2.8% drop in lending is largest since 1984

It seems like the monetary policy in theory does not work in real life. Even though the policy rates are historically low, banks reduced the amount of money extended to their customers by $210.4 billion (2.8%) between July and September, cutting back in almost every category and this is the largest drop at least since 1984. "We need to see banks making more loans to their business customers," FDIC Chairman Sheila C. Bair said Tuesday. The government has been trying to impose number of programs, but so far has resisted calls to proceed. The FDIC said that just three new banks were created during the third quarter, the smallest number since World War II.

China's Output Beats Estimates as Export Slide Slows

This article talks about how China will serve as the leader to global recovery. China's production grew more than estimated in November. Consumer prices rose .6 percent, the first increase in 10 months. As more and more countries and companies rely on Chinese production, the global economy grows smaller. China will be the first to recover and will dictate the pace for subsequent countries.

How Many Ways Can You Tax the Rich?

Democrats are looking at different strategies on how to tax rich to pay off the most of the deficit. According to Mr. Obama’s campaign, taxes should be raised on everyone whose income exceeds $200,000. IRS reported that they collected $610 billion in tax revenues from people who made more than $200,000. It is 44 percent of total tax revenue. However, some experts say that it will be not enough, and less rich people should also pay more in taxes. There was a proposition to raise marginal rate to about 55 percent in high-tax states. This level was not seen since the pre-Reagan era. On the other hand, this tax strategy can backfire by offering their rivals a political opening ahead of next year’s midterm elections.

US House of Representatives backs financial reform bill

President Obama makes financial reform one of his main goals. The bill will be focusing on creating new monitor consumer banking transactions that will give the govt. authority to stop economically threatening companies. it will pull down the companies which ensures shareholders and unsecured creditors and not taxpayers preventing from losses. President Obama is blaming the Wall Street and govt failures for financial crisis. Senate have to pass the bill before the President signs it.

Iraq oil development rights contracts awarded

UK's Shell and Malaysia' s Petronas won the bid to have the right to develop Iraqi oil field Majnoon. Majnoon reserves has 13 billion barrels of oil but currently they are producing just 46,000 barrels per day. Shell and Petronas pledge to increase the output by 1.8 million barrels per day. There are potential benefits for Iraq as it daily output is about 2.4 million barrells but it may triple over the next couple of years. This will also help Iraq in improving their economy.

EU agrees climate pledge that may boost Copenhagen

EU leaders agree on paying $10 bn to help developing countries in adjusting to climate change policies over the next 3 years. The EU members have promised to reduce their greenhouse gas emission up to 20% and are willing to reduce upto 30% if other nations are willing to do so. Financial matters are being discussed as well in the meeting. EU leaders is suggesting the IMF to implement a global tax on financial transactions so the banks do not take excessive risks that could lead to another financial crisis called a "Tobin tax". More EU countries like France and the UK are pushing it than the U.S.

Losing its shine

IT IS not unusual in Japan for corporate leaders to make semi-ritualised displays of humility. But when Akio Toyoda, president of Toyota Motor Corporation since June and grandson of the firm’s founder, addressed an audience of Japanese journalists in October his words shocked the world’s car industry. Mr Toyoda had been reading “How the Mighty Fall”, a book by Jim Collins, an American management guru. In it, Mr Collins (best known for an earlier, more upbeat work, “Good to Great”) describes the five stages through which a proud and thriving company passes on its way to becoming a basket-case. First comes hubris born of success; second, the undisciplined pursuit of more; third, denial of risk and peril; fourth, grasping for salvation; and last, capitulation to irrelevance or death.

Recession's latest victim: U.S. innovation

U.S. innovation slowed this year for the first time in 13 years as the recession cut into budgets, and costs to protect inventions rose. The number of patent filings in the United States fell 2.3% in 2009 to 485,500 from 496,886 last year, according to a preliminary estimate by the U.S. Patent and Trademark Office. That makes 2009 the first year since 1996 in which businesses and inventors filed fewer patents year over year. At the same time, U.S. patents issued to inventors and businesses in foreign nations jumped 6.3% for the year. This should be a large concern for us considering that part of the demise of most of the failed economic systems we have learned was a lack of innovation and technological advancements.

