How about being in Ben Bernanke's shoes?

Try steering the US economy via monetary policy. Have fun.

Bank of Japan Rate-Cut Speculation Surges as Recession Deepens

Expectations that the Bank of Japan will cut interest rates doubled yesterday after the government urged the central bank to do more to support the ailing economy.

Investors saw a 40 percent chance that the policy board will reduce the overnight call rate from 0.3 percent at this week’s meeting, according to calculations made by JPMorgan Chase & Co. based on interest-rate swaps trading, up from 20 percent earlier in the day.

The Tankan result, job cuts and market turmoil will probably prompt the central bank to cut borrowing costs this week, according to Takehiro Sato, chief Japan economist at Morgan Stanley in Tokyo.

“Monetary easing policies will likely be ushered in with a rate cut,” Sato wrote in a report on Dec. 15. He said the central bank will also consider buying stocks and corporate debt as well as increasing the amount of government bonds it purchases each month from 1.2 trillion yen ($13 billion).

UN approves piracy land pursuit

The United Nations Security Council has unanimously approved a resolution allowing countries to pursue Somali pirates on land as well as sea. It is an extension of the powers countries already have to enter Somali waters to chase pirates. Countries will need the permission of the transitional Somali government. It comes after two vessels were seized by suspected Somali pirates off the coast of Yemen, adding to the dozens of ships hijacked in the area this year. It is the fourth resolution approved by the council since June to combat piracy off Somalia's coast.

This year is coolest since 2000

Scientists say, The world in 2008 has been cooler than at any time since the turn of the century. The Cooling La Nina conditions in the Pacific brought temperatures are down to levels last seen in the year 2000. The World Meteorological Organization (WMO) notes that temperatures remained about 0.3C above the 1961-1990 average. Computer models suggest that natural cycles may cool the Earth's surface in the next few years, masking the warming impact of rising greenhouse gas levels. Scientists used data from two major monitoring networks, one co-ordinated by the UK's Hadley Centre and University of East Anglia (UEA) and the other by the US National Oceanic and Atmospheric Administration (Noaa), the WMO reports that despite the cooling, 2008 still ranks among the 10 warmest years on record.

Food Poverty in NYC Soars as Recession Hits Home

NYC Hunger Experience 2008 Update: Food Poverty Soars as Recession Hits Home, a report released today by the Food Bank For New York City shows that over the past five years, the number of New York City residents having difficulty affording needed food has spiked to nearly 4 million - doubling from approximately 2 million in 2003 - representing almost half of all New York City residents (48 percent). Approximately 3.5 million New Yorkers are concerned about needing food assistance (soup kitchens, food pantries and/or food stamps) during the next twelve months, including 2.1 million who have never accessed it before. This mirrors the finding that 3.7 million New Yorkers would not be able to afford food within three months of losing their household income. This alarming prospect may become all too real with unemployment at a 15-year high of 6.7 percent and predicted to reach 9 percent by the end of 2009.

http://www.marketwatch.com/news/story/Food-Poverty-NYC-Soars-Recession/story.aspx?guid={92BC8B09-5DAB-47E6-BF6B-C6FD277EAA67} (here's the link, for some reason I can't enclose the link)

MUFG to acquire Citi Japan trust bank

Citigroup will sell its Japanese trust bank to a unit of Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz) for around $276 million, as the struggling U.S. bank looks to sell assets worldwide.

The U.S. banking giant has previously said it has no plans to sell its Japanese brokerage and investment banking units, or other core businesses in Japan.

The company has all but closed its consumer lending business in Japan, shutting down more than 30 outlets and 540 unmanned branches.

If there was ever a time to be a high roller...

So the economy sucks. I think most of the hundreds of posts on this blog can attest to that. But if there's one thing that might make you feel better, it's that falling prices have made luxury goods much more accessible to consumers, whether you have 30 dollars or 30 million dollars to spare.

