Economic Crisis en-us Thu, 10 Jul 2014 22:57:31 -0400 Thu, 10 Jul 2014 22:57:31 -0400 The latest news on Economic Crisis from Business Insider Business Insider Why A New Skyscraper In Saudi Arabia Could Mean Doom For The Global Economy Sun, 27 Apr 2014 12:51:42 -0400 Mamta Badkar <p><img class="float_right" src="" border="0" alt="kingdom tower, saudi arabia" width="481" height="360" /></p><p>Saudi Arabia is expected to begin work on the Kingdom Tower next week.&nbsp;</p> <p>The building in Jeddah is expected to cost $1.23 billion and stand 3,280 feet tall, according to <a href=";contentid=20140218196138">the Saudi Gazette</a>.</p> <p>That's 568 feet taller than Dubai&rsquo;s Burj Khalifa.</p> <p>Construction is also underway on Sky City in China, projected to be 2,749 feet tall. Sky City is expected to finish before the Kingdom Tower and will, for a very brief period, hold the title of the world's tallest building.</p> <p>Two years ago, Barclays introduced its <a href="">Skyscraper Index,</a> which suggests that construction booms, highlighted by record-breaking skyscrapers, coincide with the beginning of economic downturns.</p> <p>In his 2012 report, Barclays' Andrew Lawrence and his team wrote that this is because "the world&rsquo;s tallest buildings are simply the edifice of a broader skyscraper building boom, reflecting a widespread misallocation of capital and an impending economic correction."</p> <p>But it isn't just the world's tallest building we should be looking at. Lawrence said it's also important to look at the number of skyscrapers being built and their geographic profile. This is because the tallest buildings "rarely stand alone."</p> <p>With this in mind, investors should watch the building booms in China, India, and Saudi Arabia.</p> <p>Here's a look at the Skyscraper Index from Barclays (click the image to enlarge it). Basically, what you see is a series of famous skyscrapers associated with subsequent busts. The most recent one is Dubai's Burg Khalifa. Another notable recent one is Malaysia's Petronas Towers, which presaged the Asian economic crisis of the late '90s.</p> <p><img src=" shot 2014-04-23 at 12.29.39 pm.png" border="0" alt="skyscraper index" />Drawing on Barclays' Skyscraper Index, we pulled 10 skyscrapers whose constructions coincided with the financial crises of their times.</p><h3>Equitable Life Building (1873)</h3> <img src="" alt="" /> <p><p><strong>The Long Depression, 1873&ndash;1878</strong></p> <p>The pervasive U.S. economic recession with bank failures that came to be known as the Long Depression coincided with the construction of the Equitable Life Building in New York City in 1873. At the time the building was the first skyscraper at a height of 142 feet.</p> <p>Source: Barclays</p></p> <br/><br/><h3>Auditorium (1889) and New York World (1890)</h3> <img src="" alt="" /> <p><p><strong>British Banking Crisis, 1890</strong></p> <p>Chicago's&nbsp;269-foot-tall Auditorium building, completed in 1889, and the 309-foot-tall New York World building, completed in 1890, coincided with the British banking crisis of 1890 and a world recession.</p> <p>Source: Barclays</p></p> <br/><br/><h3>Masonic Temple, Manhattan Life Building, and Milwaukee City Hall (1893)</h3> <img src="" alt="" /> <p><p><strong>U.S. panic marked by the collapse of railroad overbuilding, 1893</strong></p> <p>Chicago's 302-foot-tall Masonic Temple, the 348-foot-tall Manhattan Life Building, and the 353-foot-tall Milwaukee City Hall coincided with the U.S. panic of 1893 marked by the collapse of railroad overbuilding. It also coincided with a string of bank failures and a run on gold.</p> <p>Source: Barclays</p></p> <br/><br/><a href="">See the rest of the story at Business Insider</a> Why A New Skyscraper In Saudi Arabia Could Mean Doom For The Global Economy Wed, 23 Apr 2014 12:00:00 -0400 Mamta Badkar <p><img class="float_right" src="" border="0" alt="kingdom tower, saudi arabia" width="481" height="360" /></p><p>Saudi Arabia is expected to begin work on the Kingdom Tower next week.&nbsp;</p> <p>The building in Jeddah is expected to cost $1.23 billion and stand 3,280 feet tall, according to <a href=";contentid=20140218196138">the Saudi Gazette</a>.</p> <p>That's 568 feet taller than Dubai&rsquo;s Burj Khalifa.</p> <p>Construction is also underway on Sky City in China, projected to be 2,749 feet tall. Sky City is expected to finish before the Kingdom Tower and will, for a very brief period, hold the title of the world's tallest building.</p> <p>Two years ago, Barclays introduced its <a href="">Skyscraper Index,</a> which suggests that construction booms, highlighted by record-breaking skyscrapers, coincide with the beginning of economic downturns.</p> <p>In his 2012 report, Barclays' Andrew Lawrence and his team wrote that this is because "the world&rsquo;s tallest buildings are simply the edifice of a broader skyscraper building boom, reflecting a widespread misallocation of capital and an impending economic correction."</p> <p>But it isn't just the world's tallest building we should be looking at. Lawrence said it's also important to look at the number of skyscrapers being built and their geographic profile. This is because the tallest buildings "rarely stand alone."</p> <p>With this in mind, investors should watch the building booms in China, India, and Saudi Arabia.</p> <p>Here's a look at the Skyscraper Index from Barclays (click the image to enlarge it). Basically, what you see is a series of famous skyscrapers associated with subsequent busts. The most recent one is Dubai's Burg Khalifa. Another notable recent one is Malaysia's Petronas Towers, which presaged the Asian economic crisis of the late '90s.</p> <p><img src=" shot 2014-04-23 at 12.29.39 pm.png" border="0" alt="skyscraper index" />Drawing on Barclays' Skyscraper Index, we pulled 10 skyscrapers whose constructions coincided with the financial crises of their times.</p><h3>Equitable Life Building (1873)</h3> <img src="" alt="" /> <p><p><strong>The Long Depression, 1873&ndash;1878</strong></p> <p>The pervasive U.S. economic recession with bank failures that came to be known as the Long Depression coincided with the construction of the Equitable Life Building in New York City in 1873. At the time the building was the first skyscraper at a height of 142 feet.</p> <p>Source: Barclays</p></p> <br/><br/><h3>Auditorium (1889) and New York World (1890)</h3> <img src="" alt="" /> <p><p><strong>British Banking Crisis, 1890</strong></p> <p>Chicago's&nbsp;269-foot-tall Auditorium building, completed in 1889, and the 309-foot-tall New York World building, completed in 1890, coincided with the British banking crisis of 1890 and a world recession.</p> <p>Source: Barclays</p></p> <br/><br/><h3>Masonic Temple, Manhattan Life Building, and Milwaukee City Hall (1893)</h3> <img src="" alt="" /> <p><p><strong>U.S. panic marked by the collapse of railroad overbuilding, 1893</strong></p> <p>Chicago's 302-foot-tall Masonic Temple, the 348-foot-tall Manhattan Life Building, and the 353-foot-tall Milwaukee City Hall coincided with the U.S. panic of 1893 marked by the collapse of railroad overbuilding. It also coincided with a string of bank failures and a run on gold.</p> <p>Source: Barclays</p></p> <br/><br/><a href="">See the rest of the story at Business Insider</a> Greece Economy Has Started To Rebound But Stability Is Still A Long Way Off Wed, 09 Apr 2014 06:01:00 -0400 Karolina Tagaris <p><img class="float_right" src="" border="0" alt="A protester stands in front of the parliament during an anti-government rally outside the parliament in Athens March 30, 2014. REUTERS/Yorgos Karahalis" /></p><p><span style="line-height: 1.5em;">PIRAEUS, Greece (Reuters) - Nikos Mavrikos has fired half of his employees since 2010 as the Greek economy imploded, leaving his ship supply business on the verge of collapse. February marked a turning point, however: Mavrikos made a hire, his first in four years.</span></p> <p>"People are slowly starting to trust Greece again," says Mavrikos, who hopes to take on even more employees soon at his family-owned business.</p> <p>Greece is experiencing a remarkable financial recovery. Just two years ago, the country was expected to default and exit the euro, possibly setting off a messy unraveling of the entire currency bloc.</p> <p>Today, after a tough regime of layoffs, wage cuts and reductions in government spending, factories are beginning to hum again, Greeks are starting to buy cars and other products again and the country is being courted in financial markets. The government is looking to the end of a tough international emergency aid program at the end of the year.</p> <p>On Tuesday, Greece sold six-month Treasury bills at the cheapest borrowing cost since 2010. Most of the buyers were foreign. It is planning a return to the international bond markets for the first time in four years on Thursday, with the sale of a five-year euro bond.</p> <p>"The image of Greece abroad has changed dramatically. Now the sentiment is changing in Greece as well," Greek Prime Minister Antonis Samaras told Reuters in an interview last week. "We are now at the edge where unemployment has stopped rising, no more people are being fired, and there are some very positive indications of new hires."</p> <p>For all the green shoots, it is too early to talk about long-term economic stability. Thousands of businesses closed across Greece last year. Unemployment is at a record of nearly 28 percent, and large numbers of Greece's 20- and 30-somethings have lost precious years of early employment that are likely to hamper their work and earnings potential for the rest of their lives. Strikes against austerity continue.</p> <h3>MASSIVE DEBT</h3> <p>Greece's debt is still a massive 175 percent of economic output, and meeting a target to reduce that to 110 percent by 2020 will be difficult without economic growth.</p> <p>In its latest report on Greece last November, the Paris-based Organisation for Economic Cooperation and Development said the country's international bailout had not yet led to a true economic recovery. "Restoring growth, making it sustainable and dealing with social costs are essential," the OECD said.</p> <p>According to James Howat, an analyst at London-based Capital Economics, despite the fall in borrowing costs, direct investment flows remain weak - suggesting longer-term investors are not yet convinced by the first signs of economic recovery.</p> <p>Mimis Vanos, who runs one of the biggest marine supply companies in Greece, has like his colleague Mavrikos seen an uptick in demand. But he says the problems that have plagued Greece's economy for decades - including widespread corruption, tax evasion and barriers to competition across industrial sectors - haven't been solved. Vanos also says bank credit remains extremely tight.</p> <p>"For the last 50 years I've been hearing that things are changing in Greece," said Vanos. "I'll believe it when I see it.</p> <h3>BANK LENDING</h3> <p>Greece's economy is the most dependent on bank lending in the euro zone, with bank credit to the private sector making up 40 percent of total funding in 2000-2008 compared to 33 percent across the single currency bloc.</p> <p>But bank credit to the private sector has been in decline since 2011, aggravating the country's six-year economic slump. Prospects of a mild economic recovery this year will largely depend on new lending.</p> <p>According to the latest Bank of Greece data, in February lending to the private sector shrank 4 percent year-on-year, while loans to businesses dropped 5.2 percent year-on-year.</p> <p>The port of Piraeus - one of the busiest tourism ports in Europe - has long been a benchmark of the wider Greek economy. It is a hub for Greece's vibrant tourist business and the transport of goods between Asia and Europe.</p> <p>Yet marine supply firms, many of which are small and family-run, have suffered brutally during the economic crisis. Lending from the stricken banking sector dried up, leaving many firms starved of cash even though the shipping business, which accounts for 5 percent of Greece's overall economic output, held up better than many other sectors.</p> <p>The Hellenic Ship Suppliers Association said 40 percent of its members had gone out of business since 2010 when Greece's economic disaster began to unfold.</p> <p>For ship suppliers, problems began when insurers that cover exporters against the risk of not getting paid, started tightening the terms for business with Greece in mid-2012. That forced exporters to clamp down on credit, often demanding cash on delivery or upfront. Short of cash, Greek importers had to place smaller staggered orders which pushed up delivery costs.</p> <h3>CASH RESERVES</h3> <p>At the height of Greece's economic crisis, it was impossible for firms to order anything on credit, forcing them to burn through cash reserves to pay upfront.</p> <p>"In the beginning companies gave you credit, then that stopped. Then they wanted bank guarantees, but then that stopped too because they didn't trust the Greek banking system," says Mavrikos, whose firm supplies drinks, food and tobacco to ferries, cruise and cargo ships. He says he had no choice but to lay off nearly half of his 40 employees.</p> <p>Things began to shift towards the end of 2013, however.</p> <p>Last year, passenger traffic in Piraeus rose 11.1 percent from 2012, and there was a 3.7 percent increase in container ships on the Asia-Europe route. Greek supplies to EU-flagged ships improved considerably, says Nikos Archontis, from the Panhellenic Exporters Association.