Is Greece's Debt Trashing the Euro?

Even those who support Greece's socialist government are expected to go on strike next week to fight the country's new government who plans to cut public wages and pension payments which make up 51% of its budget. If investors don't buy 53 billion euros of government debt this year, Greece may have to get bailout from the European Union or the International Monetary Fund. Greece is in trouble because over the past decade, they took full advantage of a strong euro and low interest rates which led consumers and the government into debt. The euro is now down 5% against the dollar this year. Greece, Spain and Portugal are just recently feeling the worst damages caused by the recession that many countries have been dealing with over the past few years.

Group of 7 Vows To Keep Cash Flowing

On Saturday the G-7's meeting in the Canadian Arctic was concluded. The seven largest economies decided to stay with the fiscal stimulus plan despite the huge debts of some European governments. Britain’s chancellor of the Exchequer had said "We are all absolutely committed to maintaining the support for our economies until we make sure that we have recovery established.” The Euro is loosing value due to the large debt in Greece, accompanied by Portugal, Spain, and Italy. However, American officials do not believe that Greece will default, due to the extensive programs that are going to be initiated. European officials do not believe the IMF should be involved in the matter because of political pressure to decrease spending and increase revenues. The G-7 does not believe this is an issue that they should be handling so it was turned over to the European Union. It is a worry that sovereign debt might come to effect Britain and the US. The IMF concluded that rising sovereign debt “could crowd out private sector credit growth, gradually raising interest rates for private borrowers and putting a drag on the economic recovery.” Another worry is that "massive debts" could also lead to an increased cost of borrowing to the government. In conclusion, the G-7 declared that stimulus spending was necessary in the short run to speed up the process for recovery.

Is Debt Trashing the Euro

The article discusses how debt occurring especially in Greece could be bringing down the price of the Euro in all countries. This was brought on in Greece due to the fact that Greece was riding the strength of the Euro as well as lending money at extremely low rates causing huge debt. Now the problem facing the EU is whether or not they will have the ability to say no to Greece which will allow them to declare bankruptcy.

Judge: Pratt can't move jobs out of US

Weird...this is a first as far as I know. Read the article, and then tell me if this has even happened before in the US.

Growth and hiring outlook improves

According to CNNMoney.com analysts are confident that the current economic upturn will continue into 2010. In the quarterly survey by the National Association for Business Economics the people surveyed said that they expected GDP to increase this year, and 61% of them thought that it would increase by 2% or more. Economists expect that the financial and services sectors will do the best in adding jobs. The goods-producing and transportation sectors are not expected to add many jobs though. The article compiles that statistics of the survey, and according to those polled it seems as if the economy is turning around, although slowly and limited in areas.

Existing home sales sink 16.7%

According to CNNMoney home sales fell in November by 16.7%. Although this is a downturn the year by year report of sales is up by 15%. "It was expected that sales would decline from November to December, because November was slated to be the last month in which sales to first-time homebuyers could qualify for a federal tax credit of up to $8,000." For 2009 though home sales are up by 4.9% from last year. The article goes on to give 7 tips about buying foreclosed houses. Although sales in November have been down things are looking up because car sales are stronger and more sustainable, which is a sign of a better economy.

Economics of Terrorism

I found this article quite interesting in that it was a very different view of terrorism than I've seen and it relatesto this class in an interesting way. As you'll read, terrorist groups, in a way, have their own "economy" putting certain restrictions on it's members and providing benefits to its members to stay loyal. They act like a small centrally planned economy that tries to deter its members from the free market system.

For Older Workers, a Reluctant Retirement

Many people near retirement are feeling "forced" to retire early. Unemployed workers ages 55 to 64 has almost tripled since the recession started. These people have been left with no choice but to dig into their savings to be able to make ends meet. The outlook is predicted 378,000 workers will be pushed to retire due to the weak labor market. It is a problem to retire earlier than planned because they will receive less benefits if they retire at age 62 instead of 65 for example. Also, people who draw from their Social Security benefits before intended risk penalties. What are those close to retirement to do when they are forced out of work and do not have the money to support a standard of living?

N. Korea May Be Easing

This article talks about signs that North Korea may be relaxing on some of their anti private market regulations. It would appear as though the country is allowing for some selling of goods, although these reports are unconfirmed. North Korea cracked down on laws prohibiting private markets in the past in favor of a complete centrally planned economy. Part of this included not allowing the sale of food outside of the government's ration. While other factors persist, it appears that the demand for food has been a huge problem (the government has been under providing). This is an interesting example of the ways in which centrally planned economies have failed and what system to use.

