Latin Lessons- Restructuring Greece's debt

The Greek economy has been faltering for a couple of years now and the situation isn't improving. The European Union is has not dealing decisively with this issue, which according to this article (in the Economist) is causing the situation to get worse as time passes.

The political landscape in Europe is such that German leaders are refusing to allow any debt restructuring because German banks hold majority of Greek debt. Allowing to do so would burden German tax payers. As Germany bears considerable clout in the EU, they usually get their way.

Politicians use such issue to benefit of their constituencies. This creates anger and makes the situation more difficult to fix.

This Economist article argues that lessons should be learned from past experiences of US banks and US foreign policy towards Latin American countries. Uruguay and Mexico are 2 examples mentioned. Even though the situation isn't identical to the Latin American examples, it can be strongly argued that debt restructuring is necessary. Expecting Greece to pay back the loans at the original interest rates and at the current deadlines would be extremely misguided and unfair.

Fed, Bernanke on Investors' Radar Next Week

As earnings results for the first quarter are coming in for high net worth firms in technology and energy industries next week, eyes are on the Fed and their policy response to the new information. Some speculators think due to favorable first quarter numbers, interest rates will rises. But on the other hand, some speculators believe there will be no interest rate changes by the Fed, rather a continuation of the "quantitative easing" policy under a new name since speculators have a negative connotation for that phrase. Either way, investors and speculators alike will be watching and listening to what Bernanke has to say in the upcoming week.

Japan draws up $50 billion emergency budget

To deal with the cleanup and rehabilitation of its country, Japan's cabinet has approved a 4.02 trillion yen (about $50 billion) emergency budget. This temporary budget still needs to be approved by parliament, but analysts say it will likely be approved and put in place by early May.

The main point of contention around the $50 billion is how exactly the budget will be financed. Japan's debt already accounts for around 200 percent of its GDP. The Japanese government has said that among other small adjustments, it will cut back on overseas aid to pay for the budget, re-instate tolls on certain stretches of road, and increase the country's sales tax.

Those moves will fund this $50 billion emergency budget, but Japan estimates overall reconstruction cost estimates are closer to $300 billion. How will this huge project be financed? Due to a rising debt, issuing government bonds was ruled out as a way to finance the current emergency budget, but it is likely that the government will have to resort to issuing bonds to pay for the second budget.

Americans agree: The rich should pay higher taxes

NEW YORK (CNNMoney) -- Hey, rich folks! The American people are putting you on notice. They want you to pay higher taxes.

Two new polls suggest there is broad support for raising taxes on households making more than $250,000 a year, and all in the name of deficit reduction.

Heck, even a majority of Republicans want the rich to pay more.

A full 72% of adults approve of increasing federal taxes on households making more than $250,000 starting in 2013, according to the latest New York Times/CBS News poll.

Fifty-five percent of Republicans want the tax hike, along with 74% of independents and 83% of Democrats.

This article is interesting. I believe that the rich should be taxed, it is reported that a percent increase in taxes for the rich would give the government a revenue of nearly a trillion dollars over 10 years. This move would be useful if the taxes were to be increased for the rich because it wouldn't affect the rich's spending on goods.

Hans Rosling's 200 Countries, 200 Years, 4 Minutes - The Joy of Stats - BBC Four

This is a very interesting short video from a section of 'The Joy of Stats' that tells the story of the world in 200 countries over 200 years using 120,000 numbers - in just four minutes. Plotting life expectancy against income for every country since 1810, the video shows how the world we live in is radically different from the world most of us imagine.

"Green" Fad Diminishes

The trend of "going green" has been popular the past few years. Many household cleaning companies introduced new products to satisfy consumer tastes and preferences in this category and despite the higher price tag, consumers bought the products. Now, however, with the recession recovery going slowly, the willingness to spend more on "green" products have vanished. Consumers' current concentration is on cost, not the environment. Trends change quickly, and firms are waiting to see when incurring expenses for such products will be worth their while.

Why gas is so expensive, when oil isn't

Gasoline prices have been rising for months. By April 20th, oil price reached $111 per barrel, while gas price reached $3.84 per gallon. The interesting thing is that compare to the price records in 2008, when oil reached $147 per barrel and gas was $4.11 per gallon, the current gas price is catching up with the 2008 record faster than oil price is. Specifically, gas price was 7% off the all time record price in 2008, while oil price was 24% off its record. Also, gas price usually rise slower than oil price.
The article explained that the the oil price reported was for a particular type of oil: West Texas Intermediate storing at Cushing, OK. There has been an increase in the oil supply from North Dakota, Montana, and Canada, while little more pipes have been built, keeping the oil price low. Gas price, however, reflects prices of many other types of oil, and those oil types have had greater increase in price: London's Brent crude was closer to $124 a barrel on Wednesday.
Still, the number doesn't really add up. Gas price is still much closer to its peak than oil price. This might be that there were more subsidies on gas price in 2008, when the government wasn't as vigorously cutting spending as now.

