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2010 GREAT RECESSION NEWS - February

Introduction to Jim Wesberry
GIVING THANKS
E-Magazines by Jim Wesberry
THE FALTERING EAGLE: Speech made in 1970
MIAMI KEYNOTE: Public Financial Management, 2016
CONFERENCIA: CONTROL INTERNO Y ÉTICA: ESTARÍAN PERTINENTES EN 2025?
CONFERENCIA 6a Conferencia de Auditores Ecuador: El Auditor Interno Frente sus Tres Mayores Desafios
CONFERENCIA CReCER 2015: Empresas Estales en Busca de Etica---State Enterprises in Search of Ethics
CONFERENCIA QUITO HONESTO: Ambiente Etico = Municipio Eficiente: Principios de Conducta Etica, 2014
DOCTORADO HONORIS CAUSA - UNIVERSIDAD INCA GARCILASO DE LA VEGA, LIMA, PERU - 2013
DECORATION BY THE PERUVIAN GOVERNMENT 1972
CONFERENCIA EN HUANUCO, PERU - El Auditor enfrenta la Erupcion de Corrup$ion del Siglo XXI -2013
CONFERENCIAS EN CHILE - 3 Mayores Desafios al Auditor Interno - 2012 - VIDEO y TEXTO
DOLLARCRACY ->>>>>>>>>>>>>>>>>>>>>>>>>>> $$$ COUNT.........PEOPLE DON'T
THE CONTINUING FINANCIAL CRISIS
GEORGIA CORRUPTION ON MY MIND
Personal Information
My Resume (in English)
Mi Curriculum Vitae (en español)
Technology Use in Fighting Corruption
ACTIVITIES & EVENTS INITIATED
The Top Quartile of Life
AMERICA IN DECLINE? The Life Cycle of a Great Power
ACCOUNTANCY & AUDITING: MY CHOSEN PROFESSION
SERVICE AS PAGE IN US HOUSE OF REPRESENTATIVES 1949-51
SPECIAL INVESTIGATOR OF CORRUPTION IN STATE GOVERNMENT 1959-60
LEGENDS: Georgians Who Lived Impossible Dreams
Wesberry v. Sanders, 376 US 1 Landmark US House Reapportionment Case
POLITICS - MY FIRST CAMPAIGN 1961
POLITICS - ELECTION TO GEORGIA STATE SENATE 1962
The Best Speech I Ever Made
Why I Quit the Georgia Senate
Activities in the Junior Chamber of Commerce
Contador Benemerito de las Americas (Most Meritorious Accountant of the Americas)
Articles from The Journal of Accountancy
My Credo
Media
Interview about Leadership
ACCOUNTABILITY - RESPONDABILIDAD
THE EVER GROWING, EVER STIFLING BUREACRACY
PONZIS and PIRAMIDES
THE NATIONAL DEBT
GRAPHIC DISPLAY OF US DEBT
CALCULATE YOUR DEBT LIABILITY
Fraud-Corruption-Bribery
Collusion Breaks Internal Controls
FORENSIC AUDITING --- AUDITORIA FORENSE
ETHICS
FRIENDSHIP - AMISTAD
Creencia - Belief
Think -------- Pensar
WOMAN -------------- MUJER
Dawn
Message to Garcia - Mensaje a García
THE GREATEST SPEECHES OF ALL TIME
Education
Interesting!
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ATLANTA, GEORGIA USA - MY HOME TOWN
WASHINGTON DC - MY OTHER HOME TOWN
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ECUADOR
MEXICO
PHILIPPINES
COLOMBIA VS KLEPTOKAKISTOCRACIA: Presentación para el Día Internacional Anti-Corrupción 2011
LECTURE AT MANILA'S UNIVERSITY OF THE EAST: Integrity & Honor, Corruption & Dishonor VIDEO
MANILA LECTURES AT FAR EASTERN & SANTO TOMAS UNIVERSITIES: Good Governance and Social Responsibility
EFFECT OF 2008 GLOBAL CRISIS (JW presentation in English)
SEGUNDA GRAN DEPRESION 2010 (JW presentaciónes en español)
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Items on this page are from February, 2010.  Some links may no longer be active

Click on underlined extracts to read full articles. See below for headlines linked to articles.
Haz clic sobre extractos subrayados para leer artículos completos. Ver más abajo para los titulares vinculados a los artículos correspondientes.

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CLICK HERE TO GO TO US DEBT CLOCK
trillionbill.jpg
MOST COMPREHENSIVE PICTURE OF US FINANCIAL CONDITION

“When the people find they can vote themselves money, that will herald the end of the republic.” 
                Benjamin Franklin

.Graphic of how the big dips compare

Day
NEWS >>>>>>> <<<<<<<NOTICIAS
February 22 - 28, 2010

SAT
SUN
2/27-28

The Worst Financial Crisis Ever?

 Former Federal Reserve Chairman Alan Greenspan said that the financial crisis that triggered our current recession was "by far the greatest financial crisis, globally, ever." That's right, even worse that the collapse of the stock market in 1929, because for the first time short-term credit was "literally withdrawn." And with housing starts and car sales till "dead in the water," Greenspan said, we may not see a real recovery any time soon.

Greenspan is not alone in his dire pronouncements. Naked Capitalism has a long list of economists and bankers who think our current economic crisis could compare to the Great Depression, including current Federal Reserve Chairman Ben Bernanke, former Federal Reserve Chairman Paul Volcker, Nobel Prize-winning economist Joseph Stiglitz, and billionaire investor George Soros. While this downturn has not been as painful as the Great Depression, in part because we avoided some of the policy mistakes we made after the 1929 crash, this economic crisis itself may have been more severe. And it may take a long time for us to recover. 

A large part of the problem is that, as Greenspan says—putting it mildly—the economic recovery is "extremely unbalanced."

Three indicators spell trouble for the recovery

o  -  the Commerce Department reportedthat January new-home sales dropped 11.2 percent from December, plunging to their lowest level in nearly 50 years.
o   - the Conference Board reported that February consumer confidence fell sharply from January, driven down by the survey's "present situation index" -- how confident consumers feel right now -- which hit its lowest mark since the 1983 recession...the Reuters/University of Michigan consumer sentiment survey also showed a falloff from January to February.
o  -the Reuters/University of Michigan consumer sentiment survey also showed a falloff from January to February...the government's report on new jobless claims filed during the previous week shot up 22,000, which was exactly opposite of what economists predicted. Forecasters expected new jobless claims to drop by about 20,000.

Head of IMF Proposes New Reserve Currency >>> IMF's Strauss-Kahn suggests IMF may one day provide global reserve asset

Strauss-Kahn said such an asset could be similar to but distinctly different from the IMF's special drawing rights, or SDRs, the accounting unit that countries use to hold funds within the IMF. It is based on a basket of major currencies.

He said having other alternatives to the dollar "would limit the extent to which the international monetary system as a whole depends on the policies and conditions of a single, albeit dominant, country."

Strauss-Kahn, a former finance minister of France, said that during the recent global financial crisis, the dollar "played its role as a safe haven" asset, and the current international monetary system demonstrated resilience...

Several countries, including China and Russia, have called for an alternative to the dollar as a reserve currency and have suggested using the IMF's internal accounting unit.

Man who broke the Bank of England, George Soros, 'at centre of hedge funds plot to cash in on fall of the euro'

A secretive group of Wall Street hedge fund bosses are said to be behind a plot to cash in on the decline of the euro.

Representatives of George Soros's investment business were among an all-star line up of Wall Street investors at an 'ideas dinner' at a private townhouse in Manhattan, according to reports.

A spokesman for Soros Fund Management said the legendary investor did not attend the dinner on February 8, but did not deny that his firm was represented.

At the dinner, the speculators are said to have argued that the euro is likely to plunge in value to parity with the dollar.

The single currency has been under enormous pressure because of Greece's debt crisis, plus financial worries in Portugal, Italy, Spain and Ireland.

But, it has also struggled because hedge funds have been placing huge bets on the currency's decline, which could make the speculators hundreds of millions of pounds.

The euro traded at $1.51 in December, but has since fallen to $1.34. Details of the secretive dinner emerged days after Mr Soros, chairman of Soros

Fund Management, warned in a newspaper article that the euro could 'fall apart' even if the European Union can agree a deal to shore up support for stricken Greece.

Mr Soros, who made more than $1billion by currency speculation when the pound was ejected from the Exchange Rate Mechanism on Black Wednesday in 1992, believes the structure of the euro is 'patently flawed'.

Euro Crisis: Why Conspiracy Theories Are Running Wild >>> What Caused the Euro Crisis?

Annual report shows US government's financial position hit $11.46 trillion deficit in 2009...12.3 percent higher than the previous year...the government's big entitlement programs such as Social Security and Medicare are facing a deficit over the next 75 years of $45.88 trillion, an increase in that deficit of $2.9 trillion in just one year.

GAO Cites Weak Financial Management: Cannot render an opinion on US federal government's consolidated financial statements for 2009

SEATTLE: Where we go from here depends on how Great Recession shapes up >>> The national trends can't be avoided, even in a Seattle that didn't depend on a housing boom for its sustenance. Our overseas trading partners in Asia offer only partial relief.

MORE than $1 in every $10 that American banks have outstanding in loans is lent to a troubled borrower, a ratio far higher than previously seen in the quarter-century that such numbers have been compiled.

Britain makes better than expected recovery from worst recession in 30 years >>> House prices fall for first time in 10 months >>> Household spending up after VAT cut and low interest rates

Fannie Mae will seek $15.3 billion in U.S. aid, bringing the total owed under a government lifeline to $76.2 billion, after its 10th consecutive quarterly loss.

FRI
2/26

Moves in motion to limit credit defaults swaps use

Why the US economic recovery is a scam >>> Economists, bankers, and Treasury officials proclaim the recession is over, but they should be warning that the markets could fall apart any day.

The mainstream economics profession is guilty of dereliction of duty. They should be telling people that this ‘recovery’ is a scam. They should be warning investors that the markets could fall apart any day. They should be buying gold and selling US Treasuries…and explaining to the politicians that you can’t buy your way out of a depression with phony dollars squandered on wasteful projects!

Instead, the dopes are patting each other on the back…praising themselves for saving the planet from destruction...

Prices are vulnerable to sharp, unannounced drops until they finally get down to real depression levels. Since that hasn’t quite happened yet…we figure it’s still to come.

On the employment front, this depression has put more than 6 million people out of work. And every month, more people join the unemployment ranks...the worst thing about a depression is that it holds jobless people prisoner for so long. Many of them will become lifers…they’ll never work again...

Bank credit is still falling. Households cut back because they need to get out of debt…and save money for retirement. Businesses cut back too. New projects typically don’t do well in a depression. Small businesses struggle…and fail. Big businesses get bailouts and subsidies. Depressions are times to neither a borrower nor a lender be. Debt is only increasing at the government level.


Euro in danger as the Greek crisis deepens and Merkel admits currency is at risk

Greece's debt crisis has plunged the euro into a ‘ difficult situation’, the German Chancellor Angela Merkel admitted last night, prompting fresh fears about the collapse of the single currency.

In the gravest sign yet of the international threat posed by Greece’s crippled economy, Mrs Merkel warned for the first time that the eurozone faces a ‘ dangerous’ period.

The beleaguered euro initially fell in the wake of her comments and fresh speculation that Greece’s international credit rating may be downgraded.

On a dramatic day which also saw money markets around the world fall: 

  • The head of Germany’s leading debt management agency warned the euro would collapse if any member defaulted on its debt.
  • U.S. regulators said they would investigate whether investment bank Goldman Sachs helped Athens disguise its budget deficit.
  •  EU inspectors visiting Athens told authorities they see a deeper than expected recession.

The World from Berlin >>> 'The Current Crisis Is an Affirmation of the Euro'

US senator warns of "financial meltdown" risk

The US is heading for a debt-driven “financial meltdown” within five to seven years, according to Judd Gregg, the outgoing Republican senator for New Hampshire...Mr Gregg also complimented China for showing rising alarm about the US’s mounting levels of public debt...We have had China say that they are looking for other places to put their reserves and that is probably a smart decision on their part,” said Mr Gregg, who will not seek re-election in November. “So the warning signs are pretty clear and the path is unsustainable and, at this point, unless we take different actions, unavoidable.”

SEE VIDEO INTERVIEW OF SENATOR JUDD GREG

Clinton says U.S. deficit now a security issue >>> blames Greenspan for debt crisis

Secretary of State Hillary Clinton on Thursday said "outrageous" advice from former Federal Reserve Chairman Alan Greenspan helped create record U.S. budget deficits that put national security at risk.

Appearing before congressional panels to defend the State Department's $52.8 billion budget request for 2011, Clinton said the massive U.S. foreign debt had sapped U.S. strength around the world.

"It breaks my heart that 10 years ago we had a balanced budget, that we were on the way of paying down the debt of the United States of America," Clinton said.

"I served on the budget committee in the Senate, and I remember as vividly as if it were yesterday when we had a hearing in which Alan Greenspan came and justified increasing spending and cutting taxes, saying that we didn't really need to pay down the debt -- outrageous in my view," she said...

Clinton urged lawmakers to tackle the federal budget deficit, which reached a record $1.4 trillion for the fiscal year that ended last September.

"We have to address this deficit and the debt of the United States as a matter of national security not only as a matter of economics," Clinton said. "I do not like to be in a position where the United States is a debtor nation to the extent that we are."

Having to rely on foreign creditors hit "our ability to protect our security, to manage difficult problems and to show the leadership that we deserve," she said.

The world economy has no easy way out of the mire

Pinn illustration

Anybody who looks carefully at the world economy will recognise that a degree of monetary and fiscal stimulus unprecedented in peacetime is all that is prodding it along, not only in high-income countries, but also in big emerging ones. The conventional wisdom is that it will also be possible to manage a smooth exit. Nothing seems less likely...

So what happens next? We can identify two alternatives: success and failure. By “success”, I mean reignition of the credit engine in high-income deficit countries. So private sector spending surges anew, fiscal deficits shrink and the economy appears to being going back to normal, at last. By “failure” I mean that the deleveraging continues, private spending fails to pick up with any real vigour and fiscal deficits remain far bigger, for far longer, than almost anybody now dares to imagine. This would be post-bubble Japan on a far wider scale.

Unhappily, the result of what I call success would probably be a still biggerfinancial crisis in future, while the results of what I call failure would be that the fiscal rope would run out, even though reaching the end might take longer than worrywarts fear. Yet the big point is that either outcome ultimately leads us to a sovereign debt crisis. This, in turn, would surely result in defaults, probably via inflation. In essence, stretched balance sheets threaten mass private sector bankruptcy and a depression, or sovereign bankruptcy and inflation, or some combination of the two....

Most people hope...that the world will go back to being the way it was. It will not and should not. The essential ingredient of a successful exit is, instead, to use the huge surpluses of the private sector to fund higher investment, both public and private, across the world...

US Economy grew 5.9% in fourth quarter

US GDP growth

From Financial Crisis to Political Crisis >>> Governments made extravagant promises to their citizens over the past decades. Now those commitments risk coming into conflict with the promises made to bondholders.

Bipartisan Policy Center's (BPC) Debt Reduction Task Force convenes first in a series of meetings to examine US long-term debt crisis and develop a comprehensive budget plan to place nation on a sustainable fiscal path.

Chief Executive Officers throughout the nation are getting beyond the depression of the recession and increasingly preparing for economic growth and recovery, according to national survey

THURS
2/25

Bernanke delivers blunt warning on U.S. debt >>> Stage is set in U.S. for a Greek tragedy

With uncharacteristic bluntness, Federal Reserve Chairman Ben S. Bernanke warned Congress on Wednesday that the United States could soon face a debt crisis like the one in Greece, and declared that the central bank will not help legislators by printing money to pay for the ballooning federal debt.

Recent events in Europe, where Greece and other nations with large, unsustainable deficits like the United States are having increasing trouble selling their debt to investors, show that the U.S. is vulnerable to a sudden reversal of fortunes that would force taxpayers to pay higher interest rates on the debt, Mr. Bernanke said.

"It's not something that is 10 years away. It affects the markets currently," he told the House Financial Services Committee. "It is possible that bond markets will become worried about the sustainability [of yearly deficits over $1 trillion], and we may find ourselves facing higher interest rates even today."

It was some of the toughest rhetoric to date about the nation's fiscal and budgetary woes from the Fed chief, who faces a second round of questioning Thursday before a Senate panel.