ADP Says U.S. Companies Cut Estimated 22,000 Jobs

Companies in the US experienced the fastest pace of growth in six years last quarter and current trends indicate that companies may be poised to add jobs as they try and keep up with increasing demand.

The private company ADP compiled all the information regarding private employment however does not take into account jobs provided by government agencies. If President Obama's focus on employment comes into fruition, the continued growth in the job market may be even stronger than the forecast from ADP. The trends among big corporations are still inconclusive as Wal-Mart declared that there would be further firings over the next month, while on the other hand General Electronic is looking to increase their payroll by hiring workers in energy, health care and rail transportation. Hopefully the flood of positive news in the media since the beginning of the year continue to increase as the economy tries to rebound from the recession.

Cisco CEO says US economy on the rebound

The CEO of Cisco, John Chambers, told reporters that the sharp increase in capital spending will help boost the economy in 2010. He gave a bullish report on the economy and Cisco is traditionally a very good economic indicator especially for the tech industry. Tech firms are the first to feel the economy improving. Chambers also said that the economy needs the jobs to improve which will improve innovation then lead us to be a better export nation. All this going on, we will experience a better standard of living. These are all themes of our class.

China Researcher Argues for 10% Yuan Gain

I thought this was an good article to contribute given the current tension in US-China relations. Given that the currency dispute has been a hot topic for some time for China, it is thus interesting it is an internal Chinese think tank that is arguing for an appreciation of 10% of the Yuan.

Keeping the currency artificially low undoubtedly has some positive implications for the Chinese economy, but in the long run, there are other considerations such sustaining growth for the long run that needs to be considered as well. I wonder how the Chinese government intends to ride this out.

China Dethrones Germany as Top Goods Exporter

This article details how China surpassed Germany as the world's leading exporter.

Wizard of Oz Economics

Here is an article summarizing what Goran referred to in class about how the movie The Wizard of Oz could also be seen as an economic parable.

Europe Takes Its Own Path Toward Economic Recovery

Good compliment of what we have been talking about in class the last couple of days.

Europe relies on its large companies to maintain a cutting edge in key industries, a sharp contrast to the American pattern of turning to newer, smaller companies to drive innovation and create jobs.

Talks briefly about the possible shift of the US to a more European economic model.

Time Warner’s Movies Help It Swing to a Profit

Time Warner has recently surpassed expectations and has actually produced a profit.

After recently spinning off from AOL, and focusing more on producing movies, running cable TV networks and, to a lesser extent, publishing magazines.

Echoing comments from Mr. Murdoch a day earlier, Mr. Bewkes also said the economy was improving in a way that suggested the worst might be over for the media industry.

“There is increasing evidence that industry trends are going our way,” Mr. Bewkes said.

EU Embraces Greece with Tough Love

This is a great article to complement today's lecture. During class, Professor Goran was talking about how Greece is near bankrupt and that they in violation of EU sanctions. This article here explains that the EU is reaching out to Greece after the submission of its new stability program. The EU is setting several mandates and goals that Greece will have to reach as well as the threat of going to EU Court of Justice if Greece falsifies statistics again. The EU is also requesting that their auditing agency, EuroStat establish permanent offices to watch Greece's progress. Tough Love indeed.

US Response to Tire Market Failure

Here is a good article summarizing the reaction of the US to our decline in tire sales. It explains how we have begun to tax imported Chinese tires in order to slow down their sales as well as give our own tire market a chance to succeed.

Obama Promotes Small-Business Plan

This article is about how president Obama flew to New Hampshire for a Town Hall meeting and promoted his plan of lending $30billion to small businesses. He wants to increase employment so that unemployment is less than 10%. His proposal would need to be approved from the Congress as $30 billion would be redirected from the government's Troubled Asset Relief program. The funds would form the Small Business Lending Fund and would provide money to small businesses. The president has also planned to continue to waive fees and guarantee that small firms would get loans. He also proposed tax breaks that would increase the number of workers hired in the firms or increase wages or number of hours worked in existing firms.
The new lending firm would only be available to banks with assets under $10 million. It seems as though this may really benefit small businesses who may have trouble getting loans and additional finances as banks sometimes may be hesitant to giving out loans to small companies with few assets.

Ordnungspolitik

This article is somewhat dated, but still useful in learning what Ordnungspolitik stands for.