Hard Times

This article discusses how Irish finance minister, Brian Lenihan, in effect cut the pay of public-sector workers earlier this year by introducing a special 7% pension levy. To add to this, his 2010 budget will inflict even more pain by imposing steep pay cuts on public employees. These pay cuts came as a result of a sharp economic contraction in Ireland. GDP is projected to decline by 7.5% in 2009 and a further 1.3% in 2010.

Is a bonus tax in our future?

The United Kingdom this week slapped a 50% tax on bankers' bonuses above about $40,000. The one-time tax will be paid by all banks with employees in the country. France pledged it would adopt the same policy, while Germany's chancellor called the idea "charming". Still, the bonus tax seems like a long shot on this side of the Atlantic, where bankers wield immense power. But when Wall Street starts handing out giant year-end paychecks at a time of 10% unemployment, all the campaign donations in the world may not keep legislators facing tough re-election fights from turning on their banker chums. It is an interesting proposition after Goldman Sachs announced that their top 30 executives will not be receiving cash bonuses, but if foreclosures and unemployment remain uncomfortably high, ideas like a bonus tax could gain steam.

Goldman Sachs’s Top Managers to Get All-Stock Bonuses

Goldman Sachs’s top 30 executives will receive year-end bonuses in stock they cannot sell for five years. I wish that every company followed Goldman Sachs’s salary policy this year. However, GS is not known for paying reasonable salaries to its employees. GS was criticized a lot at the beginning of this year for paying excessively high salaries to its top executives after benefiting from government support. On the other hand, many state that Goldman had a right to do so, because it was the first one to repay bailout and generate a positive profit when most of the businesses were running out of business. In 2007, there was a lot of discontent around Goldman too, because they paid out $20.2 billion in salaries to its 31,700 employees. CEO was awarded a $67.9 million bonus that year.

American Dream 2: Default, Then Rent

This article in the Wall Street Journal points out the blessing in disguise that this mortgage crisis has brought about. From the dream of owning their houses, Americans have moved on to another alternative, renting houses, which makes more of an economical sense but at the same time providing them with more luxury and money to spend.

As pointed out by some analysts, this is a good thing for the American economy as renting apartments and houses leaves the Americans with more discretionary income to fuel consumer spending which is the backbone of American economy. Money that was used to pay off mortgage debts is now going to be used to pay rents for even more luxurious houses leaving enough to invest, save or spend. The latter seems the most attractive to people who wish for the economy to come back as soon as possible.

Fort many American families, the American dream is now a rental, a luxurious one.

China’s Economic Power Unsettles the Neighbors

This article published today in the NewYork Times talks about the inevitability of China's super power status in the near future. I am talking at least in terms of the economic clout it enjoys over its trading partners, which technically speaking is the whole industrialized and developing world.

The article talks about how Indonesian factories have not been able to compete with their Chinese counterparts despite keeping up with the Japanese and Koreans in the past. China, as pointed out in the article is no longer just a regular developing nation. Instead, its economic strength and potential is matched by none. Its Asean trading partners run billions of dollars of debt each year and have to live under China's clout concerning all their trade and foreign policy decisions. However, China is becoming more notorious by the day and it is finding it harder to cast itself as a friendly alternative to an imperious American superpower.

Many Asian nations are finding it hard to compete with the Chinese economy. Vietnam and India have devalued their currencies to keep up. However, the most important point to understand is that there is no way to control China since it dominates the world trade and many nations run trade deficits with China. It is an inevitability that all nations need to deal with, rather than pointing fingers at China.

