economic

Video: Portes Says U.K. Inflation May Decline `Quite Sharply’

March 23, 2011

March 23 (Bloomberg) — Jonathan Portes, head of the National Institute of Economic and Social Research in London, talks about the outlook for inflation this year and the U.K. government’s budget. He speaks with Maryam Nemazee on Bloomberg Television’s “The Pulse.”

Read the full article →

Video: Dennis Says Emerging Markets to Rally Over Rest of Year

March 22, 2011

March 22 (Bloomberg) — Geoffrey Dennis, an emerging-markets strategist at Citigroup Inc., talks about the outlook for emerging markets. Dennis, speaking with Lisa Murphy on Bloomberg Television’s “Fast Forward,” also discusses the economic implications of the March 11 earthquake and tsunami in Japan and U.S. President Barack Obama’s trip to Latin America. (Source: Bloomberg)

Read the full article →

Video: Lynch Says Quake Recovery Efforts May Aid Japan Economy

March 11, 2011

March 11 (Bloomberg) — Michael Lynch, president of Strategic Energy & Economic Research, discusses the impact of the earthquake in Japan on oil prices and that nation’s economy. Lynch, speaking with Mark Crumpton on Bloomberg Television’s “Bottom Line,” also talks about the long-term prospects for Japan’s economy. (Source: Bloomberg)

Read the full article →

Retail Sales Rise in February as Economic Recovery Picks Up Pace

March 11, 2011

Retail Sales Rise in February as Economic Recovery Picks Up Pace

Read the full article →

Oil Continues to Dominate Markets amid Lack of Economic News

March 9, 2011

Oil Continues to Dominate Markets amid Lack of Economic News

Read the full article →

Devinder Sharma: Is India’s GDP Growth for Real?

March 7, 2011

Economists are no better than book-keepers. They often dress up figures to create an illusion of growth. This year’s economic growth figures In India have been very cleverly fudged to create a mirage. It happened earlier in 2003-04. After a bad drought year of 2002, economists wrongly computed normal foodgrain production in 2003 as growth, in return jacking up the economic growth figures. Excited, the ruling NDA Coalition went to elections in 2004 riding the mirage of ‘shining India’. The rest is history. Once again, Economic Survey 2011 talks of robust growth and steady fiscal consolidation as the hallmark of the Indian economy. After all, with a growth of 5.4 per cent for agriculture and the allied sector on the back of the increase in foodgrain production this year, country’s GDP has been worked out at 8.6 per cent. I see jubilation all around. Business CEOs, bank heads and the policy makers are all excited. If you have seen the budget discussion — both prior and after the budget was presented on Feb 28 — you would have noticed that none of the economists have questioned the veracity of the claim. That is what worries me. Now let us look at what has been claimed. The GDP in 2010-11 has been estimated at 8.6 per cent. Given the buoyancy in agriculture, and hoping that the monsoon would be normal this year, the government estimates that GDP in 2011-12 would grow at 9 per cent . And as many economic writers have explained the impressive economic growth is because of a resounding performance of the farm sector. This brings me to the question whether agriculture has really grown? Since the 8.6 per cent growth the country has achieved in 2010-11 hinges on the robust performance of agriculture or as some analyst say on the manner in which agriculture has rebound, it is important to find out how true are the claims? Agriculture growth in 2010-11 has been estimated at 5.4 per cent. This is primarily because foodgrain production for the current year is anticipated at 232.07 million tonnes. A year earlier, in 2009-10, agriculture production had fallen to 218.11 million tonnes on account of a widespread drought in 2009, a drop of 16 million tonnes from the previous year’s record harvest of 233.88 million tonnes. In other words, it is the ‘quantum jump’ in foodgrain production, from 218.11 million tonnes in 2009-10 to 232.07 million tonnes in 2010-11, that has driven the farm growth. Of course we know that foodgrain production is not the only criteria when we work out farm growth but it remains the predominant factor. But is India justified in computing the increase in foodgrain production in 2010-11 as the reason for 5.4 per cent growth in agriculture? Let us look at some of the production figures. In the 2009-10 crop year, farm sector growth was only 0.4 per cent due to severe drought in 2009, which hit almost half the country, reducing foodgrain production by 16 million tonnes, says the Economic Survey 2010. In 2010-11, rainfall was normal, and so the country harvested 232.07 million tonnes. Interestingly, while the nation rejoices at the recovery in foodgrain production this year, the fact remains that the anticipated food production for 2010-11 at 232.07 million tonnes actually is lower than what was achieved in 2008-09 by roughly 2 million tonnes. Foodgrain production in 2008-09 was 233.88 million tonnes, and in 2010-11 it is 232.07 million tonnes . The country has therefore not even achieved the production recorded two years earlier, and yet we are mistaking it for growth. I don’t understand how can the fluctuation in foodgrain production resulting from weather aberration be construed as growth? More importantly, why are the distinguished economists, and there are a dime a dozen of them, point out this serious flaw in the estimates of farm growth? Now, consider this. Assume that the 2009 drought had not happened. With the monsoon behaving normally, foodgrain production would have hovered around 232 to 234 million tonnes. If the foodgrain production had remained around twhat was achieved in 2008-09, this year’s foodgrain production would not have shown a quantum jump of 14 million tonnes. Under the best of conditions, India could have claimed an increase in foodgrain production by say 2-3 million tonnes. If the foodgrain production last year had remained at 230 million tonnes or more, the agriculture growth this year would not have been 5.4 per cent but somewhere in the range of 0.5 to 1 per cent. If the farm growth rate had remained at 1 or a maximum of even 2 per cent, the country’s GDP would have been around 6 per cent. The GDP estimates for 2010-11 therefore are fake. As I said earlier, mere fluctuations in foodgrain production is not growth. In agriculture, it is wrong to compute growth based on annual production figures (now it is being done on a quarterly basis). Growth in foodgrain productions has to be estimated on a long-term basis, in any case not for a period less than an average of 5 years, to know whether there has truly been any growth or not.

Read the full article →

U.S. Considering Tapping Oil Reserves As Gas Prices Rise

March 6, 2011

WASHINGTON — President Barack Obama’s chief of staff says the administration is looking at the nation’s oil reserves as it considers options for dealing with the spike in gas prices. The price of a barrel of oil has passed $100. In the U.S., gasoline is averaging $3.50 a gallon. Those increases come amid unrest in the oil-producing Middle East, particularly as rebellion rages in Libya. “We’re looking at the options,” including drawing on the Strategic Petroleum Reserve, William Daley said. “It is something that only is done – and has been done – in very rare occasions. There’s a bunch of factors that have to be looked at. And it is just not the price.” He told NBC’s “Meet the Press” that “all matters have to be on the table when … you see the difficulty coming out of this economic crisis we’re in and the fragility of it.” The reserve contains 727 million barrels of oil. ___ Online: Strategic Petroleum Reserve: http://tinyurl.com/6h3h5v5

Read the full article →

Public Sector Continues To Decline

March 4, 2011

hemorrhage (Reuters) – The jobs outlook is growing dimmer and dimmer for the public sector. Federal employment data released on Friday shows that state and local governments are shedding thousands of jobs even as Republican political leaders say more layoffs are on the way. In February, state and local governments wiped 30,000 jobs off their payrolls, mostly in education, the Labor Department said. Since employment levels peaked for public sector workers in August 2008, 450,000 jobs have been shed, almost entirely at the local level, according to the Economic Policy Institute, a liberal-leaning think-tank. “State budgets are in bad shape and that means you’re going to see more cutbacks,” said David Wyss, chief economist for Standard & Poor’s, who expects state and local governments to lose about 300,000 jobs this year. “The biggest impact will be in the fall, because ‘back to school’ is going to be ‘back to school with fewer teachers.’” Public schools start their new years in the fall, and the National Education Association, a union for education professionals, expects 100,000 school employees to be laid off. “When a governor can’t meet their budget, they have no choice,” said NEA Executive Director John Wilson, noting that it is a new phenomenon to cut education jobs throughout the year. “Teachers are really feeling that they’re being made the scapegoats for a bad economy,” he added. The public sector layoffs are in deep contrast to the private sector, where employers hired 222,000 workers in February. The country is pitched in a battle over public employees that has inspired thousands of demonstrators to descend on the capitals of Wisconsin and Ohio. On Friday, Wisconsin Governor Scott Walker, a newly elected Republican, was poised to issue layoff notices to 1,500 state workers, blaming a two-week stand-off over his bill to curb union collective bargaining rights. Earlier this week he proposed a budget that would eliminate 21,000 positions and cut funding to education, cities and counties. Republican governors in Ohio and Indiana are watching Walker’s steps closely as they propose rolling back public employee union power in their budget-cutting efforts. Even though most of February’s public sector layoffs were at the local level, they were partly caused by state budget cuts. Because their revenues have been slow to recover from the recession, states have pared funds for local governments. The National Association of Counties recently found reduced state aid is the top cause of counties’ income woes. The federal economic stimulus plan passed in 2009 included money to prevent states from slashing education programs. But those funds run out this summer, which will likely force many school districts to cut more teacher jobs. “The weak spot in the economy remains budget troubles for state and local governments,” said Richard Trumka, president of one of the largest unions in the country, the AFL-CIO, in a statement. “Without some relief from the federal government, state and local layoffs could undermine prospects for sustained economic recovery.” Wyss said he expects weakness in the state and local sector to shave half a percentage point off national economic growth in the second half of 2011. But, he added, he anticipates private sector hiring to pick up enough to balance out any losses in the public sector. (Additional reporting by Jeff Mayers; Editing by Dan Grebler) Copyright 2011 Thomson Reuters. Click for Restrictions .