Obama Vows to Press Health Care, Act to Boost Economy (Update2)

This article is about Obama's plan from his state of the union address. President Obama focused on many economic issues, but said that jobs must be the number one focus in 2010. He also focused on our nations deficit spending problem, saying that he will not accept second place for our nation behind others such as China. He proposed a tax incentive for businesses as well. The republican response to what he had to say was that they were happy to hear of his desire to create more jobs, and that we should not be "piling on taxation, regulation, and litigation that kill jobs and hurt the middle class." Obama made note that giving tax cuts to the wealthy, which is what Bush proposed, was not a plausible answer, as in practice it wont work. Giving tax incentives to businesses to promote growth and hiring by hopefully making their cost of production and real wages down, would be a good answer, but this tax incentives have to be funded with the growing national debt kept in mind and in control.

Last Stimulus Report Fuels Jobs Pressure

Recipients of economic-stimulus money said 599,108 workers were being paid by the funds in the last quarter of 2009, fewer than the number of jobs attributed to the package in the seven months after it was enacted.

The recipients' reports, published on the official government Web site recovery.gov late Saturday, are likely to fuel further controversy over the impact of the $787 billion package, as Democrats craft new jobs-creation proposals to address the country's 10% jobless rate. Many opinion polls suggest that most voters don't believe the current stimulus program, which was passed last February, is working.

An In-Depth Look at Fourth Quarter GDP

This isn't a news article, but the people at fivethirtyeight.com have their hands in everything, from economics to politics to foreign affairs, and provide a lot of insightful, reasoned opinions. They also post a lot of facts and data before trying to reach any conclusions, and often admit they don't always have the whole story and to try not to rush to anything. All in all, it's a great site, and this is a nice breakdown of the GDP story.

GM offers $1,000 incentive to Toyota owners

This article is interesting because it deals with "conquest incentives"(material incentives)- which in this case means GM offering incentives to Toyota owners to buy GM vehicles. GM is attempting to capitalize on the recent Toyota recall of over 2.3 million vehicles by offering $1,000 rebates and/or current lease payments for Toyota owners, as well as 0% financing for GM 2009-10 models. Toyota had to recall their cars because of problems with the gas pedals, a similar problem that they dealt with in which they recalled 4.2 million vehicles last September. It is a good business plan for GM to take advantage of the mistakes in production that Toyota has made.

Obama: Here's $5,000. Go hire someone.

This article explains Obama's proposed tax break as an incentive for hiring new workers. During his Wednesday State of the Union Address, Obama listed jobs as his number one priority. Last month, Obama mentioned a tax break to spur job creation, and has now elaborated to explain that employers would get a $5000 tax credit for each net new employee they hire this year. Obama hopes that the recent news about an increase in GDP will increase consumer consumption and give businesses even more of an incentive to hire new employees. He went on to explain that the tax credit would be available to any size firm and would be retroactive to the beginning of 2010. The most money any one firm could receive would be $500,000. Some smaller firms are complaining because they need the money before they hire new employees, not after. But the idea is gaining some momentum in Congress because it is outlined to avoid the abuses that could have occurred with other plans (like employers hiring more employees at lower salaries or employers firing 20 people just to receive the break for hiring 20 more).

Economy soars 5.7 percent, fastest in 6 years

I don't think you have to be an econ genius to understand this article. However, I'm just posting it because I'm sick and tired of conservatives calling for Obama to do more - the economy grew by almost 6 percent in the last quarter. Now a large part of this had to do with the Christmas season, but growth is movement in the right direction and people need to stop demanding more from the government.

Jobless claims, durable goods point to weak growth

This article looks at the overall state of the economic rebound, in as generic a fashion as Yahoo! news can deliver. However, for those who watched the State of the Union last night, it shows how the administration is signing on to tackle some of the key problems that are slowing the recovery - namely, manufacturing growth, job creation, and infrastructure development. At the same time, Wall Street is anxious over administration plans to regulate banks and - as Dr. Skosples said yesterday in class - attempt to lower risk so that banks are no longer too big to fail.

If anyone else watched the speech last night, this post could be a forum to discuss whether or not Obama's proposed policies will help promote efficiency and/or equity as we emerge from the recession.

String of Disappointments, Including Apple, Lower Shares

This article summarizes the falling of shares, stating that the DOW fell 150 points yesterday.

I find this interesting, especially with the release of the new iPad on Wednesday.

“People are expecting a lot out of Apple, and they can’t disappoint,” said M. Jake Dollarhide, chief executive of Longbow Asset Management in Tulsa, Okla. “They can’t afford to get a subdued reaction to their product.”