Prof. Obama's lecture on business to the Business Roundtable

"Now, our first and most immediate task is to complete the economic recovery by taking additional steps to bolster demand and keep credit flowing. Along with our efforts to unfreeze credit and stabilize the housing market, the Recovery Act helped to do this, and it's one of the main reasons our economy has gone from shrinking by 6 percent to growing by nearly 6 percent.  
But we need to do more. We should make it easier for small businesses to get loans, and give them a tax credit for hiring new workers or raising wages.We should invest in infrastructure projects that lead to new jobs in the construction industry and other hard-hit businesses. And we should provide a tax incentive for large businesses like yours to invest in new plants and equipment.That would make a difference now.   
And we need businesses to support these efforts. ..
At a time of such economic anxiety, it's tempting, and maybe it's easier, to turn against one another and to find scapegoats to blame. So politicians can rail against Wall Street or against each other, and businesses can fault Capitol Hill, and all of it makes for easy talking points and good political theater. But it doesn't solve our problems. It doesn't move us forward. It just traps us in the same debates and divides that have held us back for a very long time and forced us to keep on punting down the road the same problems we've been facing for decades. 
And I believe we can't afford that kind of politics anymore. Not now. But we know the way forward, and we know what the future can be.  And I am confident we can get there. And I'm confident because we have the hardest-working, most productive citizens in the world. I'm confident because our universities and research facilities are second to none. And I'm confident because of the caliber of the leaders and businesses represented in this room. 
We're not going to agree on every single issue, we're not going to support the same policies every time, but I promise I will never stop listening to your concerns and your ideas, and I will never stop rooting for your success -- because we are in this together. And whether we rise or fall as a nation doesn't depend on some economic forces that are beyond our control. It depends on us -- on the ingenuity of our entrepreneurs, the determination of our workers, and the strength of our people." 

Four obstacles to recovery: Jobs > Housing > Banks and lending > Uncertainty

Administration officials, independent government analysts and private forecasters have said the fiscal measures put in place by Democrats have boosted the overall economic growth of the country and added jobs to the economy. 

Still, the need to show economic gains by November is palpable among Democrats, who are racing to pass additional fiscal measures. The $15 billion package passed in the Senate on Wednesday would be a modest measure following the $787 billion stimulus package enacted in early 2009.

“We have much more to do to boost employment and put Americans back to work,” Rep. Carolyn Maloney (D-N.Y.), chairwoman of the Joint Economic Committee, said this week.

The economic risks span the labor market, housing, bank lending and general concerns about deficits and uncertainty surrounding future regulations.

Ben S. Bernanke, the Federal Reserve chairman, told Congress on Wednesday that the central bank did not intend to start raising short-term interest rates anytime soon, saying the economic recovery would remain halting for many more months.

Economists surprised as US new-home sales fall to lowest level in nearly 50 years

Bets by some of the same banks that helped Greece shroud its mounting debts may actually now be pushing the nation closer to the brink of financial ruin.

BOOK REVIEW: "Freefall" by Joesph Stiglitz

El gobierno de EU, presionado entre la riqueza extrema y el desempleo en alza >>>la rápida recuperación de Wall Street, gracias al dinero gratis que recibió: contralor de NY

Aumento de solicitudes de beneficios de desempleo sorprende en EE.UU.

WED
2/24

'Volcker Rule' Stalls in Senate >>> Key senators are expected to scrap President Barack Obama's proposal to prohibit commercial banks from certain risky trading activities

The proposal, dubbed the "Volcker rule" after former Federal Reserve Chairman Paul Volcker, would have essentially prevented any commercial bank with federally insured deposits from owning a division that makes speculative bets with its own capital.

VOLCKER
Getty Images

Former Fed Chairman Paul Volcker, left, with Mr. Obama last month.

VOLCKER
VOLCKER

But after resistance from lawmakers from both parties, Senate Banking Committee Chairman Christopher Dodd (D., Conn.) and other legislators are expected to introduce a plan next week that would give regulators more discretion to limit and potentially ban risky trading at banks, especially if it poses a risk to the broader economy. The measure would stop short of banning such trading outright.

The United States has unveiled plans for its new $1 billion high-security embassy in London - the most expensive it has ever built.

US New home sales hit record low in January New home sales plummet 11.2 percent in January to annual rate of 309,000, lowest on record

Bernanke: Record-low rates still needed to foster recovery >>> explains exit strategy

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Index shows home prices continue rising for seventh straight month >>> But while the latest price figures look promising, swelling unemployment and related mortgage delinquencies and foreclosures threaten to upend these gains because distressed properties tend to drag down prices. Many economists predict that prices still have further to fall.

Regulators report 27 percent jump in problem banks

Despite recession, young people optimistic about future, Pew study finds

NEW BOOK OUT MARCH 22: Fraud in the Markets: Why It Happens and How to Fight It

Greenspan: la última crisis fue "con mucho" la peor de la historia y la recuperación de la recesión global extremadamente desequilibrada.

Crisis financiera de Grecia conduce a crisis del euro

Ni neoliberalismo ni populismo: democracia republicana

TUES
2/23

IT'S Official: The longest and deepest U.S. economic slump in seven decades has been dubbed the "Great Recession" by the Associated Press.

Greenspan Says Crisis "By Far" Worst, Recovery Uneven

Former Federal Reserve Chairman Alan Greenspan said the financial crisis was “by far” the worst in history and called the recovery from the global recession “extremely unbalanced.”

The world economy has undergone “by far the greatest financial crisis globally ever,” Greenspan said today in a speech to the Credit Union National Association’s Governmental Affairs Conference in Washington.

Greenspan said that while the economy was in worse shape in the Great Depression, the recent financial crisis was potentially more harmful than that in the 1930s because “never had short-term credit literally withdrawn.”

Greenspan said that the gross domestic product may recover to the level of previous peaks earlier this year, even though traditional drivers of growth such as housing starts and motor vehicles were “dead in the water.” He also said small businesses show few signs of improving because lenders are struggling with commercial real estate mortgages.

US unemployment and the Technicolor depression >>> Unlike the black and white depressions that have preceded it, the current US depression - and it is a depression if unemployment is measured the same way it was in during the 1930s - this one is Technicolor.

Gradually, people are coming to two contradictory realizations. On the one hand, there really does seem to be a kind of economic renaissance going on…or, at least that is what you might think if you read the business and investment news. 

On the other hand, people are also coming to realize that we’re in a depression.

...a depression is not just a time when people stand in line to get bowls of soup or sell apples on street corners. It’s a time of adjustment…when mistakes of the previous boom are corrected…and a new economic model is found for going forward. This doesn’t happen overnight, no matter how much federal money is put to work helping it. In fact, the government money just gets in the way…distorting the picture and delaying the necessary changes. Those black-and-white depression days of the ’30s are gone. Now, we have a depression in full Technicolor…with plenty of shades of gray, too.

FDIC Says 702 Banks Now in Danger of Collapse >>> Federal Deposit Insurance Corp.: Banks 'Problem List' Most Since 1993

Renewed sense of gloom over U.S. economy

Fed's Bullard:Stronger Fed Best Chance To Avert Future Crisis

A strengthened U.S. central bank offers the best chance for the U.S. to avoid a future financial crisis, St. Louis Federal Reserve Bank President James Bullard said Tuesday. "As the lender of last resort, the Fed will be at the center of any future financial crisis," Bullard said in remarks prepared for delivery to the CFA Virginia Society. He said that argues for the Fed to play a lead role in financial oversight, reasoning that "provides the nation with the best chance of avoiding a future crisis."

Bullard criticized financial overhaul bills drafted in the U.S. House of Representatives and the Senate, both for what they contain and what they omit, and urged lawmakers to consider changes to give the Fed more information and more authority.

For instance, Bullard questioned whether creation of a financial services oversight council would stave off a future market meltdown. The idea, contained in the House bill, calls for the Fed to be one of several members of the council, an approach Bullard said might not work well at a time of crisis when decisions "need to be made quickly, not subjected to long committee debates."

"The Fed would be better at navigating this type of decision-making," because of its monetary policy expertise and its political independence, Bullard said.

Confidence among U.S. consumers fell in February to the lowest level in 10 months, a sign that concern about job prospects may hold back the spending needed to sustain the recovery.

The Fed vs. inflation >>> Bernanke is getting ready for his next tough task.

State of Georgia May Cut 5000 Jobs >>> Georgia's budget is more than one billion dollars short and some state lawmakers are now saying furloughs simply will "not be enough."

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Government's staggering debt cannot be allowed to continue

The Sovereign Debt Disaster

Recession Tightens Grip on State Tax Revenues

Who Pays the Costs of the Recession?

Commerzbank warns economic crisis not over

Avanza el optimismo sobre la economía

El número de bancos con problemas en Estados Unidos ha subido un 27 por ciento, hasta su mayor nivel desde 1993, según informó hoy la agencia gubernamental que garantiza los depósitos de los clientes.

FMI recomienda mantener el estímulo económico >>> No ve señales de una recuperación "autosostenible" de la demanda privada

Cuatro claves a seguir en la comparencia de Bernanke sobre la estrategia de salida de la Fed

La gestión irresponsable del sector bancario, principal culpable de la crisis financiera

Japón desplaza a China como dueño de deuda de EEUU

Mon
2/22

Global Crisis Leads I.M.F. Experts to Rethink Long-Held Ideas

The International Monetary Fund has long preached the virtues of keeping inflation low and allowing money to flow freely across international boundaries. But two recent research papers by economists at the fund have questioned the soundness of that advice, arguing that slightly higher inflation and restrictions on capital flows can sometimes help buffer countries from financial turmoil.
  • 1 central banks should set target inflation rate much higher — at 4 percent, rather than the 2 percent standard.
  • 2 officials  “reconsidering the view that unfettered capital flows are a fundamentally benign phenomenon.”

Economists: Recovery is firmly on track >>> Leading economists are upbeat about the U.S. recovery, forecasting steady growth over the next two years as businesses grow and jobs return, according to a survey >>> "Overall, our economists believe we are on a fairly healthy growth track and their will be no double dip recession,"

Inflation must not become a moving target >>> Price stability is a critical part of the social contract we call money

How to walk the fiscal tightrope that lies before us

.Pinn illustration

Now we come to the big dilemma: what if private deleveraging and fiscal deficits continue in the US and elsewhere for years, as they did in Japan? Then triple A-rated countries, including even the US, might lose all fiscal headroom. This has not yet happened to Japan. It might well not happen to the US. But it could.

So, yes, high-income countries face huge fiscal challenges. And yes, the crisis-hit countries start from grossly unsustainable fiscal positions. But the US is not Greece. Moreover, a massive fiscal tightening today would be a grave error. There is a huge risk – in my view, a certainty – that this would tip much of the world back into recession. The private sector must heal. That, not fiscal retrenchment, is the priority.

Five former US Treasury secretaries urg Congress to bar banks that receive federal support from engaging in speculative activity unrelated to basic bank services

Why an American Recovery Matters

GEORGE SOROS: The survival of Greece would still leave the future of the euro in question.

Even if it handles the current crisis, what about the next one? It is clear what is needed: more intrusive monitoring and institutional arrangements for conditional assistance. A well-organised eurobond market would be desirable. The question is whether the political will for these steps can be generated

Europe's Trojan Horse: Was the real mistake creating the euro in the first place?

Taiwan, Thailand Exit Recession as Asia Leads Global Recovery

La crisis deja la banca británica 'patas arriba'

La UE enfrenta otro desafío: por primera vez debe responder al salvataje financiero de uno de sus miembros para evitar un default que dañaría a todos.

"As a very important source of strength & security, cherish public credit. One method of preserving it is to use it as sparingly as possible..."
          ---George Washington, Farewell Address of 1796

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 “Those who argued for deregulation—and continue to do so in spite of the evident consequences—contend that the costs of regulation exceed the benefits. With the global budgetary and real costs of this crisis mounting into the trillions of dollars, it’s hard to see how its advocates can still maintain that position. They argue, however, that the real cost of regulation is the stifling of innovation. The sad truth is that in America’s financial markets, innovations were directed at circumventing regulations, accounting standards, and taxation … No wonder then that it is impossible to trace any sustained increase in economic growth (beyond the bubble to which they contributed) to these financial innovations” - Joseph Stiglitz

.US Debt Per Person

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First-hand Perspectives on the Global Economy

In this special report, students from the Joseph H. Lauder Institute of Management & International Studies analyze some of the most exciting economic, business and technology developments helping to shape today's world.

The articles offer new perspectives on the ever-changing global economy, including the growth of consumer markets in Brazil, Egypt and China, and the impact of the crisis on French luxury goods. The green economy’s growth worldwide is captured in articles on organic products in Germany, solar energy in Senegal and Japan’s eco-tech industry. The rise of the Russian gambling industry, sustainable tourism in Egypt and high-end gastronomy in Spain illustrate new frontiers in the leisure business. China’s coming of age is captured in articles on the development of its venture capital and mutual fund industries, enhanced awareness of social corporate responsibility, and the growth of second- and third-tier cities. New developments in infrastructure and financial services are reflected in pieces on the mobile Internet in Latin America, the rise to prominence of Spanish infrastructure management companies, and a new form of transparent, customer-driven banking.

Taken together, the 16 articles offer perspectives on a range of dynamic economies and identify existing opportunities for conducting business within specific cultural, political and institutional contexts. The articles are part of the Lauder Global Business Insight program.

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NEWS ..........NOTICIAS
FEBRUARY 15 - 21, 2010

SATURDAY
       &
SUNDAY

Induced inflation feared as way to cut debt >>> Some see it as lesser evil for economy

Fears are growing that the United States will once again resort to printing money and ginning up inflation to resolve its debt problem.

While accelerating the printing presses could do irreversible damage to the dollar's international reputation and the U.S. economy, history suggests that this is the way Washington will go to avoid the political pain of having to raise taxes and cut spending on popular programs such as Social Security, defense and Medicare.

Some notable economists argue that such a move would avert a debt crisis like the one confronting Greece and other European countries that have been unable to reduce spending because of strong public resistance.

Political leaders and the Federal Reserve, which is charged with printing and circulating U.S. dollars, strenuously deny that they have any intent to "inflate" out of the debt...

But despite some resistance and wariness at the Fed, a growing number of Wall Street gurus expect the U.S. to adopt at least an unofficial policy of growing or "inflating" out of the debt in light of Congress' unwillingness to tackle budget deficits running at more than $1 trillion for the foreseeable future.

THE NEW POOR: Millions of Unemployed Face Years Without Jobs

Economists fear that the nascent recovery will leave more people behind than in past recessions, failing to create jobs in sufficient numbers to absorb the record-setting ranks of the long-term unemployed.

Call them the new poor: people long accustomed to the comforts of middle-class life who are now relying on public assistance for the first time in their lives — potentially for years to come.

Yet the social safety net is already showing severe strains. Roughly 2.7 million jobless people will lose their unemployment check before the end of April unless Congress approves the Obama administration’s proposal to extend the payments, according to the Labor Department.

Already gloomy conditions of states' economies are set to worsen, according to preliminary survey findings from the National Governors Association

States have $18.8 billion of budget gaps yet to be closed in fiscal 2010. This comes after they have already imposed measures to eliminate budget imbalances totaling $87 billion in the fiscal year, which for most started last summer.

In the budgets they are drafting for fiscal 2011, states foresee shortfalls of $53.6 billion and for fiscal 2012 $61.6 billion.

California, other states face problem of growing pension liabilities State governments can help ease a $1-trillion shortfall by reducing future benefits, requiring greater employee contributions and raising retirement ages

Fed faces complex set of forces as it decides how and when to reverse aggressive steps taken to contain the financial crisis and the ensuing damage to the economy.

Greece's financial problems have scared other government into taking action to strengthen their finances, and any talk of a "chain reaction" affecting other countries should be avoided, Finland said

Fed Rate Signals 'Financial Crisis Is Largely Over' >>> "The Fed, during the financial crisis, lowered the discount rate relative to the federal funds rate as part of their providing excess liquidity to the markets...Now that those excess liquidity facilities have run off, and we're not in a financial crisis anymore, it's quite natural to move back toward normalcy in the spread between the discount rate and the funds rate"

What's So Serious About Our Debt, Anyway? >>> There are still economists, mostly liberal economists, who would argue that we don't face any kind of debt crisis. Yes the debt is high, but we need it now and can afford it later. Are they wrong? >>> I think they are wrong

Bank of America: la decisión de la Fed "es una señal del final de la crisis financiera" >>> "La Fed, durante la crisis financiera, bajó los tipos de descuento como parte de su programa para facilitar la liquidez a todo el sistema...ahora hay que retirar las facilidades para acceder a la liquidez, puesto que ya no estamos en una crisis financiera".

U.S. Inflation Report Gives Fed Breathing Room >>> Consumer prices were flat in January, the Labor Department said Friday, easing concern that the Federal Reserve will have to raise interest rates to ward off inflation soon.

Crisis económica y nivel de empleo

Bajo la Lupa >>> China suspira la transferencia de poder por EU

Crisis financiera global cambia actitud de los chinos ante el empleo: encuesta

Conviven la recuperación y la incertidumbre

Friday

New Jobless Claims Rise, Pace of Economic Recovery Slows

The job market isn't improving as fast as some analysts had expected.

That was the message Thursday in a government report that the number of people filing first-time claims for unemployment benefits rose unexpectedly last week. Jobless claims rose by 31,000 to a seasonally adjusted 473,000.

That followed a drop of 41,000 in the previous week. The earlier figure had raised hopes that the job market was improving steadily.

The four-week average for claims dipped 1,500 to 467,500, near the lows at the end of last year. The average smooths out week-to-week volatility. But many economists say the four-week average would need to fall consistently below 425,000 to signal that the economy is close to generating net job gains. The economy has lost 8.4 million jobs since the recession began in December 2007.