Read the full article →

Fed Officials: We Must ‘Remain Vigilant’ Against Inflation

March 3, 2011

ST. CLOUD, Minnesota (Reuters) – The Federal Reserve Bank should continue to flood the economy with cheap money to fight high unemployment, but policymakers must stay on watch for signs of inflation, two top Fed officials said on Thursday. Political upheaval in North Africa and the Middle East has driven oil prices up sharply, with U.S. crude oil futures surpassing $100 a barrel this week. That has sparked fears of inflation, particularly given the Fed’s unprecedented stimulus to the economy, including $2.3 billion worth of government and mortgage bond purchases due to be completed in June. “We must remain vigilant in looking for any uptick in broad-based inflation that could unanchor long-term expectations,” Atlanta Fed President Dennis Lockhart told the Economic Club of Florida. So far, he said, inflation remains significantly below the Fed’s presumed comfort range of 2.0 percent or lower. At the same time, unemployment remains far too high and the economic recovery still needs plenty of help from the Fed, Lockhart said. Minneapolis Fed President Narayana Kocherlakota, speaking at the aptly named “Winter Institute” economics conference at St. Cloud State University, agreed. “It is appropriate for monetary policy to be highly accommodative,” Kocherlakota said. As long as inflation continues to decline, monetary policy will be an effective tool to fight unemployment, said Kocherlakota. But Fed officials must be vigilant on any changes to that equation. “By responding to the rate of inflation, responding to changes in the rate of inflation, that’s the best way for monetary policy to be helping the economy,” he said. Kocherlakota said he would be keeping an eagle eye on core inflation. Some Fed officials have argued that recent stronger economic data means the Fed should consider cutting short its current $600 billion bond-buying program. But officials’ comments today reflect the core view of the policy-setting committee, which next meets on March 15. Fed Chairman Ben Bernanke on Wednesday said that a failure to bring down unemployment could imperil the recovery, suggesting he is not inclined to shift policy any time soon. European Central Bank President Jean-Claude Trichet signaled he may raise interest rates next month to head off rising inflation. That was far earlier than markets expected, and puts the ECB in the pole position to hike rates well before the U.S. and even the Bank of England. UNEMPLOYMENT Economists polled by Reuters expect the jobless rate to rise to 9.1 percent in February from 9.0 percent, following two months of sharp declines. They also believe 185,000 new jobs were created, up sharply from January’s paltry 36,000. The Labor Department will release its closely watched employment report on Friday. Lockhart flagged the problem of long-term unemployment as one of the greatest challenges facing the country. “The recovery has brought little relief to the labor market,” Lockhart said. He said only part of the recent spike in joblessness was due to structural factors that are beyond the reach of policymakers. “Monetary policy can contribute, but it shouldn’t be expected to eliminate all the factors holding back employment growth,” Lockhart said. Still, he saw some signs of hope in the data. “The pace of job growth is picking up. Also, the large volume of announced layoffs … has declined,” he said. Applications for first-time jobless benefits fell in the latest week to their lowest level in 2-1/2 years, adding further evidence of an employment sector that is beginning to heal, albeit very slowly. (Reporting by Ann Saphir in St. Cloud and Pedro Nicolaci da Costa in Tallahassee, Fla) Copyright 2011 Thomson Reuters. Click for Restrictions .

Read the full article →

With Lockout Looming, NFL Owners Downplay Economic Benefits Of Football

March 1, 2011

WASHINGTON — In the past two decades, National Football League owners have received at least $5 billion from local governments to build and maintain football stadiums for their lucrative franchises. The argument was almost always the same: With a little taxpayer investment, the city would get a big boost in economic activity. With no investment, the team would up and leave. With three days until the owners lock out the players for refusing to give up their claims to $1 billion of the sport’s $9 billion in annual revenues, local officials and players are raising concerns that a canceled season could deprive cities of needed economic activity — as much as $160 million per city, according to the NFL Players Association — at the worst time possible. But now that the argument is working against it, the NFL calls such concerns “fairy tales.” Economists have debunked claims that a shutdown would devastate a stadium’s host city, or that a new stadium offers the kind of windfall that would justify significant public contributions. But NFL Commissioner Roger Goodell had a different take in 1997, when he was a league executive. “A new stadium provides more than just a new place to watch a game,” Goodell said at the time. “It can revitalize and stabilize both a team and a city.” “For them to be dismissive of the NFLPA’s claims now is sort of ironic,” said Dennis Howard, a business professor at the Lundquist College of Business in Oregon. “Many of them have used the economic benefit argument as a way of extracting significant public support for new stadiums.” Twenty-eight of the league’s 31 stadiums (the Jets and the Giants share the New Meadowlands Stadium) have been built with some amount of public financing, according to the National Sports Law Institute at Marquette University’s law school. Eleven have been 100 percent publicly financed. Taxpayers have put up more than $5 billion since 1990. In Indiana in 2004, the president of the Marion County Capital Improvement Board argued that a new publicly-funded multi-use venue would keep the NFL’s Indianapolis Colts from leaving town, which would “create 1,500 full- and part-time jobs and annually produce $104 million in economic benefit.” The $750 million Lucas Oil stadium went up in 2008, with the public bearing 50 percent of the cost. In Ohio in 1995, a Hamilton County commissioner argued that a study showed the Cincinnati Reds and Bengals were worth $160 million a year to the city’s economy, according to the Pittsburgh Post-Gazette, and that the town should pony up. Paul Brown Stadium was built in 2000 as a $453 million gift from taxpayers. The Maryland Stadium Authority, which successfully poached the Cleveland Browns and renamed them the Baltimore Ravens in the mid-1990s, estimated that a football stadium inhabited by Cleveland’s team would add 1,400 jobs and $123 million annually to the city’s economy. The state of Maryland coughed up $200 million for a stadium, built in 1998. The city of Cleveland, meanwhile, ponied up 76.5 percent of the $315 million used to build a new stadium for a new Browns team in 1999. Now, the NFL’s owners are threatening to scrap the coming season if the players, who currently receive 50 percent of the $9 billion revenue pie, don’t cede $1 billion of that revenue. The owners say they need the money for stadiums, but the players union is skeptical because the owners have refused to open their books to show how they spend the cut of revenue they already receive. Owners also want limits on rookie pay and two additional regular season games. The players, for their part, have been happy with the status quo, and say more regular season games will lead to more players with grievous injuries. The NFL owners’ threats of abandoning host cities or a whole season are probably more trustworthy than the economic arguments in favor of public financing for stadiums or the players’ claims of an economic calamity precipitated by a work stoppage, both of which have been deemed false by academics. Analyzing economic data from local Florida economies during professional sports strikes and lockouts — like the one that may be at hand for the NFL — economists Robert A. Baade, Robert Baumann and Victor A. Matheson concluded in a 2006 paper ( PDF ), that a team’s presence or absence does not have a measurable impact on the surrounding local economy, despite the estimates by “sports leagues, franchises, and civic boosters” using “league and industry-sponsored studies.” “An analysis of taxable sales in Florida cities demonstrates that none of the 6 new franchises or 8 new stadiums and arenas in the state since 1980 have resulted in a statistically significant increase in taxable sales in the host metropolitan area,” they wrote. “In addition, using the numerous work stoppages in professional sports as test cases, again no statistically significant effect on taxable sales is found from the sudden absence of professional sports due to strikes and lockouts.” Mark Rosentraub, a sports management professor at the University of Michigan, told HuffPost that the NFLPA overreached with its $160 million estimate of the economic impact of a lost season. “It fails to account for the fact that people spend money anyway,” Rosentraub said, noting that people will spend their disposable income at places like movies theaters and restaurants if not football stadiums. Rosentraub said, however, that while a canceled game won’t have a big effect on a region as a whole, it could have big effects within that region. And smaller cities would suffer more without a season, he said, than larger cities would. “It’s gonna matter a whole lot to the city of Cleveland,” he said. “It won’t even be perceivable in San Diego.” It could also matter a lot to some of the individual people who work at or near stadiums. John Marler is a beer vendor at professional hockey, baseball and football games, as well as special events, in Detroit. Marler, 25, told HuffPost that if there’s no football season, he’d lose about 15 percent of his income. “Basically, you’re just taking money, you’re taking revenue away from businesses that provide jobs,” said Marler, a member of the AFL-CIO-affiliated union Unite Here, which has partnered with the players’ union to fight the lockout. “The people that lose — it’s the businesses, it’s the people that work in casinos, the people that work in stadiums. Those are the people that lose out.” And Jerry Watson, owner of a bar near Lambeau Field in Green Bay, Wis., told HuffPost that without an NFL season, his business would lose a third of its income. “It’s going to hurt the state of Wisconsin,” he said. The Baltimore Business Journal estimated that the state of Maryland stands to lose $3.8 million in revenues just from ticket sales. When HuffPost first asked the NFL to respond to various mayors’ complaints that a lockout would hurt their cities, a league spokesman sent a link to a story in the Atlanta Journal-Constitution that rate the $160 million claim “false.” The story suggested Baade’s more modest estimate of a $16 million impact would be more accurate. Nevertheless, several experts seemed to find the NFL’s “fairy tales” position deeply ironic in light of the arguments used to win taxpayer dollars for new stadiums. “This is a classic case of the NFL talking out of both sides of its mouth,” Tim Chapin, an associate professor in the department of urban and regional planning at Florida State University, wrote in an email. “The economic benefits are HUGE when the NFL needs a stadium built, but the benefits are minuscule when the numbers don’t reflect well on the league. The truth is that the economic benefits are relatively small, but they are almost certainly in the millions.”

