EU-DIGEST

Labels: US Economy

Labels: US Economy

Labels: China, US Economy

Labels: US Economy

Labels: US Economy

Labels: US Economy

Labels: China, EU Economy, US Economy

The window for reaching a cross-party consensus is closing fast. As winter turns to spring, senators will begin to focus more on the November mid-term elections than on outstanding legislation. Mr Dodd may have little more than a month to get a deal before attention turns elsewhere. There is a “real chance” of the bill still being stuck in the Senate this time next year, thinks Tom Pax at Clifford Chance, a law firm. If it is, Mr Dodd’s successor on the committee—he retires this year—may try to break it into more digestible pieces.

Labels: Financial Regulation, Republicans, US Consumer, US Economy

Labels: US Economy

Labels: US Economy

Banks are mobilizing a smooth-running lobbying machine in Washington to ­battle Barack Obama's plans to limit the size and scope of Wall Street institutions, as financial services firms gear up to stop a shake-up that could slice away large chunks of their operations.

Their influence on Capitol Hill is broad – the top eight US banks spent euro 18.3m ($26m) on lobbying efforts last year, an increase of 6% on 2008 despite their financial woes, according to Congressional records. And in the first 10 months of 2009, the financial industry donated euro 55.3 m ($78.2m) to federal candidates and party committees – more than any other business sector – according to political research institute the Centre for Responsive Politics.

"The power of the financial services sector in this city has not dissipated at all … they've just done things in a quieter way," said Ethan Siegel, an analyst at financial consultancy The Washington Exchange, who monitors Congress for big investors. "They haven't pulled back on their lobbying just because they've become piñata [punchbags] in the press."

Labels: Barack Obama, US Economy, Wall Street

A double-dip recession is “not out of the realm of possibility” if another “financial shock” occurs, such as Europe’s banking system coming apart or government spending collapsing due to declining tax revenues at the state and local levels, said Rosengren, president of the Federal Reserve Bank of Boston. Another area of potential trouble is the battered commercial real-estate sector, whose woes are putting strains on the U.S. banking system.

Labels: US, US Economy

Labels: Banking Industry, US Economy

Labels: US Economy

Labels: US Economy, Wall Street

“It is not a low probability event, 30 to 40 percent chance,” Krugman, an economics professor at Princeton University, said today in an interview in Atlanta, where he was attending an economics conference. “The chance that we will have growth slowing enough that unemployment ticks up again I would say is better than even.”

Krugman, 56, said the Federal Reserve’s plan to end purchases of $1.25 trillion of mortgage-backed securities and about $175 billion of federal agency debt in March could spur an increase in mortgage rates and lead to declines in home sales and prices.

Labels: US Economy

Labels: US Economic Meltdown, US Economy

The poll numbers come on the eve of a crucial confirmation vote in which senators will decide whether Bernanke should keep his job. Already, at least five Democratic and Republican senators have placed "holds" on his nomination, temporarily blocking it from moving forward The poll, commissioned by the Progressive Change Campaign Committee (PCCC) and Democracy for America, recently asked more than 800 voters a simple question: "Who do you think that Federal Reserve Chairman Ben Bernanke cares about more, Wall Street or Main Street?"

Forty-seven percent of respondents said Bernanke favors Wall Street; 20 percent said Main Street; the rest weren't sure.

Labels: US Economy

Labels: US Economy

Overnight, the euro gained on the dollar after Greece unveiled a deficit-reduction plan, easing some economic concerns in the euro zone. Greece's parliament had approved a budget for next year, aimed at reducing the fiscal deficit to an estimated 9.1% of gross domestic product from 12.7% this year.

The euro has been under pressure over investor concerns that Greece might default on its foreign debt, as its deficit ballooned and servicing costs rocketed.

Labels: EU, US Economy

The US economy is growing, but not as much as expected new figures
have shown.Data released on Tuesday showed the US GDP grew 2.2 per cent
from July through September, more than half a percentage point down from
earlier forecasts.The revised growth figure follows four successive quarters of decline in the world's largest economy, but prospects for a sustainable
recovery remain uncertain.