Fed's surprise increase in lending rate ripples through markets

Ben Bernanke, chairman of the Federal Reserve, indicated last week that the central bank might increase its emergency lending rate to banks to widen the spread between that and the main policy rate. Still, markets were caught off guard Thursday when the Fed raised the discount rate, prompting officials to say borrowing costs will remain low. "The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy," the Fed said

More evidence that commercial real estate headed for foreclosure crisis

A mortgage crisis like the one that has devastated homeowners is enveloping the nation's office and retail buildings, and few places are likely to be hit as hard as Washington.

The foreclosure wave is likely to swamp many smaller community banks across the country, and many well-known properties, including Washington's Mayflower Hotel and the Boulevard at the Capital Centre in Largo, are at risk, industry analysts say.

The new round of financial pain, which some had anticipated but hoped to avoid, now seems all but certain. "There's been an enormous bubble in commercial real estate, and it has to come down," said Elizabeth Warren, chairman of the Congressional Oversight Panel, the watchdog created by Congress to monitor the financial bailout. "There will be significant bankruptcies among developers and significant failures among community banks."

Comercial Real Estate Loans in Excess of Values

Los Angeles

$40.2 billion

New York

$38.8 billion

Dallas-Forth Worth

$27 billion

Chicago

$22.3 billion

Washington, D.C.

$20.4 billion

Investors wonder whether Greece's problems will reach U.S.

Bond buyers are thinking about the odds of Greece's debt crisis spreading to Portugal, Ireland and Spain, then eventually to Britain and the U.S., according to The Economist. While the possibility of U.S. Treasuries losing their "risk-free" image cannot be rejected, a more likely outcome is higher interest rates on U.K. and U.S. government debt. "That demands a credible medium-term plan to cut deficits," The Economist notes. "Otherwise Greece's problems could be the start of something much bigger."

Bipartisan Commission Is Established to Cut Debt

Thursday

US bank lending falls at fastest rate in history Bank lending in the US has contracted so far this year at the fastest rate in recorded history, raising concerns that the Federal Reserve may have jumped the gun by withdrawing emergency stimulus.

David Rosenberg from Gluskin Sheff said lending has fallen by over $100bn (£63.8bn) since January, plummeting at an annual rate of 16pc. "Since the credit crisis began, $740bn of bank credit has evaporated. This is a record 10pc decline," he said. Mr Rosenberg said it is tempting fate for the Fed to turn off the monetary spigot in such circumstances. "The shrinking in banking sector balance sheets renders any talk of an exit strategy premature," he said

Paul Ashworth, US economist for Capital Economics, said that certain Fed officials are clearly worried about lending since they slipped in a warning that bank credit "continues to contract" in their latest statement..."The reason the Great Depression became 'great' was the contraction of credit. You would have thought that a student of the Depression like Bernanke would be alarmed by this,"

CHAPTER 9: As cities across the country struggle with debt, the continuing economic downturn is forcing some to consider filing for Chapter 9, a part of the bankruptcy code that gives them protection from creditors while they come up with a debt-payment plan. Chapter 9, which was developed after the Great Depression, is generally considered a last resort because it creates uncertainty for bondholders, municipal employees and others.

US Jobless Claims, Inflation Jump as Economy Wobbles

The number of U.S. workers filing new applications for unemployment insurance unexpectedly surged last week, while producer prices increased sharply in January, raising potential hurdles for the economic recovery.

AP

Initial claims for state unemployment benefits increased 31,000 to 473,000, the Labor Department said on Thursday. That compared to market expectations for 430,000.

Another report from the department showed prices paid at the farm and factory gate rose a faster than expected 1.4 percent from December after a 0.4 percent gain in December, as higher gasoline prices and unusually cold temperatures helped boost energy costs.

Almost all us state pensions are underfunded >>> States are facing a collective pension-funding shortfall of $1 trillion, nearly a third of the $3.3 trillion they owe in future obligations

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Labor Underutilization Problems of U.S. Workers Across Household Income Groups at the End of the Great Recession: A Truly Great Depression Among the Nation's Low Income Workers Amidst Full Employment Among the Most Affluent (Report from Center for Labor Market Studies Northeastern University, PDF, 14 pp.)

Wall Street's War against Main Street America

Banking Reform Proposals: Why They Miss the Mark

As Greece Burns, Hazards Remain in the U.S. >>> Greek Debt Fiasco Signals How Little We've Done to Prevent the Next Crisis

International Monetary Fund urges Dubai to improve handling of debt restructuring of a major conglomerate and reorganise the rest of its state-linked companies.

Greece loses EU voting power in blow to sovereignty >>> European Union strips Greece of its vote at crucial meeting next month, worst humiliation ever suffered by an EU member state...must comply with austerity demands by March 16 or lose control over its own tax and spend policies altogether

Merkel hits out at banks over Greek deals >>> The German chancellor sharply criticised global investment banks that may have helped Greek government disguise mounting budgetary problems over years.

8 Financial Fault Lines Appear In the Euro Experiment!

A bailout of one (nation) will produce the same outcome as the rescue of Bear Stearns did; moral hazard will kick in, and instead of allowing economic Darwinism to cleanse the gene pool, the weaker nations will lose any incentive to cut spending and trim their swollen deficits.

Welcome to “Credit Crunch II.” By stuffing billions of dollars of taxpayers’ money into the balance-sheet holes of the banking industry, governments have transmogrified private risk into public liabilities. The “too-big-to-fail” label just reattaches itself to governments from financial companies.

The sequel, if the European Union or its members are suckered into some kind of Greek rescue package by buying, guaranteeing or even repaying its bonds, could end up featuring Portugal as Lehman Brothers Holdings Inc. and Spain as American International Group Inc.

.

Taking the 'R' out of BRIC: How the Economic Downturn Exposed Russia's Weaknesses

Last year, Russia's economic performance was the worst among the BRIC economies by a large measure: For the whole of 2009, its real GDP is expected to have declined by at least 8% and some quarters by more than 10%. That compares to Brazil's smaller real GDP decline of 5.5%, while China's and India's GDPs grew by 8.3% and 6.5%, respectively. Russia's performance is even worse when compared to 2008, which takes into account the bursting of the oil-price bubble in the middle of that year.

Crisis en Grecia revela complicidades secretas de Estados Unidos

Venezuela and Argentina: Populism Gives Rise to Disorder in 201

Venezuela y Argentina: La arbitrariedad del populismo vuelve a sembrar el desconcierto en 2010

Wednesday

What the Nation's Budget Woes Mean for You >>> Economists Predict Cutbacks, Tax Increases That 'Aren't Even Imaginable'

Now the problem of mounting national debt is worse than it ever has been before with -- potentially dire consequences for taxpayers, according to a report by the nonpartisan Peterson-Pew Commission on Budget Reform...

Over the past year alone, the amount the U.S. government owes its lenders has grown to more than half the country's entire economic output, or gross domestic product.

Even more alarming, experts say, is that those figures will climb to an unprecedented 200 percent of GDP by 2038 without a dramatic shift in course...

"Within 12 years…the largest item in the federal budget will be interest payments on the national debt," said former U.S. Comptroller General David Walker. "[They are] payments for which we get nothing."

Economic forecasters say future generations of Americans could have a substantially lower standard of living than their predecessors' for the first time in the country's history if the debt is not brought under control.

Government debt, which fuels the risk of inflation, could make everyday Americans' savings worth less. Higher interest rates would make it harder for consumers and businesses to borrow. Wages would remain stagnant and fewer jobs would be created. The government's ability to cut taxes or provide a safety net would also be weakened, economists say.

___________________________________________________

Red Ink Rising: A Call to Action to Stem the Mounting Federal Debt

Click here to go to website of the Peterson-Pew Commission on Budget Reform see video and read report

Lone voice warns of debt threat to Fed: The US must fix its growing debt problems or risk a new financial crisis >>> a mounting deficit could spur inflation

Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, warned:
  • rising debt...infringing on...central bank’s ability to fulfil...goals of maintaining price stability and long-term economic growth.
  •  Stunning” deficit projections...putting political pressure on...Fed to keep interest rates low, infringing on its independence at...risk of inflation
  • “Without pre-emptive action, the US risks its next crisis”
  • the worst option for the US...a scenario where the government “knocks on the central bank’s door” and asks it to print more money. Instead, the administration must find ways to cut spending and generate revenue.
  • If...Fed succumbed to pressure to increase the money supply...inflation would lead to a loss of confidence in the dollar and in the economy. Meanwhile, a potential stalemate between the fiscal and monetary authorities that govern the economy could allow growing imbalances to go unchecked, thus raising the costs of borrowing and of capital for the US.
  • “dire” consequences of the central bank prolonging its holdings of mortgage-backed securities, which it purchased in an effort to prop up the US housing market.

America's debt spiral resembles Greece's crisis >>> "I have seen America's future, and it is Greece."

The ongoing Greek financial crisis is the kind of crisis the United States might face in a few years, if we continue to make the kinds of mistakes that the Greeks have made over the past decade...

aside from our very large budget deficit -- 9.9 percent of GDP and climbing -- we also have liabilities that are rarely acknowledged. The costs of Medicare and Medicaid are rising, as is the cost of veterans' care. Markets assume that the vast debts of Fannie Mae and Freddie Mac are underwritten by the government, and someday the government might be called upon to pay them. No one is lying about these things, but no one is doing very much about them either.

The good news is that the American government's bankruptcy is not on the front pages, and it will not be for many years: Our sheer size, our entrepreneurship and our relatively open business culture will keep us going for a long time. But the Greek crisis shows that the combination of debt and political deadlock can be deadly. 

Lessons for Europe from California The financial aftershocks being felt in Greece will show the EU what 'union' really means

Party Gridlock in Washington Feeds Fear of a Debt Crisis >>> a complaint being directed at Washington with increasing frequency: The unwillingness of the two parties to compromise to control a national debt that is rising to dangerous heights.

After decades of warnings that budgetary profligacy, escalating health care costs and an aging population would lead to a day of fiscal reckoning, economists and the nation’s foreign creditors say that moment is approaching faster than expected, hastened by a deep recession that cost trillions of dollars in lost tax revenues and higher spending for safety-net programs...

Many analysts say the president and Congress could send a strong signal to global markets by agreeing this year to a package of both long-term tax increases and spending reductions, especially in the popular entitlement programs, that would not take effect until 2012. That is the recommendation of two new studies, one from a diverse group sponsored by the National Academy of Sciences and a separate joint project of the Peter G. Peterson Foundation, the Pew Charitable Trusts and the Committee for a Responsible Federal Budget.

As debt rises, so do interest costs; by 2014, at a projected $516 billion, they will exceed the budget for annual appropriations for domestic programs. The government will be competing with the private sector for credit, forcing interest rates higher and imperiling future prosperity.

Foreign investors now own more than half of the publicly held debt, and officials for the largest creditor, China, have fretted publicly about the fiscal course of the United States. While few expect foreigners to dump their assets, since the resulting plunge in values would hurt them as well as everyone else, the fear is that investors will demand higher interest payments and reduce or stop future debt purchases, threatening the government’s ability to finance its borrowing.

Lesser financial and fiscal crises have brought the two parties together to compromise on tough choices about taxes and spending.

 

REPORT OFFERS POLICYMAKERS MULTIPLE WAYS TO STABILIZE NATIONAL DEBT; DELAYING ACTION WILL CAUSE GREATER FISCAL PAIN AND ECONOMIC RISKS

A new joint report from the National Research Council and the National Academy of Public Administration offers U.S. leaders ways to address the nation's fiscal problems and confront its rapidly growing debt -- a burden that if unchecked will inevitably limit the nation's future wealth and risk a disruptive fiscal crisis that could lead to a severe recession. The report offers tax and spending options that would stabilize the debt relative to the size of the economy within a decade.  The report also provides a set of simple tests to determine whether any proposed federal budget would lead to long-term fiscal stability...The nation's rapidly growing debt now totals more than $12 trillion -- of which $7.5 trillion is publicly held, about half of it by investors abroad.  As the publicly held debt rises, so does the amount of federal revenue that must be spent on interest payments, leaving less money for other services and programs.  The amount the government spent on interest was more than $800 per person in 2008 and would roughly double by 2020, even if interest rates remain at their current low levels. As the debt grows unchecked, so too does the risk of a crisis; if a loss of investor confidence led interest rates to climb suddenly, the government may be forced into a rushed, ill-considered response that could deprive people of needed services and hobble the economy for years, the report says.
  
Additional Resources:
 

President Barack Obama: $787 billion stimulus program helped the United States avoid dipping into an economic depression.

Marking the anniversary of the $787 billion American Economic Recovery and Investment Act, Obama aimed his message at people skeptical about the expensive relief measure...

Christina Romer, who heads the White House Council of Economic Advisers, said in a separate interview that one component of the stimulus program had worked especially well. "State fiscal relief really has kept hundreds of thousands of teachers and firefighters and first responders on the job," she said. "We have seen productivity surge," Romer said. "And that, at one level, is a good sign out the economy. But absolutely, we've got to translate GDP growth into employment growth. Right now, the employment numbers look basically stable. We think we're going to see positive job growth by spring."

Anniversary of Stimulus Met with Praise and Scorn

Is the Stimulus Plan Really Making a Difference?

The administration's inspector general: Twenty community agencies that are slated to receive $45 million are "at risk for fraud, waste and abuse." One example -- Illinois received $242 million to weatherize 27,000 homes, but the Department of Energy found "significant internal control deficiencies," including one instance with a "furnace gas leak that could have resulted in serious injury to the occupants."

Investigators at ProPublica, which launched a new "Stimulus Investigations" page, found that billions in stimulus money could be lost to fraud.

"The biggest problem we're seeing is with questionable contractors who are receiving stimulus funds despite being under criminal investigation. We've seen several examples of this where a contractor may be banned from getting federal contracts but still is finding a way to get stimulus money."

Federal deficit at $430.69 billion through January >>> The federal deficit through the first four months of the budget year is running at a record-breaking pace even though the deficit in January was slightly smaller than expected. The massive tide of red ink reflects the continued fallout from a deep recession and a severe financial crisis. It highlights the formidable challenges President Barack Obama will face in trying to get the deficit down to more manageable levels.

ASIA-PACIFIC REGION: Financial crisis could push 21 million into poverty

Elders of Wall St. Favor More Regulation

El FMI expone las lecciones que dejó la crisis financiera

La pugna entre el euro y el dólar vista desde los países emergentes

EEUU espera salvar o crear 1,5 millones más de empleos >>> Con la continuación del plan de estímulo aprobado hace un año, según la Casa Blanca

Aproximadamente 1,3 millones de hispanos perderán sus casas de aquí a 2012 a causa de la crisis tras el estallido de la burbuja inmobiliaria en Estados Unidos

La tragedia griega que cambió a Europa El rescate de Grecia no sólo afectará la deuda soberana en el viejo continente sino la soberanía de cada país

Tuesday

Foreign demand for US Treasury securities falls >>> The government says that foreign demand for U.S. Treasury securities fell by the largest amount on record in December with China reducing its holdings by $34.2 billion.

Real and present default danger?

The problems faced by the eurozone have cast a long shadow over the markets over the last two weeks. The prospect of a potential sovereign debt default within the single currency area have concentrated on Greece, but the prospect of similar dangers in Portugal, Ireland and even Spain have rattled investors around the world.

How real is this perceived danger of a sovereign debt default? What would the consequences be if occurred, and what would be the implication of any EU-sponsored rescue to avoid one? How should investors position themselves in the face of these risks?

Europe seizes control of Greek budgetary sovereignty >>> Debt-addled Greece's euro partners have seized control of the country's budgetary sovereignty, giving Athens 30 days to slash its national spending to the bone.

Did Wall Street bail out Greece?

The European Union has asked Greece to explain reports that it engaged in derivatives trades with US investment banks that may have allowed it to mask the size of its debt and deficit from EU authorities.Goldman Sachs made up an exchange rate that allowed the Greeks to look as though they were only engaging in a currency swap when, in effect, they were getting more than a billion more than they should have from the trades in credit.

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HENRY M. PAULSON Jr.: How to Watch the Banks >>> Congress must pass financial regulatory reform. Delays are creating uncertainty, undermining the ability of financial institutions to increase lending to the businesses of all sizes that want to invest and fuel our recovery

DAVID BROOKS: The Lean Years >>> We're looking at an extended period of above 8 percent unemployment...Long-term unemployment is one of the most devastating experiences a person can endure...

U.S. looks to reluctant foreign investors to help fund the housing market

The Federal Reserve is scheduled at the end of March to halt its purchases of mortgage-backed securities, a move that could drive up the low interest rates that have helped the housing market show new signs of life. The Fed is gambling that private investors will step in to buy the securities, helping to keep rates from spiking. Senior officials in the Obama administration and at the Fed say they are counting in part on foreigners to keep the housing market funded.

But financial analysts and advisers familiar with foreign government funds, known as sovereign wealth funds, predicted that the United States will get limited relief from abroad.

A New Phase, Not Just Another Recession >>> Policies of economic restructuring in response to major crises can benefit the masses only if there is compelling pressure from the grassroots

President Obama's recent statements claiming credit for stopping a second Depression

Timing a China Bubble Collapse- Trade War is the Most Likely Cause. Currency Revaluation Higher Imminently

  •  It's logical to assume that there will be some kind of steps taken after the Chinese New Year to revalue the currency higher. That is probably at least a few percentage point revaluation of the rate higher against the dollar.
  • Currency pressure is undermining Chinese influence with it's neighbors as many struggle to find an export market against a currency undervalued by as much as 40%.