</p> <p>Now, says Mavrikos, the foreign businesses from which he buys most of his stock are accepting bank guarantees. "That's given us breathing space. It means we can import goods, we can pay our bills."</p> <p>More good news could lie ahead for the port. Last year, China's largest bulk shipper, COSCO Holdings, agreed to a multimillion euro deal to expand its container operations at Piraeus. That deal is expected to increase the port's cargo handling capacity by two thirds in the next seven years.</p> <p>On a recent afternoon, Vanos' warehouse was bustling. His company mainly supplies tankers, container ships and gas carriers from countries such as China, Panama and Liberia. For his stock, he in turn buys flour and pasta from Turkey, canned fish from Malaysia and meat from Brazil. Vanos says his inward and outward business has picked up in recent months.</p> <p>"Ships that had never sailed to Greece before are starting to arrive," he said, as truckloads of food, alcohol, brooms and maps were being prepared for dispatch to ships at Piraeus.</p> <p>Yet Vanos says the Achilles Heel of the Greek economy remains tight credit.</p> <p>"Before the crisis, banks would approve the amount we asked for in a week. For the last three years, they haven't given us a cent," he says. "Until the bank tells me 'take the money you need,' nothing has changed."</p> <p>($1 = 0.7291 euros)</p> <p>(Editing by Alessandra Galloni and Giles Elgood)</p><p><a href="">Join the conversation about this story &#187;</a></p> How A Financial Crisis Can Help Your Retirement Sat, 05 Apr 2014 15:58:00 -0400 Joe Udo <p><img class="float_right" src="" border="0" alt="old people" width="800" /></p><p>It&rsquo;s been five years since the global financial crisis, and the stock market has made a remarkable recovery. The S&amp;P 500 rose 125 percent and is now at an all-time high.</p> <p>The bull market has been great for many of us who kept investing through the difficult years.&nbsp;<span style="font-size: 15px; line-height: 1.5em;">Financial downturns can actually be good learning experiences.</span></p> <p>If we encounter a crisis early in our investing journey, we have plenty of time to recover and learn from our mistakes.</p> <p>A recent study from Fidelity found that American households have made huge strides in their&nbsp;<a href="" title="Link:">personal finance habits</a>. Many investors have taken the following steps to secure their finances further:</p> <h2><strong>Save more</strong></h2> <p>Investors&nbsp;<a href="">increased their retirement contributions</a>&nbsp;over the last 5 years, which means they are likely to be more prepared for retirement.</p> <h2><strong>Better prepare for the unexpected</strong></h2> <p>Many households have reduced their personal debt over the last few years. They also started or increased their emergency fund. Unexpected events will have less of an impact on your life if you have adequate savings to cushion the blow.</p> <h2><strong>Rethink risk</strong></h2> <p>Many investors sold stocks during the downturn and shifted to bonds. Of course, it&rsquo;s difficult to know when to get back in and a lot of people missed part of that 125 percent S&amp;P 500 gain. Investors need to examine their risk tolerance to figure out a plan they can stick with over the long term.</p> <p>Many investors lost a lot of money during the financial crisis, but the long-term lessons we learned are invaluable. There will be another financial crisis in the future, and we need to apply these lessons to avoid losing even more money next time. It&rsquo;s much better to go through these financial crises when you are young rather than when you are getting&nbsp;<a href="" title="Link:">ready to retire</a>.</p> <h2><strong>Investing opportunities during the financial crisis</strong></h2> <p>For younger investors, the financial crisis was a boon. It provided an opportunity to buy stocks at bargain basement prices. Even if your portfolio lost 50 percent of its value, it is still a small amount in the grand scheme of things when you&rsquo;re young.</p> <p>Young people didn't have a huge amount of money to lose. When you&rsquo;re starting out, it&rsquo;s more important to&nbsp;<a href="" title="Link:">increase your saving rate</a>&nbsp;and to learn how to invest for the long term.</p> <p>It&rsquo;s also good to go through a big correction so you can see how the stock market recovers. You can learn from this experience and be more prepared for the next downturn. The downturn was an opportunity to figure out your risk tolerance and your&nbsp;<a href="">target asset allocation</a>.</p> <p>Many investors thought they could handle a stock market drop. However, when the S&amp;P 500 dropped 50 percent, they really couldn&rsquo;t handle it. If you set your risk tolerance correctly, then you should be able to stick to your asset allocation plan and ride out the down years.</p> <p>Once you have a long-term plan and a good asset allocation target, you just need to stick with it and&nbsp;<a href="">rebalance occasionally</a>. Of course, we all change as we get older and you will need to reassess your risk tolerance every 5 years or so. Most of us will become more conservative and our portfolio needs to reflect that.</p> <h2><strong>Personal finance lessons</strong></h2> <p>Even if you don&rsquo;t follow the stock market, a personal financial crisis can be a good learning experience. If you lose a job, you will learn to cut costs and keep some emergency funds for the future.</p> <p>If you lose a house to foreclosure, then you will know not to buy too much house next time. Losing a well-paying job can be difficult, but you will learn how to live a moderate lifestyle and avoid overspending.</p> <p>These&nbsp;<a href="" title="Link:">financial setbacks</a>&nbsp;can be tough, but if you have an open mind you will learn from your experience.&nbsp;</p><p><a href="">Join the conversation about this story &#187;</a></p> 7 Questions About The Puerto Rican Debt Crisis You Were Too Embarrassed To Ask Tue, 29 Oct 2013 11:04:00 -0400 Rob Wile <p><img class="float_right" src="" border="0" alt="puerto rico" width="480" /></p><p>Puerto Rico is in serious trouble.</p> <p>The economy has been in and out of recession, and at 13.5%, its unemployment rate is painfully high.</p> <p>Last week, The Economist <a href="">compared the island's economic crisis to the situation to Greece</a> as the country undergoes further rounds of austerity.&nbsp;</p> <p>Puerto Rico's story is an important one, and it matters more than many Americans can appreciate.</p> <p>We answer the seven basic questions you might have about Puerto Rico:</p> <h3>1) A lot of the U.S. states are in the dumps economically, so why are we now talking about Puerto Rico?</h3> <p>It's recently become very expensive for Puerto Rico to borrow money. Puerto Rico's bonds are trading at about 60 cents on the dollar, and yields have climbed above 9%, <a href="">according to Reuters</a>. They're rated just above investment grade with a negative outlook.</p> <p>This is much higher than what the states face.</p> <p>That's never good, but it's really bad for Puerto Rico, which is unusually dependent on deficit financing, meaning borrowing money to pay the bills.</p> <p>Because the island's securities are tax exempt, bond investors around the world and especially in the U.S. have for years catered to the island's &nbsp;debt financing habit.</p> <h3>2) &nbsp;Does this mean Puerto Rico is the next Detroit?</h3> <p>In a way. People are now saying Puerto Rico <a href=";sid=2EYD&amp;ext=PDF&amp;lcl=PuertoRicoFAQ.pdf&amp;usr=standardpoors&amp;doc=178855954&amp;key=key-1y6hnwde2pw8u26o5pv&amp;sf923039=1">could default</a>.</p> <p>However, unlike Detroit, it cannot file for Chapter 9 municipal bankruptcy protection &mdash; <a href="">the law treats it like a U.S. state</a>.&nbsp;</p> <p>So the specter of a federal bailout <a href="">is now being raised</a>.</p> <h3>3) &nbsp;Seriously? A bailout?</h3> <p>Seriously. Puerto Rico's banks already received bailout funds 2010. <a href="">Only last week</a><span>&nbsp;was Banco Popular, the island's largest financial institution, able to ask the Fed whether it was eligible to exit TARP.&nbsp;</span></p> <p>The island itself <a href="">was in talks</a>&nbsp;to get a bailout in 2009.&nbsp;</p> <h3>4) &nbsp;How did everything go so wrong?</h3> <p>The Puerto Rican economy has been in and out of recession since 2006, when&nbsp;<a href="">an earlier fiscal crunch caused San Juan to shut down</a> (yup, they're an American territory alright). That was also the same year federal tax breaks for an experiment designed to pump up the island's manufacturing sector <a href="">expired</a>.</p> <p>But the island has never been terribly competitive. The island's labor force participation hovers around 40%, and the public sector accounts for 20% of all employment.</p> <p>The Great Recession did not help matters. Three Puerto Rican banks <a href="">went under</a> as the world's travelers couldn't afford to vacation to the island nation.</p> <p>Everything came to a head this summer as unemployment <a href="">hit a 2-year high</a> and an index measuring Puerto Rican economic activity shrank 5.4% in August, the biggest drop since 2010, <a href="">Bloomberg's Michelle Kaske says.</a>&nbsp;</p> <p>That helped send bond yields spiking to record highs, triggering the current crisis.</p> <h3><a href=""></a><strong>5) &nbsp;Alright, I get it, it's bad. But still, this couldn't possibly affect me, right?</strong></h3> <p>Maybe. If you live in the United States, the chances that you or someone you know have pensions exposed&nbsp; to Puerto Rican debt are high.</p> <p>As we mentioned, Puerto Rico's tax-exempt bonds have (until now) been very popular with U.S. muni funds: about three-quarters of them hold Puerto Rican securities.</p> <p>And we don't even know the extent of the exposure within those funds: <a href="">Bond Buyer reported last week</a> the SEC was checking around to see copies of many muni funds' most recent stress tests.&nbsp;</p> <p>So if Puerto Rico is unable to meet its obligations, it's likely you or someone you know is going to lose money.</p> <p>Muni funds <a href="">have already had their worst year ever</a>, in part because of the Puerto Rican situation.</p> <h3>6) &nbsp;You now have my attention. What is the government doing about it?</h3> <p>For now, Washington says it is "monitoring the situation."&nbsp;</p> <p>In Puerto Rico itself, there have been successive administrations who have attempted to cut and tax the island out of default danger.</p> <p>Current Governor Alejandro Garc&iacute;a Padilla has successfully passed legislation that includes reinstating higher corporate tax rates, and imposing a new gross receipts tax.&nbsp;</p> <p>He also raised the retirement age for state workers, upped pension contributions, and cut summer and Christmas bonuses.</p> <p>That's actually a lot more than what some other states facing pensions crises, like Illinois, have done... &nbsp;</p> <h3>7) &nbsp;Ok, so if I want to keep following this story, what should I look out for?</h3> <p>Unfortunately, Puerto Rico does not have an economic engine like Chicago to keep it afloat.</p> <p>So, now we have to wait and see if the island can stomach austerity socially and economically.&nbsp;</p> <p>And there are already signs it is struggling to do so: in the past few years, tens of thousands of people have left the island for better opportunities, mostly coming to the U.S.</p> <p>We <a href="">reported yesterday</a> how the most recent round of cuts has caused a spike in theft of school property. Some have also <a href="">blamed a recent, deadly bacterial outbreak</a> at a public hospital on lack of necessary funds. &nbsp;</p> <p>Garc&iacute;a Padilla&nbsp;administration members have been aggressively making their case to investors and business leaders stateside &mdash; just this last week, <a href="">the country's economic development minister came to New York to meet with executives at places like BlackRock and Pfizer</a> &mdash; &nbsp;that its fiscal reforms are on track.</p> <p>If you see any cracks emerge on this united front, you'll know the worst has only just begun.</p><p><strong>SEE ALSO:&nbsp;<a href="" >The Three Questions Dominating Discussions On Wall Street</a></strong></p> <p><a href="">Join the conversation about this story &#187;</a></p> These Skyscrapers Predicted History's Worst Financial Crises Tue, 28 May 2013 15:13:00 -0400 Mamta Badkar <p><img class="float_right" src="" border="0" alt="Burj Khalifa Dubai" width="400" /></p><p>In China, construction on <a href="">Sky City, which is expected to be the world's tallest building</a>, will begin in June.</p> <p>It is expected to rise to 838 meters.</p> <p><a href="">Barclays' Skyscraper Index </a>suggests that construction booms, especially those highlighted by record-breaking skyscrapers, coincide with the beginning of economic&nbsp; downturns. The index even suggests that the rate of increase in height could also reflect the extent of that economic crisis.&nbsp;</p> <p>Drawing on Barclays' Skyscraper Index, we pulled 11 skyscrapers whose constructions coincided with the financial crises of their times.</p><h3>Equitable Life Building (1873)</h3> <img src="" alt="" /> <p><p><strong>The Long Depression, 1873 - 1878</strong></p> <p>The pervasive U.S. economic recession with bank failures that came to be known as the Long Depression coincided with the construction of the Equitable Life Building in New York in 1873. At the time the building was the first skyscraper at a height of 142 feet.