Al Jazeera English - Business - US recovery on shaky ground

Labels: US Economy

Labels: US Economy

As the debate over what to do about climate change heats up, RTI International has released a study claiming that the legislative measures proposed by the U.S. Climate Action Partnership are unlikely to affect long-term economic growth in the country. In fact, the study says, the U.S. Climate Action Partnership’s plan would cost American families just a few pennies a day. The Pew Center on Global Climate Change paid for the study, an RTI spokeswoman said. The Pew Center is member of the U.S. Climate Action Partnership, a group of businesses and other organizations urging the Congress to quickly enact strong legislation that significantly reduces greenhouse emissions.

Labels: Greenhouse Gas Emissions, US Economy

Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street.

Families have survived the ups and downs of economic booms and busts for a long time, but the fall-behind during the busts has gotten worse while the surge-ahead during the booms has stalled out. In the boom of the 1960s, for example, median family income jumped by 33% (adjusted for inflation). But the boom of the 2000s resulted in an almost-imperceptible 1.6% increase for the typical family. While Wall Street executives and others who owned lots of stock celebrated how good the recovery was for them, middle class families were left empty-handed.

Labels: Middle Class, US Economy

Anthony Chan is a cautious optimist. He is optimistic that the equity markets will continue to improve in 2010. But he's cautious, too -- because the same level of improvement won't be felt on Main Street. The tepid nature of this recovery, Chan said, owes in large part to far-lower consumer spending than is typical in economic recoveries. Chan expects to see "consumer spending contribute no more than half or less its historical contribution towards overall real GDP growth." And that, he said, is because of record-high unemployment, credit markets that are "still constrained," and a massive loss of household wealth.Plus, "consumers took a big hit in wealth, which fell $14 trillion from the peak to the bottom of the financial market collapse. It has recovered some, but consumers were still probably $8 trillion in the red in the third quarter," he said. That's significant, Chan said, because American consumers used rising asset values to substitute for real savings. Now, in order to save, they have to spend less.

Labels: US Economy

The oldest US Mosque dedicated Feb.1934 in Cedar Rapids, Iowa

For the complete report from The National click on this link

Getting corporate America to recognise the purchasing power of Muslims, rather than running scared because of stereotypes, was difficult but not impossible, said Michael Hastings-Black, the co-founder of the Desedo Advertising Agency, which specializes in minority markets. Addressing more than 200 delegates at the American Muslim Consumer Conference recently, he recounted a tale illustrating the high passions generated by a television advert last year by Dunkin’ Donuts, which did not even specifically address Muslims.

The American Muslim Consumer Conference, held at a conference hall at Rutgers University in New Jersey, was billed as the first of its kind by its volunteer organizers, a group of US Muslim professionals. Their aim was to educate non-Muslim businesses about the demand for Islamic products and encourage Muslims to exert their market power.

Note EU-Digest: There are between 6 and 7 million Muslims in America today. Muslims outnumber some Christian denominations and are equal to the number of Jews. America now has about 1,209 mosques, most of which were constructed very recently. Thirty percent of these mosques were built in the 1990s, and 32% were built in the 1980s. Other statistics show that in 1994, the total number of mosques in America was 962; in 2000, there was a 25% increase in this number. Islam is said to be the US's fastest-growing religion, fueled by immigration, high birth rates and widespread conversion. One expert estimates that 25,000 people a year become Muslims in the US.

Labels: Islam, Muslims, US Economy

Wall Street, meet Eric W. Haugaard, a civil engineer who designs water and sewer-line systems for the North Carolina Department of Transportation. Haugaard says he had tears in his eyes as he watched Barack Obama’s acceptance speech, hopeful that politics would get more constructive and the economic crisis would get fixed. Today, he is disgusted when he thinks about “what Wall Street has done to average, honest, tax-paying, no-loopholes citizens,” and says it makes him ill when he considers that Congress is letting taxpayer-assisted financial outfits get rich “without producing anything of real value to our society.” Haugaard, one of dozens of readers who e-mailed me in response to a Nov. 3 column titled “Wall Street Cries ‘Feed Me’ or World Will End,” is despondent that, even after the economic horror of the past year, people in finance are unrepentant. “I want these swine prosecuted,” wrote Robert Carlini of Richmond, Michigan, an auto-industry executive who says he is a “staunch conservative.”