George Papandreou: European Union is also guilty for financial crisis

Kim Jong-il birthday overshadowed by health and economic fears Amid celebrations, undated video footage fails to allay concerns over the health of North Korea's leader and its economy

European Commission will investigate banks working with the Greek government to judge if they acted ethically when advising on the use of complex currency swaps

En Latinoamérica, la inflación apunta a un aumento rápido de tasas

El sorpresivo aumento de la inflación a través de Latinoamérica en enero generó expectativas de mayores presiones de precios y puso en evidencia que la era de las tasas históricamente bajas podría terminar antes de lo esperado.

Brasil, Chile, Colombia y México informaron en las últimas semanas cifras de inflación más sólidas de lo anticipado para enero. En particular, los analistas sugieren que muchos de los repuntes no son hechos aislados, ya que las cifras de inflación básica también aumentaron.

Japón se mantiene como 2ª economía mundial >>> Ligeramente por delante de China, pese a la persistente deflación y su enorme deuda pública

Japón vuelve a la ruta de la recuperación económica

Monday

EU Financial Crisis: Is It Time For A Crack Down On Goldman Sachs?

The New York Times revealed that Wall Street’s elaborate financial schemes made Greece escalating debt reach today’s breaking point by allowing the Greek government to borrow above its means since 2001. One deal created by Goldman Sachs helped hide billions in debts contracted by Greece from the EU budget authorities in Brussels...

If  The New York Times’ report is confirmed, firms such as Goldman Sachs, which has offices in London, will be in the cross air of the EU for running financial practices which amount to nothing less than a global elaborate Ponzi scheme, not very different in nature from the one which got Bernard  Madoff  behind bars. If the paper’s report is corroborated by other sources, it is likely that international prosecutions will follow soon against Goldman Sachs’ top executives.

 

A lack of demand in the euro area explains why its economy is hardly growing >>> GDP in the 16-country currency zone rose by just 0.1% in the three months to the end of December compared with the previous quarter.

Consumers within the euro zone are not spending enough and the strong currency is making it hard to tap demand in the rest of the world. The best hope for a home-grown stimulus is Germany, where firms and consumers had practised thrift when the rest of the world indulged in a spending boom. Sadly Germany still relies too heavily on exports.

Calls to curb CDS gamblers as Greek crisis continues >>> Traders in credit default swaps are hoping that countries default on their debt, say experts, and the market needs more regulation

Tightening economic policy >>> Policymakers are wondering when and how to start a delicate task: weaning the world economy off fiscal and monetary stimulus

Future Bailouts of America: As Washington spins its wheels on financial reform, it's becoming painfully clear that the problem of entities that are too interconnected or "too politically powerful to fail" is also too hard for our policy makers to tackle.

Once a small membership organization comprising Fannie Mae and Freddie Mac, the mortgage finance giants, and the occasional troubled auto company, the Future Bailouts of America Club now includes a long list largely populated by financial institutions.

We can’t be sure who the specific members of this club are — regulators simply say they know ’em when they see ’em. But this much is certain: They’ve seen a lot of them lately...

“If we are extending the safety net, extending the implied guarantee to the debts of a lot of other financial institutions, and we know those guarantees are valuable and costly, then we ought to start budgeting for it. We can’t reduce the costs of these subsidies if we can’t recognize them.”

Inflation goals all wrong - IMF call to lift target to 4pc >>> THE International Monetary Fund has called for the overthrow of inflation targeting as the central goal of economic management, and urged that inflation be allowed to rise to 4 per cent to give governments a better ability to manage downturns.

Foreign direct investment is on the wane >>> The flow of foreign direct investment fell by 39% in 2009 to just over $1 trillion, from a shade under $1.7 trillion in 2008

Rich countries saw FDI inflows plunge by 41%, and foreign investment into developing countries fell by more than a third...Despite FDI plunging by 57% last year, America remained the world’s top investment destination.

Let's head off next crisis before it arrives >>> Financial re-regulation, Volcker style, offers a good starting place. But reforms must go further.

Sovereign risk and the banks The safety-net frays >>> Governments used to worry about their banks. Now the reverse is also true.

THE ECONOIMIST: A special report on financial risk >>> Financial risk got ahead of the world's ability to manage it.

Christina Romer, chairman of the White House Council of Economic Advisers, strongly defended the Obama administration's economic policy during its first year, but acknowledged that today's economic climate leaves much to be desired. "The economic challenges in many ways have never been greater," she said, noting the "terrible" economic and financial crises the administration inherited.

Time to Take a Fresh Look at the Business Cycle >>> The business cycle could be much better defined if the recovery and expansion phases were identified as two individual steps. The recovery ends and expansion begins when the economic variable recovers to the level of the previous peak.

The business cycle is composed of events and processes. Some descriptions of the business cycle confuse these two things...The business cycle could be much better defined if the recovery and expansion phases were identified as two individual steps...

They are linked by an event, the surpassing of the prior peak. The expansion does not begin until new highs are achieved; gains from the trough simply recover what had been produced in the previous expansion until the prior peak is equaled. The following table shows these relationships:

The following graph shows the type of illustration that would give a better representation of the business cycle.

Wall Street, bombero-pirómano en la crisis financiera de la zona euro >>> El banco ideó una 'contabilidad creativa' para el Gobierno de Grecia

Hace una década, con sus conocimientos de sofisticados de productos financieros y operaciones con derivados, Wall Street -encabezado por el mega banco de inversiones estadounidense Goldman Sachs- ayudó a gobiernos europeos como Grecia e Italia a aprovechar la "contabilidad creativa" con el fin de cumplir con los criterios de convergencia y entrar en la Unión Monetaria Europa.

Ahora, -según se puede desprender de investigaciones en el New York Times y Der Spiegel- en la primera grave crisis de la zona euro, Wall Street ofrece otros instrumentos financieros para posponer el coste disparado de la deuda hasta otro dia. Los bancos saben de eso porque es precisamente la clase de producto financiero de elevada innovación que provocó la primera fase de la crisis global de capitalismo financiero, el colapso de los mercados de crédito bancario debido a la imposibilidad de medir el riesgo de productos esotéricos financieros y derivados que nadie entendía. Año y medio después, se transforma en una crisis de deuda soberana.

Control a excesos financieros >>> La crisis mundial ha desatado el enojo de los líderes de las principales economías, quienes pondrán topes y límites a los bancos...Los bancos deben pagar los excesos que se cometieron en el pasado, y que desataron la peor crisis financiera mundial, con regulaciones y reglas más estrictas, cuyo eje plantea desde el pago de impuestos hasta eliminar bonos a ejecutivos.

EUROCRISIS: Al euro le ha llegado en su undécimo aniversario una inesperada crisis de madurez que obligará a la Unión Monetaria Europea a asumir sus responsabilidades o exponerse a las dudas de los inversores, la desconfianza de los ciudadanos y el escarnio de los euroescépticos.

MEXICO: La crisis financiera internacional golpeó al sector hipotecario mexicano, pues los créditos puente prácticamente se congelaron, lo cual provocó que cerca de mil desarrolladoras dejaran de construir viviendas en el país. Por ello, el reto para este año es que la banca vuelva "abrir la llave" de los créditos puente

ESPAÑA: Acerca de nuestro sobreendeudamiento

Former Federal Reserve Governor Mark Olson
discusses the Fed's next move, jobs and the economy.

FLASH >>>NEW WEBSITES BY PRO PUBLICA                                                      Happy Birthday

New List of Stimulus Investigations                  Stimulus

by Michael Grabell, ProPublica                                         

Click to see our list of stimulus investigations.
Click to see our list of stimulus investigations.
With the anniversary of the stimulus upon us, politicians are likely to bombard us with numbers: 1.5 million to 2 million jobs created or saved, $272 billion out the door, another $333 billion in the pipeline. The Democratic Policy Committee keeps a list of success stories while Sen. Tom Coburn, R-Okla., has published  two reports of 100 “wasteful” projects.

One number that’s been especially hard to pin down: the cost of waste, fraud and abuse.

Already there have been scattered reports about stimulus contractors that are under investigation or that have had serious violations in their past. Using estimates from fraud experts, the government’s stimulus watchdog, Earl Devaney, has said as much as $55 billion could be lost.

But no one knows for sure. So to get at the big picture, we at ProPublica decided tostart tracking inspector general reports, auditor investigations and news accounts about questionable contractors. We’ll be updating our stimulus investigations list regularly—so if you have new information about a case or one we should add, e-mail it to suggestions@propublica.org.

The Stimulus Speed Chart tracks how quickly federal agencies have moved stimulus dollars into the economy while our Stimulus Investigations Chart tracks questionable contractors.

Track the Stimulus: Interactive Tools

How much stimulus money has been spent? How much is left to spend?

Stimulus Speed Chart
Which government agencies are the slowest at getting stimulus money out the door? (Updated Weekly)
Recovery Tracker
Find stimulus projects happening near you. (Updated: December 2009)
Stimulus Spending Progress
How quickly are federal agencies spending? Updated weekly.
ProPublica’s Unofficial Guide to Recovery.gov 
Confused by the government's official stimulus data Web site? Our guide will tell you how to navigate it.
How to Background Check Stimulus Companies
A guide of tips and resources on researching the background of companies getting stimulus funds.

VIDEO: Nobel Prize-winning economist Joseph Stiglitz on the Obama administration's economic policies in the midst of a "sick" economy.

UK Campaign video by Richard Curtis and Bill Nighy, about the Robin Hood Tax, a tiny tax on bank transactions that could raise hundreds of billions for public services and to tackle poverty and climate change at home and around the world

MICHAEL SHULMAN
 
BEST BOOKS ON THE CRISIS

The Two Trillion Dollar Meltdown - By far the most powerful book on the crisis because it was written before the real meltdowns rushed to market. This book should be required reading for every man and woman on Capitol Hill and in the White House for current proposals on bank reform do nothing to stop the next trillion dollar meltdown - problems in the financial system are very obvious but are also hidden from most due to their ideological biases and optimism. The author, Charles Morris, is a successful, award winning financial writer and he outdid himself with a brief book that, among other things, de-mystifies derivatives and their impact on the financial system. This is the must-read book about the underlying foundation of the crisis.

Too Big To Fail - Almost too big too read, this will probably be viewed as the standard treatment of the crisis due to the clarity of the writing and the objective stance of the writer, New York Times reporter Andrew Ross Sorkin. Mr. Sorkin does a terrific job pacing inside the board rooms and with the major players as the crisis unfolds; parts of it almost read like a novel, but do not let this undermine the credibility of the author or the material. This is a fine overview of who did what and when to whom. If you have the patience, it is quite good - and if you read multiple books, read it last and you will be able to skip over some paragraphs here and there.

House of Cards - On one hand, the book is uneven, clearly written in two parts - a contemporary, blow by blow account of the failure of Bear Stearns and another, the history of the firm. This gives the book an uneven quality that many readers do not like. So what? The book's mastery of the ten days leading up to J.P. Morgan's (JPM) acquisition of Bear is all you need to read - it is more compelling than many novels I have read and depicts the behavior of senior executives beyond surreal; for example, during the last week before the fall, the Chairman refuses to come back to New York because he is playing in a bridge tournament. The book also peeks behind J.P. Morgan's curtain and that of the New York Fed (Tim Geithner was head of that bank at the time) to show their view of the deal - and better than anything, shows, day to day, the impact of the derivatives market on share prices and the ability of Bear to borrow money overnight and continue its operations. A wonderful read, if perhaps too long.

Fool's Gold - Gillian Tett, a brilliant columnist with the Financial Times, wrote this book on the financial engineers who blew up the financial world with their invention, the CDO or credit derivative obligation and what we now call credit default swaps. This financial invention re-defined leverage and when applied to poorly rated RMBS - residential mortgage back securities - well, the world went boom. Her narrative goes back to the early 1990s and walks the reader through the evolution of the product - explaining their utility when invented and their decreasing relationship to anything understandable over time as they became more and more complex and fed the greed of all the players. A wonderful read that, with a little help, could be a novel or a movie.

In Fed We Trust - The second best or must-read by a Wall Street Journal reporter, David Wessel, focuses on Bernanke and the Fed and how their role unfolded during the crisis. The book has been overlooked - maybe it came out too early - but it is the best treatment of how various agencies and individuals evolved their thinking and actions during the crisis. What I remember most from the book is the recurring mantra presented by the author about the actions of the Fed - "whatever it takes" - and if you accept the facts as presented, as I do, Ben Bernanke will someday be the first face on Mt. Rushmore Two.

On the Brink - Hank Paulson is what the nation now lacks - a hard nosed, savvy, center right Republican leader who views ideology as an impediment to getting things done. And when in office, understanding the responsibility to get things done, not work from a playbook. This is a great read - it was the last book I read and it greatly changed my view of Paulson as a man, not as a Treasury Secretary; if you want one historical treatment of the crisis on your bookshelf, this is it (sorry Mr. Sorkin). It simply is better at pushing day to day details of the crisis into perspective, juxtaposing them against government policy, attitudes on Wall Street and so on. And, since I believe what Mr. Paulson wrote, I find him a very appealing public figure, a leader unlike anyone else in the Bush cabinet, and the right man in the right place at, well, the wrong time for all of us.

Chain of Blame - This was the most fun book - an inside look at the birth through death of the subprime mortgage industry. The authors, Paul Muolo and Mathew Padilla, do a great job showing how the mortgage industry ran out of customers so created subprime mortgages just as Wall Street needed new mortgages to bundle, slice, dice and re-sell. This book brings the reader closest to how Main Street and Wall Street contributed to the crisis -- Main Street mortgage brokers prompting customers, creating customers to feed Wall Street's need for products and, alas, commission. An interesting twist in the book is the very positive treatment of industry poster boy Angelo Mozilo of Countrywide Mortgage (now Bank of America (BAC)). He hated the thought of lending to subprime customers because of the lack of historical data to properly gauge risk - smart man - but hated giving up market share even worse. The rest is history.

A Colossal Failure of Common Sense - Authors Lawrence G. McDonald and Patrick Robinson do to a bang up job describing the almost surreal behavior of Lehman Brothers executives as the firm melted down. McDonald is a former Lehman vice president and he focuses on a small group of executives who pushed Lehman further and further, with leverage, into higher and higher risk positions to generate profits. The book has prompted some nasty responses - check out some customer reviews on Amazon.com - for it is forceful and pulls no punches on assigning blame, most it going to Dick Fuld, the CEO of Lehman who comes off poorly in virtually everything written about the crisis. The value of the book is its ability to portray the gambling mentality that dominated Lehman - a mentality that led to too much leverage everywhere and is at the very center of the crisis. A very good read, but the book does not approach the crisis as a whole and is a secondary read if you are trying to get a handle on other things going on during the crisis apart from Lehman.

NEWS >>>>> <<<<<NOTICIAS
February 8 - 14, 2010

Saturday
     &
Sunday

U.S. debt threatens to be overwhelming

It's bad enough that Greece's debt problems have rattled global financial markets. In the world's largest economic and military power, there's a far more serious debt dilemma.

For the U.S., the crushing weight of its debt threatens to overwhelm everything the federal government does, even in the short-term, best-case financial scenario -- a full recovery and a return to prerecession employment levels..

The U.S. debt crisis also raises the question of how long the world's leading power can remain its largest borrower.

Moody's Investors Service recently warned that Washington's credit rating could be in jeopardy if the nation's finances didn't improve.

Despite election-year political pressure from voters for lawmakers to restrain spending, some recent votes suggests that Congress, left to its own devices, probably isn't up to the task of trimming deficits.

Collapse of the euro is 'inevitable': Bailing out the Greek economy futile, says FRENCH banking chief

The bailout of Greece will only act as a 'sticking plaster' for the Euro crisis, the bank warned today

Claims that the euro could be headed for total collapse are particularly striking when they come from one of the oldest and largest banks in France - a core founder-member...
In a note to investors, SocGen strategist Albert Edwards said: 'My own view is that there is little "help" that can be offered by the other eurozone nations other than temporary, confidence-giving "sticking plasters" before the ultimate denouement: the break-up of the eurozone.' 

He added: 'Any "help" given to Greece merely delays the inevitable break-up of the eurozone.'

The alarming claim came a day after European Union leaders promised 'determined and co-ordinated' action to shore up Greece's tattered public finances, but disappointed traders by failing to provide specifics...

The French bank's warning was echoed by Mats Persson, Director of the Open Europe think-tank, which campaigns for reforms in Brussels.

He said: 'The eurozone is facing a fully-fledged crisis. The Greece episode has made it painfully clear how flawed the euro project was from the very beginning.

'Even if Greece receives a one-off bailout it would not solve the real problem, which is the huge differences in competitiveness between the eurozone's richest and poorest members. 'If these differences are to be evened out, the EU would need a single budget and common taxes so it can redistribute resources...