</p> <p><em>Source: Barclays</em></p></p> <br/><br/><h3>Auditorium (1889) and New York World (1890)</h3> <img src="" alt="" /> <p><p><strong>British Banking Crisis, 1890</strong></p> <p>Chicago's&nbsp;269-foot tall Auditorium building completed in 1889, and the 309-foot tall New York World building completed in 1890, coincided with the British banking crisis of 1890, and a world recession.</p> <p><em>Source: Barclays</em></p></p> <br/><br/><h3>Masonic Temple, Manhattan Life Building and Milwaukee City Hall (1893)</h3> <img src="" alt="" /> <p><p><strong>U.S. panic marked by the collapse of railroad overbuilding, 1893</strong></p> <p>Chicago's 302-foot tall Masonic Temple, and the 348-foot tall Manhattan Life Building, and the 353-foot tall Milwaukee City Hall coincided with the U.S. panic of 1893 marked by the collapse of railroad overbuilding. It also coincided with a string of bank failures and a run on gold.</p> <p><em>Source: Barclays</em></p></p> <br/><br/><a href="">See the rest of the story at Business Insider</a> The Post-Crisis Global Economy Will Be Characterized By Large Imbalances Thu, 07 Feb 2013 19:22:00 -0500 Sanjeev Sanyal <p><img class="float_right" src="" border="0" alt="chinaese circus tight rope balance" width="400" /></p><p>Many analysts and observers believe that the global imbalances that characterized the world economy in the years before the 2008 crisis have substantially dissipated.</p> <p>But, while it is true that China&rsquo;s current-account surpluses and America&rsquo;s deficits have somewhat moderated since then, have the imbalances really been corrected?</p> <p>More important, can the post-crisis global economy enjoy both growth and balance?</p> <p>To answer these questions, it is important to understand the imbalances&rsquo; underlying dynamics. An economy&rsquo;s current account is the difference between its investment rate and its savings rate.</p> <p>In 2007, the United States had a savings rate of 14.6% of GDP, but an investment rate of 19.6%, generating a current-account deficit. By contrast, China had a fixed investment rate of 41.7% of GDP and a savings rate of 51.9%, reflected in a large surplus.</p> <p data-line-id="545f380346f86fe01b61a434">Since 2007, the US current-account deficit has narrowed, but not because of a higher savings rate. Rather, the external deficit has been squeezed by a collapse in investment activity, while America&rsquo;s overall savings rate has fallen below 13% of GDP, owing to worsening government finances.</p> <p data-line-id="545f380346f86fe01b61a434">Meanwhile, China&rsquo;s savings rate remains stubbornly high. The surplus has narrowed because investment has been ramped up even higher, to roughly 49% of GDP. In other words, the Americans save even less today than they did before the crisis erupted, and the Chinese invest even more.</p> <p data-line-id="545f380346f86fe01b62a434">Any future recovery in the US economy will almost certainly trigger a revival in investment activity. American businesses have postponed much-needed capital spending and, with American airports and bridges in appalling condition by developed-country standards, investment in infrastructure is crucial as well.</p> <p data-line-id="545f380346f86fe01b62a434"><a class="hidden_link" href="">Indeed</a>, it is very likely that reviving growth will lead to larger current-account deficits, even if the savings rate improves and domestic energy production curtails oil and gas imports.</p> <p data-line-id="545f380346f86fe01b63a434">China has the opposite problem. In order to sustain growth, it needs to continue to invest half of its $9 trillion annual GDP &ndash; no easy task for a country that already has brand new highways and airports.</p> <p data-line-id="545f380346f86fe01b63a434">In fact, over the next decade, as China attempts to move up the value chain into services and adjusts to a shrinking workforce, its investment requirements will shrink &ndash; and its investment rate will fall sharply.</p> <p data-line-id="545f380346f86fe01b64a434">Of course, China&rsquo;s savings rate will also decline, but Japan&rsquo;s experience since the 1980&rsquo;s demonstrates how a sharp fall in investment can generate large and persistent current-account surpluses, even when the savings rate is falling and the currency is appreciating. Indeed, a stronger currency can paradoxically feed external surpluses, while discouraging investment in export-oriented industries.</p> <p data-line-id="545f380346f86fe01b65a434">The implication is that the post-crisis global economy will not be characterized by balance, but by a return to large macroeconomic imbalances. But, although many economists will consider this problematic, history shows that symbiotic imbalances have characterized virtually all periods of global economic expansion.</p> <p data-line-id="545f380346f86fe01b66a434">The Roman Empire ran a persistent trade deficit with India for centuries. Although the resulting outflow of gold caused monetary debasement in the Roman Empire, Indo-Roman trade remained the backbone of the global economy.</p> <p data-line-id="545f380346f86fe01b67a434">Similarly, Spain ran persistent deficits in the sixteenth and seventeenth centuries, paid for by Andean silver. The resulting flood of liquidity caused a global boom that benefited economies from Elizabethan England to Mughal India. And 1870-1913, another period of rapid growth and globalization, was not characterized by balance; it was funded by the United Kingdom, acting as the world&rsquo;s &ldquo;bank.&rdquo;</p> <p data-line-id="545f380346f86fe01b68a434">In the last 60 years, the US has underpinned global growth by running persistent current-account deficits. Under the Bretton Woods system, the US ran deficits that enabled war-torn Europe and Japan to rebuild. In return, Europe funded the US deficits.</p> <p data-line-id="545f380346f86fe01b69a434">The system broke down when European countries, particularly France, decided to stop funding those deficits. But the economic model persisted, with Asian economies stepping in to finance the US deficits, while using the US market to grow rapidly. China is the latest and largest beneficiary of the economic model dubbed &ldquo;Bretton Woods II.&rdquo;</p> <p data-line-id="545f380346f86fe01b6aa434">Clearly, periods of global growth are almost always characterized by symbiotic imbalances. But, while each of these episodes was characterized by macroeconomic distortions caused by the imbalances, they lasted for years, or even decades. So, the real question is what the next generation of symbiotic imbalances will look like.</p> <p data-line-id="545f380346f86fe01b6ba434">It is likely that China will soon return to running very large current-account surpluses &ndash; potentially large enough to fund the US, with plenty left over for the rest of the world. As this capital cascades through the global financial system, it will re-inflate the economy.</p> <p data-line-id="545f380346f86fe01b6ca434">In the &ldquo;Bretton Woods III&rdquo; system, China will transform from &ldquo;factory to the world&rdquo; to &ldquo;investor to the world.&rdquo; Like all imbalanced systems, it will have its distortions, but the arrangement could last for many years.</p><p><a href="">Join the conversation about this story &#187;</a></p> CBO: One Of The Biggest Long Term Drivers Of The Deficit Is Already Improving Wed, 06 Feb 2013 11:58:00 -0500 Walter Hickey <p><img class="float_right" src="" border="0" alt="obamacare supporters supreme court" width="400" /></p><p>Yesterday, we noted that the<a href=""> Congressional Budget Office was forecasting that many short-term drivers of the deficit</a> were being taken care of through upcoming cuts and revenue increases.&nbsp;</p> <p>But, the CBO also reported that one of the most important <em>long term</em> drivers of the debt is becoming less of a problem.</p> <p>This is incredible news for both deficit hawks and people who don't want to further reduced the size of government.&nbsp;</p> <p>The acceleration of the growth rate of the cost of healthcare <a href="">was and remains one of the primary drivers</a> of the future national debt.&nbsp;</p> <p>One of the entire points of the health care fight was to get a bill that just slows down that growth so that GDP could catch up. The hope is to&nbsp;<a href="">decrease the severity</a> of the parabolic increase in health care costs.&nbsp;</p> <p>So it's excellent news that the nonpartisan, apolitical Congressional Budget Office reported they expect the deceleration of health care cost growth to have an impressive impact on the budget down the road.&nbsp;</p> <p style="padding-left: 30px;"><em>Medicaid and Medicare.</em> In recent years, health care spending has grown much more slowly both nationally and for federal programs than historical rates would have indicated. (For example, in 2012, federal spending for Medicare and Medicaid was about 5 percent below the amount that CBO had projected in March 2010.) <em>[...]</em><span style="line-height: 1.5em;">&nbsp;From the March 2010 baseline to the current&nbsp;</span><span style="line-height: 1.5em;">baseline, such technical revisions have lowered estimates&nbsp;</span><span style="line-height: 1.5em;">of federal spending for the two programs in 2020 by&nbsp;</span><span style="line-height: 1.5em;">about $200 billion&mdash;<strong>by $126 billion for Medicare and by&nbsp;</strong></span><span style="line-height: 1.5em;"><strong>$78 billion for Medicaid</strong>, or by roughly 15 percent for&nbsp;</span><span style="line-height: 1.5em;">each program.</span></p> <p><span style="line-height: 1.5em;">In short: The <a href="">CBO was surprised</a> to find that soon the U.S. will see major savings on Medicare and Medicaid because health care spending growth has slowed. That will save billions of dollars down the line.&nbsp;</span></p> <p><span style="line-height: 1.5em;">According to <a href="">Sarah Kliff at WonkBlog:</a></span></p> <p style="padding-left: 30px;"><span style="line-height: 1.5em;"><span>Squeezing $200 billion out of entitlement programs is nothing to sneeze at; that&rsquo;s about double the revenue the government would generate by raising the Medicare eligibility age from 65 to 67.</span></span></p> <p><span style="line-height: 1.5em;">Here's the expected savings for federal health care programs as a result of the deceleration of cost growth:</span></p> <p><span style="line-height: 1.5em;"><img src="" border="0" alt="years for medical" width="590" /></span></p> <p><span style="line-height: 1.5em;"><img src="" border="0" alt="cost decreases medicare" width="590" /></span></p> <p><span style="line-height: 1.5em;"><br /></span></p> <p><strong><a href=""><span style="line-height: 1.5em;">Read the full report here</span></a></strong></p><p><a href="">Join the conversation about this story &#187;</a></p> The World Economy Is Pushing The Planet Beyond Safe Operating Conditions Wed, 06 Feb 2013 05:06:20 -0500 Jeffrey Sachs <p>ADDIS ABABA &ndash; What does the future hold for the global economy? Will living standards rise worldwide, as today&rsquo;s poor countries leapfrog technologies to catch up with richer countries? Or will prosperity slip through our fingers as greed and corruption lead us to deplete vital resources and degrade the natural environment on which human well-being depends? Humanity faces no greater challenge than to ensure a world of prosperity rather than a world that lies in ruins.</p> <p>Read more at <a href=""></a> &gt;</p><p><a href="">Join the conversation about this story &#187;</a></p> There Are Signs We Are Living In A Police State Mon, 31 Dec 2012 10:37:15 -0500 Eric Zuesse <p><img class="float_right" src="" border="0" alt="san francisco giants riot police world series 2012" width="400" /></p><p>In August 2009, the <a href="" target="_blank">corporate-organized FreedomWorks/Koch &ldquo;Tea Party&rdquo; group within the Republican Party</a> bused its adherents to riots they organized against Democratic members of the U.S. House of Representatives who were trying to hold informational town hall events in order to discuss with constituents emerging healthcare legislation.</p> <p>However, there was no FBI surveillance of those corporate-organized disruptions of legitimate democratic processes.</p> <p>There also were no subsequent FreedomWorks applications for Freedom of Information Act releases of FBI files regarding such surveillance being used against them &ndash; because there was no such FBI campaign against them.</p> <p><span></span>When the grassroots Occupy Wall Street movement organized their peaceful demonstrations against banksters in September 2011, on the other hand, there was massive FBI surveillance used against them.</p> <p>On 22 August 2011 &ndash; over a month prior to the first such demonstration on September 17th &ndash; the FBI sent to its NYC field office a memo marked &ldquo;Routine,&rdquo; which summarized a &ldquo;meeting&rdquo; that had been held with &ldquo;New York Stock Exchange/Euronext (NYSE),&rdquo; which had &ldquo;Discussed ... the planned anarchist protest titled &lsquo;Occupy Wall Street&rsquo;, scheduled for September 17.&rdquo;</p> <p>Get that word &ldquo;anarchist.&rdquo; It&rsquo;s not friendly. And the FBI had already organized for these Wall Street executives; this meeting had itself been organized even prior to this 22 August 2011 memo, not just prior to September 17th.</p> <p><span></span>This interesting information was reluctantly extracted from Obama&rsquo;s &ldquo;Justice&rdquo; Department, when its FBI finally mailed&nbsp;a requested <a href="" target="_blank">file of massively redacted information</a> regarding the FBI&rsquo;s extensive snooping against the nationwide Occupy Wall Street movement to the nonprofit Partnership for Civil Justice Fund on 20 December 2012.