This article describes how yacht makers are knocking off $18 million on their $48 million mega yachts, making the boats 'only' $30 million. Luxury home prices are falling rapidly, especially in Hollywood. Rare and fine wines are going for $300,000 less. And if you want a plane to go with your $1.56 per gallon gas prices, you could buy a commercial jet for $3 billion.

This article was written by an author who took advantage of a high lobster supply in Maine due to falling demand. Lobster, usually considered a splurge for a meal (excluding Red Lobster), has fallen in price -- but it won't last long because eventually supply will adjust when lobster fishermen reduce their catch.

And while I don't have any articles to back it, the recession is affecting the fashion industry as well. Finally these stores cannot justify most of their huge markups, and are lowering prices/having bigger sales that you will probably not see for awhile. Just go to saksfifthavenue.com to take advantage of $600, $1000 reductions on good, current-season designer stuff (and not old crap).

If you ever wanted to live the high life, I guess now's the time.

CPI for the West falls 1.8 percent

The data the Consumer price index for the West has fallen once again, this time by 1.8% in the month of November. This follows decreases in both October and September, which definitely is signaling that our economy is hitting a recession. As the article states, this past year the CPI has only risen 1% which is the lowest in 25 years.

I personally find this interesting because I would have thought that with interest rates so low that inflation would be on the rise. But I think that the fall in housing prices, decrease in oil prices, and the drop in the stock market have been too big.

Personally I don't see this as such a bad thing. Yes, the economy and job market are hurting but I think it kind of good that prices are readjusting downward.
Any personal thoughts?

Interest Rates hit near-zero

According to this FT article, the Fed has cut interest rates to near zero in an attempt to stimulate investment and protect the economy from a much-feared deflation. They announced that interest rates would now be fixed between 0 and .25 percent, the "lowest the rates can go." As a result, US stocks and Treasury bonds 'surged' but the dollar weakened against the euro and the yen. The Fed also assured the public that it was prepared to improve economic conditions (or prevent them from worsening further) with a large quantity of reserves and by promoting the purchasing of longer-term securities.

The situation here is similar to Japan in the 90s, when they experienced a 0% interest rate and threat of deflation. However, it is good that the Fed is trying to boost consumer confidence. And by setting a limited range of interest rate fluctuations, maybe it will encourage investors who are expecting the interest rates to drop further to realize that it can't go much lower, and they might as well take advantage of rates now.

This article shows the limitations of monetary policy now. I agree with Obama's statement that the US is in need of a "big fiscal stimulus." If the interest rates hit zero with no major improvement in sight, it may be the only other option.

Economic woes may fuel insecurity: Sugar

Northrop Grumman Corp CEO Ron Sugar predicted that U.S. defense spending would continue at a high rate regardless of the Economic hard times and large government expenditures to stimulate the economy. Sugar say that this "economic meltdown" can cause additional security threats and cause the U.S to be vulnerable to attacks.

"We're going to see more mischief, more ethnic tensions, more fights over resources." Says Sugar. The U.S has been burning through equipments and military spending because of the war in Iraq and Afghanistan, but Sugar does not see a slow down in arms purchases even when the U.S is looking to withdraw from Iraq. Northrop has been winning big contracts from the Pentagon and The company's strong revenue growth may allow it overtake Boeing Co. Sugar said. Sugar said his company generated about $11 billion annually, or a third of its overall revenues, from work on information technologies, and said sales in that sector looked likely to expand given mounting concerns about cybersecurity.

The issue of national security is defiantly an important one to Economic development and progress, but at the same time money spend on military will crowd out money going into to sector with higher returns. The nature of national security is that it is hard to predict the demand and access its utilities because one never knows when attacks can happen or the scale of a crises. So i think this leads to the classic dilemma of Guns or Butter.

(Side Note: I think its Ironic that person with such a sweet name as Sugar is one the Top Weapons Dealer, looking at the name I'd think he'll be selling popsicles.)