Harvard University Professor Martin Feldstein, a long-standing sceptic on the euro, yesterday said the single currency 'isn't working' because member governments have no incentive to keep their public debts under control. 'There's too much incentive for countries to run up big deficits as there's no feedback until a crisis,' he said.

Germany drags EU back towards recession - The eurozone faces the danger of a 'doubledip' recession after Germany's economy retreated into stagnation.


 

Euro Falls for Fifth Week Versus Dollar on Greece, Growth

PAUL VOLCKER: Large financial institutions that engage in speculative activities for profit should be allowed to fail if they get in trouble

"If a big non-bank institution gets in trouble and threatens the whole system, there ought to be some authority that can step in, take over that organization and liquidate it or merge it -- not save it," Volcker said on CNN.

"It's called euthanasia, not a rescue."

As Congress debates financial reform in the wake of the worst financial crisis since the 1930s, Volcker has argued for fencing off investment firms primarily engaged in market speculation from commercial, deposit-taking banks.

Wall St. Helped Greece to Mask Debt Fueling Europe's Crisis

With Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachshelped obscure billions in debt from the budget overseers in Brussels.

Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning.

Economists Say U.S. Expansion Nearing Self-Sustaining Status

The U.S. economy is now expected to grow 3% this year and next -- more than expected a month ago, according to the median estimate of 62 economists polled this month by Bloomberg News. Equally important, those same economists now expect the U.S. unemployment rate to fall to 9.5% by the end of 2010. The significance of this news? If the economists surveyed by Bloomberg are accurate about a 3% GDP growth, that would lend credence to Obama administration Council of Economic Advisors Chair Christina Romer's forecast that the U.S. economy will average monthly job growth of 116,000 jobs per month, or about 1.4 million jobs created in 2010.

Further, if the 1.4 million job forecast pans out, this will be, arguably, the best economic news Americans have heard in a long time...

Greece turns on EU critics >>> Greece unleashed a fierce attack on its European Union partners, accusing them of creating a "psychology of looming collapse" a day after they pledged support for the countrys crisis-hit government.

PROPOSAL: "Using sovereign wealth to rebuild America"

Annual investment in public and quasi-public infrastructure systems of 4 to 6 per cent of GDP ($500 - $700 Billion) will probably be necessary for the foreseeable future but in an era of trillion dollar deficits, no funding source is projected to have the capacity to generate funds sufficient for infrastructure investment at these levels. At the same time, there is a clear and immediate need for public and institutional pension funds to invest in instruments that can generate stable, long-term and low-risk returns on equity.

The idea is that a US sovereign wealth* fund would dip into public and private pension savings and invest the money in much-needed infrastructure. If it worked, the economy would benefit, infrastructure would benefit, pensions would receive a healthy return and savings would be made for the next generation.
“The core idea of the proposal is to utilize a combination of public and institutional pension funds, individual retirement accounts, and other private investment capital, together with Social Security Trust Funds to capitalize a National Infrastructure Bank (NIB) that would provide senior debt to fund projects and programs supported by user fees or other reliable and sustainable revenue streams.”

Richard G. Little of the University of Southern California’s School of Policy Planning and Development has an interesting new paper out entitled, “Towards a New Federal Role in Infrastructure Investment: Using U.S. Sovereign Wealth to Rebuild America.” The paper’s premise is that the US has to address years of chronic under-investment in infrastructure. In order to do this, Little want’s to tap into the public pension and social security savings in order to match long-term investment capital with long-term investments in infrastructure. So long as this new entity remains commercially oriented, it’s a reasonable idea; public pension funds have indeed been moving into infrastructure at an increasing rate, driven in large part by the desire to find assets that better match their long-term liabilities.

US retail sales rise brightens recovery picture >>> Retail sales stronger than expected in January...General merchandise store sales highest in almost a year...Consumer confidence slips in early February * Business inventories unexpectedly fall in December

INTERVIEW WITH STEPHEN GREEN: 'A Churchillian Defense of the Markets'

UNIVERSITY OF MONTANA ECONOMISTS PREDICT SLOW, GRADUAL REBOUND FROM RECESSION: Economic Recovery Underway, Though it's Hard to Tell

Wall Street ayudó a Grecia a ocultar problemas financieros

Mas allá del rescate a Grecia, el euro se enfrenta con su mayor prueba

Crisis europea: temblores y temores al efecto contagio >>> El colapso financiero que amenaza a Grecia es la punta de un iceberg mayor. Ahora hay que afrontar los costos y déficit generados por una formidable estructura especulativa.

El sistema de divisa única se resquebraja en Europa

El papa Benedicto XVI afirmó hoy que la crisis económica, la transformación del sistema industrial y agrícola y la emigración han influido en la pérdida de los valores tradicionales, que, precisó, deben ser propuestos nuevamente y reforzados.

La UE debatirá iniciativas como las de Obama para limitar el riesgo en la banca

El premio Nobel de Economía Joseph Stiglitz es partidario del llamado "impuesto Robin Hood" a la banca - quitar el dinero a los ricos para dárselo a los pobres- como forma de limitar los recortes en los servicios públicos y ayudar a combatir la pobreza en el mundo.

Friday

INFLATION: Unintended Consequences >>> A likely outcome of all the bailouts is a recurrence of inflation...in a year or two...the crisis won't be about solvency. It will be about inflation.

Our government has taken extraordinary steps to head off a feared depression and to stimulate a deflating economy. All well and good. But who has seriously weighed the unintended consequences of such actions? Where are the long-term forecasts that reflect the consequences of our short-term remedies? You won't hear answers from the politicians and bureaucrats mainly concerned with staying in office.

INFLATION: Targets need rethinking to tackle future financial crises more effectively - IMF chief economist Olivier Blanchard

A research report by Blanchard and associates at the IMF said policymakers became too complacent during the period of expansion known as "the Great Moderation" about issues such as inflation and debt. He said that while the financial sector was the source of the recent crisis, "large adverse shocks" could come from elsewhere in the future such as a pandemic or major terrorist attack. Against this backdrop, he said aiming for a higher inflation rate could provide more room for policymakers to grapple with crises. "Maybe policymakers should therefore aim for a higher target inflation rate in normal times, in order to increase the room for monetary policy to react to such shocks," Blanchard said in a report "Rethinking Macroeconomic Policy."

READ IMF REPORT "RETHINKING MACROECONOMIC POLICY" (PDF, 19 pp.)

Europe May Be Headed for a Double-Dip Recession

In China, the problem is an economy that could be overstimulated. In Europe, it's an economy that could be falling back to sleep. After expanding at a 0.4% rate in the third quarter of 2009, GDP in the 16-country eurozone grew by only 0.1% in the year's last three months. Germany -- the group's largest exporter and biggest economy -- showed zero growth. Economists had been forecasting a 0.4% fourth-quarter increase, so the drop in growth is fueling speculation that Europe is headed for a double-dip recession.

Euro zone GDP recovery falters, bumpy road ahead

Economists expect recovery to survive sovereign debt crisis

As European leaders grapple with ways to force Greece and other EU debtor nations to live within their economic means, the most common view among Australian economists is that the debt crisis is not a serious threat to recovery.

Others, however, say worldwide stimulus measures have simply shifted the private debt problem to government balance sheets, and more pain is on the way. EU leaders yesterday offered rhetorical support to Greece but no specific aid measures. Prices for equities and base metals jumped, but markets remain nervous about sovereign debt.

The International Monetary Fund said this week that the G7 nations owed a combined $US30 trillion ($33.7 trillion).

IMF managing director Dominique Strauss-Khan said state debt could become the world's "biggest problem for the coming . . . several years". 

The Canadian Century? >>> Canada has avoided many of the problems that currently bedevil the U.S.--mountains of public debt, a banking system in crisis, the housing debacle and a weakened currency.

Bill Gross, who runs Pimco, one of the world's biggest bond managers, recently said that he thinks Canada is the best bet for investment among developed nations. "It moved toward and stayed closer to fiscal balance than any other country," said Gross.

In addition, the Canadian economy, the world's 10th biggest, is endowed with natural resources increasingly valuable in this century--like potash and uranium. New technologies allow for the vast development of the Athabasca tar sands in Alberta, helping make Canada's oil reserves the world's second largest. Yes, there are environmental implications, but Canada is now the biggest supplier of crude oil to the U.S., a lucrative--and enviable--position for any country.

See Slide Show: "10 Reasons Canada Is Cheering"

America On The Rise >>> Complaints of China's ascent and the U.S.' collapse are overly pessimistic--and misguided.

The population of the People's Republic will be considerably older than the U.S.' by 2050. It also has far more boys than girls--a rather insidious problem. Among the younger generation there are already an estimated 24 million more men of marrying age than women. This is not going to end well--except perhaps for investors in prostitution and pornography.

In the longer term demographic trends actually place the U.S. in a relatively strong position. By the end of the first half of the 21st century, the American population aged 15 to 64--essentially your economically active cohort--are projected to grow by 42%; China's will shrink by 10%. Comparisons with other competitors are even larger, with the E.U. shrinking by 25%, Korea by 30% and Japan by a remarkable 44%.

Obama Economists Expect 8.2% Unemployment In 2012

One Ambivalent Economy + Many Cautious Employers = One Difficult Job Market

The Recession is Dead, Long Live the Recession: Life Without Jobs

US Treasury Secretary Timothy Geithner: Financial system healing, needs work >>> it averted a meltdown but it is not yet back up to full strength

Australian Treasury Secretary Ken Henry: Global Financial Crisis is 'over' >>> business booming nationally...jobless figure 5.3%

German economic recovery loses steam

China surprises by raising banks' required reserves >>> seeks to slow bank lending and tamp down on rising inflation.

Few thought the second rise would come so soon. Markets were rattled by fears that the pace of monetary tightening in China would be more aggressive than had been reckoned on, potentially denting global growth.
Article Image

China: Boom Or Bust? >>> "Despite the government's recent effort to rein them in, asset prices will continue to trend up for years because ofstructural factors (including a lack of an adequate social safety net). The biggest bubble is in property prices...The pace of monetary expansion in 2009 was excessive.

No, China Will Absolutely Not Collapse >>> More reasons the bubble finders and doomsayers are wrong.

Seeing Red: What Are the Costs of China's Currency Policy?

The Next Crisis: Peak Oil >>> Get ready for a new global "crunch"--the rapid depletion of oil resources. Government and industry need to act now.

“The next five years will see us face another crunch--the oil crunch. This time, we do have the chance to prepare. The challenge is to use that time well… Our message to government and businesses is clear: act. Don't let the oil crunch catch us out in the way that the credit crunch did.”

So wrote the CEOs and Chairmen of the companies involved in the U.K. Industry Taskforce on Peak Oil and Energy

Recession Hammers Low-Wage Workers, but Glances Off the Affluent

New Jersey Governor Freezes Spending

Reserva Federal estudia medidas de ajuste monetario >>> Aunque por ahora la economía estadounidense aún requiere el apoyo de políticas monetarias altamente laxas, en cierto momento la Reserva Federal tendrá que endurecer las condiciones financieras mediante una subida de las tasas de interés a corto plazo y la reducción de la cantidad de reservas bancarias, dijo el jefe de la Fed, Ben Bernanke

Recession so great it has a name

Crecimiento económico de la eurozona se desacelera El crecimiento económico de la eurozona se ralentizó en el último trimestre de 2009, debido a que sólo una de las cuatro grandes economías de la región creció.

La deuda soberana pesa cada vez más sobre la zona euro

Economía griega en cuidados intensivos

China eleva el requisito de reservas para los bancos El banco central de China elevará el requisito de reservas de los bancos en 50 puntos básicos a partir del 25 de febrero, la segunda subida en lo que va de año, en medio de una creciente preocupación por la aceleración de la inflación.

El principal economista de FMI propone mayores techos inflacionarios para evitar una nueva crisis

Según economistas, muchos empleos en EE.UU. no volverán a ser creados

Thursday

NIALL FERGUSON: CRISIS COMING TO US >>> It is appropriate that the fiscal crisis of the west has begun in Greece, the birthplace of western civilization. Soon it will cross the channel to Britain. But the key question is when that crisis will reach the last bastion of western power, on the other side of the Atlantic.

Pinn illustration

Explosions of public debt hurt economies in the following way, as numerous empirical studies have shown. By raising fears of default and/or currency depreciation ahead of actual inflation, they push up real interest rates. Higher real rates, in turn, act as drag on growth, especially when the private sector is also heavily indebted – as is the case in most western economies, not least the US.

Although the US household savings rate has risen since the Great Recession began, it has not risen enough to absorb a trillion dollars of net Treasury issuance a year.

JEFFREY D. SACHS: Politicians underestimate debt damage >>> How to Tame the Budget Deficit

"The only thing that reliably grows in our economy is the public debt," Jeffrey D. Sachs writes in a TIME magazine commentary. The government is "utterly paralyzed" in addressing the issue, Sachs writes, and escalation of the national deficit is leaving the country in a "first-rate mess." Homeland security, unemployment compensation, and support for state and local governments are only some of the programs being funded by debt...
When the New Deal deployed deficit spending from 1933 to '36, the deficits were around 5% of GDP, compared with around 10% today. The publicly held debt was rather stable, around 40% of GDP then, but it will soon reach 60% of GDP in 2010, and on the Administration's budget plans will rise above 70% by 2012. What's more, in the 1930s the debt was financed domestically — by Americans. Today about half of public debt is held by the rest of the world, much of it by China and Japan. In the New Deal era, taxes could easily rise to cover the increased cost of servicing interest on the debt. Today we have no agreement on how such debt servicing will be paid for. And we face another unprecedented challenge: large increases in entitlement spending as a share of GDP are likely to continue into the 2020s and '30s as the population ages and health care costs mount...here are the key questions. Will we kill our economic future by shortchanging the public on investments needed to modernize the economy and train the workforce? Will we borrow heavily from China and other countries to cover today's spending while racking up massive bills for our children? Or might we just decide to protect the future of our country through a judicious mix of tax increases and spending cuts that will bring honor to this generation and prosperity to the next?

White House predicts slow employment growth >>> Unemployment rate to be at 10% for the year, according to Obama administration's annual economic report

SUMMARY: A Look Inside the Economic Report of the President

READ the entire 2010 Economic Report of the President

The next crisis: Commercial real estate

Subprime 2.0 strategy: "Extend and pretend" >>> Between 2010 and 2014, $1,400bn US commercial real estate loans will reach the end of their terms. Nearly half of them are currently in negative equity - that is, the borrower owes more than the property is worth.

More shocking is that banks and their auditors are typically well aware of the problem, but have not written down the value of property as prices have fallen. Instead they are “extending and pretending” - or “delaying and praying”: holding property values steady and assisting the borrowers where possible. They need to. If banks were accurately to record property values, they would write down assets on their own balance sheets and jeopardise their business...

A very thorough report just released from the Congressional Oversight Panel expects many banks to go under when the pretence comes to an end. The report concludes: “There is a commercial real estate crisis on the horizon, and there are no easy solutions to the risks commercial real estate may pose to the financial system and the public.”

CLICK HERE TO READ FEBRUARY CONGRESSIONAL OVERSIGHT PANEL OVERSIGHT REPORT: "Commercial Real Estate Losses and the Risk to Financial Stability" (PDF, 190 pp.)

After the Great Intervention, the Bernanke Fed is now contemplating the Great Unwind, trying to figure out how to suck that money out of the economy in a way that neither stops the nascent recovery in its tracks nor leaves so much money flowing through the economy as to cause high inflation.

The Fed's strategy hinges on a major shift in its monetary policymaking. For decades, the central bank has used the federal funds rate as its primary tool for controlling the money supply. Under the approach outlined by Bernanke, the Fed would take advantage of a relatively new power to pay interest on the funds that banks keep on reserve with the central bank.

In effect, if banks increase their lending so much that too much money starts swirling through the economy, raising the risk of inflation, the Fed can increase the interest rate that banks receive to keep money locked up at the central bank above its current 0.25 percent. That would slow bank lending, keep the supply of money in check and, Bernanke argued, lead to higher interest rates for all sorts of loans.

Good Capitalism, Bad Capitalism: What Is a Market Economy and How Can It Deliver?

  • The traditional approach to studying economic growth overlooks the importance of individuals and individual firms.
  • Market economies are not monolithic – there are four different types of capitalism (oligarchic, state-guided, big-firm, and entrepreneurial), each with different features and implications for growth.
  • Entrepreneurial capitalism is the most effective driver of economic growth because it provides opportunities for new firms to innovate and create new markets.

Corporate Governance in the Wake of the Global Financial Crisis: Challenges and Solutions

  • Despite fears that it would, the global financial crisis has not led to significant backsliding in corporate governance reforms.
  • Risk management has been one of the key governance failures in today’s crisis.
  • Sustained, worldwide efforts are needed to maintain the commitment to improve corporate governance.

New Jersey Governor Chris Christie declares a "fiscal emergency," allowing him to reserve or freeze state spending as part of his plan to tackle one of the largest 2011 deficits among U.S. states

China to push aside Japan as No. 2 economy

Crisis económica internacional: ¿Comienza el segundo capítulo?

JOSEPH STIGLITZ: UE debe mostrar fuerte apoyo a Grecia

BEN BERNANKE: Elevará la Fed tasas de interés:

Wednesday

UK PRIME MINISTER GORDON BROWN: Global bank tax near...could cost the financial services sector tens of billions of pounds a year.