</p> <p>The FBI was organizing against the OWS movement even before it was known to the general public, and they kept on their campaign against it, until it was dead.</p> <p>Meanwhile, the Tea Party Republicans eliminated the public option from Obamacare, and continued to hold hostage the entire nation in order to extend George W. Bush&rsquo;s tax-cuts for the top 1% &ndash; and also in order to cut government benefits to everybody else: to slash Social Security, Medicare, Medicaid, etc.</p> <p>The public must suffer, while banksters continue to boom &ndash; that&rsquo;s government, under Barack Obama and his &ldquo;Justice&rdquo; Department. This is our &ldquo;democracy.&rdquo; This is today&rsquo;s America.</p> <p><span></span>OWS ended just a few months after it began, on 14 November 2011. That was when Robert Johnson and Linette Lopez of <a href="" target="_blank"></a> headlined <a href="" target="_blank">&ldquo;This Weekend&rsquo;s Occupy Crackdowns May Be The Beginning Of The End For Protest Groups.&rdquo;</a> The very next day, the same reporters bannered <a href="" target="_blank">&ldquo;This Week&rsquo;s Occupy Evictions Were Systematically Plotted By The Nation&rsquo;s Mayors.&rdquo;</a> They quoted Oakland Mayor Jean Quan admitting to a reporter from the <a class="hidden_link" href="">BBC</a>, &ldquo;I was recently on a conference call with 18 cities across the country who had the same situation where what started as a political movement and a political encampment ended up being an encampment that was no longer in control of the people who started them.&rdquo; She said there that the 18 mayors simply wanted to help &ldquo;peaceful demonstrators&rdquo; to &ldquo;separate themselves from anarchists&rdquo; &ndash; as if this nationwide crackdown against OWS had been done in order to help &ldquo;peaceful demonstrators,&rdquo; instead of to help the banksters whose still-unprosecuted frauds against unqualified mortgagees and against trusting mortgage-investors had brought down the American (and largely the world&rsquo;s) economy, in late 2008.</p> <p><span></span>The BBC did not post online, nor otherwise publish, Mayor Quan&rsquo;s startling admission to them. Instead, they simply handed off their audio of it, to &ldquo;The Takeaway&rdquo; program of WNYC &ndash; a radio station that&rsquo;s controlled by NYC&rsquo;s Mayor <a class="hidden_link" href="">Michael Bloomberg</a> of Wall Street &ndash; which promptly buried it, in passing, during their show that day. (As Johnson and Lopez noted, &ldquo;they [WNYC] have a partnership with the BBC.&rdquo;) This is how one aristocracy deals with another.</p> <p><span></span>The only comprehensive news report on the systematic nationwide crushing of OWS ended up being posted on the World Socialist Web Site, which headlined on 17 November 2011, <a href="" target="_blank">&ldquo;Mayors Conspired to Close Occupy Wall Street Encampments,&rdquo;</a> and which quoted from (but unfortunately did not link to) numerous reports from around the country. Taken all together, these reports exhibited the effectiveness of the FBI&rsquo;s police-state snooping and tracking of Occupy Wall Street, which had begun even before most Americans knew that there was any such movement for the FBI to snoop against.</p> <p><span></span>In other words, the reason why Barack Obama&rsquo;s &ldquo;Justice&rdquo; Department refuses to prosecute even a single one of the mega-bank executives who profited so enormously from having defrauded both mortgagees and the investors in mortgage-backed securities, and who were bailed out by future U.S. taxpayers whose government purchased those remaining &ldquo;toxic assets&rdquo; at 100 cents on the dollar, is clear: we live in a police state, and these elite crooks control it. This is not real democracy.</p> <p><span></span>Voters were given a choice in November between a President like that but whose liberal rhetoric is condemnatory of &ldquo;Wall Street,&rdquo; versus a professional stripper of corporations, whose rhetoric was overtly supportive of Wall Street. And voters chose the former. But this nonetheless is a police state, not an authentic democracy.</p> <p><span></span>I can only cross my fingers and hope that this will be published. After all, there are opposing factions, even within the aristocracy that collectively control this country.</p> <p style="text-align: center;" align="center"><span>----------</span></p> <p><em><span>Investigative historian Eric Zuesse is the author, most recently, of&nbsp;</span></em><span style="text-decoration: underline;"><span><a href=";qid=1339027537&amp;sr=8-9" target="_blank">They&rsquo;re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010</a></span></span><em><span>, and of&nbsp;</span></em><span style="text-decoration: underline;"><span><a href="" target="_blank">CHRIST&rsquo;S VENTRILOQUISTS: The Event that Created Christianity</a></span></span><em><span>.</span></em><span class="HOEnZb"><span style="color: #888888;"><span></span></span></span></p> <div class="yj6qo ajU"> <div id=":1fw" class="ajR" data-tooltip="Show trimmed content"><img class="ajT" src="" border="0" /></div> </div><p><a href="">Join the conversation about this story &#187;</a></p> The Biggest Banks Are Risking An Endless Cycle Of Bankruptcy Sat, 29 Dec 2012 08:11:31 -0500 Harry Wilson <p><img class="float_right" src="" border="0" alt="wall street bull caged" /></p><p>Large banks risk getting caught in "perpetual" cycle of bankruptcy like aerospace companies and carmakers unless they radically alter the way they do business, according to a leading industry consultant.</p> <p>Alix Partners, one of the most influential advisers to senior banking executives, warns that global investment banks must tackle head-on issues such as bonuses and their addiction to the "steroids" of debt-fueled growth.</p> <p>"Just look at the auto manufacturing and commercial aviation industries, where over the past two decades, changes in regulatory and operating environments combined to render formerly solid businesses into perpetual wards of the bankruptcy court," said the consultants.</p> <p>According to Alix, investment banks still pay their staff far too much, pointing out that the "overpayment effect" last year was $18bn (&pound;11bn), or close to 30pc of the world's top 15 banks' combined pre-tax profits.</p> <p>Senior bankers agree lenders must change their ways if they are survive. The head of one major British bank said he agreed with the findings and that those businesses, which did not adapt to the new world, would "die".</p> <p>"There was a major change in 2008 and a lot of people seem to be acting like it never happened. The choice is pretty stark; you can either carry on as you are and disappear into irrelevance, or you can change. There is no other option," he said.</p> <p>Investment bank revenues have fallen by 31pc in the past three years as earnings have been hit by the combination of a slowing global growth and tougher and more costly regulation.</p> <p>Despite efforts to cut costs that have seen average bonuses halve between 2007 and 2011, Alix Partners said this was just "protracting the slow, but inevitable, disappearance into irrelevance of a business that badly needs to be reinvented".</p> <p>Alix recommends that global investment banks should consider "breaking up" their businesses before they are forced to by regulators. To do this, it says banks need not pursue full separation, but could allow the creation of "internal marketplace".</p> <p>In practice, this would mean banks unbundling some of the services they currently provide, cooperating more with rivals to reduce costs, and outsourcing operations.</p> <p>In Britain, <a class="hidden_link" href="">Barclays</a> is currently in the middle of a strategic review commissioned by its new chief executive, Antony Jenkins, that is expected to lead to a radical overhaul of its investment banking arm and the rest of its business.</p> <p>Meanwhile, Royal Bank of Scotland remains under pressure from the Government to continue shrinking its investment bank, as well as considering selling off large parts of its international business, including its US retail bank.</p> <p>However, while British lenders have been at the vanguard of the change, many banks remain relatively unchanged four years on from the financial crisis that saw several investment banks become extinct.</p> <p>"In fact, it seems the current taxonomy of business models could have been written in 2007, with just a few amendments," said Alix Partners.</p> <p><img class="nc_pixel" src="" border="0" alt="" width="1" height="1" /></p><p><a href="">Join the conversation about this story &#187;</a></p> The Government Policies That Are Suffocating Entrepreneurs Tue, 18 Dec 2012 17:54:37 -0500 James Pethokoukis <p><img class="float_right" src="" border="0" alt="DNU" width="400" /></p><p>There&nbsp;are nearly 5 million small businesses in America, firms with less than 500 employees.</p> <p>On average, they employ 11 workers each and&nbsp;produce $1 million of output annually.</p> <p>They account for 60% of job creation, and nearly half of all employment and economic output.</p> <p>But, says Citigroup, &ldquo;the&nbsp;US small-firm sector is under substantial stress.&rdquo;</p> <p>Small firm employment has declined about 20% relative to&nbsp;large firm employment versus its peak in the mid-1980s &mdash; including a 10% drop&nbsp;since the late 1990s.</p> <p>And the small-firm share of output produced by the private sector has declined to 45% in 2010 versus 50% in 1998.</p> <p>And, as the chart above shows, the birth rate of new small firms &ndash;&nbsp;the number created in a given year relative to the total number of such firms &ndash;&nbsp;has fallen to around 8% vs. 10% before the financial crisis and 12% in the 1980s.</p> <div class="entry-content"> <p>Some of the decline can be blamed on short-term reasons.</p> <p>Small firms make up a good chunk of the construction and real estate sectors, both hard hit by the Great Recession and Not-So-Great Recovery. But longer-term, structural issues also play a role. Citigroup:</p> <blockquote> <p style="padding-left: 30px;">First, large firms account for the lion&rsquo;s share&nbsp;of U.S. exports and, as such, have been better positioned to benefit from the rapid&nbsp;growth of emerging market economies and globalization trends more generally.&nbsp;Consistent with this observation, we find that a depreciation of the dollar&nbsp;systematically raises large-firm employment relative to that of small firms.</p> <p style="padding-left: 30px;">Second,&nbsp;we find that large firms tend to be in more capital-intensive industries, which means&nbsp;that these firms have likely benefited more directly from the decline in interest rates&nbsp;that has occurred over the past thirty years.</p> <p style="padding-left: 30px;">A third structural headwind appears to&nbsp;have been the ongoing consolidation of the U.S. banking system. This has brought&nbsp;with it a declining role for small banks, which traditionally have been major suppliers&nbsp;of credit to small firms.&nbsp;Our sense is that such structural forces are&nbsp;likely to continue to favor large firms for some time to come.</p> <p style="padding-left: 30px;"><span>The requirements&nbsp;of the new healthcare law may prove to be another structural headwind for the&nbsp;small-firm sector.</span></p> </blockquote> <p>From a public policy perspective, the key would be to focus on entrepreneurship and the expansion of young firms &mdash; they&rsquo;re the engine of job growth &mdash; rather than small firms in general.</p> <p><a class="hidden_link" href="">Indeed</a>,&nbsp;research from the&nbsp;<a href="" target="_blank">Kauffman Foundation</a>&nbsp;finds that&nbsp;the fastest-growing 1% of firms typically account for about 40% of US job creation. And of that group, three-quarters are less than six years old.</p> <p>Given the Citigroup findings, an entrepreneurship agenda might include a) a less concentrated banking system and b) getting business out of the health care business through consumer-driven reform.</p> <p>Beyond that, perhaps eliminating capital gains taxes on long-term investments and creating a more-skilled workforce. NGDP level targeting might also play a role, as Evan Soltas argues:</p> <blockquote> <p style="padding-left: 30px;">Economists believe that firms in the United States are risk-averse, and that&rsquo;s not a bad thing in itself, but it does imply that nominal instability has real costs in the long run. In other words, if the economy is constantly swinging from boom to bust in NGDP, then if I run a business, I won&rsquo;t invest as much as I would have if the economy grew with more stability, because I am afraid that if I invest (say, I open a new storefront) and a recession comes, then my investment will lose value. Now expand this consideration of one firm to the entire economy: when NGDP growth is unstable, firms make fewer investments &mdash; factories buy fewer machines, merchants open fewer stores, companies hire and train fewer employees, etc. &mdash; and what this means is that, in the long run, the economy grows more slowly because productivity increases more slowly.</p> </blockquote> </div><p><a href="">Join the conversation about this story &#187;</a></p> Argentina Is Now Paying For Its Dangerously Successful Economic Story Mon, 03 Dec 2012 18:37:00 -0500 Jayati Ghosh and Matias Vernengo <p><img class="float_right" src="" border="0" alt="paul singer" /></p><p>Argentina is in the news again.