OPEC Plans to cut output further

OPEC will make its biggest oil production cut ever, reducing output by 2 million barrels a day, or 2.5% of its total production.  The cartel is trying to catch up with the plummeting demand for oil in these hard times, and decrease the swelling supply.  Prices are dropping, and OPEC, which accounts for 40% of the oil supply, doesn't like it.  Some analysts say their best bet is to keep prices moderate during this recession and help the economy out of it in order to reap future benefits in places like the US, Japan and Europe.

Chinese Car poised to invade the U.S

The crises is Detroit is about to face further competition from abroad, as Chery looks to gain U.S auto market shares. Chery Auto, base in Wuhu Anhui province had won a $1.5 billion deal from the Export-Import Bank of China, in the $4 trillion government stimulus plan. Chery is looking to enter into the U.S market through buying assets from the Chrysler. Chana another car maker from China whom has been a partner of Ford is looking to purchase Ford's Volvo division. Detroit beware!!! it looks like the Big Three are starting to face more and more competitions as they loose their market shares and giving rise to newer and possibly more efficient car companies.

Slump Hits India’s Car Industry

Carmakers Nissan and Renault have cut back on joint projects planned for India. The reason for this is due to the sharp decline in car sales. Nissan said it would cut down on investments to improve cash flow. The plan was to produce cars by the first half of 2010 in the city of Chennai. The plan will continue, but will be scaled back.

The car that will be produced will cost roughly $2500. Another project that is getting delayed is the production facility to make trucks. This is getting delayed due to drop in construction activity and a 60 percent decline in the demand for trucks.

Irish Banks to be Recapitalized

The Irish government plans on providing 10 billion euros to recapitalize its banks. The money will go to four different banks. The finance minister said, “the financial institutions are so embedded in our economy…they are of systematic importance to our economy.” Shares of one bank, Bank of Ireland, have fallen 92 percent this past year.

The objective of the plan is to ensure long-term sustainability in the banking sector. Some of the money to fund the plan might come form the National Pension Reserve Fund.

Japan Doubles Size of Rescue Plan

The Japanese government has increased its stimulus plan another 23 trillion yen. This is an increase from the 27 trillion yen plan it passed in October. Half of the money will go to help stabilize financial markets. The Japanese yen soared to a new high, hurting the stocks of the country’s exporters.

The new plan also includes 10 trillion yen for tax breaks and public financing projects. The prime minister has said, “The economy has worsened beyond our expectations.” Japanese companies are closing and decreasing their workforce due to the decline in global demand and the rising yen.

Chinese Car Sales Hit by Slowdown

Both retail sales and car sales were down in China during the month of November. Retail sales dropped 20.8 percent down from 22 percent, which is less of a drop than predicted. Car sales dropped 14.6 percent when compared November 2007, which was a bigger drop than expected.

The Chinese minister of industry has described the drop in car sales as “a serious problem.” The government has already passed an investment plan to kick-start the economy, but the minister is calling for subsided loans for the industrial sector. The Chinese economy is still expected to grow at 8 percent this year, despite the global economic crisis. China is still growing at a fast pace while most western countries are in recession.

Daily China-Taiwan Flights Begin

Daily passenger and cargo flights have begun between China and Taiwan. It’s the first time in 60 years that such direct transport has been allowed between the two states. It was a visit by a top Chinese official to Taiwan when these negotiations were agreed upon. The agreement is to allow up to 108 flights. Before, both planes and cargo ships would have to make detours to places like Japan or Hong Kong before going to its destination.

This new direct routes will not only save time, but will also decrease the cost of doing business. Supporters see this as a step to warmer ties with China.

Slump in Japan Firms’ Confidence

Japanese business confidence has had the biggest drop in 34 years. The drop was due to fears the economy is headed towards a very long recession. The Tankan survey, which measures business sentiment, fell to -34 from -3. This was the fourth straight decline of the index. Analysts speculate interest rates will be lowered sometime in the future, the exact date is unknown.

This is the first recession for Japan in seven years. Japanese exporters have been especially hard hit due to the global financial downturn and the yen’s surge to a thirteen year high. The current index of -34 was expected, but the next survey is expected to decrease to -36.