US Congressional Budget Office director warns of big budget deficit increases

Douglas Elmendorf, director of the Congressional Budget Office, is regarded as an unbiased voice amid partisan budget battles, but the rulings issued by his office often draw ire from lawmakers on both sides of the aisle. Elmendorf's CBO currently is forecasting big budget deficit increases based on the Obama administration's proposals...Elmendorf's CBO forecasts that the federal deficit will reach $1.35 trillion this year — $4,400 for every American. All that red ink means the overall debt will rise to $8.8 trillion by the end of 2010, or about 60% of gross domestic product — the highest level of public debt since 1952...Now, with the health care plan in deep political trouble, the focus for both Congress and the White House is shifting from expanding government to shrinking it.


How a New Jobless Era Will Transform America

The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults. It will leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come.

Bank of England warns Britain could plunge back into recession this year...the first time that the Bank has issued such a stark warning since the recession officially ended last year

.

Why European debt matters to the United States >>> It is widely accepted that we process grief in five stages: denial, anger, bargaining, sadness and acceptance. If we apply that psychological continuum to the financial market construct, it offers a valuable lens with which to view this evolving crisis

European economies facing grim times >>> For the 16-nation monetary community, which comprises 330 million people, the current problems are by far the most severe in its history

Greece's economic crisis could signal trouble for its neighbors >>> Europe scrambled for ways to prop up Greece's crumbling government finances, restoring some stability to this unlikely keystone of the global financial system

Broke! Fixing America's fiscal crisis >>> How the U.S. can avoid the Greek problem

Reversal of fortune >>> After trend of rising prices, some housing markets see about-face...next few months will likely show more declines in home values in most markets

One in five housing markets entered a second leg of home price declines in late 2009, after showing price increases for nearly half of last year. In 29 of the 143 markets tracked by the site -- including Boston, Atlanta and San Diego -- prices flattened or began to decrease again in the second part of last year, after five or more months of consecutive monthly increases, according to the site's fourth quarter real-estate market report...Nationwide, home values fell 5% in the fourth quarter compared with the fourth quarter a year earlier. Values fell 0.5% from the third quarter of 2009.

Henry Paulson, the former Treasury chief, and billionaire Warren Buffett said taxpayers will recover every cent paid out to banks during the economic meltdown and may even turn a profit.

Testimony of Federal Reserve Chairman Ben Bernanke to the House Financial Services Committee on the Fed's exit strategy from its easing policies.

The 2009 Economic Crisis in Peru: The final balance and what's ahead

ROBERT J. SAMUELSON: Los peligros de la prosperidad >>> Quizás sea más conveniente tolerar recesiones y reveses financieros frecuentes y leves antes que apoyar un aparente equilibrio que termine en estallidos devastadores

Presidente de la Reserva Federal Ben Bernanke: Crisis financiera develó la existencia de "debilidades" y "huecos" regulatorios en Estados Unidos

Ministros de Unasur van por integración financiera...Es necesario trabajar en esa línea porque la crisis económica aún no ha pasado

Presidente Leonel Fernandez: lo peor de la crisis pasó pero queda mucho por delante

Tuesday

Senior Chinese military officers have proposed that their country boost defense spending, adjust PLA deployments, and possibly sell some U.S. bonds to punish Washington for its latest round of arms sales to Taiwan

While far from representing fixed government policy, the open demands for retaliation by the PLA officers underscored the domestic pressures on Beijing to deliver on its threats to punish the Obama administration over the arms sales.

"Our retaliation should not be restricted to merely military matters, and we should adopt a strategic package of counter-punches covering politics, military affairs, diplomacy and economics to treat both the symptoms and root cause of this disease," said Luo Yuan, a researcher at the Academy of Military Sciences...

The warnings from the PLA come after weeks of strains between Washington and Beijing, who have also been at odds over Internet controls and hacking, trade and currency quarrels, and President Barack Obama's planned meeting with the Dalai Lama, the exiled Tibetan leader reviled by China as a "separatist."

Federal Reserve Bank of New York President William Dudley: Financial System In 'Much Better' Shape

The U.S. financial system is in "much better shape," although small and medium-sized financial institutions are under pressure, which will put a damper on credit availability in the U.S. economy..."The capital markets are generally open for business--with the important exception of some securitization markets--and the major securities dealers that survived the crisis have seen a sharp recovery in profitability." But, "many smaller and medium-sized banks remain under significant pressure," he noted. "Loan losses in commercial real estate and consumer and mortgage loans seem likely to continue to pressure smaller banks for some time to come," which means "credit availability to households and small businesses will still be curtailed."

President of the Federal Reserve Bank of St. Louis James Bullard: Fed Could Keep Interest Rates Low Until 2012

The central bank could keep short-term interest rates low until 2012 to encourage economic growth, but that it also could use some of its newer monetary tools to check excessive inflation if it materializes in the current economic recovery...

 

The Federal Open Market Committee, which faces tough, unprecedented policy decisions this year as the central bank unwinds first-time programs it launched during the financial crisis to prevent a second Great Depression.

The programs include “quantitative easing” measures designed to help keep interest rates low and to pump ready cash – liquidity – into the financial system. The “QE” supplemented the FOMC’s principal policy mechanism: setting the Federal Funds rate, the short-term benchmark interest rate banks charge each other for overnight borrowing.

At the height of the crisis, the FOMC cut the Fed Funds rate to about zero, where they remain today; a reversal now could rattle fragile financial markets still on the mend.

The Worst of the Pain >>> there is still almost a willful refusal to focus on just who is suffering the most from joblessness and underemployment.

What you’re not hearing from the politicians and the talking heads is that the joblessness and underemployment in America’s low-income households rival their heights in the Great Depression of the 1930s — and in some instances are worse. The same holds true for some categories of blue-collar workers. Anyone who thinks this devastating problem is going away soon, or that the economy can be put back on track without addressing it, is deluded.

There has been talk about income inequality over the past several years, but what is happening now is catastrophic...the lowest group, which had annual household incomes of $12,499 or less...unemployment rate during the fourth quarter of last year was a staggering 30.8 percent. That’s more than five points higher than the overall jobless rate at the height of the Depression.

The next lowest group, with incomes of $12,500 to $20,000, had an unemployment rate of 19.1 percent.

These are the kinds of jobless rates that push families already struggling on meager incomes into destitution. And such gruesome gaps in the condition of groups at the top and bottom of the economic ladder are unmistakable signs of impending societal instability. 

China Owns $9.6 Billion in Shares of U.S. Companies

Flush with cash despite the global economic downturn, China’s sovereign wealth fund quietly bought more than $9 billion worth of shares last year in some of the biggest American corporations, including Morgan Stanley, Bank of America andCitigroup.

 

Although most of the stakes were small, the China Investment Corporation, the government’s $300 billion investment fund, now owns stock in some of the best-known American brands, including Apple, Coca-Cola, Johnson & Johnson, Motorola and Visa.

 

Paul Krugman talks money at MIT >>> Nobel Laureate warns of second slump

A CANADIAN VIEW: Tilt toward me-first thinking undercuts economic recovery

Economy will correct itself, Bloomberg columnist says

Europe could face years-long debt grind

World Socialist Website >>> Government debt: a new stage in the global financial crisis

How Global Banking Crisis, Reforms Clouded Davos Summit

BANCO CENTROAMERICANO DE INTEGRACION ECONOMICA: Centroamérica con recuperación económica moderada en 2010

Prevé ONU oportunidad de crecimiento con tecnología "limpia" >>> Los países en desarrollo deben aprovechar la tensión generada por la crisis financiera mundial, así como las preocupaciones del cambio climático y los precios de los alimentos, para reorientar sus esfuerzos hacia un crecimiento "limpio"

Presidente de Fitch Ratings: "La crisis financiera aún no ha terminado"

VENEZUELA: El blindaje contra el crecimiento

COMUNIDAD EUROPEA cree que el euro resistirá dificultades y que hay análisis no objetivos

EEUU estuvo muy cerca del colapso, dijo Paulson

.
Monday

Former U.S. Federal Reserve Chairman Alan Greenspan: "The recession is over. It bottomed back in the middle of the year."

Greenspan added that, as many economists agree, the economic recovery will have to continue for some time to absorb the slack in the labor force to lower the U.S. unemployment rate significantly.

Greenspan then agreed with co-guest former U.S. Treasury Secretary Henry Paulson that one key to job growth would be a longstanding characteristic of the historically adaptable, resilient U.S. economy: innovation. That's the rate at which new businesses are formed, and existing businesses deploy new technologies/products/services, and find ways to operate more efficiently.

Krugman Compares Obama's Policies to Government Stance in Great Depression...predicting a prolonged recession with high unemployment for years to come.

Crash is coming for municipal bond market, money manager says

The $2.8 trillion municipal bond market is likely to crash in the same way as the markets for housing and technology, said Michael Aronstein of Marketfield Fund. Politicians have taken advantage of the low cost of credit to pile up an unsustainable level of debt, Aronstein said. "I think we're getting quite close," Aronstein said. "You'll see people trying to withdraw money from the municipal bond funds. The big risk comes when you start seeing the tightening credit cycle."

Chinese Depression: Will Its Massive Foreign Reserve Hoard Save the Country's Economy?

As the United States and Europe deal with economic contraction resulting from excessive credit expansion that many believe has lead to another Great Depression, China’s future remains hazy. Some argue that China has replaced the US as the global engine of growth because of increased internal consumption, export capacity and massive reserves. And for these reasons, China will avoid the same fate as the US and Europe.

Not everyone is convinced, however.

Trend Forecaster Gerald Celente believes that the depression is global and a contraction across the entire planet cannot be avoided, and that includes China. Economist Harry Dent holds a similar view, recently saying that, “China will see their bubble collapse strongly when the U.S.-led stimulus program fails due to rising defaults and foreclosures later in 2010, at the same time that the world is looking for China to pull it out of this global downturn.”

Michael Pettis, of China Financial Markets, says that the conditions in China are eerily similar to conditions in the United States right before the 1930’s Great Depression and Japan’s depression which started in the 1990’s and continues even today. According to Pettis, there are a multitude of reasons why China’s massive $2 trillion plus in reserve may not save them from an economic collapse...

Twice before in history a country has, under similar circumstances, run up foreign reserves of the same magnitude...

Europe could face years-long debt grind

Greece financial crisis: Panic, bad policies and conflicts of interest

G-7 Seeks to Calm Market Fears >>> Finance Leaders Downplay Threat of Greece Debt Woes as Worries Rise Over 'Contagion'

.

European Central Bank in a Squeeze >>> as investor alarm about Greek, Spanish and Portuguese indebtedness increases, the crisis has highlighted the fundamental weakness of the European monetary union...no strong political arm to ensure that members observe debt limits set by treaty

If you think Europe's debt woes are all Greek to you, they're not

Group of Seven officials agree banks must contribute toward the cost of dealing with the financial crisis but have not agreed on how they should pay

DOLLARCRACY AT WORK: Irked, Wall St. Hedges Its Bet on Democrats >>> Republicans are rushing to capitalize (ca$h in) on what they call Wall Street's "buyers remorse" with the Democrats

With Federal Stimulus Money Gone, Many US Schools Face Budget Gaps

Richard A. Posner: Toward Refocusing on Economic Growth >>> 6 suggestions

1. Remove all limits on the immigration of highly skilled workers, or persons of wealth. (This should be done gradually, so as not to increase unemployment while the unemployment rate remains very high.)

2. Decriminalize most drug offenses in order to reduce the prison population, perhaps by as much as a half, which will both economize on government expenditures and increase the number of workers. (Again and for the same reason, phase in gradually.)

3. Curtail medical malpractice liability, which increases medical costs gratuitously (because the courts are very poor at identifying actual malpractice) and, more important, engenders a great deal of very costly, and largely worthless, "defensive medicine."

4. Augment the admirable efforts being made by the Obama administration to improve public education.

5. Increase investment in the treatment of mental illness, which disables people during their productive years.

6. Simplify the federal tax code.

La crisis en la economía europea

El aumento de la deuda pública para paliar los costos de la crisis financiera y los recortes presupuestarios que se imponen para afrontar el déficit aparecen así como dos fuerzas en tensión. 

Lo que los mercados y las sociedades están demandando son los mecanismos de coordinación y regulación prometidos para prevenir nuevas crisis financieras, las reformas que permitan sanear las finanzas públicas y los incentivos y políticas que permitan amortiguar sus efectos sociales.


La economía europea sigue sufriendo el impacto de la crisis, especialmente en sus eslabones más débiles, como España, Grecia y Portugal.

México asegura estar protegido de crisis europea

Grecia, o la tragedia financiera de la UE >>> Bruselas no disimula su escepticismo ante el plan de Papandreu para reducir el déficit / Temor a que la crisis se extienda a España y Portugal

El déficit presiona la nota de crédito de EEUU

Plan de choque contra la crisis >>> Crédito, rebajas fiscales e impulsar las infraestructuras, claves para la recuperación

BOOKS
LIBROS

Buen capitalismo, mal capitalismo

Robert E. Litan, co-autor del libro “Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity”, realizado bajo los auspicios de The Kauffman Foundation, presenta un resumen de esa publicación.

Reitera que el crecimiento económico es el única forma en que los países pueden mejorar el nivel de vida de su población. Pero recuerda que a la base de la producción nacional está el crecimiento de cada empresa, que es donde reside el factor clave.

Litan dice que el capitalismo no es algo monolítico. Los 188 países que reconocen la propiedad privada (sólo 2 no lo hacen, Cuba y Corea del Norte) son muy diferentes entre si.

Sugiere que una forma de ordenarlos es considerando las características de sus economías según las siguientes categorías:

  • Capitalismo oligárquico: Los recursos y el control de la economía están concentrados en las manos de unos pocos poderosos. Estos no maximizan el crecimiento, sino su bienestar propio, y es frecuente que sus ganancias las saquen hacia paraísos fiscales.
  • Capitalismo guíado por el Estado: El Estado tiene una influencia significativa en las empresas, dirigiendo su curso a través, por ejemplo, del control de los bancos, la protección arancelaria, subsidios, incentivos regulatorios y otros.
  • Capitalismo de las grandes corporaciones: Tiene como beneficios las economías de escala, recursos para investigación y desarrollo y capital para invertir. Aún así no invierten en nuevos productos o servicios que puedan volver obsoletos sus actuales centros de ganancia; es decir que no práctican las innovaciones radicales.
  • Capitalismo de emprendedores: La economía está dominada por nuevas corporaciones que son independientes, y por tanto no están interesadas en mantener el status quo. Abren oportunidades de innovación y nuevos mercados.

Las categorías son conceptuales. En realidad en cada país se presentan estos diferentes tipos de capitalismo simultaneamente, pero en diferente grado, destacando una categoría más que los otras.

Litan sostiene que el capitalismo de emprendedores es el que de forma más efectiva conduce el crecimiento económico. Entre los datos que cita menciona que entre 1980 y 2005 la cantidad neta de empleos creados en Estados Unidos correspondieron a corporaciones con menos de cinco años de existencia.

Documento:

DEL BLOG DE JAIME LOPEZ "AUDITOR SOCIAL"

MULTIMEDIA

The Obama banking plan explained

The global banking industry was thrown into turmoil in January when President Barack Obama proposed the most far-reaching overhaul of Wall Street since the 1930s. The reforms, which could force the restructuring of some of the biggest names in US finance, were seen as a response to public rage over the financial crisis. Mr Obama promised that never again would the American taxpayer be held hostage by a bank that is “too big to fail”.

NEW GLOBAL ECONOMY: Are you ready for it? The era of U.S. economic dominance is said to be over and the future of your money is international. CLICK HERE TO take a quiz to see whether you're really ready.

VIDEO:
FIXING THE HOLE IN AMERICA'S BUCKET

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Feb. 1 - 7
Headlines >>>>> <<<<< Titulares

SATURDAY
SUNDAY

USA >>> The Debtor the World Still Bets On

For decades — through political upheaval and wars and wild bouts of deficits or inflation — the debt of the United States has always been rated AAA, the gold standard of creditworthiness by which all nations are compared....

What explains this oddity? Why is the world betting that the United States will overcome its political deadlock and solve its problems — believing, it seems, in the truth of Churchill’s biting quip that America will always do the right thing, after exhausting every other alternative? And how long can this aura of invincibility last?

Maybe a long, long time. One of the many things that makes the United States different is that it prints the world’s most important currency and can always print more — one reason investors in government debt remain confident they will be repaid, even if in dollars devalued by inflation or by changing exchange rates. There is also value in being the one nation on which the world still depends for security... 

Treasury Secretary Timothy F. Geithner: Recovery in global economy has not caused major economies to ease up their commitment to stiffen rules for banks

Geithner: U.S. Won't Lose Triple-A Bond Rating

Dr. Bill Conerly: Economic Forecast for 2010-2011 Looking Up

Fourth quarter growth came in stronger than expected >>> Here's how the new forecast looks:

GDP Forecast 2011

The dark blue columns are actual data (though subject to revision by the government), and the light blue columns are my forecast growth rates. The red line is the average growth rate of all the post-World War II recoveries. I've posted information showing that typically, more severe recessions result instronger economic recoveries. So any forecast underneath that red line is being very conservative.