'Uneven' housing recovery continues

Although home sales have increased from the previous months, they are still down from a year ago. In the housing market, supply still far outweighs demand. Foreclosures are evident and the credit score to get a conventional mortgage has risen. First-time buyers purchased 33% of homes in March, down from 44% in March 2010.

Where's the growth?

This is a good article on the outlook of many US banks. Talks about increasing regulations, fines, prosecutions, and less activity that are all pushing down profits for banks. The future doesnt look good for these banks either with even more of the above mentioned factors coming just around the corner.

Baseball Takes Over Control of Los Angeles Dodgers

Baseball Commissioner Bud Selig said Wednesday that he would appoint someone to oversee all operations of the Los Angeles Dodgers because of his “deep concerns” about the state of the marquee franchise.

The reason for Selig wanting to sell the franchise is because Frank McCourt, LA Dodgers owner, has recently damaged the once renowned franchise for his own benefit. It is reported that McCourt has put the team in well over $400 million in debt, and has had disputes with his wife who he recently divorced. If Selig can obtain 3/4 approval vote from all the owners, then he can sell the team on McCourt's behalf.

I believe that this is the end for McCourt as the team looks to be sold on his behalf very soon. He has damaged the franchise and it's time for a change. Selig, as well as the other owners, will put an end to this chaos.

Government Debt Ceiling raised

Disagreements between the Democrats who run the senate and Republicans who run the House of Representatives lead to a late decision of a budget for the rest of the fiscal year. The budget cut is very small when considering the estimated budget deficit for 2011. We can expect the American people to be very disappointed with the results of the negotiations between representatives of the democrats and the house of representatives.

" The Democrats brought events to this pass by neglecting to pass a budget last year, when they had control of both the House and the Senate. The Republicans, for their part, refused to accept a Democratic offer to cut the very amount their own leaders had originally proposed back in February, $75 billion, and instead held out for $100 billion"

The approach of both sides was inefficient considering the goal is to lower the government deficit given that the congress will have to raise the government debt ceiling it imposes.

Japan’s Exports Fall a More-Than-Expected 2.2% After Quake

Japan's exports fell more than economists expected in March as shipments of automobiles tumbled, declines analysts said may worsen as companies struggle to restore facilities and output in the wake of a record earthquake.Overseas shipments declined 2.2 percent from a year earlier, the first drop since November 2009. The median estimate of 19 economists surveyed by Bloomberg News was for a 1.1 percent drop.Car exports fell 28 percent from a year earlier and shipments for electronic devices also slid as the disaster prevented companies from transporting goods. Automakers including Toyota Motor Corp. and Honda Motor Co. were forced to reduce production after the March 11 disaster.

The Assembly Line Is Rolling Again, Tenuously, at Honda in Japan

This article discusses the triumph for Honda in Japan. It has recently began to resume domestic production after the recent earthquake and tsunami that had devastated the automobile industry’s supply chains in Japan. This is great for the Japanese economy, as well as the world economy, for Honda has been one of the leading car manufacturing companies in the world in the last decade. However there are some crucial losses in inventory, which means there is a chance that they may have to shutdown there factories again. But, ultimately this is a good sign for Honda, and furthermore for Japan.

45% don't owe U.S. income tax

The statistics show that nearly half of U.S. households end up owing no federal income tax for tax year 2010. However, the stats is often misunderstood and misinterpreted, like this one. It does not mean 45% households end up paying no taxes at all--they still need to pay other taxes such as state and local income taxes, payroll taxes, and property and sales taxes. Membership to the non-payer group is not restricted to the poor, nearly 5 million households in the group make somewhere between $50,000 and more than $1 million. Very high-income households can fall into the non-payer group if they get their income from tax-exempt bonds or overseas sources for which they get foreign tax credits.

The ranks of those whose federal income tax burden nets out to zero,or less,have grown in recent years due to two reasons: 1). temporary tax breaks to mitigate the economic downturn; 2). The tax code is filled with tax breaks to encourage economic activities the government favors.