Ford on the rise: First reported profits in 4 years.

The American auto maker is increasing market share and has been profitable in all of its regions including the challenging North American market. CEO Alan Mullaly talks about competing on a global scale and how being consistent and delivering a solid product has helped the company. Shares are now above $12 from $1.50 in February 2009. The company also won awards at the Detroit Auto Show. Exports also explain that Ford will play off of Toyota's recent missteps. This is just encouraging to read about a great American company get out of the red and establish authority in this industry. America needed this boost to our confidence.

Advocates of Climate Bill Scale down their Goals

I thought this would be an appropriate addition to our class discussion on market failure and the role of government in regulating such failures.

In this article, we see how the Obama administration is attempting to regulate the climate and energy market with the cap and trade policies that is favored by Obama administration. Despite the fact that climate change is a national security threat, we see how other competing aims such as creating jobs for the economy complicates the political decision making process. This is thus a case in point of how the government attempt to allocate resources efficiently is often politicised and complicated by interest groups.

With Sun, Oracle Aims at Giants

Oracle was recently allowed to buy Sun Microsystems after months of scrutiny by European regulators. With this acquisition, Oracle is now competing with Dell, Hewlett-Packard, I.B.M., and Cisco Systems to provide hardware and software to corporate clients. Oracle and its competitors can provide all elements, like databases and servers, that companies need and install all the elements together. Businesses would have to go to multiple vendors in order to obtain all the parts without working through one of these companies. Oracle used to only provide databases in the past. Potential clients like the idea of one-stop shopping, but fear that with only a few big companies to choose from instead of smaller companies providing a single component, price might rise.

Companies do have a reason to be worried. Part of the failure of markets is when there is a decrease in competition. The convenience that these large companies provide might keep future clients from looking at cheaper, single product companies. European regulators were smart to take so long to approve the merger, since consumers may get hurt. The companies must also be careful of becoming too big. When a company grows large, they need to do more planning. Too much planning leads to a company being inflexible. In a market system, being inflexible leads to a company's downfall.

Stimulus more expensive (Provision of Public Goods)

This article describes how the The American Recovery and Reinvestment Act is now expected to be $75 Billion more expensive, with the projected total to be around $862 Billion. The article relates well to class because on 1/25/10 we talked about government intervention especially in the case public or social goods like roads, where private companies usually either do not or will not produce because it has very high fixed costs associated with it, is not very profitable (especially in the short run) and is not very public-friendly, when you pay constant tolls. So, the government takes care of it, and in turn, especially in this case, is providing construction jobs that people otherwise would not have with the construction sector hit hard from the housing crisis and lack of building. On top of this, it is increasing the budget - even though we are supposedly decreasing it in 2010 to 1.35 trillion, down from 14trillion. Included in the additional $75B are food stamp and unemployment costs that were higher than expected due to the extreme amounts of unemployment.

Verizon to Cut 13,000 Jobs

With a fourth quarter loss, Verizon plans to cut 13,000 jobs in 2010. Even after cutting 17,000 jobs last year, there was still a net loss of $653 million. Sales rose from $24.6 billion to $27.1 billion, but below the analyst estimates of $27.3 billion. Verizon’s fixed-line revenue plunged 3.9% from $11.9 billion last year to $11.5 billion this year. This is not surprising news considering today’s economy and all the competition amongst cell phone companies.

US Retail Industry Sales Seen Up 2.5% for 2010

According to this article on cnbc.com, the economy is showing some glimmering signs of hope. This article reports that U.S. consumer confidence rose for the third straight month and highest since September 2008. This indeed is an encouraging sign. Another notable statistic is major retail shares tracked by the Standard & Poor's Retail Index rose 1.1 percent. This is coming off of retailers finishing up a holiday season that was forecasted to be dismal. Job losses have been slowing in numbers every month as well so hopefully employment follows this trend. There are some other important things that relate back to class and that is high income consumers are more likely and in fact, are spending more because they feel that their job is secure. Comparing this to middle income markets, retailers will struggle to break through to this segment. Forecasters also predict that the recovering housing market will continue the retail market.