“If the Obama administration really wanted to create policy and push agendas helpful to consumers, it would not have a Treasury Department populated by Goldmanites and other Wall Street alums,” wrote Melissa Huelsman, a lawyer in Seattle.Terry Bailey of Auburn, Nebraska, an office assistant at a local college, says the financial industry is out of touch with the public and weighed down with an inflated view of its value.

Labels: US Economy

Will Americans be able to sustain their life style?

For the complete report from the NYTimes.com click on this link

American workers are overpaid, relative to equally productive employees elsewhere doing the same work. If the global economy is to get into balance, that gap must close. Americans take advantage of the higher productivity that makes their country rich: better education and infrastructure, abundant capital and a strong work ethic. But how much higher should American wages be? The answer depends in large part on two measures: the difference in productivity in making goods that can be traded across borders, and the quantity of such goods. Both measures point to a narrowing wage gap. Many factors are raising productivity in poor countries. Fast development, cheap capital and more efficient shipping all help. Cheap communication via the Internet reduces costs and makes it easy to trade many more goods and especially services. The global wage gap has been narrowing, but recent labor market statistics in the United States suggest the adjustment has not gone far enough.

Global wage convergence is great for the poor but tough on the overpaid. It’s possible to run the numbers to show that American manufacturing workers should take average real wage cuts of as much as 20 percent to get into global balance. The required cut may be smaller. But if American wages get stuck above global market-clearing levels, as in the 1930s, the result could well be something approaching Depression-era levels of unemployment.

Labels: Labor market, Life Style, Unemployment, US Economy

Friday's unemployment report offered no comfort to economists, government officials and the 27.4 million Americans now unable to find full-time employment. In recent months unemployment numbers have produced growing economic concerns over the likelihood of an economic recovery that fails to produce job growth; and this month's unemployment report, coupled with recent GDP estimates point support those concerns. Despite billions of dollars in stimulus spending that continues to flow out of Washington, the Department of Labor report pointed to job loss numbers that have failed to improve amid the spending. The Department of Labor reported a rise in the adjusted non-farm unemployment rate to a new high of 10.2% after the economy shed another 190,000. However, the Department of Labor also reports that the number of unemployed Americans increased by 558,000 last month, representing a sharpest increase in unemployment since this spring. In addition, beyond the adjusted payroll number lies a host of employment numbers including the disturbing reality that 27.4 million Americans are now unable to find full-time employment.

According to the Department of Labor, 15.7 million Americans are now unemployed. 9.3 million Americans are unable to find full-time employment and 2.4 million Americans have simply given up. As a result, 27.4 million Americans are now unable to find full-time employment.

Labels: Labor, Unemployment, US Economy

Common sense tells us that if phenomenon A causes problem B, then B cannot be rectified unless A is first removed. As an adherent of the Austrian School of economics, I can confidently tell you that a sustainable US recovery is not at hand. An upward blip in the GDP reading (itself a flawed measure of material well-being) must not be mistaken for a sustainable recovery, especially when government borrowing is unprecedentedly high and a lot of the input parameters, not the least of which is the GDP deflator, can be fudged. I'll borrow an analogy from Peter Schiff. Imagine if you will a victim at the unfortunate end of a Brock Lesnar knuckle sandwich. The blow has knocked him out cold and the medics try to revive him. The best suggestion they can come up with is to have Lesnar pound the man's head even harder with his fists. When the man has seizures from the repeated pounding, a medic (coincidently named Bernanke) screams gleefully "Hurray, he's moving."

Real output will continue to decline. Declining real output will result in lower real savings. Lower real savings will put pressure on debt repayments and defaults will result. Private defaults will wipe out banks and depositors, and they will also cause the government to default on its debt. The Fed will bail out all the affected parties by creating money. Bailouts cause malinvestments that lower real output, beginning the cycle again. This cannot continue forever: it will eventually result in a runaway-inflationary depression.