</p> <p>The country that successfully managed an external debt restructuring after a major financial crisis in 2001-02, and eschewed the standard austerity package to benefit from a remarkable economic recovery, is being attacked by a combination of court rulings and aggressive moves in financial markets.</p> <p>Elliott Capital Management, a vulture fund based in the tax haven Cayman Islands <a href="" title="">owned by conservative financier</a> <a class="hidden_link" href="">Paul Singer</a> (a big donor to the Romney campaign), refused to accept the terms of the debt restructuring that was accepted by more than 92% of bondholders in 2005 and 2010.</p> <p>It has demanded payment in full, and has actively pursued its case in different courts across the world. A few months ago, the Argentine frigate Libertad, which ironically means freedom in Spanish, <a href="" title="">was seized in Ghana</a> after a local judge ruled in favour of Elliott Capital Management.</p> <p>Judge Thomas Griesa has recently <a href="" title="">ruled</a> in a district court in New York that the Argentinian government must pay $1.3bn to the same vulture fund &ndash; the full face value of their holdings plus accumulated interest starting in late 2001 &ndash; on the basis of an unusual interpretation of the <em>pari passu</em> clause in debt contracts.</p> <p>Elliott and other "<a href="" title="">vulture funds</a>" are not conventional investors. They buy bonds at discount rates during a crisis with the explicit intention of taking the distressed countries to court in foreign jurisdictions, while also holding out for payment in full with no renegotiation of the debt.</p> <p>Obviously vulture funds are not concerned with niceties such as how the debt was accumulated, the principle that debts should be served according to the debtor's capacity to pay or how the enforced payments will affect the wellbeing of the most vulnerable. They represent global finance in its most nakedly aggressive and exploitative form.</p> <p>The Griesa ruling also contained an injunction that prohibited third parties from "aiding and abetting" any violation of his order, thereby preventing Argentina from being able to continue payments to the creditors that had accepted the restructuring.</p> <p>This has far-reaching implications beyond this case, because it calls into question all debt restructuring deals that are not just likely, but also necessary to preserve international finance. Why would those holding Greek bonds, for example, accept a debt restructuring plan that might be necessary for a solution and beneficial to all, if they know that vulture funds can hold out and receive judicial support in international courts?</p> <p>The ruling also contradicts US internal bankruptcy laws, which force minority creditors to confirm to deals accepted by 70% of creditors. If this ruling is supported in the higher courts (both Argentina and other creditors have already appealed) it will create an unviable situation for global bond markets. Creditors will only be making one-way bets if no possibility of restructuring is accepted, making the only options all (full payment) or nothing (complete default).</p> <p>But that is not the only onslaught Argentina is facing. This week the rating agency Fitch, which earlier gave US sub-prime bonds Triple A ratings, <a href="" title="">lowered Argentinian bonds</a> to slightly above junk status. Many financial analysts are now predicting another Argentinian default.</p> <p>But there is no reason to believe that the country is close to a default. The current account is in balance, international reserves are above $46bn and the ratio of debt service payments to exports is less than 20%. In the recent past, Argentina has been one of the fastest growing economies in the world, with unemployment falling from around 22% to close to 7%. So what explains all the downgrading and undermining of the country in financial markets and the media?</p> <p>The real reason may lie in the very success of the country's economy after its default and forced debt restructuring process. After 2002, Argentina reversed the austerity measures promoted by the IMF, renationalized key productive sectors like aviation, pensions and most recently oil, increased social protection and income transfers to the poor, and reduced poverty substantially. Real wages have increased, and wage inequalities have been reduced.</p> <p>This is a dangerously successful story. It shows that there is life after a default, and that austerity is not the best way out of a crisis. These are two lessons that clearly frighten financial markets and their allies within the judicial system, and obviously there is concern that other countries in financial distress could seek to emulate this example. Hence the eagerness to show that this is not a success story after all, and to keep the pressure on Argentina through court rulings, downgrades and similar measures.</p> <p>Ironically, this may turn out to be counterproductive. It is not just that these recent moves are deeply unjust and anti-democratic &ndash; it is also that they threaten the global financial system itself. Allowing vulture funds to get precedence over other bondholders that accept restructuring undermines any possibility of renegotiating debts, without which no credit system can function.</p> <p>The "level of rancor" in Griesa's decision shows how important it is to have judicial systems that are not loaded in favour of purely profit-motivated private investors. Allowing rating agencies with extensive conflicts of interest to function without regulating them and setting up public alternatives creates misinformation without accountability.</p> <p>Even a blatantly unjust capitalist system cannot survive this way for very long. So once again, international finance and its partners may be biting the hands that have fed it, with potentially disastrous consequences even for finance.</p> <p><img src=";pageName=Why+Argentina+is+now+paying+for+its+dangerously+successful+economic+story+%7C+Jayati+Ghosh+and+Mat%C3%ADas+Vernengo+Article+1836469&amp;ch=Comment+is+free&amp;c2=53056&amp;c4=Argentina+%28News%29%2CAmericas+%28News%29%2CWorld+news%2CGlobal+economy+%28Business%29%2CEconomics+%28Business%29%2CBusiness%2CFinancial+crisis+%28Business%29%2CBanking+%28Business+sector%29%2CFinancial+sector+%28business%29&amp;;c6=Jayati+Ghosh+and+Mat%C3%ADas+Vernengo&amp;c7=12-Dec-03&amp;c8=1836469&amp;c9=Article" border="0" alt="" width="1" height="1" /></p> <!-- Guardian Watermark: internal-code/content/400329011|2012-12-03T14:48:38Z|556c2ac3f80976e783ad56c1dc59d2b214dac4d7 --> <p>This article originally appeared on <a href=""></a></p> <p><img class="nc_pixel" src="" border="0" alt="" width="1" height="1" /></p><p><a href="">Join the conversation about this story &#187;</a></p> The Relentless Eurocratic Power Grab Sat, 01 Dec 2012 13:34:00 -0500 Wolf Richter <p><img class="float_right" src="" border="0" alt="european central bank creative" width="400" /></p><p>&ldquo;The euro has profound economic advantages and is the most powerful symbol of European integration,&rdquo; said not some wild-eyed dude with a joint between his lips, slouching in a caf&eacute; in Amsterdam, but the &ldquo;<a href="">Final Report</a>&ldquo; issued by the Future of Europe Group, composed of the foreign ministers of Germany, France, Italy, Spain, the Netherlands, Poland, Belgium, Austria, Denmark, Portugal, and Luxembourg.</p> <p>It remains uncertain what they were smoking.</p> <p>But they did fret about the future of the euro and the EU, their <em>chef d&rsquo;&oelig;uvre.</em> To keep it glued and duct-taped together, they came up with a laundry list of recommendations concerning its governance.</p> <p>It included the vampire item that simply refuses to die, namely shifting sovereignty over national budgets to the European government.</p> <p>To their credit&mdash;or was it just window dressing, given the uproar on the internet?&mdash;they also called for more &ldquo;democratic legitimacy and accountability,&rdquo; of which only trace elements are discernible in the EU government. One of the key items: &ldquo;a directly elected Commission President.&rdquo;</p> <p>Then came the eurocrat response.</p> <p>&ldquo;If this is not going hand in hand with large powers for the Commission, then forget it,&rdquo; <a href="">said</a> European Council President <a href="" class="hidden_link">Herman Van Rompuy</a> at a conference centered on that Final Report. It would give that top job &ldquo;a huge legitimacy,&rdquo; he said, but it would &ldquo;organize the disappointment in advance.&rdquo; Only by handing &ldquo;large powers&rdquo; to the Commission could a directly elected Commission President become functional.</p> <p>Another step in the ongoing and ever so methodical power grab.</p> <p>Just then, a 52-page draft report by the unelected European Commission President Jos&eacute; Manuel Barroso <a href="">bubbled</a> to the surface&mdash;a continuation of <em>his</em> bureaucratic drive to create the United States of Europe come hell or high water.</p> <p>To overcome &ldquo;the crisis of confidence,&rdquo; he called for &ldquo;fast and deep&rdquo; integration and envisioned a powerful European government. It would, for example, have the power to coordinate how Member States tax their citizens&mdash;with the unspoken goal to alleviate tax competition between countries, a recurrent complaint by high-tax countries against their lower-tax brethren. Even in the USA, the federal government doesn&rsquo;t attempt to tell the states how to tax their residents. It would cause a revolt.</p> <p>Barroso, building on his idea of a United States of Europe, also wants to give the Commission, <em>his</em> Commission, the power to <em>veto</em> the budgets of Member States. Imagine the White House vetoing California&rsquo;s budget&mdash;OK, that budget should be vetoed because it's a sham, but it&rsquo;s <em>our</em> sham, and <em>we</em> will deal with it or sink with it. White House interference would be a reason for secession.</p> <p>He wants to endow that souped-up government with the ability to levy its own taxes, rather than be dependent on handouts that are determined during bitter budget negotiations by the 27 Member States. It would be a coup. It would give the European government the power to impose taxes on already overtaxed people&mdash;with little or no democratic limits.</p> <p>And all that <em>without</em> a constitution. Because the people had voted it down by referendum [read.... <a href="">Sacrificing The Will Of The People On The Altar of The Euro</a>].</p> <p>Meanwhile, Dutch Prime Minister Mark Rutte was giving interviews <a href="">left</a> and <a href="">right</a>, to reject exactly what the eurocrats were trying to push through: a federal Europe. He believed in a Europe of national states that worked together closely.</p> <p>Instead of all that federal razzmatazz, he <a href="">demanded</a> that Eurozone countries &ldquo;stick to the commitments that they made when they introduced the currency.&rdquo; Hence, deficits not to exceed 3% of GDP. And austerity. That would be &ldquo;essential for the survival&rdquo; of the euro, he said. And only that would make the euro &ldquo;credible.&rdquo; The goal should be to strengthen the euro &ldquo;and attack the dollar as world currency.&rdquo;</p> <p>He had something for everybody. Including Greece: treaties should be tweaked, he said, to allow a country that doesn&rsquo;t follow the rules to leave the Eurozone without also having to leave the EU, which is currently not possible. And haircuts for official sector creditors, such as the ECB, that are holding most of the Greek debt? Not a good idea, he said. Not only for legal reasons, but also out of principle. &ldquo;That would send the wrong signal to other countries that have debts ... like America.&rdquo;</p> <p>&ldquo;I cannot be disillusioned because I no longer have any illusions about Europe,&rdquo; muttered Euro Group President Jean-Claude Juncker a while ago. He wasn&rsquo;t the only one. &ldquo;There are better alternatives to the bailout policies of Chancellor Merkel,&rdquo; declared the man who&rsquo;d run against her in 2013; alternatives that &ldquo;protect taxpayers and don&rsquo;t only benefit the banks.&rdquo; Read... <a href="">&ldquo;The Euro Will Blow Up Europe Instead Of Bringing It Together&rdquo;</a>.</p> <p>And here&rsquo;s a hilarious video&mdash;even if you&rsquo;ve already seen it&mdash;that, in 2:30 minutes, explains better than anything else the entire <a href="">Eurozone debt crisis. By Australian comedians Clarke and Dawe</a>.</p><p><a href="">Join the conversation about this story &#187;</a></p> We Are Facing An 'Austerity Bomb,' Not A 'Fiscal Cliff' Fri, 23 Nov 2012 08:58:00 -0500 Linda McKissack Beale <div class="entry-content"> <div class="entry-body"> <p><img class="float_right" src="" border="0" alt="Explosion" width="400" />Keynesian economic theory is the only theory that has gotten much of what's gone on in the last few decades correct, but of course the GOP market fundamentalists, in reliance on the unrealistic assumptions of most freshwater economics, still claim that all we need to do is starve the beast more, cut taxes and regulations&nbsp;more and economic growth will take off and take care of every problem imaginable.