Bernanke cautious on 2010's economic growth

Federal Reserve Chairman Ben Bernanke warned that there is no certainty that the economy is on its long-lasting recovery. Even though we have seen some improvement and stabilization in economic activity, there is still a lot of work to do before we can be assured that “the recovery will be self-sustaining.” Ben Bernanke also encouraged stronger demand for homes and consumer goods and services, because it might be the key for future recovery and economic growth.

Exports to grow by 15% in 2010-11

India the next economic superpower has just announced an increase in the countries exports by an enormous 15% for the 2010-2011 fiscal year.

This news is a welcome statement to Indian firms wanting to export goods to other countries, as since October 2008, India's exports have been on a declining route due to the global economic recession.

In May 2009, India's merchandise exports saw a mammoth decline of 38.9%. However, the good news is that the country has made steps on arresting the downturn, and in October 2009 it stated that the decline had been reduced to just about 6.6%.

The country's positive steps to improvement might see India considerably growing its exports next year and might finally make a massive impression on the global economy.

Health-Bill Amendment Restricting Abortion Is Introduced

The highly controversial issue over abortion and whether it should be funded by the government in the new health care bill is discussed in this article. As it stands now, "the Senate health bill would include abortion coverage in the new public plan and would allow women who receive government tax credits for insurance to enroll in a plan that covers the procedure. The tax credit would be segregated so none of it could go toward funding abortion." But many antiabortion advocates are not having it and want an amendment that ensures that no federal funding goes toward abortions unless it is due to rape, mother's health or incest. On the other side of the abortion issue, supporters just want to see a compromise. 

Politicians can't believe that the entire health care bill has come down to abortion. It will be interesting to see the outcome and how it will affect politicians' decisions about the health care bill since no matter the final decision we will all be affected.   

U.S. Retail Hiring in November Rose to Highest Level in 2009

In November, U.S. discount, grocery, restaurant, and specialty chains hired the largest number of people in 2009. It signals that retailers may be anticipating a gradual recovery in consumer spending. Last month, 3.87 percent of applications resulted in job offers, which is the highest level this year after adjusting it for seasonality. “While these are classic signs of a gradual, post-recession recovery, last month’s hiring increase might be a ‘spill over’ from October, as retailers delayed the peak season for taking on employees.”

End to stimulus moves threatens more job losses

This article discusses the potential for an increase in unemployment if the stimulus strategies end. According to the International Labor Organization, further measures must be taken in order to create jobs. Without the stimulus and these efforts, employment is not predicted to ever make a full recovery until 2013. Job losses may have been less than predicted, but this in large part due to the tendency for companies to give employees less hours, with government support, than to fire them. Therefore, the ILO argues that it is essential that we do not end the stimulus prematurely.

Concerns about Comcast-NBC

This is an article on the proposed takeover of cable network giants NBC, by cable providing giants Comcast.

It is believed that Comcast's takeover of NBC could prove to be highly taxing for ad agencies and also for those linked directly to NBC. There are rising concerns over Comcast's intentions on barring rival cable providers access of NBC networks.

Even though GE has officially stated that Comcast is ready for the takeover, consumers are overly concerned with Comcast's plans to set higher fees for its customers.

A fascinating piece of news which will be even more interesting to follow as newer developments are reached.

U.S. Forecasts Smaller Loss From Bailout of Banks

As the world and the US economy begin its long but slow journey to recovery, this article in the New York Times aims to settle some nerves down concerning the use of the bailout money for financial institutions. News in the past two years or so of the money being lent to banks and other similar institutions had been floating around for a while especially with negative publicity concerning the use of that money to reward high level officials with huge bonuses.
This article portrays greener pastures relating to the use of that bailout money worth $700 billion. Recent estimates show that the Treasury Department expects to recover all but $42 billion that has already been loaned out. At an extreme level, the government is expected to lose not more than $100 billion out of the total of $700 billion planned. These new estimates are good news for the administration as it is expected to lower the administration's deficit from $1.5 trillion to $1.3 trillion. This is good news for the country, both politically and economically as it will tend to bring a level of stability to the administration which has been taking the hammer for the financial woes of the superpower.