Labels: Inflation, US Economy

For the first time in more than a quarter century, unemployment in the United States has reached double digits. That's bad economic news for America, which has now been shedding jobs for 22 consecutive months. That's bad social news for the Americans who are out of work, for their families and for their communities, especially when we consider data that tells us 35 percent of jobless men and women have been looking for work for more than six months. And that's bad political news for President Barack Obama and the Democrats in Congress, who continue to make the mistake of treating unemployment as an afterthought rather than the most serious issue facing the nation.

Labels: Unemployment, US Economy

The U.S. Treasury Department cut its estimate for government borrowing in the current quarter by 43 percent largely because of reductions in a program for helping the Federal Reserve manage its balance sheet. Borrowing will total a net $276 billion from October through December, compared with a previous estimate of $486 billion, and it projects borrowing of $478 billion in the three months to March 31, the department said in a statement today in Washington. In the quarter that ended Sept. 30, the Treasury borrowed $393 billion compared with $406 billion projected three months ago. The Treasury is financing a budget deficit that may exceed $1 trillion for a second straight year, even as the economy starts to recover.

Treasury officials today declined to comment about when the country’s $12.1 trillion debt ceiling might be reached. Earlier estimates indicated the limit might be reached by December.

Labels: US Deficit, US Economy

US economy: U.S. Claim of 3.5% Economic Growth is Smoke and Mirrors

The elite media is euphoric, saying the Obama stimulus package worked and we had 3.5% economic growth this quarter! Unfortunately when I explain to you how the U.S. Government comes up with that number you are going to realize why the CBO likely never has an accurate forecast and why most economists are worse than weatherman at predicting economic trends. What I am about to explain to you is a tad arcane but Poligazette and my IUSB Vision readers are some very smart people and I have confidence that you will grasp this just fine.

The first thing that must be understood is the difference between a growth in GDP (Gross Domestic Product is the total sum of production within the borders of a country in a given year adjusted for inflation) and a growth in real GDP per capita. It is possible to claim that your economy is in “recovery” even at 1% growth (Joe Biden) but since 2% of production growth in the United States is because of improvements in technology and capital goods; and another 1% is needed for population growth, an economic growth rate of over 3% is required to reliably increase the GDP per capita of the United States. The GDP per capita is the most important measure of the standard of living and wealth of the average citizen. With a claimed GDP growth rate of 3.5% and a non farm unemployment rising past 10%, how can each citizen be producing more per person while the unemployment rate is skyrocketing with another 530,000 NEW jobless claims just in the last month? This would have to mean that American consumers went on a spending spree to drive that number up or that each worker became way more productive and must be working lots of extra hours and overtime to get that per capita GDP up….

If you are starting to think that something sounds fishy you would be right.

Labels: US Economy

"the fantasy continues)" European stocks, Wall Street gain on US GDP Data - by Louisa Wat

The U.S. government report delivered the strongest signal yet that the economy entered a new, though fragile, phase of recovery and that the worst recession since the 1930s has ended. In afternoon trading in Europe, Germany's DAX jumped 1 percent to 5,551.94, Britain's FTSE 100 added 0.6 percent to 5,110.80, and France's CAC 40 climbed 1.1 percent to 3,703.90.

In a separate report, official data showed workers filing for jobless claims for the first time fell slightly less than expected last week, evidence that the labor market remains weak even as the economy is recovering.

Note EU-Digest: Whoever says that the recession has ended based on these results must be dreaming. Where are the real figures about employment and new job creation?

Labels: Economic Reports, US Economy

Barack Obama and globa economy - by Peter Hartcher

As the Nobel Prize committee was voting one way on Barack Obama's promise for the world's future, the global marketplace was holding a very different vote on America's future. The US dollar is falling sharply against currencies around the world. Since March it has lost 9 per cent of its value against the yen, 17 per cent against the Canadian loonie, 18 per cent against the euro and 40 per cent against the Australian dollar. And the price of gold rose to an all-time high of $1040 an ounce in the past week, partly on fears over the future of the greenback as a store of value.