&nbsp;</p> <p>In the process of trying to enact their ever-more-absurd vision of how to legislate a good economy, the GOP is prepared, once again, to be the obstructionist party of "no", with Boehner saying no tax rate increases, Ryan claiming that Obama's reelection (with exit polls showing majority support for tax increases on the wealthiest Americans) does not signify a mandate to increase taxes on the wealthiest Americans, and the GOP generally pushing for benefit cuts to Medicaid, Medicare and Social Security &mdash; irrelevant to the deficit and actively harmful to the livelihoods of millions of Americans and hence to the economy &mdash; as the solution of choice to the horror (in their view) of cutting military expenditures or raising taxes on the rich.</p> <p>There may finally be some light at the end of the long, corporatist, Koch-funded, Norquist-induced "big sleep" in which too many Americans were lulled into thinking that taxes were all bad, spending was all bad unless on military, and the GOP greed-is-good; let-the-rich-keep-getting-even-richer philosophy was okay.</p> <p>Alex Seitz-Wald even asks "<a href="" target="_blank">Is it game over for Grover Norquist?", </a> (Nov. 14, 2012).&nbsp; Seitz-Wald reports that Norquist has only 217 no-tax pledgers in the new House and an all-time low of only 39 in the Senate, and contrasts that with 238 House members and 41 Senators last year.&nbsp; Id.&nbsp;</p> <p>Thousands of Norquist's political arm Americans for Tax Reform were spent on two GOP pledge signers &mdash; Ricky Gill and Lee Anderson &mdash; who were ultimately defeated.&nbsp; Some who signed the pledge, such as MN Chip Cravaack (who lost)&nbsp;recognized too late that giving away your responsibility to think was an act of political suicide.&nbsp;</p> <p>Even Senators Graham and McCain have suggested that the time of adhering to a no-taxes-ever pledge has passed, and Jeb Bush, the family's current presidential aspirant, says he doesn't believe in "outsourc[ing] your principles and convictions to people."&nbsp; Id.&nbsp; Even Boehner, after all, has admitted he could support limiting deductions as a way to get more taxes from the rich, even if he won't yet say he will agree to tax rate increases.</p> <p>Robert Reich&nbsp;notes that the apparent GOP willingness to allow some tax increases through "base broadening" should be looked at squarely for what it really is &mdash; not generally a way to ensure that the rich pay more and that the poor and middle class continue to get appropriate breaks on their taxes to avoid a renewed recession.&nbsp; See Robert Reich, <a href="" target="_blank">So much for 'grand bargains'</a>, (Nov. 14, 2012).</p> <p style="padding-left: 30px;">'Broadening the base' has nothing whatever to do with the rich paying more.&nbsp; That's because a lot of tax credits and deductions help the middle class and the poor.&nbsp; If we end the Earned Income Tax Credit, for example, some of the poorest Americans weill end up sacrificing.&nbsp; That tab was $63 billion last year.&nbsp; Or if the 'loophole' is tax-free employee health care, or the home mortgage tax deduction, or tax-deferred 401k accounts, most of the added tax revenues will come out of the pockets of the middle class.&nbsp; So when Republicans talk about 'broadening the base', watch your wallets. Id.</p> <p>Instead of cutting these types of loopholes that are beneficial to the middle and lower income classes,&nbsp;Reich suggests that Congress take aim definitively at the lairs of tax loopholes for the rich.</p> <p style="padding-left: 30px;">If Republicans won't budge on raising tax rates but insist on broadening the base, Democrats should take aim at the biggest tax loophole of all for America's wealthy: the preference for capital gains.&nbsp; Id.</p> <p>Krugman in his blog, <a href=";seid=auto" target="_blank">An Austerity Bomb </a>(Nov. 14, 2012)&nbsp;argues that we've again allowed the extremists on the right to set the tone of the dialogue by letting them label the current situation.&nbsp; We aren't facing a "fiscal cliff", he notes, but rather an "austerity bomb".&nbsp;</p> <p style="padding-left: 30px;">[The term 'fiscal cliff'&nbsp;implies] "a problem of excessive deficits when it's actually about the risk that the deficit will be too small; also and relatedly, the fiscal cliff stuff enables a bait and switch in which people say 'so, this means that we need to enact Bowles-Simpson and raise the retirement age?' which have nothing at all to do with it.&nbsp; Id.</p> </div> </div><p><a href="">Join the conversation about this story &#187;</a></p> Cheer Up America, The Economy Is Much Better Off Than You Think Sat, 17 Nov 2012 10:41:42 -0500 Zachary Karabell <p><img class="float_right" src="" border="0" alt="balloons, celebrations" width="400" /></p><p>Barely had the counting ceased in last week's presidential election when the news took a somber turn.</p> <p>Two of the next day's headlines read <a href="">"Back to Work, Looming Fiscal Crisis Greets Obama"</a> and my favorite, <a href="">"America has Sown the Seeds of Its Own Demise."</a> Politicians either celebrated or decried the results, but regardless of party affiliation most warned of formidable challenges and a perilous future.</p> <p>How did it come to pass that even the resolution of a contested election brings almost zero relief from the relentless focus on problems and threats?</p> <p>How did a country that for much of its history exhibited a (sometimes naive) willingness to ignore obstacles and plunge forward become a society that struggles to turn its gaze away from the dangers that loom just ahead?</p> <p>In short, how did the United States become so pessimistic?</p> <p>Some of it surely has to do with how the past decade has unfolded. &nbsp;</p> <p>Without question, this has been a challenging time for America and much of the Western world.</p> <p>We can all recite the crises, disasters and failures: Y2K, the bursting of the Nasdaq stock market bubble in 2001, 9/11, Iraq, Afghanistan, Enron, WorldCom, the bursting of the housing bubble, the Wall Street implosion of 2008, the euro zone's troubles, chronically high unemployment, anemic growth, the continued emergence of China as a global economic force. I could go on.</p> <p>The bleak attitudes of the past decade are in stark contrast to the giddy optimism of the 1990s, a consequence of the Internet revolution, a soaring stock market and the end of the Cold War. Yet even then, the growth model that so many Americans took for granted was showing signs of strain.</p> <p>Manufacturing jobs were quietly evaporating, and incomes for the middle class were stagnating. And so we have come to a point where even the conclusion of a peaceful, contested democratic election offers no pause in the drumbeat of negativity.</p> <p>Few today are unaware of the problems that beset us. There is ample informed commentary, analysis and prognostication describing &nbsp;what is going wrong and could get worse: increasing deficits, waning economic growth, high unemployment, unstable financial systems, stock markets crashes, inflation spikes, geopolitical conflict, renewed recession, destructive gridlock, rising inequality, etc. No one could argue reasonably or rationally against the possibility that these issues will undo us or lead to worse times ahead. The problem, is that few argue consistently or cogently that our fears may, in the end, just be fears and that we will do more than muddle through.</p> <p>That is the goal of "The Edgy Optimist," my new column. It will examine what might go right and how, and what is going right and why. To deny the challenges and perils of our world, particularly the changing nature of our material and economic lives in the West and how we can ensure sustainable prosperity and growth in the years to come ‑ well, that would be foolish. But it is equally wrongheaded to dismiss arguments to the contrary as foolish, unlikely or ill-informed.</p> <p>Behavioral psychologists <a href="">have shown</a> that when people feel fearful, anxious or pessimistic, warnings about the dangers that lie ahead sound smarter and wiser than alternate views that suggest more constructive outcomes. <a href="">Alliance Bernstein recently sent a note</a> to clients charting how the Dow could quietly reach 20,000 within five years. The reaction? Anger and outrage. Bernstein was flooded with complaints that they were naifs. Had they released a paper with the title "Dow 5000" they likely would have generated just as much reaction, but from clients wanting to know how to prepare for what seemed like a credible scenario.</p> <p>None of these outcomes can be known, by any of us, of course. Some seem more credible because they reinforce our view of the present, but unless you give a date at which all goes to hell, no argument about future peril can be falsified. This column won't change the minds of those convinced that the road ahead leads down, but it will at least offer an alternate view about what is possible ‑ without donning rose-colored glasses or ignoring the risks.</p> <p>That brings us to the election and the reaction. You would think the fate of the U.S. economy hinges on the election and that what government does will be the prime determinant of whether America rises or falls in the next few years. Yet government is only one piece of the three-dimensional chess game that is our economic system.</p> <p>Yes, it accounts for as much as $6 trillion of the approximately $16 trillion of U.S. economic output. Much of that $6 trillion is necessary and productive ‑ it pays for schoolteachers, firemen, police, Federal Aviation Administration controllers. But even if you write that off as less productive spending, that leaves $10 trillion that has nothing to do with government.</p> <p>And what about government regulation? There, too, the emphasis is almost entirely on costs rather than on the uncalculated benefits. But what is added<em> </em>to overall output by a judicial and legal system that enforces contracts? What boost is there to output because of rules against excessive pollution that reduce the healthcare expenses that would be required to treat those harmed? We are very good at looking at the inefficiencies and calculating the harm of over-regulation. We are less adept at weighing those against the benefits.</p> <p>Non-governmental activity remains incredibly dynamic. With that comes the vertigo of rapid change and disruption. So much of the structurally morphing labor force is a function of disruptive technologies and the various forces of globalization. These forces have led to stagnant wages in countries such as the United States, Japan and Europe, while China, India and much of the rest of the world begin to make more.</p> <p>That need not be a recipe for despair, nor proof that the future is grim for those societies. The flip side to the struggles of the developed world is billions of people entering the global middle class. Also, a porous global system has and will continue to yield benefits. (Whether our macroeconomic statistics and indicators are designed to measure that is another matter.) All those iPhones and iPads are possible only because of the fusion of American intellectual property and Chinese manufacturing ‑ as the recent focus on working conditions at Apple's manufacturing contractor <a class="hidden_link" href="">Foxconn</a> has powerfully shown.</p> <p>The election and the looming "fiscal cliff" have managed to add to general anxiety, but one is a validation of a functional political system and the other is a problem with obvious solutions. That makes the present challenges enviably easy to meet, whether they are met or not. No one can say what the future holds, but the chances that it will see our fears realized only increase when the consensus is that they will be. We know the risks; it is time to pay attention to the possibilities.</p><p><a href="">Join the conversation about this story &#187;</a></p> The 'Obamacare Layoffs' Are Way Overblown Mon, 12 Nov 2012 20:09:00 -0500 Diane Bullock <p><img class="float_right" src="" border="0" alt="Layoffs Job Cuts Fired Pat On Back Sad Walking Time-Picayune Newspaper Layoff" /></p><p></p> <p><span id="article_content">"Obama Reelection Triggers Massive Layoffs Across America."<br /> <br />"Job loss an early consequence of election."<br /> <br /> "Obama keeps job; others lose theirs."<br /> <br /> "The Obamacare Layoffs Begin..."<br /> <br /> "Top US Companies Plan Layoffs Because of Obamacare."<br /> <br /> These are some of the headlines coming out of media sources like the <em>Washington Times</em>, the <em>National Review</em>, and <a href="" class="hidden_link">Fox News</a> since President Obama won his bid for reelection last Tuesday night. </span></p> <p><span id="article_content">They speak to a looming economic apocalypse and rest the blame on the shoulders of the president and his administration&rsquo;s business and health care policies.<br /> <br /> Alarming? Yes. Accurate? Not so much.<br /> <br /> Digging just a little under the surface unearths a whole lot of hyperbole and in some cases, to use an executive term, &ldquo;malarkey.&rdquo;<br /> <br /> Take the <em>Washington Time</em>s article <a href="" target="_blank" class="lightsGal">&ldquo;Obama keeps job; others lose theirs&rdquo;</a> that loosely claims <strong><a href="" class="hidden_link">Boeing</a></strong> and <strong><a href="" class="hidden_link">Groupon</a></strong>, among other companies, can directly attribute layoffs to a second Obama term. </span></p> <p><span id="article_content">Pulling only half of a quote from Boeing Defense, Space &amp; Security President and CEO Dennis Muilenburg &mdash; &ldquo;funding for the US Department of Defense is under extreme pressure&rdquo; &mdash; the <em>Times </em>carefully omitted the second part of the sentence: &ldquo;we're innovating and expanding our core, in the US and around the globe, to sustain and grow our business.