Read the full article →

Dave Johnson: Crappy Jobs Caused by Plutocracy and Austerity

February 28, 2011

There are good jobs and there are crappy jobs. There are burger-flipping jobs and there are skilled trades and professions. There are jobs that pay well and have benefits and jobs that don’t. There is even the job you had, now paying less, with no benefits. Much of the post-recession job growth is at low end. Many “better” jobs not at the low end pay less and offer fewer benefits than they used to. So the middle class continues to fall. The “economic divide” — the gap between the top few percent and the rest of us — continues to accelerate, pushed by the recent continuation of tax cuts for the wealthy, stock bubble-pumping from the Fed, and ongoing attacks on labor. And now, in particular by “austerity” budgets in the states and the pullback of stimulus and other programs from the federal government. If you are desperate you’ll take any job, and the “austerity” idea — cutting taxes for the rich and using the resulting deficits to force cuts in unemployment, services, things government does for We, the People — forces people to be desperate enough to do just that. At the same time, it is cutting the number of jobs and the possibility that the economy will ever create more. Why Crappy Jobs? Plutocracy and Austerity Why isn’t the economy rebounding and producing lots of good jobs? The answer has two parts: plutocracy and austerity. Plutocracy forces the money and power to the top, and that power forces austerity measures on us to remove even more money and power from the rest. Plutocracy : Fundamental changes brought in by the Reagan Revolution have come home to roost , shifting almost all of our economy’s income growth to a few at the top, while pitting working people around the world against each other. The forced decline of labor unions has left people on their own against giant corporations. This video shows what it is like to negotiate on your own, up against companies with billions in resources: Austerity : The second part of the crappy-jobs, slow-growth equation is austerity. Tax cuts for the wealthy have resulted in huge budget deficits, defunding government’s power to protect regular people. The plutocracy uses these deficits as an excuse to force budget cuts, “spending down” our infrastructure by deferring maintenance and modernization, cutting back on education, cutting back on basic scientific research and cutting back in many other areas thereby reducing our economic competitiveness. But they’re doing fine today, so they don’t care about how this hurts the rest of us tomorrow. Austerity cuts back economic growth. This week a Goldman Sachs report says that the proposed budget cuts passed by the House shave a couple percent off of economic growth. A Goldman Sachs economist has warned that the $60 billion package of spending cuts proposed by the Republicans to counter President Obama’s proposal could slow economic growth. The cutbacks will also hurt employment. Center for American Progress this week, in Cuts In House GOP’s Continuing Resolution Could Drive The Unemployment Rate Up One Full Point , Earlier this month, the Economic Policy Institute released a report finding that the $100 billion in discretionary spending cuts that the House GOP passed last weekend would result in the loss of nearly one million jobs. “Cuts of this magnitude will undermine gross domestic product performance at a time when the economy is seeing anemic post-recession growth,” wrote EPI’s Rebecca Theiss. Another report this week shows how state and local cuts are also shaving growth. And who can be surprised by that? When you lay off thousands of teachers and other government workers, this causes a ripple effect to grocery, clothing and other stores. It causes even more foreclosures. AP: State spending cuts slow US economic growth in Q4 , The government’s new estimate for the October-December quarter illustrates how growing state budget crises could hold back the economic recovery. The Commerce Department reported Friday that economic growth increased at an annual rate of 2.8 percent in the final quarter of last year. That was down from the initial estimate of 3.2 percent. . . . State and local governments, wrestling with budget shortfalls, cut spending at a 2.4 percent pace. That was much deeper than the 0.9 percent annualized cut first estimated and was the most since the start of 2010. The Effect On People This “austerity” craze — cutting taxes for the rich to force cuts in the things government does for We, the People — is threatening to destroy even the small amount of job creation we are getting. And what is the human effect? A report from the Coalition on Human Needs titled A Better Budget for All: Saving Our Economy and Helping Those in Need shows that millions of Americans would suffer from the proposed budget cuts: At a time when 14 million people are out of work, the House approach to the federal budget fails those who are struggling most, according to a new report by the Coalition on Human Needs for the SAVE for All campaign. The report draws a sharp contrast between the president’s budget for next fiscal year and the House plan for the remainder of this year, although it also notes serious concerns with elements of the president’s budget. It shows how the proposed budget cuts would both harm individuals and damage the country’s fragile economic recovery. The House plan includes the largest cuts, on an annualized basis, in domestic appropriations funding in history. An Expanding Economy Fixes This Cutbacks shrink the economy. And expanding economy provides good jobs with good pay and benefits and fixes budget deficits. We want an expanding economy for We, the People, not tax cuts for the rich and cutbacks on the things government does for We, the People. Tax cuts and austerity provide an opportunity for a few to cash out and take off, but does not provide for the rest of us . March 10 Summit on Jobs and America’s Future On March 10, 2011, the Summit on Jobs and America’s Future will bring together leaders and activists who understand that America faces a jobs crisis — and who are committed to building a political movement for sustainable economic growth, dynamic job creation, and a revival of the American economy. Free. $15 with lunch. Register here. This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture . I am a Fellow with CAF. Sign up here for the CAF daily summary .

Read the full article →

San Jose Names New Office of Economic Development Leadership

February 25, 2011

Seasoned Economic Development Experts Take Helm Driving Job, Revenue and Investment Growth

Read the full article →

Canadian Dollar to Trim Gains as US Economic Data Moderates

February 19, 2011

Canadian Dollar to Trim Gains as US Economic Data Moderates

Read the full article →

Video: Clifton Says U.S. Budget Process Is `Game of Chicken’

February 18, 2011

Feb. 18 (Bloomberg) — Dan Clifton, head of policy research at Strategas Research Partners, talks about the outlook for this year’s U.S. budget. The House is nearing passage of a spending plan for the remaining seven months of this fiscal year that includes at least $61 billion in cuts. Democrats reject the proposal as too extreme and harmful to the economic recovery. Clifton talks with Tom Keene on Bloomberg Television’s “Surveillance Midday.” (Source: Bloomberg)

Read the full article →

U.S. Stocks Open Lower after Economic Data

February 15, 2011

U.S. Stocks Open Lower after Economic Data

Read the full article →

Mark Weisbrot: Spain’s Troubles Are Tied to Eurozone Policies

February 11, 2011

It has become fashionable since Spain’s economy began to decline to make comparisons to Germany, which is rebounding strongly. The idea is that the Germans went through their restructuring, got organized labor under control, and thereby made their economy more competitive. According to this narrative, this is the key to their economic success — so Spain should do the same if the Spanish economy is to recover. This fits well with various stereotypes of Germans as disciplined and hard working, willing to do what is necessary to be competitive in the global economy, while their counterparts in Europe’s periphery are seen as undisciplined and indulgent. However, the story does not fit the economic facts very well. Spain’s problems are mostly associated with the euro, combined with some bad economic policy decisions that have nothing to do with “labor inflexibility,” the strength of unions, or government spending. And its recovery is being delayed as a result of decisions made by the European authorities: the European Commission, the European Central Bank, and the International Monetary Fund (IMF). When Spain joined the euro in 1999, its level of productivity in manufacturing was about 63.6 percent of Germany’s. Over the next 10 years, productivity grew at about the same rate in both countries, so that by 2009 the ratio was about the same: 63 percent. Hourly wages in manufacturing also increased by about the same amount in both countries, so Germany kept its large, productivity-based cost advantage over Spain. Of course, this arrangement has worked out much better for Germany — during the upswing from 2002-2007, more than 120 percent of Germany’s growth was due to exports — with most of these exports going to other Eurozone countries. This is the basic problem when a country decides to adopt a common currency with other countries that have much higher levels of productivity. They can’t really be competitive in tradable goods — which includes not only exports but industries that compete with imports. If Spain had its own currency, it could let the value of its currency fall to a level that would make the country’s tradable goods sectors competitive. In a situation where the economy is in recession or is weak — Spain’s economy shrank by 0.2 percent in 2010 — the increased exports and reduced imports from such a devaluation would also help get the economy growing again. Instead, the European authorities have prescribed what is called an “internal devaluation” — shrink the economy and raise unemployment enough so that the country can become competitive, through lower prices and wages, without changing the exchange rate (i.e. keeping the euro). Unemployment in Spain is now 20 percent, and although exports have picked up some over the last year or so, it is not nearly enough to pull the economy out of its slump. Spain needs expansionary fiscal and monetary policy to boost the economy. But monetary policy is controlled by the European Central Bank — which just last week announced that it may raise interest rates, despite Europe’s anemic recovery and crushing unemployment in the Eurozone’s weakest economies (Spain, Ireland, Portugal). Expansionary fiscal policy is prohibited by pressure from the European authorities — who are actually pushing Spain to do the opposite, i.e. cut spending and raise taxes — and the fact that, not having its own monetary policy, Spain cannot engage in “quantitative easing,” as the US has done recently, or Japan has done for decades, to finance government spending without adding to the country’s net debt burden. Now back to Spain’s decade of experience with the euro. The adoption of the euro opened up a period of bubble growth, with big capital inflows from other European countries, and the country experienced a vast run-up in the stock market and a huge housing bubble. Spain’s economy grew by a third between 1999 and 2007, and its net debt fell to just 26.5 percent of GDP in 2007. But it was bubble-driven growth: the stock market peaked at 125 percent of GDP in November 2007 and dropped to 54 percent of GDP a year later. A housing bubble increased construction from 7.5 percent to 10.8 percent of GDP (2000-2006), and housing starts dropped by 87 percent when the bubble burst. It was the bursting of these bubbles, and not any lax spending policies by the government, that crashed Spain’s economy and caused its budget troubles. And it is Spain’s subordination to the European authorities, which prohibits it from using any of the three most important macroeconomic policies — fiscal, monetary, and exchange rate — to get out of its slump. Furthermore, although it was theoretically possible for Spain to have narrowed the productivity gap with Germany — since it was starting out at a much lower level of productivity — the bubble-driven growth of the last decade, spurred by the adoption of the euro and large capital inflows, is not the kind of growth that drives up manufacturing productivity. So the neoliberals have it backwards: it is the neoliberal macroeconomic policies, locked in with the euro, that are the source of both its recession and continuing troubles. Spain should refuse to accept any policies that prolong its slump and prevent it from reducing unemployment. If that means restructuring its debt or even leaving the euro, then these options should be on the table in any negotiations with the European authorities. These choices would better than suffering through many more years of sluggish growth and high unemployment. This column was published by the Guardian Unlimited (UK) on January 29, 2011.