North Korea Launches First 3G Phone Network

The first hi-tech mobile phone network for North Korea has been announced by an Egyptian telecom firm. The firm, called Orascom, says that it will invest $400 million over four years. It is unclear who will be able to use the system since North Korea is one of the world’s tightest societies. The country launched a basic system in 2002, but most citizens are banned from using it.

The new system has been launched in the capital city of Pyongyang thus far. The new system will be able to accommodate all 22 million of North Korea’s citizens being able to handle fast internet connections and large quantities of information. Making phone calls out of North Korea is impossible. It is unsure if this new cell phone network will be available to all citizens, but the handset for the new network will cost about $700, which will be out of reach for the vast majority of the citizens

The chief executive of Orascom said that “he was astonished by the quality and advancement of the Korean people,” however the UN estimates that 40 percent of the population is in need of food aid.

Castro on First Presidential Trip

Cuba’s new president, Raul Castro, made his first oversees trip and visited Venezuela, a long time Cuba ally. On this trip, Castro met with Hugo Chavez where the two of them signed a series of joint energy and commercial deals. Also during this trip, 300 different projects in health, education, and culture were announced.

This visit was mostly symbolic in nature, but the two leaders discussed ways to deal with the global economic crisis and the low price of oil, which Cuba receives 90,000 barrels of oil from Venezuela everyday.

US Sales and Producer Prices Fall

Both producer and retail prices fell quite a bit in November due to decreased consumer spending and the reduction in energy prices. Sales fell 1.8 percent, which is the fifth consecutive decrease, but better than October’s 2.9 percent decrease.

The percentage fall is retail sales was not a bad as analysts had expected. Gas price reduction played a major part in the decrease in these percentages.

Pound Continues to Fall Against Euro

Pound Sterling has fallen to a new low against the euro. The US dollar also fell against the euro due to interest rate cut talks. For every one pound it costs 1.1084 euros, or for every euro its 90.22 pence. The dollar fell to $1.3662 against the euro and $1.5294 against the British pound.

The decline in the dollar is due to the uncertainty of the US carmakers and the state of the overall economy. A bailout plan is defiantly weighing hard on the value of the US dollar. The value of the euro was supported by speculations that the ECB will not change interest rates too much in the future.

US Industrial Output Falls by 0.6%

The US industrial production fell by .6 percent in November, which is less that analysts had expected. It was anticipated to fall by .8 percent. Compared to November 2007, industrial production is down 5.5 percent.

Output was up 1.5 percent in October, which is higher than the estimated 1.3 percent. Output at US mines, which includes oil drilling, was up 2.5 percent.

These not so horrible numbers could possibly have been padded due to the increase in oil production following hurricane Ike and the end to strikes at Boeing.

Obama Picks Nobel Man for Energy

US President-elect Barack Obama has picked Steven Chu for his energy secretary. He is a Nobel winner in physics. He is the director of the Lawrence Berkeley National Laboratory and is an energy specialist. Some of the other members of Mr. Obama’s energy team that were recently picked are:

-Lisa Jackson: Head of the EPA
-Carol Browner: will co-ordinate a council on environmental change
-Nancy Sutley: Head of the council on environmental quality

Mr. Obama has made climate change one of his top priorities, stating that we must “move beyond our oil addiction and create a new hybrid economy.”

Fraud Risk ‘Rises’ During Crunch

Fraud will likely increase in the workplace during the global economic downturn, a report has found. The reason for the increase will be because of false figures to make performance look better and because employees, who are facing tough times, are more likely to commit fraud. The typical person who commits fraud is a manager who is male between the ages of 35 to 55. This individual usually works in the finance department and has worked at the company for many years.

Overall, fraud is on the rise and the report states that during the global economic downturn it’s only going to get worse. It will take months to see if the reports findings will come true.

