Tang sold the equivalent of 20 billion drink servings . But, to put that in perspective, Coke sells that much in under a month.

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Dr. Sasha Galbraith: Like Mother, Like Daughter? Lauren Herring IMPACTS the Family Business

June 20, 2011

What makes some organizations thrive, while others struggle? Strong leaders often make all the difference. I recently had the opportunity to speak with Lauren Herring, 32, President and CEO of IMPACT Group , a global talent development and career management firm with special expertise in relocation and outplacement. Lauren’s mother, Laura Herring, a psychologist by training, founded the company in 1988. The elder Herring noticed that many people in her counseling practice were distressed by corporate relocations. So she started a company to assist corporate clients in the complete relocation process, from finding jobs for spouses to schools for the kids and everything associated with “fitting in.” And while the company continues to enjoy a solid record of success, its potential for growth is stronger than ever, particularly given a recent report in the Financial Times . Today, IMPACT Group generates over $15 million in revenue with 100 full-time employees in 22 countries. As the only child of an entrepreneurial and “pioneering” mother, Lauren Herring did not initially plan to join the family business, but when her mother was diagnosed with breast cancer in 2001, she jumped in to help. She started off doing project work, and from 2005 to 2007 drove the company’s exponential international growth. In 2007, she led the successful integration of an outplacement firm IMPACT acquired, a move that doubled the company’s size. With her mother now retired and serving as chairwoman of the Board of Directors, Lauren is solely responsible for IMPACT’s continued growth. I asked Lauren what organizational practices and leadership tools she’s implemented since taking over as CEO in 2009. Here’s what she said: Lauren Herring: As in any leadership transition, there were some significant changes in terms of my leadership style versus hers, as one might expect. I mean, she is a pioneering entrepreneur, and really a phenomenal salesperson, and a very inspirational leader. I think people really viewed her as representing the soul of the company. [But] I want the company to be more than just about me. And I can’t possibly work hard enough as the company grows and takes on more product lines, and more geographic capabilities — it can’t all be about me. So I think that’s one of the things I worked really hard on: to build up others within the organization so they can take on more and more leadership roles as well. I also added more structure to the organization. I want [employees] to work on what they need to do according to the business goals and the strategy, not what they think is on my mind today. Q: Are you aware of anything IMPACT Group does that is different from the norm in a typical corporation? LH: For the size of organization that we are, we’re probably more virtual than the majority of companies, by a significant margin. Many of our leadership positions are not based in our headquarters. We have a large group [of people] that work from home [and] a tremendous amount of just telecommuting or flexible work arrangements in general. And our delivery methodology, we’ve been very virtual from the very beginning. Even in the ’80s, we were doing telephone counseling, for example, rather than face-to-face for some of our work. We also have a significant ‘adjunct pool,’ which is what we call a group of flexible workers that we pay on an hourly basis. So when our business spikes, we can utilize that talent, and when it’s lower, we can manage our fixed costs. Many of those people are independent contractors who might have a small business of working with different organizations, doing their own consulting. These people have tremendously broad skills as well. So some of them, in addition to providing career counseling, might also have experience in consulting around leadership development. At different times, we’ve had that group up to about 300 people. Q: How do you hire people? LH: I’m going to hire, first and foremost, for cultural fit. I believe there are a lot of people out there that could probably do whatever job I’m looking for, but it’s got to be the right fit. We’re a company that is mission driven around making a positive impact on peoples’ lives. And we want to make a profit doing it. So I look for people with passion, integrity, who strive for excellence and a handful of other competencies that are really important [such as] innovation, flexibility and managing your own career. Q: So with employees all over the place, how do you yourself imprint your leadership across the organization? LH: That’s a great question, and I think about it a lot because I’ve really tried to make this a company that is about being more than any one of us. And at the same time, as a leader, clearly I’m visible as well. And so I really have worked tremendously over the last several years on facilitating strong communication and dialogue with the teams. I do that in a variety of ways — newsletters, webinars, ‘coffee talks,’ and a quarterly all-hands meeting. A lot of it just comes down to what I expect from my leaders and my team. I want a collaborative culture. I want to break down siloes. The first couple years, I spent a lot of focus on how I can be the kind of leader that they need me to be. And over the last six months, I have switched that around a little bit, and recognized, you know what? I think I’m doing a lot of the work here, probably like a lot of women. I’m putting myself out there all the time. I need to do more to expect them to meet me halfway a lot of times. Communication is a two-way street. So what’s next for this impactful leader? Lauren says she is continuing to learn and evolve in her leadership style. Considering the progress that she’s already made — growing the business by 700 percent in 10 years — I’d say she’s one woman to watch. Cross-posted from Forbes .