Read the full article →

Video: Al-Khalifa Says Egypt Unrest Is `Positive’ for Region

February 11, 2011

Feb. 11 (Bloomberg) — Mohammed Bin Essa Al-Khalifa, chief executive officer of the Economic Development Board of Bahrain, discusses the unrest in Egypt and its potential economic impact on the region. Al-Khalifa speaks with Scarlet Fu and Margaret Brennan on Bloomberg Television’s “InBusiness.” (Source: Bloomberg)

Read the full article →

Video: Bowles Says New ECB Head Must Be `Best Person For Job’

February 11, 2011

Feb. 11 (Bloomberg) — Sharon Bowles, chairwoman of the European Parliament’s Economic and Monetary Affairs Committee, talks about the possible successor to Jean-Claude Trichet as head of the European Central Bank. She speaks with Maryam Nemazee on Bloomberg Television’s “The Pulse.”

Read the full article →

Stiglitz: Expect 2 Million U.S. Foreclosures This Year

February 9, 2011

Nobel Prize-winning economist Joseph Stiglitz said another 2 million foreclosures are expected in the U.S. this year, adding to the 7 million that have occurred since the economic crisis of 2008. “U.S. foreclosures are continuing apace,” Stiglitz told a conference near Port Louis, the capital of Mauritius, today. “A quarter of U.S. homes are underwater.”

Read the full article →

House Dems To Reintroduce Longshot Bill For Long-Term Unemployed

February 7, 2011

WASHINGTON — Democratic Reps. Barbara Lee (Calif.) and Bobby Scott (Va.) are reintroducing legislation this week to provide additional weeks of unemployment insurance benefits for “99ers,” the long-term jobless who have exhausted their benefits and still haven’t found work. “The bill that I am introducing with Congressman Scott, The Emergency Unemployment Compensation Expansion Act, would ensure that these long-term unemployed workers get the long overdue assistance that they need to support their families, make ends meet and contribute to our economy,” Lee said in a statement . “Our bill would add 14 weeks of emergency unemployment benefits and would make sure these benefits are retroactively available to people who have exhausted all their benefits and are still unemployed.” Given Republican hostility to additional deficit spending — Lee’s office said the cost of the extra benefits would not be offset — the effort will likely amount to little more than a reminder that long-term unemployment persists even though much of the nation’s political discourse is focused on signs of economic recovery. The Congressional Budget Office has estimated that 1.4 million Americans have been unemployed for as long as 99 weeks. Of the 13.9 million unemployed, 43.8 percent — or 6.2 million — have been out of work for six months or longer. Lee and Scott are holding a press conference on Wednesday to discuss the bill further. They will be joined by 99ers from an ad hoc online group that calls itself the American 99ers Union . “The American 99ers Union supports government spending that results in a positive return on investment,” a statement from the group said. “The Emergency Unemployment Compensation Act will effectively serve this purpose.” Lee and Scott expressed frustration last year, when they first introduced an extension bill, that President Barack Obama omitted help for the 99ers from the deal he struck with congressional Republicans that preserved tax breaks for the rich and reauthorized extended federal unemployment benefits through 2011. Federal unemployment benefits enacted in response to the recession provide the unemployed up to 73 weeks of benefits beyond the standard 26 weeks provided by states. (The full complement of federal benefits is only available in 25 states, so some exhaustees are not officially 99ers.) The Lee-Scott bill faces even tougher odds in the new Republican-controlled House of Representatives than it did last year in the previous Congress, when helping the 99ers was barely an afterthought. “If you’re serious about helping Americans on unemployment, you need to show how you’ll pay for the cost with cuts elsewhere,” a House GOP aide said. “If you don’t do that, you’re looking to issue a press release, not to actually help people.” Heidi Shierholz, an economist with the progressive Economic Policy Institute who supports the legislation and will attend Wednesday’s press conference, said there’s no economic reason for benefits to stop at 99 weeks. “There is no magic number of how long extensions should last,” she said. “There’s just nothing in the economic literature that says 99 weeks is the limit. It’s not like if we break the 100 barrier things are going to fall apart.” HuffPost readers: Long-term unemployment? Tell me all about it — email arthur@huffingtonpost.com . Please include your phone number if you’re willing to be interviewed for a story.

Read the full article →

Video: Senor Says Israel Boosting Incentives for Innovation

February 4, 2011

Feb. 4 (Bloomberg) — Dan Senor, author of “Start-up Nation: The Story of Israel’s Economic Miracle,” and Alan Patricof, managing director of Greycroft Partners LLC, talk about Israel’s ability to attract venture capital. They speak with Matt Miller and Carol Massar on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

Read the full article →

Video: Alan Patricof Says Obama in `Delicate Position’ on Egypt

February 4, 2011

Feb. 4 (Bloomberg) — Alan Patricof, managing director of Greycroft Partners LLC, and Dan Senor, author of “Start-up Nation: The Story of Israel’s Economic Miracle,” talk about protests against Egyptian President Hosni Mubarak. They speak with Matt Miller and Carol Massar on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

Read the full article →

Video: Stanley Expects `Big Numbers’ in Jobs Gains This Spring

February 3, 2011

Feb. 3 (Bloomberg) — Stephen Stanley, chief economist at Pierpont Securities LLC, talks about the outlook for the U.S. economy and labor market, and Federal Reserve monetary policy. Fed Chairman Ben S. Bernanke said the U.S. needs to see faster job growth for a sufficient time before policy makers can be assured the economic recovery has taken hold. Stanley talks with Mark Crumpton on Bloomberg Television’s “Bottom Line.” (Source: Bloomberg)

Read the full article →

Ireland Credit Rating Slashed Again

February 2, 2011

DUBLIN — Ratings agency Standard & Poor’s cut its credit grade for Ireland on Wednesday and warned it could fall further because of doubts about the true scale of defaulting loans yet to surface in the country’s largely state-owned banks. S&P joined fellow agencies Moody’s and Fitch in dropping Ireland’s credit score following the nation’s November negotiation of a potential euro67.5 billion ($93 billion) credit line from the European Union and International Monetary Fund. Ireland already has drawn down euro8.4 billion ($11.6 billion) this year from that rescue fund – and plowed much of it straight into the cash-strapped coffers of Dublin banks. Still, S&P’s reduction Wednesday was just one notch to A minus, one step above the multi-grade cuts imposed last month by Moody’s and Fitch. Both dropped Ireland into the higher-risk BBB tier in the immediate wake of the EU-IMF bailout deal. The BBB level is considered the lowest investment-grade rating, whereas BB and lower indicate “junk bond” status. S&P senior analyst Frank Gill warned the agency could also drop Ireland’s rating somewhere into the BBBs in April, once a new Irish government settles in and the impact of the current infusion of EU-IMF cash into Dublin banks can be assessed. The S&P announcement coincided with Wednesday’s formal launch of campaigning for Ireland’s Feb. 25 election. The free-market government of Prime Minister Brian Cowen – who presided over the country’s spectacular collapse from Celtic Tiger success in 2007 to a bank-crippled debtor today – is universally forecast to be ousted from power in favor of a left-leaning coalition. The two parties expected to form the next coalition government, Fine Gael and Labour, are both campaigning on promises to reopen negotiations with the EU and IMF to loosen some of the strings attached to the aid deal. Both question Cowen’s determination to slash euro15 billion ($21 billion) from the economy over the next four years through spending cuts and tax hikes. Troublingly, the two would-be government partners criticize Cowen’s brutal austerity effort from opposite extremes, with Fine Gael favoring more cuts and Labour insisting on more taxes for the rich. Gill warned that Ireland’s economic forecasts presume that the total bank-bailout bill funded by taxpayers won’t top euro50 billion ($70 billion) while the current unemployment rate of 13.4 percent – near a 17-year high – will stabilize in 2011 and decline in 2012. He noted the total debts of the six Irish banks – Allied Irish Banks, Bank of Ireland, Irish Life & Permanent, Anglo Irish Bank, Irish Nationwide and Educational Building Society – actually approach euro275 billion ($375 billion), more than 170 percent of Ireland’s gross domestic product. “Irish domestic banks currently depend almost entirely on the (European Central Bank) to refinance expiring market debt,” Gill said. “Were the labor market to deteriorate further, a rise in the level of delinquencies in the domestic banks’ mortgage books could result in higher new capital requirements than we presently assume,” Gill said. On the flip side, he said Ireland’s prospects would be boosted if European Union leaders agree to change its bailout rules, which currently require donors to tack a profit margin on its loans of approximately 3 percentage points. That means Ireland’s EU-IMF loan package comes with an average interest rate of 5.8 percent rather than the donors’ actual financing costs of 2.8 percent. This premium will add tens of billions to Ireland’s annual deficits, which last year soared to a modern European record of 32 percent of GDP. European leaders are also planning to discuss this week possible bailout-rules reforms that would make it easier for governments to negotiate hefty discounts on repayments to a bank’s foreign creditors. Ireland so far has repaid tens of billions to those banks and hedge funds rather than risk poisoning the country’s credit worthiness with a major default. Ireland’s government and main opposition parties remain publicly committed to a goal of slashing the deficit to just 3 percent of GDP by 2014, the limit that eurozone members are supposed to observe. But that plan presumes Ireland’s economy will grow by at least 2 percent each year, whereas the most recent forecasts from the Irish Central Bank and the Economic and Social Research Institute, Ireland’s main think tank, expect much weaker growth if any in 2011.