&rdquo;<br /> <br /> While there is indeed a <a href="" target="_blank" class="lightsGal">shake-up</a> at Boeing since the winding down of the Iraq and Afghanistan wars means less Pentagon demand for cruise missiles and drones, the company has expanded its commercial airline division &mdash; from 80,000 jobs at the beginning of 2012 to 85,000 presently.<br /> <br /> Moreover, the cost-cutting plans were made on November 5, and, according to spokesman Boeing Todd Blecher, were <a href="" target="_blank" class="lightsGal">not a response to the election</a>.<br /> <br /> As far as Groupon is concerned, <a href="" class="hidden_link">Business Insider</a> <a href="" target="_blank" class="lightsGal">reported</a> that &ldquo;the cuts are part of a sales and marketing &lsquo;optimization&rsquo; effort that Groupon management alluded to on the last earnings call.&rdquo;<br /> <br /> Consider also the foreboding <em>National Review</em> article<a href="" target="_blank" class="lightsGal"> &ldquo;Obamacare Layoffs Begin...&rdquo;</a> that was about exactly one anonymous Las Vegas business owner who called into a radio show to complain that Obamacare already forced him to fire 22 of his 144 employees &mdash; despite the fact that the law wouldn&rsquo;t go into effect until 2014.<br /> <br /> Similarly, the <strong>Fox News</strong> article claiming <a href="" target="_blank" class="lightsGal">&ldquo;massive layoffs across America&rdquo;</a> &mdash;&nbsp; merely its headline tacked onto a story published by Utah&rsquo;s &mdash; profiles a single coal company, UtahAmerican Energy Inc. of Murray Energy, that cut 102 of its miners&rsquo; jobs.<br /> <br /> It should be noted that Murray Energy CEO Robert Murray has been an <a href="" target="_blank" class="lightsGal">outspoken critic</a> of Obama and a supporter of Romney &mdash; even allegedly forcing miners to take an unpaid workday to attend a campaign rally as well as coercing donations and votes for the Republican candidate. &nbsp;&nbsp;&nbsp; </span></p> <p><span><span id="article_content">Now, there has been much ado about the decline of Big Coal for the past several years. Increased competition from cheap natural gas coupled with rising production costs associated with replacing aging coal plants has put a squeeze on the industry. It&rsquo;s true that the EPA has tightened regulations on soot- and smog-forming air pollution but, largely, the market forces are simply moving against this particular fossil fuel.<br /> <br /> Again, the UtahAmerican Energy Inc. job losses were the only ones identified in Fox&rsquo;s &ldquo;massive layoffs&rdquo; article. Meanwhile, the &ldquo;related stories&rdquo; side panel features links to over a dozen headlines totaling thousands of cuts from other companies. Parsing through each article, I found a variety of reasons why companies said they are delivering pink slips &mdash; not one of them being Obamacare.<br /> <br /> Here, in order of the Fox News article links, are the stated rationales for layoffs from rocket engine producers to PC manufacturers to wind companies. Yes, Fox News is worried about wind companies.<br /> <br /> <strong>TurboCare and Oce's 220 jobs</strong><br /> TurboCare: &ldquo;The move is intended to streamline the company's business and is the result of &lsquo;months of effort to assess <a href="" target="_blank" class="lightsGal">changing energy service market conditions</a> and how the TurboCare assets are employed...&rsquo;&rdquo;<br /> <br /> Oce: &ldquo;The job cuts are the result of &lsquo;careful consideration and an application of Oce's business judgment in connection with its integration with <a href="" class="hidden_link">Canon</a>.&rsquo;&rdquo;<br /> <br /> <strong>ATI Schools &amp; Colleges's 172 jobs</strong><br /> Though the for-profit higher education company vaguely <a href="" target="_blank" class="lightsGal">referenced</a> the Worker Adjustment and Retraining Notification Act of 1988 in an October 31 letter explaining its redundancies, ATI has been slapped with sanctions from the workforce commission in the past for misreporting graduate employment rates.<br /> <br /> <strong>Rocketdyne&rsquo;s 100 jobs</strong><br /> &ldquo;The money that <a href="" class="hidden_link">NASA</a> is spending on <a href="" class="hidden_link">SpaceX</a> and others who are offering lower-cost private missions is money it <a href="" target="_blank" class="lightsGal">won't be spending on Rocketdyne</a>...That isn't necessarily a bad thing, long-term, for Rocketdyne...SpaceX has created the groundwork for the region to become a center of private, startup space companies. They'll be employers, and if they're successful, they could make rocket scientists more than smart. They could make them rich.&rdquo;<br /> <br /> <strong>CVPH Medical Center&rsquo;s 17 jobs</strong><br /> &ldquo;The layoffs &mdash; nine in management and eight hourly staffers &mdash; are part of an effort to &lsquo;help <a href="" target="_blank" class="lightsGal">bolster the hospital&rsquo;s financial position</a> in 2013 and beyond..&rsquo;&rdquo;<br /> <br /> <strong>FirstEnergy&rsquo;s 400 jobs</strong><br /> Regarding the immediate elimination of 142 jobs, 58 open spots, and another 200 by 2016, the <strong>FirstEnergy Corporation</strong> &ldquo;<a href="" target="_blank" class="lightsGal">cited lower prices, competition</a>.&rdquo;<br /> <br /> <strong>Career Education Corporation&rsquo;s 900 jobs</strong><br /> The Schaumburg-based <strong>Career Education Corp.&rsquo;s</strong> &ldquo;said <a href="" target="_blank" class="lightsGal">enrollment is down</a> 22% from a year ago, and new student enrollment is down 23%.&rdquo;</span></span></p> <p><span><span><span id="article_content"><strong>Wright-Patterson Air Force base&rsquo;s 115 contract jobs</strong><br /> &ldquo;The Air Force says the [computer modernization] program is <a href="" target="_blank" class="lightsGal">no longer viable</a> and it will move forward with other options to meet those requirements.&rdquo;<br /> <br /> <strong><a href="" class="hidden_link">Advanced Micro Devices</a> Inc.&rsquo;s 400 jobs</strong><br /> &ldquo;<strong>Advanced Micro </strong> has been suffering from the <a href="" target="_blank" class="lightsGal">slowdown in the global PC market</a>. We believe that the weak computer market, strong competition from <strong><a href="" class="hidden_link">Intel</a> Corp.</strong>, and the company's failure to penetrate the emerging mobile device market have forced it to refine its cost structure.&rdquo;<br /> <br /> <strong><a href="" class="hidden_link">Caterpillar</a> Inc.&rsquo;s 100 jobs</strong><br /> According to <strong>Caterpillar</strong> workers, &ldquo;the decision came as a response to <a href="" target="_blank" class="lightsGal">weak demand</a> for their forestry manufacturing equipment.&rdquo;<br /> <br /> <strong>Exide Technologies&rsquo; 150 jobs</strong><br /> "This decision was based on several factors, including the dramatic <a href="" target="_blank" class="lightsGal">swings in the lead market</a> and the high capital investment needed, due to regulatory requirements...&rdquo;<br /> <br /> <strong>TE Connectivity, Ltd.&rsquo;s 620 jobs</strong><br /> <strong>TE Connectivity</strong> stated that the company needed &ldquo;to improve operating efficiency as we see <a href="" target="_blank" class="lightsGal">demand decline</a>...We are consolidating into those four other plants to be more efficient.&rdquo;<br /> <br /> <strong>Vestas&rsquo; 3,000 jobs by the end of 2013</strong><br /> &ldquo;One major reason for the slowdown is industry uncertainty over the <a href="" target="_blank" class="lightsGal">production tax credit</a>. Right now, wind producers receive a 2.2-cent tax credit for each kilowatt hour of energy the produce.That credit is set to expire December 31.&rdquo;<br /> <br /> <strong><a href="" class="hidden_link">Cigna</a> 1,300 jobs (worldwide)</strong><br /> A full five days before election day, <strong>Cigna </strong>announced that &ldquo;1,300 jobs will be cut worldwide now through June 2013,&rdquo; most of which &ldquo;will occur in Europe&rdquo; and this will happen &ldquo;in order to deliver more cost effective and efficient health care.&rdquo;<br /> <br /> <strong>Energizer&rsquo;s 1,500 jobs (worldwide)</strong><br /> A full three months before the election, <strong>Energizer</strong> &ldquo;first announced that [it] was launching a review of its operations amid sluggish battery sales and heightened competition in the razor category.&rdquo; These layoffs are the result of that review.<br /> <br /> In a separate piece, Fox News <a href="" target="_blank" class="lightsGal">reported</a> that <strong>Papa John's</strong> John Schnatter has threatened his workforce with reduced hours as a result of the president&rsquo;s health care reform law. The CEO of the country&rsquo;s third largest takeout and delivery pizza chain &mdash; and a vocal Romney booster &mdash; said his franchise owners will likely be unable to afford to insure their employees.<br /> <br /> However, <a href="" target="_blank" class="lightsGal">according to Politico</a>, Schnatter vowed instead to pass those costs onto customers &mdash; to the tune of $.11 to $.14 cents per pizza.<br /> <br /> "We're not supportive of Obamacare, like most businesses in our industry, Schnatter said. &ldquo;But our business model and unit economics are about as ideal as you can get for a food company to absorb Obamacare.&rdquo;</span></span></span></p><p><a href="">Join the conversation about this story &#187;</a></p> Economic And Political Collapse Would Be A Reality If Romney Had Been Elected Mon, 12 Nov 2012 10:35:00 -0500 Steven Strauss <p><strong><img class="float_right" src="" border="0" alt="Mitt Romney Paul Ryan" /></strong><em><strong>2020, A Scenario</strong>&nbsp; </em></p> <p><em>Romney won the election and Congress passed the Romney-Ryan tax cuts. </em></p> <p><em>As with prior Republican administrations, the tax cuts were not funded. By 2020, the Federal Budget reached its tenth year of annual deficits of about 10 percent of GDP, and the National Debt reached over 200 percent of GDP. </em></p> <p><em>Eventually, the world refused to accept payment in dollars. Without critical imports, the U.S. economy came to a halt. People couldn't get to work, food couldn't be delivered to stores, unemployment increased to 25 percent in three months, families were starving in the streets, and martial law was declared.</em><br /> <br /> This dystopian future may seem like science fiction. However, something like this scenario is already happening in <a href="" target="_hplink">Greece</a>. And if Romney wins, based on the performance of past Republican administrations and Romney's campaign promises, it is plausible for America. <br /> <br /> Romney supports Representative <a href="" target="_hplink">Ryan's tax plan</a>, which reduces personal income tax rates to just two brackets (10 percent and 25 percent). However, even assuming the Republicans implement their significant cuts to the social welfare net, Ryan's plan is short <a href="" target="_hplink">$4.6 trillion</a> in revenues. Romney-Ryan <a href="" target="_hplink">don't deny</a> this $4.6 trillion shortfall, but say the details for closing this gap will be explained after Romney's election. <br /> <br /> If Romney (as with prior Republican administrations) passes the tax cuts and doesn't cut government spending &mdash; we'll be on the road to continuous budget deficits of 10 percent of GDP per year, and heading toward national insolvency. <br /> <br /> Romney's script resembles what our last three Republican presidents used to get elected. Remember the plot: Republican candidate claims to be a fiscal conservative, denounces 'tax and spend' Democrats, promises big tax cuts, and says Republicans have a magic formula for replacing lost revenues. <br /> <br /> Let's look at the numbers for the last four presidents. <br /> <br /> <strong>President Reagan</strong> (1981-1989) cut taxes and claimed his tax cuts would produce growth in tax revenues (they didn't). In addition, Federal expenditures remained approximately constant as a percentage of GDP. Results: When Reagan left office in 1989, the National Debt had increased from 31 percent to 51 percent of GDP. <br /> <br /> The first <strong>President Bush</strong> (1989-1993) followed Reagan's example. In four years, Bush increased the National Debt from 51 percent to 65 percent of GDP. Again, Federal expenditures as a percentage of GDP weren't reduced. <br /> <br /> <strong>President Clinton </strong>(1993-2001) reduced the National Debt from 65 percent to 57 percent of GDP, and turned the budget deficit he inherited (4 percent of GDP), into a surplus of 1 percent of GDP. He also reduced Federal expenditures as a percentage of GDP from 23 percent to 19 percent. <br /> <br /> The second <strong>President Bush</strong> (1993-2001) was frightening. He turned a budget surplus of 1 percent of GDP, into an annual deficit of about 10 percent of GDP. Bush passed major tax cuts for the rich and increased expenditures as a percentage of GDP (from 19 percent to 23 percent). As a result, under Bush, the National Debt grew from 57 percent of GDP, to 80 percent of GDP. <br /> <br /> So much for the myth of 'tax and spend' Democrats. It was the Republicans who managed our economy by tax cuts, government spending and saddling future generations with an ever-increasing National Debt (See <a href="" target="_hplink">Charts 1 and 2</a>, below for a summary of these numbers).