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Greece Faces Power Outages Due To Austerity Strike

June 20, 2011

ATHENS, Greece — Greece faced power outages on Monday as employees at the main power utility began 48-hour rolling strikes to protest the company’s privatization, part of austerity plans needed to avoid a national debt default. The sell-off of state assets in the power company is a major step in a euro50 billion ($71 billion) privatization drive that must be completed by 2015. It is part of highly unpopular austerity plans, including more tax hikes and spending cuts, that must be passed by Parliament by the end of the month if Greece is to get the next euro12 billion installment of its euro110 billion bailout next month. Without the funds, Greece will be unable to pay its debts as of the middle of July, triggering a default that would rock financial markets in Europe and abroad. The power company, known by its acronym DEH, said nine small and large thermoelectric units were already offline as of Monday morning due to the strike, and appealed to consumers to limit their use of electricity, particularly during the midday heat, when air conditioning use is at its peak. It said it was preparing hour-long power cuts in several areas if that became necessary. Greece has seen near-daily protests against the belt-tightening that has slashed salaries and pensions in an attempt to stem a ballooning national debt. “We are on strike because, believe it or not, I feel that they – the government and its measures – have taken my smile away, have robbed me of my life as well as my children’s future,” said electrician Giorgos Maleskos. “My only income comes from this job. After 33 years of work, we have got to the point of wondering if we will be able to survive.” The start of the strike came as Greece’s new finance minister, Evangelos Venizelos, was meeting his colleagues from the eurozone in Luxembourg for a second day. Talks overnight did not produce a final agreement on the next installment of rescue loans or on a broader, second bailout expected in cooperation with the International Monetary Fund. The country’s embattled prime minister, George Papandreou, was also heading to Brussels for meetings with EU President Herman Van Rompuy and European Commission President Jose Manuel Barroso later Monday. On Tuesday, Papandreou faces a vital confidence vote in the new government he announced on Friday, when he reshuffled his cabinet amid a major political crisis. Talks between Papandreou and the head of the conservative opposition party, Antonis Samaras, on forming a coalition government had collapsed two days earlier while an anti-austerity rally and demonstration degenerated into riots on the streets of Athens. Facing a mountain of debt coupled with a massive budget deficit, Greece was granted the euro110 billion package of rescue loans in May 2010 to prevent it from defaulting on its debts. In return, it has been passing strict budget cuts and tax hikes in an effort to reform its economy. But the cuts have led to a recession, and the country is now in negotiations for a second bailout – which Papandreou said Sunday would be roughly the same size as the first. European officials fear a default by Greece could set off a chain reaction that would shake Europe’s banking system and economy, and drag down other financially troubled eurozone countries such as Portugal, Ireland and Spain. Both Portugal and Ireland have also taken bailouts since Greece did. While European officials concede another bailout is needed, they have not agreed on the conditions.

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California Man Arrested After IRS Mistakenly Deposits $110K In His Account

June 18, 2011

This post has been corrected Last September, Laguna Beach resident Stephen McDow found $110,000 deposited in his bank account, courtesy of the IRS. That same deposit has now landed him in hot water, according to CBS Los Angeles . (h/t The Consumerist) The IRS mistakenly sent the tax refund money, meant for a 67-year-old woman, to McDow, instead, reports local news station KCAL . The Los Angeles woman reportedly failed to inform the IRS that she had closed the bank account she had filed with them, and the account number was subsequently assigned to McDow. When the woman discovered that McDow had been the recipient of her refund, she called him and demanded her money back. McDow, in turn, offered to pay back the balance in monthly payments, as he had already spent $60,000 paying off student loans and his home mortgage. Unsatisfied with the suggested size of the monthly payment, the woman declined the offer, according to KCAL. McDow was subsequently arrested and charged with one felony of grand theft by misappropriation of lost property. He reportedly faces four years imprisonment and is currently being held on bail for the exact amount he first received: $110,000. Correction: An earlier version of this post said McDow had received a prison sentence. He is currently being held on bail. Watch KCAL report here:

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Mexico: $250 Million In Oil Stolen In 4 Months

June 17, 2011

MEXICO CITY — Increasingly sophisticated thieves stole thousands of barrels per day of oil products from Mexico’s state-owned oil company in the first four months of 2011, thefts worth about $250 million, the company’s director said Thursday. Those thefts amounted to almost one million barrels in the first four months of the year, a level almost 50 percent more than what thieves stole in the same period of 2010, according to the Petroleos Mexicanos oil company, also known as Pemex. Pemex director Juan Jose Suarez Coppel said the stolen fuel was the equivalent of 100 tanker trucks per day. “Fuel theft has increased in the last few years,” said Energy Secretary Jose Antonio Meade. “The gangs that participate in these crimes are increasingly sophisticated, better organized and many times they have carried out these thefts using the latest technology.” Mexican officials say drug cartels have been involved in the thefts, often by tapping into state-owned pipelines. The thieves will sometimes inject water into pipelines to cover up the drop in pressure caused by thefts or drill a second tap near the first to continue siphoning off oil if the first is detected. Drilling into pipelines is dangerous because of the high pressure and combustibility of the fuel; while illegal pipeline taps have caused explosions, fires and spills in the past, authorities still find hundreds of successful taps each year. Suarez Coppel said 556 illegal taps had been detected so far in 2011, compared to 710 in all of 2010. Officials have said in the past that drug cartels have been implicated in some of the thefts, especially in northern Mexico. Suarez Coppel said the largest number of thefts – about 150 – occurred in Sinaloa state, considered the cradle of Mexican drug trafficking. He said the cartels may sell the fuel or even use it for their own vehicles. About 390 of the taps involved refined fuel pipelines, while about 135 were at ducts carrying crude. Because there is little market in Mexico for unrefined oil products stolen from some pipelines, the thieves often sell the oil products to U.S. refineries. Pemex filed lawsuits in May against nine U.S. companies for alleged involvement in buying or processing Mexican oil products. But thieves have also sold unrefined fuels to bulk users like brick kilns and factories, so authorities have proposed new laws that would stiffen penalties for the possession, sale or use of stolen oil products. The changes being discussed in congress would also allow organized crimes charges to be brought in fuel-theft cases, and allow charges to be brought against Pemex employees or subcontractors who give information to thieves. In the past, investigators have said workers may have told thieves when pressure in pipelines would drop for maintenance or other reasons, allowing them a window of opportunity to drill into ducts more easily.