Banks and Information Technology: Silo but Deadly

Information Technology (IT) is incredibly important in any modern industry. It is especially important in financial services, which is responsible for more than a fifth of the world's total IT expenditure.

However, all that spending isn't necessarily paying off. Because banks were among the first to adopt computers, old technology is still in place. Switches to new systems become more and more complex as banks grow, so employees may be left with different numbers from different systems and things that just don't add up.

Was this a factor in the current financial crisis? Possibly. It was very difficult for banks to determine risk. Whether managers would have paid attention even if they had known the true risk will never be known, but it is clear that banks need to spend the money to develop integrated systems in the very near future.

Redefining 'emerging markets'

Due to the news that Dubai World, an investment company that manages projects for the government of Dubai, might default on $60 billion in loans brought back concerns emerging markets. However, it is now thought that certain countries in Latin America and East Asia are in their own separate class, called advanced emerging markets. These countries have shown resilience in the recession. The list includes Brazil, Hungary, Mexico, Poland, South Africa, and Taiwan. Investment abroad is expected to increase. Hopefully, this will bring these countries "ahead of the curve" and towards greater stability.

Luxury Makes a Comeback

Throughout the economic downturn, many people have sacrificed the more luxury items. Before the economic downturn, companies tried to get upper middle class people to buy their products - things that they couldn't really afford, but they bought to live the lifestyle they wanted. Now, the companies are going a different route to get new business in this time - and it's working. Sales are going up for many of these companies. They are increasing quality, and increasing price as well, but counting on the idea that people will spend more to get more. However, overall, sales are still expected to go down for the year.

Taxes, Taxes, Everywhere

This article discusses the measures taken by various states to increase their revenue. Many are facing extreme budget shortages, and are looking for solutions. Taxes are the first measure used, and they are seen in many ways - speeding tickets, horse racing, etc. The other form of taxes has to do with income taxes. They are increasing for those with high incomes. It will be interesting to see if budget deficits are improved by these measures.

Why Treasury Needs a Plan B for Mortgages

In this New York Times article, the failing job of the Treasury's plan to help homeowners change their mortgage terms is discussed. The Home Affordable Modification Program put in place ten months ago has done nothing that it is supposed to do and the Treasury points a finger at big institutions who are failing to do what they are supposed. The program is not working to help ailing homeowners with their mortgages and need to come up with a plan that is actually effective. According to a senior managing director and head of mortgage strategy at Amherst Securities Group,

"The Treasury program has decided to tackle the delinquent mortgage problem by reducing the interest rate on eligible borrowers’ loans to a level that makes monthly payments affordable. Her research shows, for instance, that 70 percent of modifications involving only interest rate cuts, rather than reductions in the principal borrowers owe, have failed after 12 months." People are just falling right back into default because the plan is ineffective. Something needs to be done or else homeowners will continue to foreclose and the real estate market will continue to suffer. 

India's recovering economy: Vroom, Vroom

India has recovered successfully after a devastating summer monsoon. Although it has left a mark of inflation especially in food prices as agriculture was tremendously hurt by the lack of rain, the Indian economy is very strong. They will need to get their high inflation under control before it becomes a factor which inhibits growth.

The Copenhagen Summit Stopping Climate Change

As the world leaders converge on Copenhagen yet again, what will the economic impact be of improved climate change policies? This article highlights some of the possible impacts.

Italy's Troubled Prime Minister Under Attack From All Sides

This article shows the inter-workings of Italy's government. Italy's governmental structure is closely mixed with business, some similarities to Russia. If the people of Italy get their way they will be celebrating a new prime minister very soon.

Obama boosts hopes for deal at Copenhagen

President Barack Obama agreed to attend the final negotiating stages of the Copenhagen summit to raise the prospects of a global deal on climate change. All of the world’s big economies have set objectives for cutting their greenhouse gas emissions. The fact that China and India participate in that mission is putting a lot of pressure on Mr. Obama. It will be much easier to accomplish these goals if the US agrees to participate in the program.