Home Prices Up Slightly in November

There are mixed feelings within the community concerning the Housing Prices. According to data released Tuesday by Standard & Poor’s Case-Shiller Home Price Index the recovery in the housing market is struggling to stay alive. In November on a seasonally adjusted basis, Home prices were just able to create a 0.2 percent gain. David M. Blitzer, Chairman of the Index Committee at S.&P. declared in a statement, “There is no clear sign of a sustained, broad-based recovery.” A second index, compiled by the government using different data, showed a significantly healthier market. The Federal Housing Finance Agency said Tuesday that its index rose 0.7 percent in November from the previous month, however the October data was revised downward. On the other hand, a third national housing index, released last week by the data firm First American CoreLogic, showed a decline of 0.2 percent in November. However, the pricing data lags the sales data by one month. November home sales were unusually strong because of the rush to take advantage of the government’s tax credit. But December sales, released Monday, fell sharply. That is leading analysts to believe that the long-anticipated winter slowdown has probably begun, even if it is not yet reflected in the data.“We expect home price deflation to resume in the December or January Case-Shiller indices and continue through 2010,” Zelman & Associates wrote in a research note. However, prices in 15 of the 20-city composite cities rose in November from the previous month, while 5 fell, including Chicago, Miami and New York.

Budget Freeze is Proposed

In order to fight the US' $1.4 trillion deficit, President Obama has proposed a three-year stop in spending. This would account for 1/6Th of the federal budget. There will be limits on discretionary spending, but not on military, veterans, homeland security, social security, Medicare and international affairs. The freeze would be on 17% of the budget, $447 billion, which hopefully will save $250 billion over the decade. The cuts potentially will be in the departments of Housing and Urban development, Justice, Energy, Transportation, Agriculture, and Health and Human Services. This is just one of several proposals that will be in the State of the Union address. This is all in efforts to fix our economy and the huge amount of spending that the Democrats have done since in office. Along with the proposal to scale back the federal budget, there is talk of energy reformations and more support for middle-class families.

After 10 Years, Federal Money for Technology in Education

More than 10 years ago, the former president of NBC News and PBS, Lawrence K. Grossman and the former chairman of the Federal Communications Commission, Newton N. Minow, were both asked to research how nonprofit organizations such as schools and libraries could tune into new digital technologies. They planned to construct a multibillion dollar trust to research learning technology. Their organization could be handing out grants by this fall. Although the organization which has bipartisan support did not get as much funding as planned, they continue to expect growth after a few successful projects. This is an example of a positive externality where private costs are greater than social costs. The public is benefiting greatly by expanding their ability to use technology at the expense of private parties and government spending.

Sites to Refuel Electric Cars Gain a Big Dose of Funds

Better Place is a start-up company that has high hopes for creating a green alternative for gas-stations - they are in the process of creating "charge spots" for electric cars, which is a large step in an eco-friendly direction.

Today, Better Place is set to receive $350 million towards its electric car goals, making its total $700 million in investments. The whole business idea is an extremely costly venture, but with such huge financial backing from places like Morgan Stanley and HSBC the company is on its way to putting their goal of having electric car charging centers into reality. The first stations are expected to be built in Denmark and Israel, but Better Place hopes to extend its reach to the US, Australia, and other cities in Europe.

A major obstacle that Better Place faces is convincing the public to go green and to begin using electric cars, as well as convincing auto-makers to begin making more eco-friendly cars. Additionally, it is estimated that Better Place will need billions more in order to finance their potentially ground-breaking company.

In Unions, Government Workers Surpass Private-Sector Workers

Many people, when they hear the phrase “union worker,” probably imagine someone who works on an assembly line. But such blue-collar jobs are probably no longer representative of the typical union man or woman.

For the first time in American history, the majority of the nation’s union members are government workers, rather than private-sector workers, according to a Bureau of Labor Statistics report released today. This is despite the fact that there are five times more wage and salary workers in the private sector.

McCain says campaign finance reform is dead

This article is brief, so I will include a link to the NYT report on the Supreme Court decision so you can dissect the particulars:
http://www.nytimes.com/2010/01/22/us/politics/22scotus.html

What this essentially means is that the Supreme Court believes that the First Amendment is more inclusive than the contested legislation currently reads, and in the instance of campaign-finance legislation, rules that corporations may donate unlimited sums of money to political candidates. Currently, under McCain-Feingold, contributions are limited to a certain amount to prevent candidates from garnering huge sums of money. This is not to say corporations WILL; it merely states they can. For economics, this does mean that politicians will have more of an incentive under the current electoral system to seek donations from corporations (and thus support policies that corporations prefer). For those of you who have read Freakonomics, this does not necessarily mean we will live in a corporatist state - money plays a large but not all-consuming role in politics. However, it is an important decision and should encourage people on both sides of the aisle to try and manipulate the new system.