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Simon Johnson: The Big Banks Fight On

June 16, 2011

The bank lobbyists have a problem. Last week, they lost a major battle on Capitol Hill, when Congress was not persuaded to suspend implementation of the new cap on debit card fees. Despite the combined efforts of big and small banks, the proposal attracted only 54 votes of the 60 needed in the Senate.

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Pensions Set To Be Next Battleground For State Employees

June 15, 2011

First came the pay freezes and unpaid furloughs. Then came the higher contributions for health insurance. Now, in the most definitive sign yet that the era of generous compensation for public-sector employees is ending, workers in more than half the states face the prospect of paying more of their salary toward their pensions.

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WATCH: Obama Talks Economic Recovery In Wake Of Grim Poll Numbers On Key Issue

June 11, 2011

WASHINGTON — President Barack Obama on Saturday sought the public’s patience with a slowing economy and said training workers for manufacturing jobs despite declines in that sector will help put the economy on a path toward growth. He said the recession didn’t happen overnight and won’t end that way, either. “It’s going to take time,” Obama said in his weekly radio and online address . Recent polling shows broad disapproval with Obama’s handling of the economy, which is becoming the central issue in next year’s presidential election. Such disapproval hit a record 59 percent in a recent Washington Post-ABC News poll. Job growth slowed sharply in May and unemployment inched up to 9.1 percent, according to economic indicators that also showed manufacturers cutting 5,000 jobs last month. Those were the first job losses in that sector in seven months. No president since World War II has won a second term with a jobless rate above 7.2 percent, and Obama’s options for sparking faster economic growth before the November 2012 election appear limited. On Monday, Obama was to head to Durham, N.C., for a brainstorming session with his jobs council on steps Washington can take to encourage private-sector hiring. Council members and senior administration officials also were to hold “listening and action sessions” with businesses in the Raleigh-Durham area to get their input. Last Wednesday, Obama announced an effort by the private sector, colleges and the National Association of Manufacturers to help half a million community college students become trained and certified for manufacturing jobs. They would get a credential guaranteeing that they are skilled. “If you’re a company that’s hiring, you’ll know that anyone who has this degree has the skills you’re looking for,” the president said Saturday. “If you’re a student considering community college, you’ll know that your diploma will give you a leg up in the job market.” Obama said other steps, such as providing students with a quality education and investing in new jobs in the clean energy sector, will also help the economy grow. In the weekly Republican message, also on jobs, Rep. Adam Kinzinger, R-Ill., recalled the administration’s promise that unemployment would go no higher than 8 percent after Obama pumped billions of dollars into the economy soon after taking office to stimulate it. Kinzinger said the “road to refueling our economy and creating jobs” includes tackling government debt, simplifying the tax code, limiting regulations, passing free-trade agreements with Colombia, Panama and South Korea, and boosting domestic energy production. “These are some of the steps we need to take to get government out of the way and let our economy grow and get back to producing jobs,” he said. WATCH:

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Small Town America Pushes Back Against Cuts To Local Services

June 8, 2011

Around the country public officials are asking themselves similar questions. Plunging property-tax receipts and rising pension and health-care costs have pushed many municipalities to the brink of financial collapse. The idea is that local governments can operate with fewer workers and smaller budgets if they do things like combine fire departments, create regional waste authorities and fold towns and cities into counties. But selling the notion in small communities like Onekama is no easy job. Public officials have floated a proposal to merge this village of 1,500 along Lake Michigan into the township that encircles it. Some residents worry that a leaner government risks becoming a less responsive one.

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Michael Moynihan: End OPEC Now!