Read the full article →

How A New Jobless Era Will Transform America

February 1, 2011

HOW SHOULD WE characterize the economic period we have now entered? After nearly two brutal years, the Great Recession appears to be over, at least technically. Yet a return to normalcy seems far off. By some measures, each recession since the 1980s has retreated more slowly than the one before it.

Read the full article →

Video: Binder Discusses Impact of Egypt Unrest on South Asia

January 31, 2011

Jan. 31 (Bloomberg) — Jonathan Binder, chief investment officer at Consilium Investment Management, talks about the economic impact of the unrest in Egypt on Indonesia, Bangladesh and Sri Lanka. Binder speaks with Matt Miller and Carol Massar on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

Read the full article →

Jim Wallis: Changing Bad Behavior At Davos

January 29, 2011

Davos, Switzerland — The contradictions here are enormous. Many of the wealthiest people in the world are here — and the most powerful, including heads of state. Yet there is more and more talk about values, even a yearning for them, especially in the wake of this economic crisis, which most here now believe was also a crisis of values. There is more sincere talk of the common good. I am right now listening to a panel on “The Social Contract” and there is much encouraging talk about company’s responsibilities to society and even the common good — “doing good while doing well” and all that. But what there has not been much conversation about is what we do when rich and powerful people and institutions act against the common good. For example, this economic crises was not caused by all “the corporations” or even all “the banks.” It was a crisis sparked by about six banks! Particular bank leaders from particular banks made some risky, short term, selfish and greedy decisions. So how do we name that, and them, and tell them they need to change their behavior, or hold them accountable for it and make new rules and, yes, laws that don’t let them do it again. Unless all our talk about “values” changes bad behaviors, we are just talking.

Read the full article →

Slovakia’s housing market poised to recover

January 28, 2011

Things are getting better in Slovakia! Buoyed by the economic recovery, average housing prices fell only 1.36% (-2.41% in real terms) y-o-y to Q3 2010.

Read the full article →

Ian Fletcher: Obama Whistles Past Economic Graveyard in Deluded SOTU Address

January 26, 2011

Not that I really expected otherwise, but Obama’s State of the Union address was a great disappointment on economic issues. Although the president made token noises about how serious our economic problems are, he immediately negated these gestures with other statements that made clear he does not understand. Statements like the following: We know what it takes to compete for the jobs and industries of our time. We need to out-innovate, out-educate, and out-build the rest of the world. Unfortunately, as I discussed at some length in my book , the old “education is the solution” mantra just won’t cut it: One commonly suggested solution to America’s trade problems is better education. While this would obviously make America more competitive, that it would be enough is unlikely, if by “enough” we mean able to maintain wage levels in the face of foreign competition. For a start, our rivals are well aware of the value of education, so it can’t be a unique source of advantage for us. And unfortunately, the U.S. is simply no longer formidable from an educational point-of-view. Roughly the top third of our pop-ulation enjoys the benefits of a world-class college and university system, plus other forms of training such as the military and the more serious trade schools. But the rest of our population is actually worse educated, on average, than their opposite numbers in major competing nations. Thanks mainly to the high-school movement of the early 20th century, the U.S. once led the world in high school completion, the most readily comparable international measure of education. But we have been slipping behind for decades. This is clear from the fact that while we still lead a-mong 55-to-64-year-olds (who were schooled over 40 years ago), we rank only 11th among 25-to-34-year-olds. (South Korea is first.) Not only is our college graduation rate of 34 percent behind 15 other nations, but it does not even reach the average for developed countries. Studies designed to measure specific skill sets tell an even direr story. According to the 2006 Program for International Student Assessment, American 15-year-olds were outmatched in math and science by students from 22 other nations. The very bottom of our population is more alarming still: one 2003 study reported that a third of the adults in Los Angeles County were functionally illiterate. Furthermore, it is a testable hypothesis whether education on its own can protect wages, and the evidence is to the contrary. For one thing, a college degree is no longer the ticket it once was: workers between 25 and 34 with only a BA actually saw their real earnings drop 11 percent between 2000 and 2008. And, as David Howell of the New School for Social Research has written after looking at this problem on an industry basis, “Higher skills have simply not led to higher wages. In industry after in-dustry, average educational attainment rose while wages fell.” This should be no surprise, as merely shoveling education into workers’ heads obviously will not save them, or the industries they work in, if these industries are bleeding market share and revenue due to imports. Neither can people be expected to devote time and money to acquiring more education (or be able to afford it) if there are no jobs for them at the end. Who feels like pursuing advanced training in automotive engineering today? The weak education of American workers is thus a self-reinforcing problem: educated workers not only support, but require , strong industries. As for “innovation” as the solution? That’s another thing that’s nice enough, but not a solution per se to our economic decline; some remarks by Rep. Marcy Kaptur (D-OH) make this point well: Putting money into research is this Holy Grail for people here who are all college educated when the majority of the country is not, and who put themselves on this elevated plane thinking they know. I remember [Clinton Labor Secretary] Robert Reich saying, ‘Here’s what America has to do, Marcy: see this salt shaker?’ ‘Yeah?’ ‘America’s going to do the design,’ he said. ‘It’ll be made elsewhere, but we’ll do the design.’ I thought, ‘Wouldn’t that be an answer from a professor?’ I want both! I want engineering and pro-duction because I know the people in my district who used to make goods but don’t anymore, and they have a right to make what they end up buying. Ralph Gomory, no less than the former chief scientist of IBM, has criticized what he calls “the Innovation Delusion” in this very webzine.

Read the full article →

Michael Likosky: Obama’s Economic Philosophy

January 26, 2011

President Obama reaffirmed his economic philosophy in the State of the Union address — a government that works, invests, delivers opportunity, and that we can believe in. It is a lean government, not a big government. It is not a problem, but a problem-solver. The approach that Obama laid out for infrastructure and clean energy investment is emblematic. I describe it in my book: Obama’s Bank: Financing a Durable New Deal . Rather than looking to 2012, the State of the Union Address returned to 2008, on the campaign trail in Janesville. In front of an audience of workers at the GM Plant, Obama first set out his economic philosophy. The GM plant would not survive to see his inauguration; however, the approach that Obama set forth in Janesville was the template for the State of the Union address. What Obama said in Janesville in 2008 is far more inspiring and durable than Paul Ryan’s rebut tonight. Importantly, the Janesville speech — and the State of the Union — start off by reminding us that our crisis has been decades in the making. In other words, our crisis did not emerge in the subprime mortgage market, and it will note be solved there. Instead, we have divested from our real economy for decades. In the meantime, our new competitors — China, etc — have invested in state-of-the art infrastructure. As a result, we risk loosing our competitive edge. In other words, we do not have the state-of-the-art infrastructure that makes companies like GE see the US as an attractive place to do business. Enlisting Jeffrey Immelt in our recovery effort is valuable for exactly this reason — he knows what it takes to insource jobs, repatriate the operations of American firms, draw money out of the TARP banks and into our real economy. And, just as in Janesville, Obama explained how we can co-invest with the private sector to return the country to its prestige place. The State of the Union spoke of the types of co-investments that happened during the Cold War that produced the Internet. Forget about the controversial shovel ready projects, few would deny that Obama’s examples tonight of entrepreneurs who benefited from a little federal help — not a lot — have excelled in the midst of the crisis. Certainly, this is the story of GE in Schenectady. When it came to infrastructure investment, Obama too returned to Janesville. We have a long term deficit in the infrastructure field. Our bridges crumble. The American Society of Engineers awarding us a D. Obama once again explained how we have to bring private investment into US infrastructure to solve this problem. Government lends a hand, but only as honey to attract private sector money. And, it’s all about the importance of opportunity — from the nod to Biden and Boehner and their uniquely American stories to the need to invest in infrastructure not only to make our powerhouse metropolitan regions even more competitive. But instead, to make sure that the off-ramps of the high speed rail and our highways that we build today become the on-ramps of vibrant cities and towns tomorrow. This was the benefit of the Transcontinental Railroad, the Eisenhower national road system, and the Internet. This is the essence of not only the Progressive Movement, but also America Dream

Read the full article →

Obama Losing Key Economic Adviser

January 21, 2011

WASHINGTON (Reuters) – President Barack Obama announced on Thursday that former Federal Reserve Chairman Paul Volcker was stepping down from his role as head of an outside panel advising the White House on economic policy. “From his bold vision around how to reform our financial system to his thoughtful insight on how to make our economy work for working families again, Paul brought his brilliance and vast experience to bear on a host of difficult challenges,” Obama said in a statement. “I will always be grateful to Paul Volcker for his service as the head of my Economic Recovery Advisory Board,” Obama said. Reuters reported earlier this month that Volcker intended to leave the advisory board in February. Copyright 2010 Thomson Reuters. Click for Restrictions .