<br /> <br /> Obama hasn't completed four full years, and inherited his first budget from Bush. However, under Obama's leadership, Congress agreed to a real deficit reduction program (the <a href="" target="_hplink">Budget Control Act of 2011</a>). According to the non-partisan <a href="" class="hidden_link">Congressional Budget Office</a>: The 2011 Act will reduce the budget deficit by half in 2013, and more importantly puts America on a long-term stable fiscal path that reduces <a href="" target="_hplink">National Debt as a percentage of GDP</a>.<br /> <br /> Romney-Ryan are horrified at the Budget Control Act of 2011's tax increases on the wealthy, and budget cuts for the military. They've proposed throwing out this compromise, and replacing it with increases in defense spending and massive tax cuts, which will all somehow pay for themselves, somewhere (somehow) down the road. <br /> <br /> The Budget Control Act of 2011 is a compromise. It has lots of provisions I don't like, but it's a real solution to our challenges. As Americans, we should insist the Republicans provide a detailed plan before we abandon this compromise, and not be deceived by promises of painless solutions. <br /> <br /> If America is again deceived by the GOP's con game, we will reap what we have sown. And the opening scenario may well be our future.<br /> <br /> Follow Steven Strauss on <a href="" class="hidden_link">Twitter</a> at: <strong>@Steven_Strauss</strong> or on <a href="" class="hidden_link">Facebook</a> at: <strong></strong><br /> <br /> <a href="" title="View National Debt and Federal Spending as % of GDP on Scribd">National Debt and Federal Spending as % of GDP </a><br /> <br /> <em>Note: Budget, National Debt and GDP data are from <a href="" target="_hplink"></a> unless otherwise noted.</em><br /> <br /> <em><strong>About the Author: Steven Strauss</strong> was founding Managing Director of the Center for Economic Transformation at the New York City Economic Development Corporation (NYCEDC). He is an Advanced Leadership Fellow at <a href="" class="hidden_link">Harvard University</a> for 2012. He has a Ph.D. in Management from <a href="" class="hidden_link">Yale University</a> and over 20 years' private sector work experience.</em></p> <p><strong>Read more posts on <a href="">Harvard University &raquo;</a></strong></p><p><a href="">Join the conversation about this story &#187;</a></p> Whomever The Next President Is, He Won't Solve The Middle Class Crisis Tue, 06 Nov 2012 16:20:00 -0500 Derek Thompson <p align="left"><img class="float_right" src="" border="0" alt="obama romney debate" width="400" /></p><p>There is a quadrennial <a href="">temptation</a> to call each presidential election "the most important in our lifetime," and this time (like every time) there is the remote possibility that it might be.</p> <p align="left">But probably not.</p> <p align="left">True, there are cavernous differences between the candidates &mdash; and perhaps even deeper differences between the parties.</p> <p align="left">The distance between their ideas is measurable only with the most gosh-wow numbers.</p> <p align="left">Fifty-two million is how many people could lose insurance if <a href="" class="hidden_link">Mitt Romney</a> repeals Obamacare and enacts his <a href="">Medicaid plan</a>, as Jonathan Cohn <a href="">reports</a>; $1.8 trillion is how much Washington would cut the discretionary budget that pays for public goods and support for low-income families in Paul Ryan's budget; $800 billion is the 10-year cost of Romney's plan to keep the Bush tax cuts for the highest-income households.</p> <p align="left">And that's just on economic policy. On social issues, the candidates are even further apart.</p> <p align="left">How could this not be the most important election of our lifetime, given those stakes? It's the political system, stupid. A 3-pronged government torn between 2 fiercely opposed parties representing 1 evenly divided electorate is a recipe for stasis, pure and simple.</p> <p align="left">Barring a complete shock tomorrow night, we will wake up Wednesday to another two years (at least) of fiercely divided government, with Republicans holding the Congress and Democrats holding the Senate.</p> <p align="left">If Mitt Romney wins the election, he will preside over a divided government and find it nearly impossible to accomplish anything in his agenda. If Barack Obama wins the election, he will preside over a divided government and find it nearly impossible to accomplish anything in his agenda.</p> <p align="left">Repeal Obamacare over a Democratic Senate majority? Forget about it. Raise taxes on a GOP Congress? Can't wait to see it. Nominations for the Federal Reserve and Supreme Court are important events where the White House does seem to hold home-field advantage; and a Supreme Court ruling that overturns <em>Roe v. Wade</em> would be truly momentous. But when it comes to passing laws, both parties have made it repeatedly clear they don't want what the other guy is serving, and they're not terribly interested in discussing matters further. It that environment, who controls the congressional caucuses matters as much as who sits in the Oval Office.</p> <p align="left"><strong>THE FUNDAMENTALS PRESIDENTS DON'T CONTROL</strong></p> <p align="left">When it comes to economics, I'm dovish about the significance of this election, not only because divided government will blunt either candidate's agenda, but also because global fundamentals will probably outweigh whatever they accomplish.</p> <p align="left">The U.S. today suffers from a jobs gap, a wage gap, and an innovation gap &mdash; and the president doesn't have much control over any of them right now. The jobs gap is being filled, albeit too slowly. The end of government austerity means that we've gone from losing 200,000 public sector jobs a year to gaining more than 20,000 this year. That's a big deal. The other big deal is housing, where a nascent recovery will expedite hiring, first in construction, and then throughout the industry, while rising home prices should make consumers and businesses more confident about spending. Barring some awful news from Europe or Asia, this is going to happen no matter whom we call president next January.</p> <p align="left">As jobs return, incomes will rise, but middle class salaries will continue to fall behind their historical rate of growth. This wage gap isn't Obama's fault, and it wouldn't be a President Romney's fault, either. It's globalization, and automation, and rising health care costs, and labor's decline matching the fall of U.S. manufacturing, and a lot of other trends you have heard of, and are easily considered opaque, because they have no easy solution. Some public problems have logical matching policies (e.g.: If Social Security is underfunded, we raise taxes or tweak spending). But some middle class problems are just ... problems. When multinational companies discover that American workers within a global supply chain are replaceable with cheaper workers around the globe, that's not the president's fault; it's just a part of global business.&nbsp;</p> <p align="left">Creating tens of millions of well-paying middle class jobs means giving tens of millions of people something to do with high added value. Presidents can't do that. Innovations can. But as Clayton Christensen <a href="">described brilliantly in the Times</a>, the U.S. economy has, for the moment, moved beyond "empowering" innovations that create new scalable products that require more workers toward "efficiency" innovations that make existing processes cheaper and easier -- and replace workers. The fixation on efficiency isn't evil. It's not a function of bad governance. Instead, Christensen writes, it's a <a href="">stage of capitalism</a>, and a dilemma for capitalists.</p> <p align="center">***</p> <p>Any U.S. president in a divided government today faces two distinct challenges to enacting an economic agenda that makes a difference for average people. The first challenge is that the architecture of divided government prohibits any one branch from getting its way on domestic policy. The second challenge is that even getting one's way on domestic policy is probably insufficient to take on the huge global forces threatening the middle class.</p><p><a href="">Join the conversation about this story &#187;</a></p> Diamonds Can Be Investors' Best Friend In A Rocky Economy Wed, 19 Sep 2012 13:02:00 -0400 Crunch It! <p><img class="float_right" src="" border="0" alt="Marilyn Monroe, diamonds, gentlemen prefer blondes, blonde, movie" /></p><p>She was an icon of glamour and beauty.</p> <p>But Marilyn Monroe also knew how to appreciate the timeless value of compressed carbon. When she sang "Diamonds are a Girl&rsquo;s Best Friend," she was offering a not-so-subtle investor tip to bank on the precious stones.</p> <p>These days, with the euro crisis, investors are increasingly turning to people like&nbsp;Reinhard Paul, who knows all about gold and platinum, pearls and precious stones.</p> <p>But the favorite stone of this jeweler, whose store is on Kaiserstra&szlig;e, Nuremberg&rsquo;s fanciest shopping street, is the diamond.</p> <p>Since 1985 Paul has specialized in diamonds and colored gemstones, and he is the chairman of the Deutscher Diamant Club (German Diamond Club), an association of German jewelry retailers.</p> <p>Paul considers jewelry made of skillfully cut and set diamonds an "accessory to the personality of the wearer, male or female." He points out that for many years they have found favor not only with American and European women but with wealthy men and women in China, India, and the Gulf states.</p> <p>He has noted a particularly sharp increase in demand for diamonds &ldquo;bought purely for their investment value&rdquo; in the past few months. He believes that, along with precious metals like gold and platinum, gemstones like diamonds are also suitable as a capital investment, in the sense of securing capital long-term. According to Paul, the prices for even the smallest diamonds have soared over the past year.</p> <p>A number of experts believe that prices will rise between 21% and 32% over the next five years. In 2012 alone, the sector has seen 7% growth. Paul recalls that in 1970, you could get a good-quality one-carat stone for $4,000; today that same stone would cost you $15,000, and if it were absolutely top-quality, you could double that figure.</p> <p><strong>A lot of value in a tiny package</strong></p> <p>And indeed, investment advisors the world over have discovered the advantages of diamonds. They pack a lot of value into a very small space. As easily transportable items with a stable value, they constitute a nice emergency reserve. Unlike gold and platinum, the value of diamonds is not quoted on a daily basis. Diamond exchanges do not have official rates.</p> <p>Anxious investors, looking at investments that are considered stable in these uncertain times and thinking of buying diamonds, should, however, check out <em>and heed</em> the warnings of experts and consumer advocates. Many investors have had bad experiences investing in diamonds short-term, when they&rsquo;ve tried to reconvert the jewelry quickly into cash.</p> <p>If you get more than two-thirds of the original purchase price short-term for a jewel, you&rsquo;re doing very well in many cases, as VAT and profit margins can be a third of the price. But some diamonds are virtually unsellable. Reinhard Paul says he&rsquo;s observed many inferior-quality stones on the market.</p> <p>Stiftung Warentest, a German consumer advocate group, warns inexperienced buyers with no diamond knowledge about potential losses. While they say that diamonds costing between 2,500 to 50,000 euros and up are a good crisis-proof investment with excellent long-term prospects, they are ill-suited to buying speculatively and short-term.</p> <p>Also, scams in the diamond business are increasing. Buyers are constantly warned to avoid sellers who advertise or cold-call and sell ignorant victims expensive soldered diamonds with fancy-looking provenances and certificates. To gain trust, sellers offer a buy-back guarantee &ndash; but only if the diamond is returned <em>exactly</em> as purchased, which effectively means that a jewelry expert would be unable to ascertain its value, because an evaluation requires dismantling the jewelry to examine it thoroughly.</p> <p>With diamonds, the &ldquo;four Cs&rdquo; determine value: Carat for weight, Clarity for purity, <a href="" class="hidden_link">Color</a>, and Cut. Color is the most important quality, and the major price determinant. Large stones are much rarer than small ones, and a single 5-carat stone will always be worth more than five 1-carat stones.</p> <p>Over the last 50 years, prices for uncut diamonds have almost always risen, and experts expect they will continue to rise over the next five to 10 years. At the same time, reserves are dwindling, and pessimistic forecasts say that the supply of raw diamonds will be exhausted within the next 20 to 30 years.</p> <p>In the opinion of Reinhard Paul, investors who see diamonds as a long-term investment are on the right track. Jewelry is never suitable for speculation, or for short-term investment, he says. Its primary function is to be worn. "The best returns are the day-to-day joys of fine jewelry-- that sparkle in the eyes of the wearer."</p> <h3>NOW READ: <a href="">10 Things That Used To Be Free &gt;</a></h3><p><a href="">Join the conversation about this story &#187;</a></p>