June 8, 2011

The OPEC cartel that meets in Vienna today has thrived in its 50-year history. First ignored, then despised for using the “oil weapon” on the West, and ultimately granted a strange legitimacy due to age, it has assumed all the trappings of an international organization. This week’s meeting of Mahmoud Ahmadinejad ‘s Iran, Muammar Gaddafi’s Libya and Hugo Chavez’ Venezuela to fix quotas, for example, will take place not in Gaddafi’s tent but in a sumptuous building on the Helferstorferstrase in Vienna. Press is likely to report not on why oil prices are set by a cartel of the world’s worst leaders but rather on whether oil quotas are modestly adjusted to cover wells out of order since the Libyan revolt Unfortunately, the cartel’s victims have not fared as well. OPEC has over the last century engineered a massive transfer of wealth from the rest of the world to its rulers. At key junctures, it has used the “oil weapon” to destabilize the global economy as with the 1970s oil shocks, the 1980s debt crisis triggered by soaring oil bills and the 2008 financial collapse (when it cut quotas with prices over $100). Less well known is the role of oil price spikes in stoking misery and instability in developing countries. The final victims have been the people of the oil states themselves who have not shared in the wealth enjoyed by a few while seeing democracy pushed indefinitely into the future. Adam Smith famously observed “Seldom do businessmen of the same trade get together but that it results in some detriment to the general public.” Based on a long history of economic study, today cartels are illegal in virtually all developed countries. The question with OPEC, therefore, is not why it is bad but why has it survived. During the first Gulf war in 1991, the US and its allies saved Saudi Arabia, liberated Kuwait and dictated peace terms to Iraq. Yet after the war, all three countries continued as prominent OPEC members. In 2002 we invaded Iraq again, this time overthrowing Saddam Hussein. But rather than insisting that Iraq leave OPEC, the United States actually became a de facto OPEC member through the provisional Iraq authority. The superficial answer to this question of why OPEC has persisted is it has successfully claimed sovereign immunity. Unlike a private cartel — hundreds of which have been prosecuted by the Justice Department since 1990, OPEC is comprised of governments that happen to set quotas for oil. But this argument is weak. The 1976 Foreign Sovereign Immunity Act contains an exception to immunity in the case of governments engaging in commercial activities. The real reason that OPEC has survived is a lack of US resolve to break it up. In 2007 and 2008, the House and Senate passed legislation that would have forced the Justice Department to go after OPEC. However, a veto threat from President Bush prevented final passage of the legislation. There is an equally strong case for trade action against OPEC, made compelling by Senator Frank Lautenberg. The WTO unequivocally prohibits quota-based cartels except in the rare case of conserving resources or national security and of the 12 OPEC members, five are WTO members and 3, observers. Yet to date, the US Trade Representative has not filed an action. These tools alone might suffice to end OPEC. But the ratcheting up of US engagement in the region recently creates a new opportunity to break the cartel. The Middle East — the geographic center of OPEC — is clearly undergoing fundamental change. Not only, of course, did the US midwife democracy in Iraq, we remain the guarantor of security of Saudi Arabia, Kuwait and the UAE, and are now also supporting the rebels in Libya. The expanded US and EU role in the region provides an opportunity to make a simple case to all parties. US and more broadly EU support must be contingent on a timeline for withdrawal from OPEC. In short, the conditions exist to end OPEC. We only need resolve. Here is a plan forward. By July 4th, Congress should pass legislation revising the FSIA to strip OPEC of any hint of sovereign immunity. The US Trade Representative should immediately begin studying action against the OPEC countries in the WTO. The Obama Administration should make it clear to parties we aid in the Middle East they need to plan to transition out of OPEC. We can end OPEC but only if we act. Time is of the essence due to the tenuous state of the global recovery.

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WATCH: Man Receives Foreclosure Notice For $0.00

June 8, 2011

Of all the foreclosure warnings issued during the housing crisis, perhaps oddest is the one demanding no money at all. Earlier this year, in Northampton, Massachusetts, a man, referred to in reports only as Mark, received a notice demanding that he pay $0.00 to his mortgage lender, Bank of America, or his home would be seized, according to local television network News 22 WWLP . The notice surprised Mark, who had consistently made his mortgage payments, yet it was indeed no joke, as Mark found his credit score had been downgraded. Despite the gravity of the situation, Mark understood the absurdity of it all. “It says, you owe us zero dollars, zero cents. I’m going to write a check to them for zero dollars and have it clear? I couldn’t help but laugh,” he told News 22 WWLP, who, in turn, informed Bank of America of the story after Mark himself had struggled to get in contact with the bank. Turns out, an electronic filing error caused Mark’s payments to end up in the wrong place. Bank of America made right after the mix-up, making sure Mark’s credit score was restored and, of course, allowing him to keep his home. For his trouble, he also got a little extra in the form $150 and a gift certificate. The story is only the latest in a string of bizarre foreclosure incidents. In Jacksonville, Florida, home flipper Perry Laspina ended up not having to pay the remainder of his mortgage on an investment property first purchased in 2006, AOL Real Estate reported in April. After the value of his investment plunged, the story goes, Laspina found no buyers or renters and so simply stopped making payments. His lender, Wells Fargo, was apparently not at odds with the idea, and the loan was written off, the house subsequently given to Laspina. Others have found success by taking more direct action against banks. Instead of being foreclosed upon, one couple in Naples, Florida actually foreclosed on Bank of America. After the bank failed to compensate Warren and Maureen Nyergers for legal fees leftover from a wrongful foreclosure lawsuit, the couple, with the help of their lawyer and two sheriff’s deputies, began legally seizing assets from the bank’s branch office. Then of course, there’s the Bank of America that foreclosed on itself in Charlotte, North Carolina. In that case, Bank of America has filed a foreclosure lawsuit against the owner of a building housing one of the bank’s own branches. Watch the News 22 WWLP news segment here: I-Team:Man gets a $0 foreclosure notice: wwlp.com