Read the full article →

Australian Dollar Sinks on Trade Balance, Economic Worries

January 11, 2011

Australian Dollar Sinks on Trade Balance, Economic Worries

Read the full article →

Dan Dorfman: The Jobs lost in the Great Recession May Return… By 2018

January 9, 2011

The charade in the bloodied jobs market just won’t quit. That’s the growing contention–strongly promoted by the White House and Wall Street–that the employment picture is on the verge of taking a decided turn for the better and that it’s only a matter of time, thanks to a peppier economy and government stimulus, before the roughly 8.5 million jobs lost during the recent recession will be restored. Friday’s bum employment news–the creation of only 103,000 new jobs in December, nearly 50% lower than the generally expected 150,000–was an unmistakable sign to the contrary, namely that the folks holding such exuberant job expectations are not doing it with a full deck. The key reason: The economy, though on the way back and gnawing away at unemployment, is by no means ready to transition into robust growth. Nor is Corporate America, though sitting with oodles of cash on their balance sheets (about $2 trillion) in a gradually improving economy, ready to commit to more aggressive hiring on a national level. Nor, for that matter, are banks, whose death rate continues at brisk pace (157 failures in 2010, the highest number since 1992), and saddled with a lofty level of overly stated assets, especially in real estate, ready to offer an abundance of cash to would-be buyers to speed up the recovery, in turn leading to more job creations. So it all raises some obvious questions: How long should it realistically take to recover the jobs lost during the recession and get us back to a normal unemployment rate? And what will it cost Uncle Sam to achieve such a goal? For some thoughts, I rang up Madeline Schnapp, the economic skipper of West Coast liquidity tracker TrimTabs Research, partially owned by Goldman Sachs. Sharp, incisive, perceptive and thought-provoking, she is no stranger to my HuffPost contributions, having made a number of timely and on-the-money economic calls. Sorry to say, her words won’t be pleasing to the 14.5 million jobless Americans or the nearly 26 million job seekers, including those who’ve quit the work force and would like full-time employment. For starters, Schnapp figures it will take four to seven years to recuperate all the jobs lost during the recession, which means the timetable could be as far out as 2018. She believes four is probably too optimistic, given such ongoing economic-stifling problems as high unemployment, a dead housing market, a deleveraging consumer, the financial plight of state and local governments saddled with gigantic budget gaps, meaning more layoffs and higher taxes, and a 14% jump in prices at the gas pump over the past three months, equivalent to a $60 billion tax on consumption on an annual basis. Actually, Schnapp thinks there’s a possibility that 20% to 25% of the lost jobs may never come back because of the damaging effects from the eventual collapse of the hyper-charged housing market between 2003 and 2007. Over the past two years, the federal government has spent about $3.5 trillion in bailouts, stimulus and quantitative easing. In 2010, after almost two consecutive years of job losses, the economy generated about 1.1 million jobs. That means each job that year cost taxpayers $3.2 million. Going forward, Schnapp estimates the economy will produce a total of 2.8 million jobs in 2010 and 2011. If that’s right, each job will cost taxpayers $2 million. She further notes that if the Fed keeps printing dollars ad nauseum and the government keeps running trillion dollar-plus deficits, the total price tag to replace the 8.5 million jobs could run $13-$15 trillion. Given her economic concerns, our worry-wart looks for a muddling-along 2011 economy, with anemic growth, say in the 2%-2.5% range. Goldman Sachs, more positive than Schnapp, recently predicted the S&P would wsind up would wind up this year at 1,500. She disagrees, looking for an uninspiring year for investors, with the index trading in a narrow range of 1,050-1,100 on the low side and 1,300 on the high side. Another 2011 thought from Schnapp: She expects another round of quantitative easing or QE3. No, not to further fuel the economy, but to provide bailout money for insolvent states, such as California, Illinois and New Jersey. “They say it can’t happen, but we’ve heard that before,” she says. “I guess deficits work, until you run out of other people’s money.” What do you think? E-mail me at Dandordan@aol.com

Read the full article →

Robert Lenzner: Pete Peterson’s Crusade to Cure the Global Debt Bubble

January 8, 2011

Peter G. Peterson, founder of Blackstone, the private equity giant, and former chairman, Lehman Brothers, backed by the support of 55 former US officials, is calling on president Obama to instantly organize a bipartisan effort to deal with the nation’s debt and bloated federal budget. In a personal interview with me in late December, Peterson, chairman of his own foundation, admitted, “What I fear is that we need a crisis to educate the public on the seriousness of the problem. What I hope is that the president will decide this is a major national issue, spell out what needs to be done, and what kind of a future we want.” Peterson is adamant; “We need a positive view of the kind of America will emerge,” he told me. “We need an elevated national dialogue leading to a bipartisan agreement.” If not, the former secretary of commerce in the Nixon administration warns, “The implication if we dont do something is clear. The interest costs will begin to consume the budget.” Indeed, a study commissioned by the Peterson Foundation shows that by 2027 interest on the federal government’s debt will be the largest item in the budget — far more than the amounts spent on education, infrastructure and research and development. By 2055, if there is no reform, the interest expense for servicing U.S. Treasury debt will require 100% of the US government’s tax revenues, according to figures supplied by the Peterson Foundation. Peterson is plainly worried about the nation’s debt weakening its influence in global politics. “If the current trends continue, the exploding amount of U.S. debt owned by foreign lenders leaves us vulnerable to their economic and political demands,” his latest report suggests. Peterson recently polled 55 former treasury secretaries, former members of the Council of Economic Advisers, former Federal Reserve Board governors and previous directors of the Office of Management and Budget — and was heartened that to a man they agreed wholeheartedly with him that the long term structural financial outlook of the United States is not sustainable unless there are major cuts in the federal budget as well as tax increases. Now, he is trying to organize a global pressure group made up of other nations with too much debt and too large an elderly retired population to tackle solutions for this widespread quandry in a unified fashion. The Peterson Foundation is preparing projections for debt servicing across the globe and trying to estimate the total costs for funding the aged everywhere — to show that the rising cost of medical care and social security plagues more than just the U.S. The painful lesson; to underscore there are going to be far fewer taxpaying citizens and that as a result — social insurance programs all over the world are not being funded sufficiently.

Read the full article →

U.S. Dollar Gains Broadly on Economic Positive Data

January 5, 2011

U.S. Dollar Gains Broadly on Economic Positive Data

Read the full article →

Debtris: Animation Captures The Scale Of U.S. Debt (VIDEO)

January 3, 2011

The Sunday talk shows this week sparked fresh anxiety over the U.S. debt puzzle this week, with Austan Goolsbee, the chairman of the White House’s Council of Economic Advisers pushing back hard against GOP refusal to raise the debt ceiling . If the debt ceiling isn’t extended this spring, the U.S. government could be effectively shut down, as it defaults on its obligations, a possibility that Austan Goolsbee, the chairman of the Council of Economic Advisers, calls “the first default in history caused purely by insanity.” In an interview on ABC’s This Week Goolsbee hit the “game” rhetoric hard. “This is not a game… I don’t see why anybody’s talking about playing chicken with the debt ceiling … There would be no reason for us to default other than that would be some kind of game. We shouldn’t even be discussing that.” The animators at Information Is Beautiful , however, have turned U.S. debt into a game of Tetris. Viewed below in relation to the cost of the credit crisis , the global cost of obesity related illness and total African debt to the West , our current debt problems don’t seem too severe. Behold, Debtris: The Game:

Read the full article →

WATCH ‘Debtris’: Animators Turn U.S. Debt Into A Puzzle

January 3, 2011

The Sunday talk shows this week sparked fresh anxiety over the U.S. debt puzzle this week, with Austan Goolsbee, the chairman of the White House’s Council of Economic Advisers pushing back hard against GOP refusal to raise the debt ceiling. If the debt ceiling isn’t extended this spring, the U.S. government could be effectively shut down, as it defaults on its obligations, a possibility that Austan Goolsbee, the chairman of the Council of Economic Advisers, calls “the first default in history caused purely by insanity.” In an interview on ABC’s This Week Goolsbee hit the “game” rhetoric hard. “This is not a game… I don’t see why anybody’s talking about playing chicken with the debt ceiling… There would be no reason for us to default other than that would be some kind of game. We shouldn’t even be discussing that.” The animators at Information Is Beautiful , however, have turned U.S. debt into a game of Tetris. Viewed below in relation to the cost of the credit crisis, the global cost of obesity related illness and total African debt to the West, our current debt problems don’t seem to severe. Behold, Debtris: The Game:

Read the full article →

Video: Achuthan Expects Revival of U.S. Economic Growth in 2011

December 30, 2010

Dec. 30 (Bloomberg) — Lakshman Achuthan, managing director of Economic Cycle Research Institute, talks about the outlook for the U.S. economy and employment in 2011. Achuthan, speaking with Melissa Long on Bloomberg Television’s “Bottom Line,” also discusses Federal Reserve policy. (Source: Bloomberg)

Read the full article →

New Voters May Sway Fed Actions

December 27, 2010

WASHINGTON — As the Federal Reserve debates whether to scale back, continue or expand its $600 billion effort to nurse the economic recovery, four men will have a newly prominent role in influencing the central bank’s path.