Over the past decade, Greece took full advantage of a strong euro and rock-bottom interest rates to fuel a debt binge by the country’s consumers and its government. Now, if Greece can’t persuade investors to buy 53 billion euros of its government debt this year, it may have to seek a bailout from its European Union brethren or the International Monetary Fund — or, worse, to default.

YOU know we’re in trouble when we’re told that the economic problems in Greece, Portugal and Spain, the most indebted countries in the euro zone, are likely to remain safely contained in those nations. After all, we heard the same nonsense in 2007 from United States financial leaders talking about the subprime mortgage mess.

US food stamps set ever-higher record-32.8 million

A record 38.2 million Americans were enrolled in the food stamp program at latest count, up 246,000 from the previous month and the latest in record-high monthly tallies that began in December 2008.
Food stamps are the primary federal anti-hunger program, helping poor people buy groceries...USDA estimates up to $58 billion will be spent on food stamps this fiscal year...with average enrollment of 40.5 million people...Participation has surged since the financial-market turmoil of late 2008 and has set records each month since December 2008, when it reached 31.78 million. Enrollment is highest during times of economic distress. 

Governments in the 16 countries that use the euro must now confront a new and disturbing reality: The deal they struck more than a decade ago to create a common currency area, hoping that a single central bank could manage to paper over the divergent economic and financial conditions of its members, is finally being challenged. “This is the first big test for the European monetary system,”

43.4 million people are paid for government employment in the military, or supported through government programs. If added to the jobless numbers, it equals about 58 million people. Conditions, meanwhile, continue to worsen for many. On Thursday, the Bureau of Labor Statistics reported that 480,000 additional people filed for unemployment insurance last week. That’s 10.4 million people now on unemployment, up from 7.2 million in December 2008.

 Contrary to what you often hear, the large deficit the federal government is running right now isn’t the result of runaway spending growth. Instead, well more than half of the deficit was caused by the ongoing economic crisis, which has led to a plunge in tax receipts, required federal bailouts of financial institutions, and been met — appropriately — with temporary measures to stimulate growth and support employment.

The point is that running big deficits in the face of the worst economic slump since the 1930s is actually the right thing to do. If anything, deficits should be bigger than they are because the government should be doing more than it is to create jobs.

Despite encouraging indications for the future, the government’s monthly snapshot of the labor market revealed that last year’s collapse was considerably more severe than previously recorded. And the report came wrapped in substantial statistical uncertainty, intensifying debate about the staying power and vigor of the apparent recovery.

I'm giving a 70 percent probability to the happy scenario -- that economic growth continues better than expected, unemployment subsides and inflation remains subdued as the dollar rallies and stocks and corporate profits are stronger than expected.

The Euro Zone won't Fail >>> Why crisis will only make it stronger.

The End of Switzerland >>> The economic crisis and rising xenophobia are breaking down the great Swiss myths and undoing this once unique model nation.

PAUL KRUGMAN: Bueno y aburrido

Ahora que la atención del mundo se desvía del rescate financiero hacia la reforma financiera, las discretas historias de éxito merecen al menos la misma atención que los fracasos espectaculares. Tenemos que aprender de esos países que, evidentemente, lo han hecho bien. Y encabezando esa lista está nuestro vecino del norte. Ahora mismo, Canadá es un modelo de conducta muy importante.

Banqueros: ¿a pagar?

España y Portugal en apuros

La política del miedo

FRIDAY
DOW 1012
GOLD 
$ 1066
CRUDE 
$ 71.89

US January unemployment rate drops unexpectedly to 9.7 percent; employers cut 20,000 jobs

The Great Recession has eliminated 8.4 million jobs...the most of any recession since World War II as a proportion of total payrolls. Aside from November's gain, January's job losses were the smallest since the recession began...The report included more good news from the manufacturing sector, which is a key factor in the recovery. Manufacturers gained 11,000 jobs, its largest increase since April 2006. Retailers added 42,100 jobs, the most since November 2007, before the recession began. Temporary help services gained 52,000 jobs, the fourth month of gains in that category. 

Just as America’s recession begins to ebb, trouble is brewing in Europe that may prolong a downturn on the Continent and ricochet through the global economy as it struggles toward a recovery...

Like the United States, Europe has been slow to exit recession. France and Germany — the biggest of the 16 countries that use the euro as their currency — have tried to put their financial houses back in order quickly. But countries on the fringe, including Greece, Portugal, Spain and Ireland, are having trouble paying for years of debt-driven expansion. Now the bill is coming due. In the worst case, they could default on their debts, prolonging the economic downturn.

__________________________________________

Unexpected Rise in U.S. Jobless Claims

US Federal Reserve Governor Kevin Warsh said giving regulators new powers to shut failing institutions wont be enough to avert future financial crises.

Wall Street reform died this week >>> It died Tuesday before the Senate Banking Committee from unnatural and illogical causes: the finance lobby, obstruction, fear-mongering and plain ignorance.

Rarely does financial history offer a living, breathing voice of reason in crucial times, but listening to Paul Volcker spell out his plan for reform was such an event. Too bad for all of us, his prescription for reform will be discarded like loan underwriting standards for a multi-family home near Las Vegas.

The former chairman of the Federal Reserve hit the committee like a ghost of banking past -- and future -- leaving the rule that bears his name on the doorstep of Capitol Hill. His plan is not a pure return to the dreaded Glass-Steagall days, but to those in Congress who are lining up to kill the plan, it may just as well have been that and more.

Mr. Volcker's testimony was at once a brilliant articulation of the structural dangers of Wall Street as it stands and a forceful warning. He clarified the most controversial part of the rule, the ban on proprietary trading for commercial banks.

INTERVIEW: Confronting the Debt Threat >>> with Ryan Avent, Economics Editor, Economist.com

OPEC President Expects Price Stability as Demand Recovers >>> Oil will remain between about $70 and $80 a barrel this year amid a slight increase in global consumption

America Is Still Hurting From the First Stimulus -- Another One Would Be a Calamity

Ernst & Young: Global corporates are tiptoeing cautiously into 2010

Treasury Budget Focused on Building New Foundation for Economic Growth, Reform of the Financial System

Two Days That Upended Wall Street Former Treasury Secretary Paulson's New Book Details Tense Hours Leading Up to Lehman Brothers' Bankruptcy

"Banksters" is a term seen increasingly in the Blogosphere. It is used to describe the top executives at the Too Big To Fail banks and financial institutions. By alliteration, it suggests that these people are gangster-like.

Los dos días que estremecieron a Wall Street En un pasaje de su nuevo libro, el ex secretario del Tesoro de EE.UU. Henry Paulson detalla las tensas horas previas a la bancarrota de Lehman Brothers

La crisis fiscal de Grecia infecta a los mercados, del euro al Dow Jones

[UE].

A la sombra de una crisis de deuda >>> Son los casos de Grecia, Portugal, España, Irlanda y Gran Bretaña

Las claves de la crisis financiera europea

Preocupación en España por la crisis económica

Zapatero dice que el sistema financiero español es "sólido"

SIGTARP
REPORT
 
 
US
STILL
DRIVING
OFF
SAME
CLIFF...
 
 
BUT
IN
FASTER
CAR!

Top TARP Cop Warns: The Bubble Is Back

accuses the Obama administration of recklessly reinflating the real estate bubble in an attempt to keep the housing market going and prevent the collapse of financial institutions.

extract from

special inspector general

troubled asset relief program

quarterly report to congress

january 30, 2010 5

 

 

…Many of TARP’s stated goals, however, have simply not been met. Despite the fact that the explicit goal of the Capital Purchase Program (“CPP”) was to increase financing to U.S. businesses and consumers, lending continues to decrease, month

after month, and the TARP program designed specifically to address small-business lending — announced in March 2009 — has still not been implemented by Treasury. Notwithstanding the fact that preserving homeownership and promoting

jobs were explicit purposes of the Emergency Economic Stabilization Act of 2008 (“EESA”), the statute that created TARP, nearly 16 months later, home foreclosures remain at record levels, the TARP foreclosure prevention program has only

permanently modified a small fraction of eligible mortgages, and unemployment is the highest it has been in a generation…in the final analysis, TARP can truly only be a success if TARP is both managed well and its positive effects are enduring. The substantial costs of TARP — in money, moral hazard effects on the market, and Government credibility — will have been for naught if we do nothing to correct the fundamental problems in our financial system

and end up in a similar or even greater crisis in two, or five, or ten years’ time. It is hard to see how any of the fundamental problems in the system have been

addressed to date.

• To the extent that huge, interconnected, “too big to fail” institutions contributed to the crisis, those institutions are now even larger, in part because of the substantial subsidies provided by TARP and other bailout programs.

• To the extent that institutions were previously incentivized to take reckless risks through a “heads, I win; tails, the Government will bail me out” mentality, the market is more convinced than ever that the Government will step in as necessary

to save systemically significant institutions

• To the extent that large institutions’ risky behavior resulted from the desire to justify ever-greater bonuses — and indeed, the race appears to be on for TARP recipients to exit the program in order to avoid its pay restrictions — the current bonus season demonstrates that although there have been some improvements in the form that bonus compensation takes for some executives, there has been little fundamental change in the excessive compensation culture on Wall Street.

• To the extent that the crisis was fueled by a “bubble” in the housing market, the Federal Government’s concerted efforts to support home prices...risk re-inflating that bubble in light of

the Government’s effective takeover of the housing market through purchases and guarantees, either direct or implicit, of nearly all of the residential mortgage market.

Stated another way, even if TARP saved our financial system from driving off a cliff back in 2008,

absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car…

Wednesday

Moody’s Investors Service fired off a warning on Wednesday that the triple A sovereign credit rating of the US would come under pressure unless economic growth was more robust than expected or tougher actions were taken to tacklethe country’s budget deficit.

Pinn illustration

In a move that follows intensifying concern among investors over the US deficit, Moody’s said the country faced a trajectory of debt growth that was “clearly continuously upward”...“Unless further measures are taken to reduce the budget deficit further or the economy rebounds more vigorously than expected, the federal financial picture as presented in the projections for the next decade will at some point put pressure on the triple A government bond rating,” the rating agency added...

Crucially, projections of the overall debt-to-GDP ratio for the US are seen rising from 53 per cent in 2009 to 73 per cent in 2015 and 77 per cent by 2020. Moody’s, however, says this understates the overall US debt level. “Using the general government measure, including state and local governments as well as the federal government, which is used internationally, this ratio would be well over 100 per cent in 2020.”

Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, issued a report to Congress that said the rescue plan has not addressed the underlying causes of the financial meltdown, and as such, the U.S. could face an even bigger crisis in the future. "Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car," Barofsky writes. He renewed a call for Treasury to enact clearer walls so that such apparent conflicts of interest are less likely.

GDP may not be the best way of gauging an economy's health, Judith D. Schwartz writes in a Time analysis. GDP rose 5.7% in the fourth quarter, even as unemployment hung at record-high levels and foreclosures continued at a steady clip. "I don't think there's ever been such a large disconnect between the GDP and what ordinary people are experiencing," said Hazel Henderson, president of Ethical Markets Media.

U.S. unemployment rate rose in 306 of 372 metro areas...Joblessness topped 10 percent in 138 metro areas, up from 125 in November...In the past year, unemployment rose in almost all of the 372 metro areas...

Dour forecast underpins Obama's budget plan

Geithner Says Long-Term U.S. Deficits Pose Corrosive Threat

PETERSON FOUNDATION: The Congressional Budget Office Budget and Economic Outlook: 2010-2020

Despite a slowly improving economic picture, latest projections from the Congressional Budget Office (CBO) show that serious fiscal challenges remain that will, within 10 years, compromise the ability of the federal government to address important public needs. With a growing share of the overall budget devoted to Medicare, Medicaid, Social Security, net interest, and national defense, fewer and fewer resources will be left for other federal programs such as education, research and development, and investments in physical infrastructure that could strengthen our future economy.

The structural imbalances within the budget – largely stemming from rising health care costs as well as growing number of beneficiaries for the largest federal entitlement programs (Social Security, Medicare, and Medicaid) together with a lack of appetite for tax increases—remain unchanged, even after the economy recovers.

Globalisation will resume at slower pace: Ernst & Young

The Perils of Prosperity: The Story Behind the Economic Crisis

Republican and Democratic Lawmakers: White House not doing enough to reduce deficit

More than 5 Million Homes Will be Worth Less than 75% of Their Mortgage >>> it would take $745 billion to get mortgages to the point where no home loans in the U.S. were underwater.

No Help in Sight, More Homeowners Walk Away

Struggling banks need government help, trade group says

Moody's: $700 billion in high-yield debt will come due by 2014

Largest-ever federal payroll to hit 2.15 million...the largest federal work force in modern history

Volcker Urges Lawmakers to End Era of 'Too Big to Fail'

Soros: China seen as a motor of global economy

Gobernador del Banco de México Agustín Cartens: Las economías van a depender cada vez más del crecimiento interno para reactivarse... El impacto de la crisis fue modesto,augura estabilidad y empleo... Los aumentos de impuestos y de precios de combustibles tendrán efectos transitorios...

Paul Volcker pide al Senado de EE.UU. que se limite el tamaño de los bancos

El coste de las contradicciones

Thursday
Dow 10,002   
Gold  $1,016

Next in Line for a Bailout: Social Security

Another huge bailout is starting, this time for the Social Security system.

A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits.

Instead of helping to finance the rest of the government, as it has done for decades, our nation's biggest social program needs help from the Treasury to keep benefit checks from bouncing -- in other words, a taxpayer bailout...

Social Security currently provides more than half the income for a majority of retirees. Given the declines in stock prices and home values that have whacked millions of people, the program seems likely to become more important in the future as a source of retirement income, rather than less important.

The magnitude is not the same as the subprime crisis, but to a certain extent, they're similar

China’s currency reserves grew by more than the gross domestic product of Norway in 2009. Its $2.4 trillion of reserves is a bubble all its own, one growing before our eyes with nary a peep out of those searching for the next big one.

The reserve bubble is actually an Asia-wide phenomenon. And we should stop viewing this monetary arms race as a source of strength. Here are three reasons why it’s fast becoming a bigger liability than policy makers say publicly...

One, it’s a massive and growing pyramid scheme... Two, reserves are dead money...Three, reserves add to overheating risks.

China should let the yuan strengthen before raising interest rates, to avoid fueling inflows of capital that may stoke inflation, government economist Zuo Chuanchang said.

“Raising interest rates while keeping the yuan’s exchange- rate fixed would only attract more capital,” Zuo, of the Academy of Macroeconomic Research, said in a Feb. 2 interview in Beijing. Separately, state researcher Zhang Ming wrote in the China Securities Journal today that appreciation may resume as early as March.

Chinese officials aim to limit price surges that could undermine the recovery of the world’s fastest-growing major economy. The People’s Bank of China said last week that accelerating inflation will complicate policies in 2010 and central bank adviser Fan Gang said Feb. 1 that asset bubbles are “the real worry

China's next mountain to climb >>> China's government will have to assume greater international responsibility while her economy will be increasingly driven by global and domestic markets.

SURPRISE: Unemployment filings head higher

City of Harrisburg, Pennsylvania State Capital, Mulls Bankruptcy as a Budget Option

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Obama Budget Dwarfs Depression-Era Spending

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$2 Trillion in Tax Hikes Is Good for the Economy?

Crisis in the currency club >>> Greece's financial problems have been a disaster for the eurozone, and there could be much bigger shocks to come.

Secret Banking Cabal Emerges From AIG Shadows

BOOK REVIEW: On the Brink: Inside the Race to Stop the Collapse of the Global Financial System by Hank Paulson

VIDEO:
Debt & Taxes Derail Recovery?

BERNANKE: Crisis develó huecos regulatorios >>> El titular de la Reserva Federal señaló la necesidad de mantener la independencia de la institución, a fin de preservar la confianza del público

Soros: China es considerada como un motor de la economía global

Cuesta la crisis financiera en México 100 mil mdp a la banca

La crisis lastra el gasto militar mundial, salvo en China y la India

Tuesday

Huge Deficits May Alter U.S. Politics and Global Power >>> How long can the worlds biggest borrower remain the worlds biggest power?

.Unless miraculous growth, or miraculous political compromises, creates some unforeseen change over the next decade, there is virtually no room for new domestic initiatives for Mr. Obama or his successors. Beyond that lies the possibility that the United States could begin to suffer the same disease that has afflicted Japan over the past decade. As debt grew more rapidly than income, that country’s influence around the world eroded.

Budget Forecasts, Compared With Reality

Text of Remarks by the President on the Budget

Shadowed by deficits, Obama pitches economic plan

Introducing the 2011 Budget by OMB Director Peter Orszag

Budget Terminations, Reductions and Savings (identifies programs that do not accomplish their intended objectives, are not efficient, or that replicate efforts being completed by another initiative and recommends these programs for either termination or reduction)

Budget of the United States Government, Fiscal Year 2011

Contains the Budget Message of the President, information on the President’s priorities, budget overviews organized by agency, and summary tables.