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Under Pressure, OPEC Hammers Out Deal to Raise Oil Supply

June 8, 2011

VIENNA (Ramin Mostafavi and Alex Lawler) – OPEC producers on Wednesday hammered out a deal to raise oil supplies for the first time in four years to support the fragile world economy. Under pressure from consumer countries to contain fuel inflation, Saudi Arabia hopes to convince the Organization of Petroleum Exporting Countries to lift production by as much as 1.5 million barrels a day, Gulf delegates said. They said that one option could be an initial one million bpd increase with a promise of another 500,000 bpd to come in three months time. Iran offered to host an emergency meeting within three months to review policy, an Iranian source told Reuters. Initial opposition to an increase from Iran shifted to a proposal for a modest 700,000-one million bpd increase during a closed session of ministers, the Iranian source said. Iran’s acting oil minister Mohammad Aliabadi struck a conciliatory note at the start of the meeting. “Iran is a member of OPEC and will go with the decision of the majority,” Aliabadi told reporters. As OPEC’s biggest producer and the only one with any significant spare capacity, Saudi usually gets its way. But long-time price hawks Iran and Venezuela plus Ecuador, Iraq and Angola all want to keep oil prices above $100 a barrel. Brent crude traded near $116 a barrel. BASELINE? Also at issue is the baseline for any increase. As the meeting started it was not clear whether an increase would come on top of current output or from OPEC’s out-of-date production target, which is much lower. Delegates said Saudi would prefer to use April OPEC output of 26.33 million bpd as the baseline rather than the old official target of 24.84 million set in December 2008. If Riyadh gets its way, OPEC would be committing to a real increase rather than a cosmetic deal that leaves Saudi to pump more unilaterally outside the official agreement. An increment of, say, 1 million bpd on top of April output would lift OPEC’s official target for 11 members by 2.51 million bpd to 27.35 million. Iraq, not bound by a quota, is pumping an additional 2.7 million. Venezuela is holding to a tough line. “We do not agree with production being increased now, we must continue to consolidate balance in the market and we have to defend fair prices,” Venezuelan President Hugo Chavez said on Tuesday in Ecuador. Apparently backing Gulf Arab producers are Nigeria and Algeria who sit on a committee that on Tuesday recommended a one-million-bpd increment. SAUDI PUMPING MORE REGARDLESS Regardless of the policy decision, Riyadh will pump more. A Gulf official said Saudi was already raising output by at least 500,000 bpd in June to 9.5-9.7 million bpd. Saudi output was last as high in the middle of 2008 after oil prices set a record $147 a barrel, shortly before recession sent prices crashing. Forecasts suggest more oil is required to stop oil prices rising again. OPEC’s Vienna secretariat sees demand in the second half of the year 1.7 million bpd higher than current cartel output. Copyright 2011 Thomson Reuters. Click for Restrictions .

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GOP Presidential Candidates Seek To Hammer Obama Hard On Key Issue

June 8, 2011

WASHINGTON (Reuters) – The slow-forming 2012 Republican race for the White House is starting to gain focus, with candidates competing to see who can hammer President Barack Obama the hardest for his economic leadership. Republicans have launched a volley of attacks on Obama’s economic policies in the last week, hoping to capitalize on what polls show is broad public dissatisfaction with how he is handling the economy and the budget deficit. Next week’s nationally televised debate in New Hampshire gives Republicans their best forum so far to make their case on what promises to be their central argument in 2012 — that Obama should be fired for his economic stewardship. “Given the state of the economy and the public’s economic exasperation, this election is going to be about one thing — who can fix the economy. Because Obama hasn’t done it,” said Republican strategist Kevin Madden, an aide on Mitt Romney’s 2008 White House campaign and now an informal Romney adviser. Former governors Romney of Massachusetts and Tim Pawlenty of Minnesota lead a Republican field with few ideological differences that has been united in attacking Obama for tax and spending policies they say stifled the economic recovery. Pawlenty offered his own economic prescription on Tuesday, presenting a plan that would restructure and slash taxes for individuals and corporations and include a Constitutional amendment requiring a balanced budget. “He has spent three years dividing our nation, fanning the flames of class envy and resentment to deflect attention from his own failures and the economic hardship they have visited on America,” Pawlenty said of the president in a speech at the University of Chicago, where Obama once taught. Democrats were quick to ridicule the plan as a giveaway to the wealthy and corporations that would explode the deficit. “It’s a prescription for economic disaster that would fall squarely on the backs of seniors and working families,” said Debbie Wasserman Schultz, chairwoman of the Democratic National Committee. FEW DIFFERENCES ON ECONOMY Romney and the other Republican candidates — former House of Representatives Speaker Newt Gingrich, former Senator Rick Santorum, former pizza executive Herman Cain and Representative Ron Paul — have offered their own economic critiques of Obama as they jockey for Republican primary support. Former U.S. Ambassador to China Jon Huntsman, who served two terms as governor of Utah, and Representative Michele Bachmann also have traveled to early voting states and are expected to enter the race in the next few weeks. Santorum, a staunch social conservative, formally launched his campaign on Monday with a broadside against Obama that accused him of wrecking the economy. The Republican contenders are all conservatives who want to cut spending and reduce taxes, and all have pledged allegiance to Representative Paul Ryan’s proposal to restructure the Medicare health program for the elderly. But they offer sharper differences in experience and perspective. Romney, Pawlenty and Huntsman hope to highlight their executive experience as governors handling budgets. Romney and Huntsman will feature their business backgrounds. Bachmann, Santorum and Cain will vie for the backing of social and religious conservatives, but the growth of the Tea Party and the coming clash in Congress over the debt ceiling has made that bloc more responsive to economic arguments. A Washington Post-ABC News poll published on Tuesday found the country broadly pessimistic about the economy. Obama received record high disapproval ratings on the economy and deficit, with about 6 in 10 voters disapproving. The poll found Obama leading five of the six Republican candidates surveyed in a head-to-head matchup — Gingrich, Hunstman, Pawlenty, Bachmann and Sarah Palin — but slightly trailed Romney among registered voters. Seven months before the first nominating contest, the field of contenders for the right to challenge Obama in 2012 is largely set. But polls show lingering unhappiness among some Republicans about their choices, leading to continued intrigue about other high-profile names that might enter the fray. Palin, the former vice presidential nominee, ignited a frenzy of speculation about her plans with last week’s publicity-grabbing East Coast bus tour, and Texas Governor Rick Perry now says he is thinking about a potential bid. But time is running short to organize. The failed White House campaigns of Democrat Wesley Clark in 2004 and Republican Fred Thompson in 2008 showed late-starting candidates are often better in concept than in practice. “The magical non-candidate is only magical as long as they stay out of the race,” said Republican Dan Schnur, an aide to John McCain’s 2000 presidential race who is now at the University of Southern California. (Editing by Cynthia Osterman) Copyright 2011 Thomson Reuters. Click for Restrictions .