Read the full article →

US- Economic outlook brightens according to Fannie Mae

December 21, 2010

US- Economic outlook brightens according to Fannie Mae

Read the full article →

US- Economic outlook brightens according to Fannie Mae

December 21, 2010

US- Economic outlook brightens according to Fannie Mae

Read the full article →

Why Rising Interest Rates Are Actually A Good Sign For The Economy

December 19, 2010

There has been much hand-wringing in the business press lately about the recent rise in interest rates. The fear is often expressed that this will choke off the economic recovery and decimate further the still-weak housing industry. But in fact, rising interest rates are an extremely bullish sign; tangible evidence that the economy may have finally turned the corner and is poised for a sharp rise in growth.

Read the full article →

Economic Signs Improve — Except For Housing, Unemployment

December 17, 2010

While signs show the economic recovery is strengthening , palpable change is still a long way off. Falling home prices and high unemployment aren’t expected to significantly improve any time soon. Looking forward about six months, the economic forecast is slightly rosier than it has been, as the Leading Economic Indicator index increased in November, according to Friday’s release. The LEI index, a composite of 10 predictors of growth, rose 1.1 percent in the month, its biggest gain since March. But with unemployment high and home prices falling, real change won’t be felt for a while. The LEI improvement signals that economic growth is durable. The speed and strength of this growth, though, could continue to be disappointing. “It’s to me a very reassuring sign,” said Stuart Hoffman, chief economist of PNC Financial Services Group. “But it doesn’t mean that the economy is going to take off.” If nothing else, the LEI shows the economy is indeed on the mend, economists say. Nine of the 10 components of the index — including stock prices, consumer expectations and manufacturers’ orders for goods — improved in November. The LEI generally predicts trends about six months before they materialize. But the housing market and unemployment situation remain bleak. With the fall in home prices expected to continue, and even to accelerate, the foreclosure crisis is likely to drag on. And as unemployment remains stuck at 9.8 percent, six in 10 out-of-work Americans have been without a job for at least a year. Even economists who predict overall strength say the housing situation could get worse. “Housing is the Achilles’ heel of the economy,” said Sung Won Sohn, a former Wells Fargo chief economist, who is now a finance professor at California State University Channel Islands. “Housing could very well go into a double dip. The total economy will not, but housing could.” Falling home prices erode the stake homeowners can claim in their homes, making them more vulnerable to default and foreclosure. Homeowner equity dropped two percentage points in the third quarter to 38.8 percent, as Americans saw their grasp on their most valuable asset slipping, according to Federal Reserve data released last week. “The job market and the housing market at the two biggest headwinds to economic growth in the United States,” said Tim Quinlan, an economist at Wells Fargo. “It will take a long, long time before those areas turn around.” Even as the economy improves, the pace isn’t quick enough to reduce the unemployment rate, Sohn said. Economists generally say the economy needs to add about 150,000 jobs every month just to keep up with population growth. Last month, the economy added a net of 39,000. What’s more, temporary factors could have juiced the November improvement in LEI. Two of the drivers of the index, the interest rate spread and the money supply, were boosted by government intervention, Quinlan said. The Federal Reserve is currently engaged in a quantitative easing program, in which it buys up to $600 billion in government debt in an effort to lower interest rates and augment the flow of money through the economy. Quinlan cautioned against ascribing too much importance to “government life support.” An improvement in the housing market might not come until late next year. Aaron Smith, an economist at Moody’s Analytics, predicted the market will turn around in second half of 2011. Once that happens, he said, the overall economic recovery will sustain itself. “We’re getting to a point where the recovery reaches escape velocity — job and spending growth begin reinforcing one another,” he said. “That’s the stuff economic expansions are made of.”

Read the full article →

Economic Signs Improve — Except For Housing, Unemployment

December 17, 2010

While signs show the economic recovery is strengthening , palpable change is still a long way off. Falling home prices and high unemployment aren’t expected to significantly improve any time soon. Looking forward about six months, the economic forecast is slightly rosier than it has been, as the Leading Economic Indicator index increased in November, according to Friday’s release. The LEI index, a composite of 10 predictors of growth, rose 1.1 percent in the month, its biggest gain since March. But with unemployment high and home prices falling, real change won’t be felt for a while. The LEI improvement signals that economic growth is durable. The speed and strength of this growth, though, could continue to be disappointing. “It’s to me a very reassuring sign,” said Stuart Hoffman, chief economist of PNC Financial Services Group. “But it doesn’t mean that the economy is going to take off.” If nothing else, the LEI shows the economy is indeed on the mend, economists say. Nine of the 10 components of the index — including stock prices, consumer expectations and manufacturers’ orders for goods — improved in November. The LEI generally predicts trends about six months before they materialize. But the housing market and unemployment situation remain bleak. With the fall in home prices expected to continue, and even to accelerate, the foreclosure crisis is likely to drag on. And as unemployment remains stuck at 9.8 percent, six in 10 out-of-work Americans have been without a job for at least a year. Even economists who predict overall strength say the housing situation could get worse. “Housing is the Achilles’ heel of the economy,” said Sung Won Sohn, a former Wells Fargo chief economist, who is now a finance professor at California State University Channel Islands. “Housing could very well go into a double dip. The total economy will not, but housing could.” Falling home prices erode the stake homeowners can claim in their homes, making them more vulnerable to default and foreclosure. Homeowner equity dropped two percentage points in the third quarter to 38.8 percent, as Americans saw their grasp on their most valuable asset slipping, according to Federal Reserve data released last week. “The job market and the housing market at the two biggest headwinds to economic growth in the United States,” said Tim Quinlan, an economist at Wells Fargo. “It will take a long, long time before those areas turn around.” Even as the economy improves, the pace isn’t quick enough to reduce the unemployment rate, Sohn said. Economists generally say the economy needs to add about 150,000 jobs every month just to keep up with population growth. Last month, the economy added a net of 39,000. What’s more, temporary factors could have juiced the November improvement in LEI. Two of the drivers of the index, the interest rate spread and the money supply, were boosted by government intervention, Quinlan said. The Federal Reserve is currently engaged in a quantitative easing program, in which it buys up to $600 billion in government debt in an effort to lower interest rates and augment the flow of money through the economy. Quinlan cautioned against ascribing too much importance to “government life support.” An improvement in the housing market might not come until late next year. Aaron Smith, an economist at Moody’s Analytics, predicted the market will turn around in second half of 2011. Once that happens, he said, the overall economic recovery will sustain itself. “We’re getting to a point where the recovery reaches escape velocity — job and spending growth begin reinforcing one another,” he said. “That’s the stuff economic expansions are made of.”