The US deficit is a bipartisan disaster. It demands a bipartisan solution.

Labels: Barack Obama, Democrats. Republicans, US Economy

US economy - Unemployment Confronts Obama Rhetoric With Chronic Joblessness - Rich Miller

Economists since the mid-1990s have reckoned that full employment was equivalent to about a 5 percent unemployment rate, taking into account the time required to switch jobs. Now Nobel Prize winner Edmund Phelps and Pacific Investment Management Co. Chief Executive Officer Mohamed El-Erian say the fallout from the deepest recession in more than five decades is driving the so-called natural rate higher, perhaps to 7 percent. “We are in the midst of a large and protracted increase in both actual unemployment and its natural rate,” said El-Erian, 51, whose Newport, California-based company manages the world’s largest bond fund. Even with the economy growing, “it will take at least a couple of years” for joblessness to fall to 7 percent from 9.7 percent now. That may keep the federal budget deficit near a record $1.6 trillion into next year and might prevent the Federal Reserve from raising interest rates in 2010, said Bruce Kasman, chief economist at New York-based JPMorgan Chase & Co., the second- largest U.S. bank. Economists since the mid-1990s have reckoned that full employment was equivalent to about a 5 percent unemployment rate, taking into account the time required to switch jobs. Now Nobel Prize winner Edmund Phelps and Pacific Investment Management Co. Chief Executive Officer Mohamed El-Erian say the fallout from the deepest recession in more than five decades is driving the so-called natural rate higher, perhaps to 7 percent.

“We are in the midst of a large and protracted increase in both actual unemployment and its natural rate,” said El-Erian, 51, whose Newport, California-based company manages the world’s largest bond fund. Even with the economy growing, “it will take at least a couple of years” for joblessness to fall to 7 percent from 9.7 percent now. That may keep the federal budget deficit near a record $1.6 trillion into next year and might prevent the Federal Reserve from raising interest rates in 2010, said Bruce Kasman, chief economist at New York-based JPMorgan Chase & Co., the second- largest U.S. bank.

Labels: Unemployment, US Economy

U.S. economy weakened in August, Chicago Fed says - by Rex Nutting

The U.S. economy took a small step backwards in August on its road to recovery, according to a national index released Monday by the Chicago Federal Reserve Bank. The Chicago Fed's National Activity Index dropped back to negative 0.90 in August from an upwardly revised negative 0.54 in July. Only one of the four broad categories of indicators made a positive contribution in August. The production and income component was positive for the second straight month. Employment, consumption and housing, and sales made negative contributions

Labels: US Economy

GOP's ( Conservative) 'leverage' is tantamount to extortion - by George Skelton

Presently in the US Congress Senate Republicans are abusing the two-thirds vote requirement for passage of many bills to try to get Democrats to cave in on unrelated demands.The two-thirds rule is not used merely to protect taxpayers from politicians trying to reach deeper into their pockets. It's used by special interests -- mainly big business -- to game the system; a tool handy for legislative leverage, or extortion. If you don't give us what we want, we'll withhold the votes needed for the two-thirds. It's about buying and selling. Last Friday, at the all-night windup of this year's regular legislative session, Democrats weren't in a buying mood. This is what happened, according to Democrats, and Republicans aren't exactly denying it: The Senate GOP blocked more than 20 bills requiring a two-thirds vote because Democrats wouldn't cave on three unrelated demands.

One demand was the elimination of a program, called ReadyReturn, that allows low-income earners to have the state do their tax returns free. Intuit wants these people to buy its software product, TurboTax. Since 2005, the company has donated to the political coffers of three-fourths of the Senate, The Times reported Tuesday. Another GOP insistence was that a big corporate tax break enacted as part of the February budget deal be tweaked to help more businesses, especially Chevron.