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The Creeping Rollback Of Child-Labor Laws

June 6, 2011

The government has not had a lot of ideas for what to do about the nation’s anemic job market, but there are troubling signs that one old idea is starting to re-emerge: child labor. In the first part of the 20th century, there was a concerted effort to end the scourge of children working in factories and textile mills. But now there is a small but noticeable drive to weaken these protections.

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Steve Mariotti: 24 Concepts Every Young Person Should Know About Business

June 6, 2011

The Babson College definition of entrepreneurship is: “A way of thinking and acting that is opportunity obsessed, holistic in approach, and leadership balanced.” In honor of the Urban Entrepreneurship Summit being held at Rutgers Business School in Newark today, I wanted to present my thoughts on what the younger generation needs to know about entrepreneurship. The quotation above from Babson, the top entrepreneurship college in the country, gives a springboard to my essential thought: Every individual should learn how to start, finance, and manage a small business. This will give millions of people the skills necessary to make a livelihood, in case they have to leave a job or are unable to find one. It will also enable them to take advantage of a market insight and turn it into a business opportunity. Also, they will become better employees through understanding how business functions. After 30 years of teaching entrepreneurship as a way to encourage at-risk students to learn how to be economically independent and to stay in school, I am confident that this experiential approach works will help struggling youth to stay in school and learn basic skills. One of the major causes of poverty is business failure, often due to a lack of expertise. Learning the basics of entrepreneurship and business ownership will, I believe, significantly lower the rates of global poverty. I have met thousands of young people who have the drive to make their families proud, build good communities, go to college and exit poverty via entrepreneurship. Learning how to start a business should be part of every school’s curriculum. Below I have listed the 24 concepts every young person should learn before graduating high school: 1. The Importance of Mental and Physical Health This means eating right, getting enough sleep, exercise, building strong ties with friends, family, and community, and, as much as possible, to minimize stress! The most important relationship you will have in your life is with yourself, so treat yourself well to make life worth living. 2. The Joy of Business Business is fun. Entrepreneurs coordinate resources — land, labor, capital, and ideas — and through the craft of entrepreneurship organize them in such a way as to provide a product or service to the public at a profit. If being in business is not enjoyable, this is the wrong profession for you. 3. Opportunity Recognition There are two ways to find opportunities: the external method, where you see opportunities where others see obstacles and problems, and the internal method. To tap into this, make a list of your hobbies, interests, and skills in one column, and business opportunities they could generate in another. Whenever you encounter a problem, think of how it could be solved. 4. The Economics of One Unit This is the cornerstone of a business plan. Many young people dream of how they will make millions. Instead, think of how you will develop and sell one product or one hour of service and make a profit; everything will build from that An economics of one unit will have three numbers: the price of one unit, the cost of goods sold (which is subtracted from the price, leaving the “contribution margin” — or gross profit). This number is key, as it will be added to the fixed costs per unit. The resulting number will be your profit (before taxes). 5. The Laws of Supply and Demand The law of supply and demand is the most important economic concept of all! Discovered by Alfred Marshall, a Cambridge University don, in 1890, the internal method: make a list of your hobbies interest and skills in one column, and in the other list all the business opportunities that come from the list. The laws of supply and demand interact to determine prices, which communicate information to entrepreneurs and consumers about the best way to allocate resources. 6. Vision, Mission, Strategy, and Tactics Find a vision of the world you want to create. Develop a clear mission for your business. Get your economics of one unit accurate and simple.Write down your strategic goals making them measurable with numbers and a timeline. Your strategy can be presenting a product at a lower cost than your competitor, having a better focus on the consumer market, or differentiating it in the marketplace. Your tactics will use your resources to achieve your strategic goals. 7. Don’t Compete, Create a Competitive Advantage How will you compete? What will be your business edge? How can you create a winning business model with an advantage? Like the Grateful Dead, the secret is to find a niche where you can be not necessarily the best but the only. Find out what everyone else is doing and then do something different. Your competitive advantage can be based on a unique skill, intellectual advantage, or by selling at an unusual time or location. The alternative to uniqueness is to be ordinary, and sell the same product at the same price as everyone else, making minimal profits if any at all. 8. Wealth Creation, Risk, and Uncertainty Most wealth is created through a business opportunity combined with ownership. In an entrepreneurial endeavor, wealth is created by building a business that has a profit and can be sold for a multiple of earnings. Both mental and monetary wealth is the end result of a successful entrepreneurial career. Being an entrepreneur without ownership can be a nightmare-other people make the profit on your insights. The sooner an individual understands the difference between salary and profit, the better. Ownership of future profits can be sold for a multiple of earnings. Salaries and wages are compensation for work in the present, and hence are worth less than profits — which are projected into the future. All investments take place in uncertain world with risk. The investment of resources to create a business needs to be wisely balanced against the risk involved. 9. Marketing. Putting Yourself in the Customer’s Shoes If you listen to your customers and ask honest questions, they will tell you they need and want. People are fascinating, and you can learn so much about their problems if you put yourself into their shoes by asking the right questions and then engage in “active listening.” Out of this will come business insights that can help you find your market niche. Be sure to name your business simply and accurately. Always be building your brand through excellent products, customer service, and good communications. Marketing is the process of creating a product or service that meets the needs of consumer profitably. 