Read the full article →

U.S. Equities Gain On Better-Than-Expected Economic Data

December 16, 2010

U.S. Equities Gain On Better-Than-Expected Economic Data

Read the full article →

Jacob S. Hacker and Paul Pierson: The Great Disconnect

December 15, 2010

If an economic catastrophe befalls Americans and no one in power hears it, did it happen? That was the question raised by a new Yale/Rockefeller Foundation report released yesterday that looks at the economic experiences of Americans during the Great Recession. Since one of us (Hacker) was a coauthor, we obviously gave it extra attention. Yet the picture it painted — based on a two-wave survey between March 2008 and September 2009 — was only confirmation of what most Americans know: there’s a lot of economic pain out there. According to the report, more than 90 percent of Americans experienced at least one major economic “shock” during these 18 months: a substantial drop in wealth or income, a large increase in nondiscretionary spending (such as medical costs), or similar dislocation. Even if you ignore big wealth losses — ubiquitous because of the fall in the housing and the stock markets — roughly 7 in 10 Americans saw their earnings substantially decline or their nondiscretionary expenses substantially rise. Nearly a quarter saw their income fall by 25 percent or more. Even more worrisome, those who experienced these shocks were much more likely to report serious economic deprivation (going without food, housing, or medical care because of the cost). And this was true for middle-income families as well as the least advantaged. Indeed, more than half of families with incomes between $60,000 and $100,000 that experienced employment or medical disruptions reported being unable to meet at least one basic economic need. Against this backdrop, the tax-cut deal brokered by President Obama looks like very weak tea. Extended unemployment benefits are a vital lifeline that will encourage spending to revive the economy, and the temporary cut in payroll taxes will provide an important, albeit modest and short-lived, boost. But a huge chunk of the bipartisan deal is tax cuts that the Congressional Budget Office has judged singularly ineffective as economic tonic, including massive cuts for the richest of Americans and their heirs that will pile on future debt, exacerbate inequality, and crowd out other, more effective measures — all for little or no short-term economic gain. What about a major effort to create jobs to rebuild our crumbling roads, bridges, and transportation system? Nope. What about giving more relief to struggling states that are laying off teachers and first responders? Nada. Perhaps we could step up the implementation of the health care law to provide expanded Medicaid benefits during this weak recovery, when millions of Americans are still losing their jobs and health insurance. Are you kidding? That the tax-cut deal may well be the best that Obama could have gotten only makes the joke crueler. What’s wrong with our politics that so much hardship evokes so little response? At the event launching the Yale/Rockefeller foundation report, the panelists — Ezra Klein of the Washington Post , Larry Mishel of the Economic Policy Institute, and Stuart Butler of the Heritage Foundation — seemed genuinely puzzled by this question. Even Butler, an astute conservative thinker who saw the report as a chance to have a real conversation about the level and distribution of economic risk in the United States, appeared not to have a precise response. Two answers floated around the room. The first is that our political system is so dysfunctional that even political leaders deeply worried about what’s happening just don’t see any prospect for serious action. Klein fingered the Senate filibuster, which has showed its ugly head again and again during the lame-duck session. With an intense conservative minority in the Senate, everyone from the president to those peddling deficit-reduction proposals to liberal democrats simply assumes that nothing that involves direct job creation or serious public spending or increased revenues — even revenues gained by letting tax cuts expire — is feasible. But there was second hypothesis: Maybe a good chunk of the political class is just so insulated from the realities in the report that they don’t feel the same sense of urgency that most Americans do. Things are terrible on Main Street, but on Wall Street, Pennsylvania Avenue, and K Street, they don’t look so gloomy. How else can we explain why everyone in Washington was talking about deficit reduction (at least until they decided to blow another hole in the budget), even while polls show that Americans ranked it way, way below fixing the economy? It’s not clear which is scarier — that our leaders don’t think they can lead, or that they don’t want to. Either way, the middle-class economy keeps falling, and no one is there to hear it. Jacob S. Hacker and Paul Pierson are the authors of Winner-Take-All Politics: How Washington Made the Rich Richer–And Turned Its Back on the Middle Class

Read the full article →

Sidney Shapiro: False Choices: Senator Warner’s Plan to Adopt a Regulation, Drop a Regulation

December 14, 2010

A particularly revealing story in The Washington Post this weekend reported on a sordid tale of regulatory failure that may have helped contribute to this spring and summer’s outbreak of outbreak of egg-borne salmonella that sickened more than 1,900 people and led to the largest recall of eggs in U.S. history.

Read the full article →

Robert Teitelman: Joseph Stiglitz on Gordon Brown

December 13, 2010

Joseph Stiglitz is a brilliant economist — arguably the best of his generation. He is also a brave soul. For years he warned about the dangers of hot money ricocheting around the world. And he took a stand in support of the Asian model in the late ’90s in opposition to the powerful Washington Consensus, jousting with his own employer at the World Bank. But as the after-effects of our own financial crisis unfold, Stiglitz has opted to delve more deeply into the political half of the old concept of the political economy. And like many economists, left and right, he does his economic half — his economic brilliance — no good service for indulging. This weekend, Stiglitz published a review of former U.K. Prime Minister Gordon Brown’s new memoir-cum-policy tract, Beyond the Crash: Overcoming the First Crisis of Globalization in both the Financial Times and Slate. Stiglitz likes and admires Brown, and there’s a rough correspondence between Stiglitz’s left-progressivism and Brown’s Labour credentials. Brown, he says, unlike many “other people,” particularly those “who were responsible for the creation of the crisis,” instantly recognized the significance of it all. “As soon as Northern Rock began to teeter, he realized there were deep structural problems with the financial sector and he tried to act on what he saw. He grasped immediately that the problem was not just one of liquidity but of a weakness in the financial sector built on years of mismanagement, lax regulation and reckless speculation. He also saw early on that unless a government recapitalisation was accompanied by requirements that banks continue lending to businesses, the crisis in the financial sector would spread to the broader economy.” Now it’s a little hard to tell whether Stiglitz knows all this because it’s in the book or from conversations with Brown. In either case, Stiglitz displays no skepticism about Brown’s sudden, and startling, epiphany — or indeed that he was somehow far more advanced than others in power. In fact, Northern Rock was the U.K.’s Bear Stearns Cos. Both were runs (one by depositors, the other by counterparties and lenders) that forced the hands of policymakers to engage in a bailout. And once those moves were made, both countries found themselves spiraling down into deeper crisis. The U.S. ended up nationalizing Fannie Mae, Freddie Mac, AIG and injecting money into the largest banks; the U.K. essentially nationalized its largest banks, with the exception of Barclays. Both countries remain mired in post-crisis malaise, with incomplete recoveries and demands to reduce deficits. The U.K., now under a coalition government led by Tory David Cameron, is involved in a fierce cost-cutting campaign that is sparking widespread social tensions. The U.S. may be marginally better off only because of its entrenched advantages – its size and status as home of the world’s reserve currency — and perhaps because the Obama administration has avoided severe austerity measures. So where does Brown fit into all this? First, Brown served as chancellor of the exchequer (and heir apparent) under Tony Blair beginning in 1997; he became prime minister when Blair resigned in 2007, just as the crisis was beginning. Stiglitz manages to ignore the fact that Brown presided for a full decade over the very mismanagement and structural flaws he so quickly identified when it blew up. This makes Henry Paulson, Tim Geithner and Ben Bernanke look like latecomers to the party. Stiglitz manages to spread the blame around to the usual suspects; one of the pleasures of reading this is wondering when he’ll get to Brown’s own complicity. And finally he does. “Brown also shares the disappointment that more wasn’t done in the aftermath of the east Asian economic crisis in 1998. To him, that episode showed how interconnected the global economy was. He expresses disappointment with the Financial Stability Board. But he doesn’t reveal who was on the other side of the battles — one can only guess that it might have been some of the same people who had fought in the U.S. against derivatives regulation.” Notice the recurrence of “disappointment” in others. See how easily Stiglitz slides from Brown to others. And what’s that “one can only guess”? So Robert Rubin, Larry Summers and Alan Greenspan — two of three gone from office by 2001, while Brown continued to preside — were responsible not only for beating up Brooksley Born on derivatives, but for somehow battling Brown to silence over issues that included the size of London’s financial center, the leveraging up of U.K. banks, deregulation and the overheating of real estate. You can blame the Committee to Save the World for a lot of stuff, but you can’t blame them for what occurred after George W. Bush took office. Maybe that’s why Brown doesn’t single them out. Stiglitz, however, is eager to give Brown a pass. “He doesn’t dwell, however, on the mistakes of the past,” he writes of Brown, “either those that led to the crisis or the more recent one [presumably post-crisis economic responses]. What he tries to do is learn the lessons — as different as they may be from the conventional wisdom that prevailed before the crisis.” Ah, the old conventional wisdom. Perhaps Brown realizes what Stiglitz chooses to forget: The blame game is a kind of contagion; few are immune. It’s one thing for Brown to ritually blame Margaret Thatcher for everything — “We needed to overturn 30 years of policymaking,” he declares, 10 of which occurred under Labour — but anything closer than the ’90s poses a threat to his own reputation. After all, the Clinton New Democrats, including Summers and Rubin (who were Stiglitz’s great antagonists in the Asia crisis debates) and Tony Blair’s New Labour generally shared a centrist governing philosophy that gave a large role to finance as the engine. What was not to like? Labour continued to win elections, and the U.K. seemed to prosper, particularly the City. Let’s face it: Brown missed the bubble just like everyone else. Brown today is a sad figure — a man who waited all those years for ultimate power, only to get it just as everything was collapsing around him. That sadness, of course, is diluted by the fact that he had oversight over the very economy that swept him under — unlike Obama who inherited the mess. Brown did act with dispatch and focus, and he was a voice calling for harmonization of policies around the globe, culminating in the London G-20 meeting in 2009, perhaps his finest moment. As for his bank nationalization policies, it’s a little hard to discern whether they were clearly superior to steps taken in the U.S. Stiglitz certainly believes they were, though he offers no evidence. “The U.S. strategy of letting the banks continue with the same practices, including credit card abuses, was doomed economically and politically,” Stiglitz writes. The British public obviously did not agree. Making these kinds of glib national comparisons is fraught with difficulties. The crisis, alas, still has a way to go before it’s firmly placed in history. Comparing Brown to Rubin, Bush, Paulson or Obama involves far more than simply resorting to the conflicts and the clash of ideas and politics from over a decade ago. It involves issues that are far more nuanced and ambiguous than economic doctrines, whether left or right. And indeed, we may never know for certain whether Brown was the great and magnanimous hero of Stiglitz’s telling or a figure brought low by forces he failed to foresee. Robert Teitelman is editor in chief of The Deal

Read the full article →

Obama To Convene CEO Summit

December 11, 2010

WASHINGTON–President Barack Obama will convene a one-day summit of corporate chief executives Wednesday as part of a renewed White House effort to build support among business leaders for his economic agenda.

Read the full article →

← Previous Entries

Next Entries →