Labels: US Economy

9 US hurdles to climate treaty -- by Jim Tankersley

After months of almost single-minded focus on health care, President Barack Obama is about to shift the spotlight to global warming this week, first with a speech to the United Nations in New York on Tuesday, then later in the week at the G-20 economic conference in Pittsburgh. The renewed emphasis on climate change and reducing carbon dioxide emissions comes at a crucial time: Negotiators are entering the home stretch in the drive to unveil a comprehensive new international agreement to curb rising temperatures at a December conference in Copenhagen.

With divisions remaining among the major industrialized nations, as well as with developing industrial powers and poorer nations, there is concern that negotiations could be bogging down. Obama administration officials, while acknowledging the seriousness of the challenges, continue to hold out hope for a deal.

Labels: US Economy

What Happened To The Push To Reform Wall Street? - by Kevin Whitelaw

Michael Bernstein, an expert in political and economic history who is currently serving as provost at Tulane University, says Obama's position is very different from that of President Franklin Roosevelt during the Great Depression, when FDR harnessed popular anger against bankers to pass key financial reform laws as part of the New Deal.Both then and now, it was largely up to the president to rally public sentiment, Bernstein says. "But I don't see Obama out there on the road, saying, 'You have to help me here go after the moneybags.' That's the kind of card Roosevelt played."

Heather Booth who runs Americans for Financial Reform, an advocacy group with nearly 200 institutional members, including AARP and the AFL-CIO has organized a push for widespread financial reforms. She expects a growing grass-roots call for change. She says - "We think people have been operating out of not just frustration, but fear. If that fear turns to hope for a real solution, and also, as fear changes to anger towards those who created this, we think there will be mobilization for change."

"If political leaders wanted to make it an issue, they could succeed in mobilizing people, but they're not," says Robert Shapiro, a political scientist and expert on public opinion at Columbia University. "For the people to mobilize themselves, it would take either another big drop in the stock market, or if not that, something worse."

Still, even if Americans aren't clamoring for a regulatory overhaul, the rest of the world is, says Fred Block, a professor who specializes in economic and political sociology at the University of California, Davis. "The Europeans, the Chinese and the Japanese are putting on continuous pressure," Block says. "If this were simply a matter of internal American politics, one would have to be more pessimistic. But the rest of the world has suffered from what the US allowed to happen in the financial market."

Note EU-Digest: So far nothing substantial has been done by our politicians to really correct what has gone wrong in the financial markets except help those who caused the problems. Politicians are the ones to blame for failing to do the job we "hired" them to do - watching over the well being of the citizens who elected them. Instead they turned a blind eye to the real needs of their constituents and a financial community gone out of control. The question which now must be answered without delay - can we trust our politicians with the power we gave them or should we get rid of them and the corrupt system they created? The answer should be quite simple.

Labels: economic meltdown, Financial Community, Political System, Revolution, US Economy

OECD expects 25 million unemployed by 2010

The economic downturn is likely to cost as many as 25 million people their jobs by the end of 2010 as the unemployment rate nears a record 10% in the OECD group of countries, according to a report released on Wednesday (16 September).The Organisation for Economic Cooperation and Development said 15 million jobs were lost between the end of 2007 and July 2009 and 10 million more could go by the end of next year despite signs the economy is picking up.pAccording to official figures in the UK, one of Europe's youngest populations, youth unemployment has hit an all time low since 1997 with one in five young people now jobless.

Labels: EU Economy, US Economy

US Economy - Mayor Bernero tells CNN that recession ‘ain’t over for a lot of our people’

Mayor Virgil Bernero was on CNN Wednesday morning responding to statements from Federal Reserve Chairman Ben Bernanke that the recession that has crippled our economy, tossed millions of Americans out of jobs and made the housing crisis worse, is over. Bernero told CNN’s John Roberts that while Bernanke might being seeing hopeful signs in the economy, it is not translating to Michigan. “Look, there’s a long way to go,” Bernero said. “But I would say it is premature at this point to say the recession is over. It ain’t over for a lot of our people. It’s not over for working people. It may be over for Wall Street but I will tell ya there is still a major disconnect between Wall Street and Main Street.”