10. Time Management The most important resource of all is time. Time is precious. Once spent, you can never get it back. Do not waste it. By planning how you will spend your time for the coming day, week, month, and year, you will be much more likely to achieve your goals and live a productive and positive life. 11. Leadership and giving back Every great business leader is aware of the community around them and looks to satisfy a community need. Philanthropy is good business, and if you are known as someone who cares about your community, more people will want to do business with you. Winston Churchill said: “We make a living by what we get; we make a life by what we give.” It is likely that everyone will have some problem to solve that is not answerable from a purely financial profit point of view. Solving this kind of problem creates a great deal of pleasure, and “psychic” income helps build communities. Ethical and philanthropic behavior will always end up helping one’s career and business. 12. Financial Literacy: Financial Statements, ROI, and Breakeven Financial literacy is a subset of entrepreneurship education. It’s important to understand that giving time, energy, and money to your business is an investment that will help you to meet your goals. Utilizing the tools of compound interest and the time value of money are indispensable to create wealth. It is imperative that every young person learn basic record keeping, and how to read income statements, balance sheets, and cash flow statements. Return on investment (ROI) is calculated by dividing the profit from a venture by the amount of the investment. What the ROI will be should guide you on your investments. And “breakeven” is important because it tells you whether or not you can afford your marketing plan. Understanding how to save and invest your money is vital to create and sustain wealth. 13. Ownership From a very early age, everyone should be exposed to the idea of owning assets. The best way to teach this is to discuss the concept openly. The responsibilities of ownership as a good citizen should be discussed as well. Without understanding and appreciating the concept of ownership, you will be less likely to understand who has financial power in the community, and you will be less likely to own the output of what you produce. This is what has been missed by so many leaders who discuss the importance of math, reading, and writing skills-who owns the output from people’s skills is as important as the skills themselves. The most successful entrepreneurs, like Madonna and Russell Simmons, own their own economics of one unit. 14. Lengthening Time Preference Perhaps the most important characteristic of success for a young person is the ability to wait for gratification — to save money and plan ahead in order to control future time. Aside from goal setting, this can be taught best by a standard wholesale-to-retail lesson. Before you go to the wholesaler, draw a chart and think about how this event will take place. Much of success in life is thinking about what to do now to make your goals come true in the future. Entrepreneurship, and all of business, is about investing ideas, money, and time in the present to get benefits in the future. I would argue that working on lengthening time preference is one of the most important skills you could develop. 15. The Basic Sales Call Preparing appropriate sales material is as vital as learning to be an active listener. What problems does your product solve? Who is your audience? Answering these questions is important. View selling as both learning and teaching. By identifying the consumer need, you can educate the customer on the benefits of your product or service. A sales call a day can help develop a skill that can be used anywhere in the world at anytime. Practice your sales call, so you are communicating clearly the benefits of your product. Good sales-call procedure will give you feedback on your product and help continue to improve it. 16. Goal Setting Goal setting is something every young person should practice every week. Having long-term goals (ten years), intermediate-term (five years), and short-term (one year), and immediate (the next month) is absolutely crucial for success. Make sure to make them visual, so you see them. Always set goals that are numerical and measurable-for example: I want to have five new customers by next month or I will lose ten pounds by April. 17. Public Relations, Media, and Communications Communications strategy is a key asset for a young entrepreneur to understand. Learning to communicate to other people by being covered by the media is valuable. The key concept here is to learn the craft of story development. A story is helpful if people can understand it and it motivates them to buy your product or service. A good story would show how your product had a positive effect on someone. Remember, though, it must be 100% accurate. 18. Teamwork Ultimately, all success is based on teamwork. Learning to pick people that you can work with successfully, training them, and providing them with incentives is absolutely essential for success. Playing sports or engaging in any other activity that involves teamwork will help build these skills. 19. Think Globally The world is much smaller now, and even young entrepreneurs need to think globally, taking into account markets and suppliers worldwide. Being respectful and educated on different cultures will be critical to success. Travel for young people is also important, to develop an international perspective and knowledge of foreign markets. 20. Technology Wealth is created through the inter-connectivity of the Internet and progressive use of technology. Stay up-to-date with technology to keep your business vibrant and growing. The ultimate technology rests on the intellectual skills of entrepreneurship and ownership. 21. Study Economic Theory and History Learn basic macro-economics, particularly trade-cycle theory. Starting a business during a recession can be a huge advantage because the cost of land, materials, and labor are cheaper. Many business failures are blamed on entrepreneurs but, in reality, they are the result of companies being founded or expanded during the boom portion of the trade cycle. It is better to start a business when resources and prices are lower. Save money during a booming economy to survive and be ready to take best advantage of the opportunities available when others go out of business. There are three main theories of trade cycles: Monetarist, Austrian, and Keynesian — study them all. 22. Be Prepared for Failure and Success Many business ventures do not work out, often through no fault of the entrepreneurs. Your business success or failure will not be a reflection of your self-worth. Be prepared for setbacks in any venture you undertake. Be mentally strong and positive at all times. Plan for the possibility of closing the business and learning from the setback. Get experience in a field before starting a business in it. Uncontrolled growth can also lead to mistakes and business failure. 23. How to Write a Business Plan There is an adage that goes, “Failing to plan is planning to fail.” A lot of young people have visions and dreams. By putting your vision and goals in writing, your chances of success will improve. The format NFTE has developed is good for youth and can be found in our books, Entrepreneurship: Owning Your Future (Steve Mariotti and Tony Towle) and Entrepreneurship (Steve Mariotti and Caroline Glackin). Go to www.nfte.com for more info. 24. The Golden Rule Treating others as you would have them treat you will help you achieve success in life, both personal and financially.