 

To download "Budget of the United States Government, Fiscal Year 2011" as a single PDF click here (192 pages, 7.4 MB)

 

Document

Size

File Format

The Budget Message of the President

303 K

PDF

Rescuing the Economy

461 K

PDF

Reviving Job Creation and Laying a New Foundation for Economic Growth

166 K

PDF

Restoring Responsibility

134 K

PDF

Department of Agriculture

239 K

PDF

Department of Commerce

191 K

PDF

Department of Defense

248 K

PDF

National Intelligence Program

76 K

PDF

Department of Education

191 K

PDF

Department of Energy

259 K

PDF

Department of Health and Human Services

236 K

PDF

Department of Homeland Security

163 K

PDF

Department of Housing and Urban Development

196 K

PDF

Department of the Interior

153 K

PDF

Department of Justice

345 K

PDF

Department of Labor

219 K

PDF

Department of State and Other International Programs

260 K

PDF

Department of Transportation

189 K

PDF

Department of the Treasury

209 K

PDF

Department of Veterans Affairs

242 K

PDF

Corps of Engineers – Civil Works

148 K

PDF

Environmental Protection Agency

191 K

PDF

National Aeronautics and Space Administration

170 K

PDF

National Science Foundation

185 K

PDF

Small Business Administration

204 K

PDF

Social Security Administration

188 K

PDF

Corporation for National Community Service

139 K

PDF

Summary Tables

906 K

PDF

Briefing by OMB Director Peter Orszag and Chair of the Council of Economic Advisers Christina Romer

Government data show an ongoing but uneven economic recovery

Economies in Asia Continue to Show Strong Rebound

FORBES: Not The Great Depression

Paulson Says U.S. Was Close to Financial Collapse

Existen riesgos económicos que podrían generar una nueva crisis

Bancos y ricos, afectados por el presupuesto de Obama

Los cerebros detrás del colapso financiero

Trustbusters Try to Reclaim Decades of Lost Ground

Monday

Obama's new budget blueprint preaches the need to make tough choices to restrain run-away deficits, but not before attacking what the administration sees as the more immediate challenge of lifting the country out of a deep recession that has cost 7.2 million jobs over the past two years.

The result is a budget plan that would give the country trillion-dollar-plus deficits for three consecutive years. Obama's new budget projects a spending increase of 5.7 percent for the current budget year and forecasts that spending would rise another 3 percent in 2011 to $3.83 trillion.

CONGRESSIONAL LEADER: 'We've got to spend our way out of this recession'

Distressed Commercial Property Could Cause Another Financial Crisis

Bankers back crisis scheme

Davos Weekend: China to Maintain Current Monetary Policy

How the bottom fell out of "old" Davos

.pinn

Cierra el Foro de Davos sin consenso sobre reforma de sistema financiero

Es pronto para celebrar recuperación

Después de la crisis financiera, llegan las crisis fiscales

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La economía rusa, golpeada por la crisis, se contrajo un 7,9% en 2009

THE
CRISIS
IS
NOT
OVER
By Paul Craig Roberts, exAssistant Secretary of the Treasury during President Reagan’s first term, exAssociate Editor of the Wall Street Journal, exSenior Research Fellow, Hoover Institution, Stanford University, awarded the Legion of Honor by French President Francois Mitterrand.

Readers ask if the financial crisis is over, if the recovery is for real and, if not, what are Americans’ prospects. The short answer is that the financial crisis is not over, the recovery is not real, and the U.S. faces a far worse crisis than the financial one.

Here is the situation as I understand it: The global crisis is understood as a banking crisis brought on by the mindless deregulation of the U.S. financial arena. Investment banks leveraged assets to highly irresponsible levels, issued questionable financial instruments with fraudulent investment grade ratings, and issued the instruments through direct sales to customers rather than through markets.

The crisis was initiated when the U.S. allowed Lehman Brothers to fail, thus threatening money market funds everywhere. The crisis was used by the investment banks, which controlled U.S. economic policy, to secure massive subsidies to their profits from a taxpayer bailout and from the Federal Reserve. How much of the crisis was real and how much was hype is not known at this time.

As most of the derivative instruments had never been priced in the market, and as their exact composition between good and bad loans was unknown (the instruments are based onpackages of securitized loans), the mark-to-market rule drove the values very low, thus threatening the solvency of many financial institutions. Also, the rule prohibiting continuous shorting had been removed, making it possible for hedge funds and speculators to destroy the market capitalization of targeted firms by driving down their share prices.

The obvious solution was to suspend the mark-to-market rule until some better idea of the values of the derivative instruments could be established and to prevent the abuse of shorting that was destroying market capitalization. Instead, the Goldman Sachs people in charge of the U.S. Treasury and, perhaps, the Federal Reserve as well, used the crisis to secure subsidies for the banks from U.S. taxpayers and from the Federal Reserve. It looks like a manipulated crisis as well as a real one due to greed unleashed by financial deregulation.

The crisis will not be over until financial regulation is restored, but Wall Street has been able to block re-regulation. Moreover, the response to the crisis has planted seeds for new crises. Government budget deficits have exploded. In the U.S., the fiscal year 2009 federal budget deficit was $1.4 trillion, three times higher than the 2008 deficit. President Obama’s budget deficits for 2010 and 2011, according to the latest report, will total $2.9 trillion, and this estimate is based on the assumption that the Great Recession is over. Where is the U.S. Treasury to borrow $4.3 trillion in three years?

This sum greatly exceeds the combined trade surpluses of America’s trading partners, the recycling of which has financed past U.S. budget deficits, and perhaps exceeds total world savings.

It is unclear how the 2009 budget deficit was financed. A likely source was the bank reserves created for financial institutions by the Federal Reserve when it purchased their toxic financial instruments. These reserves were then used to purchase the new Treasury debt. In other words, the budget deficit was financed by deterioration in the balance sheet of the Federal Reserve. How long can such an exchange of assets continue before the Federal Reserve has to finance the government’s deficit by creating new money?

Similar deficits and financing problems have affected the EU, particularly its financially weaker members. To conclude, the initial crisis has planted seeds for two new crises: rising government debt and inflation.

A third crisis is also in place. This crisis will occur when confidence is lost in the U.S. dollar as world reserve currency. This crisis will disrupt the international payments mechanism. It will be especially difficult for the U.S. as the country will lose the ability to pay for its imports with its own currency. U.S. living standards will decline as the ability to import declines.

The financial crisis is essentially a U.S. crisis, spread abroad by the sale of toxic financial instruments. The rest of the world got into trouble by trusting Wall Street. The real American crisis is much worse than the financial crisis. The real American crisis is the offshoring of U.S. manufacturing, industrial, and professional service jobs, such as software engineering and information technology.

Jobs offshoring was initiated by Wall Street pressures on corporations for higher earnings and by performance-related bonuses becoming the main form of managerial compensation. Corporate executives increased profits and obtained bonuses by substituting cheaper foreign labor for U.S. labor in the production of goods and services marketed in the U.S.

Jobs offshoring is destroying the ladders of upward mobility that made the U.S. an opportunity society and is eroding the value of a university education. For the first decade of the 21st century, the U.S. economy has been able to create net new jobs only in domestic nontradable services, such as waitresses, bartenders, sales, health and social assistance and, prior to the real estate collapse, construction. These jobs are lower paid than the jobs were that have been offshored, and these jobs do not produce goods and services for export.

Jobs offshoring has increased the U.S. trade deficit, putting more pressure on the dollar’s role as reserve currency. When offshored goods and services return to the U.S., they add to imports, thus worsening the trade imbalance.

The policy of jobs offshoring is insane. It is shifting U.S. GDP growth to the offshored locations, such as China, thus halting growth in U.S. consumer incomes. For the past decade, U.S. households substituted an increase in indebtedness for the lack of growth in income in order to continue increasing their consumption. With their home equity refinanced and spent, real estate values down, and credit card debt at unsustainable levels, it is no longer possible for the U.S. economy to base its growth on a rise in consumer debt. This fact is a brake on U.S. economic recovery.

Stimulus packages cannot substitute for the growth in real income. As so many high value-added, high productivity U.S. jobs have been offshored, there is no way to achieve real growth in U.S. personal incomes. Stimulus spending simply adds to government debt and pressure on the dollar, and sows seeds for high inflation.

The U.S. dollar survives as reserve currency because there is no apparent substitute. The euro has its own problems. Moreover, the euro is the currency of a non-existent political entity. National sovereignty continues despite the existence of a common currency on the continent (but not in Great Britain). If the dollar is abandoned, then the result is likely to be bilateral settlements in countries’ own currencies, as Brazil and China now are doing. Alternatively, John Maynard Keynes’ bancor scheme could be implemented, as it does not require a reserve currency country. Keynes’ plan is designed to maintain a country’s trade balance. Only a reserve currency country can get its trade and budget deficits so out of balance as the U.S. has done. The prospect of U.S. default and/or inflation and decline in the dollar’s exchange value is a threat to the reserve system.

The threats to the U.S. economy are extreme. Yet, neither the Obama administration, the Republican opposition, economists, Wall Street, nor the media show any awareness. Instead, the public is provided with spin about recovery and with higher spending on pointless wars that are hastening America’s economic and financial ruin.

20 reasons

Global Debt

Time Bomb

may explode soon

...ignite Great Depression II

...wipe out your retirement

VIDEO  >>>WSJ's Jerry Seib: The federal
 
budget deficit has become so large, it's
 
time consider it a natural-security threat

 

BOMBS AWAY

1. Federal Budget Deficit Bomb. The Bush/Cheney wars pushed America deep into a debt hole. Federal debt limit was just raised almost 100% with Obama's 2010 budget, to $14.3 trillion vs. $7.8 trillion in 2005. The Congressional Budget Office predicts future deficits around 4% through 2020. Get it? America's debt at 84% of GDP will soon pass that toxic 90% trigger point.

2. U.S. Foreign Trade Bomb. Monthly deficits actually dropped from $50 billion per month to roughly $35 billion. But the total continues climbing as $400 billion is added each year. Foreigners now own $2.5 trillion of America, with China holding over $1.3 trillion in Treasury debt.

3. Weakening U.S. Dollar as Foreign Reserve Currency Bomb. Fear China and other currencies will replace dollar as main foreign reserves. The dollar's fallen: The main index measuring dollar strength has gone from 120 at the Clinton-to-Bush handoff to below 80 today.

4. Cheap Money Bomb: Credit Ratings Down, Rates Up. Economists at S&P, Fitch and Moody's were totally co-conspirators of Fat Cat Bankers, misleading investors before meltdown: Soon, debt up, ratings down, interest rates soar.

5. Global Real Estate Bomb. Dubai Tower, new "world's tallest building" is empty. BusinessWeek warns that China's housing collapse could be worse than America's. Plus the U.S. commercial real estate bubble is now $1.7 trillion, a "ticking time bomb" bloating 25% of bank balance sheets.

6. Peak Oil and the Population Bomb. China and India each need 500 new cities. The United Nations estimates world population exploding 50% from 6 billion to 9 billion by 2050: Three billion more humans demanding more automobiles, exhausting more resources to feed their version of the gas-guzzling "America Dream."

7. Social Security Bomb. We have no choice; eventually we must either cut benefits or raise taxes. Politicians hate both, so they'll do nothing. Delays worsen solutions. Without action, by 2035 Social Security and Medicare benefits will eat up the entire federal budget other than defense.

8. Medicare: A Nuclear Bomb. Going broke faster than Social Security. Prescription drug benefit added an unfunded $8.1 trillion. In 5 years estimates rose from about $35 trillion to over $60 trillion now.

9. Health-care Insurance Bomb. Burden increasingly shifted to employees. Costs rising faster than inflation. Recent Obamacare plan would have cost $90 billion annually, paid to Big Pharma and insurers.

10. State and Local Government Budget Bombs. Deficits of $110 billion in 2010, $178 billion in 2011on top of more that $450 billion in underfunded state and municipal employee pension funds.

11. Underfunded Corporate Pensions Bomb. From $60 billion surplus in 2007 to $409 billion deficit in 2009. And a whopping 92% of the pension plans of companies are now underfunded. Defaults are guaranteed by taxpayers.

12. Consumer Debt Bomb. Americans are still living beyond their means. Even with a downturn, consumer debt rose from about $2.3 to $2.5 trillion. Fat Cat Bankers love it -- yes love making matters worse by gouging cardholders and mortgagees, blocking help in foreclosures and bankruptcies.

13. Personal Savings Bomb. Before the 2008 meltdown savings rate dropped from about 10% in the early 1980s to below zero. Now it's increasing, slowing retail recovery. Today, government's the big "unsaver."

14. War and Military Defense Deficits. Costs of Iraq and Afghanistan wars -- $200+ billion annually, $3 trillion minimum, with massive long-term costs for veteran medical care, equipment renewal, recruitment.

15. Homeland Insecurity Bomb. Security at airports, seaports, borders, vulnerable chemical plants all increase budgets.

16. Fed/Treasury Bailout Bombs. Tax credits, loans, cash and purchase of toxic assets from Wall Street banks estimated at $23.7 trillion as new debt was shifted from too-big-to-fail Fat-Cat banks to taxpayers.

17. Insatiable Washington Lobbyists Bombs. Paulson, Goldman, Geithner, Morgan and Wall Street banks, through their lobbyists and former employees working inside now have absolute power over government spending. Democracy and voters are now irrelevant in America's new corporate-socialism.

18. Shadow Banking: The Derivatives Bomb. Wall Street wants no regulation of this $670 trillion, high-risk, out-of-control casino that's highly leveraged versus the $50 trillion total GDP of all nations. We forget that derivatives almost destroyed global economies in 2008-09, finally will by 2012.

19. Dysfunctional Two-Party Political Bomb. Polarized partisanship increasing: Every day both parties show zero interest in cooperating for the public good. Instead they fight viciously, resisting everything and anything proposed by opponents. Only goal: Score political points, make the other side look bad.

20. The Coming Populous Rebellion Bombs. Nobody trusts anyone in authority. For good reason. So immediate gratification, short-term betting and a lack of long-term perspective wins for individual investors, consumers and taxpayers as well as Washington, Wall Street and Corporate America CEOs. Today: "Doing what's right for the common good and country" is just empty political rhetoric.

READ THE ENTIRE ARTICLE

QUOTES

 

"Wendy (Paulson's wife) had just returned from church. I told her about Lehman's unavoidable bankruptcy and the looming problems with AIG. "What if the system collapses?" I asked her. "Everybody is looking to me, and I don't have the answer. I am really scared." I asked her to pray for me, and for the country, and to help me cope with this sudden onslaught of fear. She immediately quoted from the Second Book of Timothy, verse 1:7—"For God hath not given us the spirit of fear, but of power, and of love, and of a sound mind."         Former US Treasury Secretary Henry M. Paulson Jr.

.

FROM THE COUNCIL ON FOREIGN RELATIONS

Confronting the Debt Threat

Some of Obama's budget proposals are sound policy, but congressional gridlock and faster economic reforms in China and Europe could jeopardize U.S. competitiveness, says Economist.com editor Ryan Avent. Read more

Op-ed: "How to Destroy American Jobs" by Matthew Slaughter (Wall Street Journal)

Geo-Graphics: Chart on President Obama's "Export Ambitions"

CFR Meeting Trancript, Video, Audio: "Global Economic Trends - A Conversation with Joseph Stiglitz"

Op-ed: "Fiscal Death Spiral" by Edward Alden (Daily Beast)

CFR Meeting Transcript, Video, Audio: "Stimulus in a Volatile Financial World" with World Bank Chief Economist Justin Yifu Lin

Op-ed: "How to Make a Weak Economy Worse" by Amity Shlaes (Wall Street Journal)

CFR experts on Economics, Financial Crises

FROM THE COUNCIL ON FOREIGN RELATIONS

Obamanomics Considered

Economists Allan Meltzer and Martin Baily discuss the economic and political implications of Obama's State of the Union proposals and the reappointment of Federal Reserve Chairman Ben Bernanke.

Obamanomics Considered

Jim Young/Courtesy Reuters

Global Economic Trends: A Conversation with Joseph E. Stiglitz (Video)

Global Economic Trends: A Conversation with Joseph E. Stiglitz (Text)

What Happens When the Fed Stops Buying Government Debt?

2010.1.20.FedFinanceTreasury

The Federal Reserve plans to stop buying securities issued by government housing loan agencies Fannie Mae and Freddie Mac by the end of the first quarter. This is not only likely to push up mortgage rates; Treasury rates should rise as well. Throughout 2009, the private sector sold a portion of their agency holdings to the Fed and used those funds to buy Treasurys. Once the Fed’s agency purchases stop, this private sector portfolio shift will end, removing a major source of demand in the Treasury market. As the chart shows, since the start of 2009 the Fed has bought or financed the entire increase in Treasury issuance. As Fed purchases slow and Treasury issuance continues at a high level, interest rates will have to move up to attract new buyers.

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Whenever you find you are on the side of the majority, it is time to pause and reflect

                     --- Mark Twain

We have never observed a great civilization with a population as old as the United States will have in the twenty-first century; we have never observed a great civilization that is as secular as we are apparently going to become; and we have had only half a century of experience with advanced welfare states...Charles Murray

Kella
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