US Rate Cut Towards Zero Expected

The US Federal Reserve is expected to cut rates again from an already historical low of 1 percent. It is expected to decrease to .5 percent or possibly .25 percent. With these cuts, the policy makers at The Fed are running out of options. Other tools they have would be buying debt backed by home loans.

It was the failure of the housing market that caused the problems in the US to begin with, but an increase in demand in that sector could boost the economy. Another way to battle deflation is to use quantitative easing, which is when a central bank prints money and puts it in an economy. Deflation becomes more of a risk if interest rates are expected to decrease, as is the case in the United States.

Rates were at 5.25 percent in September 2007.

Massive Job Losses in Congo Mines

More than 200,000 jobs have been lost in the Democratic Republic of Congo. The reason for this is the decrease in mineral prices due to the global economic crisis. The number of job losses could increase by another 100,000 by the end of this month. The price of producing things like cobalt and copper are greater than the prices of the actual commodities. Forty firms have shut down in the past month due to the collapse in prices. The Democratic Republic of Congo produces 40 percent of the world cobalt. The situation could be helped if the government would decrease taxes on the mining sector.

A Visual Guide to the Financial Crisis

I found this link a while back through the website Digg.com and thought it was very interesting. Basically it gives a visual illustration to the current financial problems and shows how interconnected some of the problems are.

It starts out with what I personally believe has been a major problem, with historically low interest rates. This coupled with excess funds from the burst of the dot com bubble meant that a large investment went into the housing sector. The diagram also gives some nice quotes. I especially like the last one from President Bush.

The Onion

The Onion once again, read it for some lighter material.

After Rate Cuts: The Fed's New Ball Game

This article talks about the Fed's new plan to save the economy and bring us out of the recession. It says that the main instrument (that they hope will be effective) is to print a bunch of money. Everything I have learned in my economic education has shown that this is not the answer. This article acknowledges that the end result could be high inflation and even larger government debt when the recession is cleared. So what are they thinking?? Is a short term fix really that important that we want to cause irreparable damage??

Bankruptcy Filings up 30% this year

This article is about the rather large bankruptcy percentage increase in the United States. It explains that the number of company bankruptcies, as well as individual ones, have both risen. However, the article goes on to explain that the bankruptcy rates are actually lower than that of two years ago. This is rather surprising to me. Why weren't people worried about this two years ago when it happened... Most likely the recession is the simple answer, but any ideas?

Obama filling up the Energy Department

US President-elect Barack Obama has tapped physics Nobel Prize winner Steven Chu as his new energy secretary. Dr Chu shared the 1997 Nobel Prize for physics for his work on cooling and trapping atoms using laser light and is a leader in the field to combat climate change using scientific methods. He now is the director of the Lawrence Berkeley National Laboratory.

Mr Obama also picked former head of the New Jersey Department of Environmental Protection, Lisa Jackson, to lead the environmental protection agency (EPA), and has named Nancy Sutley, a deputy mayor of Los Angeles, as head of the White House's council on environmental quality.

Announcing the environment team, the president-elect vowed to "move beyond our oil addiction and create a new hybrid economy".

I don't know much about the new appointee-elect (is that what you would call them?) but I know their home state and towns don't have the best relationship with nature right now. Maybe they have done a lot respectively.

What's good with Russia?!?!?

A gang of seven racist skinheads, who killed 18 non-Slavic migrants, in Russia's capital have been sentenced to jail terms of between six and 20 years. The murders originally took place between August 2006 and October 2007. The jail sentences are so low beacuse most of the attackers were minors at the time. If you follow the link you can see some of the footage the youths took with a camera phone. The heaviest jail term was handed to Roman Kuzin, one of the leaders, who got 20 years.

I really hope they spend time trying to rehabilitate those kids, not just throw them in jail. You have to stop the racism at the source, not just punish bad behavior, otherwise it won't stop. I think a lot of it has to do with recources. If everything is prosperous and people have jobs I do not care who comes in and out the country that much. But when you see whoever from half-way across the world come and take your fathers job. And it is a recurrence then you'll will just think it is all their fault.