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DSK Pleads Not Guilty

June 6, 2011

NEW YORK (Reuters) – Former IMF chief Dominique Strauss-Kahn pleaded not guilty Monday to charges he sexually assaulted a New York hotel maid in a case that cost him his job and a chance at the French presidency. Strauss-Kahn, 62, faces up to 25 years in prison if convicted on charges including attempted rape, sex abuse, a criminal sex act, unlawful imprisonment and forcible touching. (Reporting by Basil Katz; editing by Daniel Trotta) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Obama Adviser: Don’t Worry About Recent Lack Of Job Creation

June 6, 2011

Although the U.S. private sector added only around 54,000 jobs in May, Austan Goolsbee, chairman of Obama’s Council of Economic Advisers, still says the recovery is headed in the right direction. “Don’t bank too much of any one month’s jobs report,” Goolsbee told Christian Amanpour on her Sunday program The Week . “You want to look at a little bit of a trend to get a more accurate barometer.” Government stimulus might have been essential to preventing the country from sinking into another Great Depression, Goolsbee says, but it’s the private sector that must pull the country up. “Our effort now as a government should be to get the private sector, to help them stand up, lead the recovery,” he said. “Government is not the central driver of recovery.” To accomplish self-sustaining, private sector growth, Goolsbee explained how recently initiated payroll and business tax breaks will encourage individuals to spend and private industry to hire. “We’ve got to rely on government policies that are trying to leverage the private sector, and give incentives to the private sector, to be doing the growth.” Despite last month’s dismal jobs growth, Goolsbee says to look at larger trends, where optimism appears more warranted. “We were losing 780,000 jobs a month when the President comes into office. Fast forward to now, we’ve added 1 million jobs over the last six months.” This year’s total job numbers appear to support Goolsbee’s argument. The employment trends for 2011 through the month of May are actually better than that of last year’s at the same time period, says blog Calculated Risk . By this time last year, only 358,000 jobs had been added to the private sector; this year, 908,000 jobs have been added by the private sector.

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Video: Paul on Debt Ceiling, Spending: Political Capital With Al Hunt

June 4, 2011

June 3 (Bloomberg) — Republican presidential candidate Ron Paul talks with Bloomberg’s Al Hunt about the U.S. debt ceiling, U.S. troop withdrawals from Afghanistan, Pakistan and Libya, and Federal Reserve monetary policy. Bloomberg’s Rich Miller and Hans Nichols discuss the state of the U.S. economy and the Fed’s quantitative easing program. Julie Davis talks about the debate over the debt ceiling and a documentary on Sarah Palin to premiere in Iowa next month. Commentators Margaret Carlson and Amity Shlaes discuss the outlook for former Massachusetts Governor Mitt Romney as a Republican presidential nominee. (Source: Bloomberg)

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