Siemens in corruption settlement

German industrial giant Siemens has agreed to pay over $1.3 billion to settle charges. Siemens is charged with bribery and falsifying its books. As part of the settlement, Siemens will still be able to bid for government contracts in the US. Once again, I feel that this is more of a slap on the wrist for this huge company than a true punishment. They got off easy.

Banks hit worldwide by US 'fraud'

Bernard Madoff has been charged with fraud in what is the biggest case ever in the history of markets. All in all, it amounts to a loss of $50 billion worldwide. A lot of banks in the UK, Spain and France are some of the biggest losers. US prosecutors say Mr Madoff, a former head of the Nasdaq stock market, masterminded a fraud of massive proportions through his hedge fund and investment advisory business. What he did is pay off people already invested in the hedge fund with money from new investors. If found guilty he could face 20 years in prison and a $5m fine. I think he would be getting off easy with this sentence, and he needs to be made an example of, what do you guys think?

Obesity 'controlled by the brain'

Seven new gene variants discovered by scientists suggest that obesity is largely a mental problem. The findings conclude the brain plays a major role in the functions of an appetite, and obesity cannot be blamed solely on metabolic flaws. All seven variants were picked up by a study led by Icelandic company deCODE Genetics, while six of the seven were also identified in a second, independent study by an international team dubbed the Giant consortium.

I think this can do more for people for losing weight. The more control they are aware that they have, the more motivated they will be to change their weight.

Around the World in 80 days

The Bush administration continues it's travels around the world embarks on a late series of foreign policy initiatives. This week the start of the show is Secretary of State Condolezza Rice working at the United Nations seeking help fighting Somali pirates, trying to avert a humanitarian disaster in Zimbabwe and reaching for momentum in Middle East peace efforts.

The State Department did not release details of Dr. Rice's schedule before her trip, but the U.S. is circulating a resolution that would authorize military force against pirates in Somalia, including land and air attacks on pirate bases. Again they are stopping one of the many symptoms of what is a bigger problem.

Dr. Rice, Russian Foreign Minister Sergey Lavrov, EU commissioners Bettina Ferrero-Waldner and Javier Solana, and U.N. Secretary-General Ban Ki-moon will participate in the 60-minute discussion, as well as a second meeting with Arab foreign ministers. Then on Tuesday Miss Rice will attend the Security Council session on Somalia.

Oil Prices Rise With Upcoming OPEC Meeting

Oil prices have risen to about $49 a barrel with the rumor of OPEC cutting supplies by 2 million barrels per day. The leaders in OPEC are trying to combat predictions that oil prices will sink below $30 a barrel in early 2009.

Saudi Arabia said $75 a barrel is a fair price. But what I want to know is shouldn't they have tons of money saved up from when oil was almost $150 a barrel? It seems only fair that prices sink really low for a period.

Christmas Shopping Down

This holiday shopping season has been the worst in decades. Some stores have had to slash their prices 50-70% to draw shoppers in. It is expected that many households will reduce their shopping budget to almost half of what it was last year.

Saturday Dec. 13 was the best shopping day of the season, but still did not compare to last year. Sales on "Black Friday" were 34.5% lower than they were last year. One positive that is coming from this is that shoppers can expect to see even bigger deals in the days to come. Large department stores and electronic stores are going to be looking to reduce their stock and trying to win over reluctant shoppers with great deals.

No End In Sight

U.S. homes are predicted to have lost $2 trillion in value over the past year. There is no end in sight for the mortgage crisis and the falling property values compound the problem. Now homeowners owe a mortgage that is worth more than their home.

Stan Humphris, CEO of zillow.com, said,"When we look for a turnaround we look for two or three consecutive quarters [of smaller price declines]...We also want to see sales numbers pick up, inventories go down and improvements in foreclosure figures. Foreclosures really muddy the picture."

One area of the country where home values are increasing are in metropolitan North Carolina and South Carolina.