Note EU-Digest

The disconnect between Wall Street and Main Street has never been greater. It is also risky and unrealistic to make assessments of the US future economic health and overall market performance based upon stocks in which Uncle Sam holds anywhere from a 40-80% equity stake. Trading these stocks is pure gambling, not investing, and every honest economic analyst will agree with that evaluation. While the industrial segment of the US economy appears to be stabilizing as a result of savings made by reducing the payrolls by millions of people, the consumer, which controls 70% of the US economy, remains severely stressed. Delinquencies and defaults continue to run at a record pace across almost every form of debt, including mortgages, and credit cards. Also looming in the background as another danger is the commercial real estate market, which is ready to collapse at any moment.

Labels: Economic Health, G20, US Economy, Wall Street

US Economy: Obama administration adding $3 million per minute to national debt - by Jarid Brown

The Obama Administration and congressional Democrats have done an outstanding job of breaking down uninsured statistics into smaller more understandable numbers such as their 14,000 newly uninsured claim. Yet, when it comes to deficits and the national debt, no one in Washington seems to want the public to understand just how much money they are spending. Politicians talk in dollar amounts that no American, even the richest among us, will ever truly comprehend.

The Obama administration released in the past 2 weeks revised projections that the 2009 deficit will amount to just shy of $1.6 Trillion dollars and that their long term budget projections will create $9 Trillion dollars of deficits in the next ten years. More than a year ago for another organization, we excoriated the Bush Administration for years of unchecked government spending culminating in the single largest deficit in US history. At the time, that budget deficit of half a Trillion dollars amounted to over $1 million dollars a minute in new national debt; an debt level that simply is not sustainable. With no balance of power in Washington this year, the drunken spending of politicians has tripled the record breaking Bush deficit, creating a phenomenal $3 million of new national debt every single minute (not total government spending, but new government debt). As a result, during the 8 hours of time you will spend at work today, the US government will go more than $1.4 billion into debt.

With a national debt approaching $19 trillion dollars, US taxpayers would be forced to pay a minimum of $950 billion per year in interest on such debt. That amount would be based upon the US government's ability to finance debt at a 5% rate, which historically would be unlikely, considering the debt to GDP ratios. In order to finance the debt, the government would have to pay higher interest rates and as a result those interest payments alone would likely swell to as much as $1.5 trillion per year. Further complicating the nation's ability to finance the US government's lust for debt, is the fact that more than 2 years ago, rating agencies issued warnings that the United States debt ration was likely to lead to a credit rating downgrade. Such a downgrade from our AAA status, would devalue the dollar and force an even larger rise in interest rates as lenders demand higher rates due to a greater risk of default. To reiterate a point, those warnings were first issued before the record deficits of the past two years.

By 2019, the US national debt will have become so large that the very longevity of the US will be at risk. The United States is the 800 KG. giant in the world's economy and the nation that time and time again has come to the rescue of others when their monetary systems have collapsed. Unfortunately, if the US monetary system collapsed under the weight of this unsustainable debt, there will be no nation capable of rescuing the US financial system.

Labels: Barack Obama, US Economy

Analyst: Up to 200 more US banks may fail in crisis

Analyst: Up to 200 more US banks may fail in crisis

Banking equities analyst Richard Bove said Sunday that it's possible 150 to 200 more U.S. banks could fail in the current banking crisis, putting greater stress on the Federal Deposit Insurance Corp.'s deposit insurance fund. The FDIC, which insures deposits, may be forced to turn to non-U.S. banks and private equity funds to help shore up the banking system, the Rochdale Securities analyst wrote in a note to investors. Among the 81 banks closed so far this year - compared with 25 last year and three in all of 2007 - were a stream of smaller institutions, many ruined by losses on ordinary loans amid the souring economy, tumbling home prices and spiking unemployment.

Labels: Banking Industry, G20, US Economy

US Economy: GDP shrinks 1pc, list of problem banks grows

Separate figures showed 570,000 Americans filed claims for unemployment benefits last week, down from 580,000 a week earlier, according to the Labor Department. Helping stoke spending is the government's `cash-for-clunkers' program, which gives car buyers a discount of as much as US$4,500 to trade in older vehicles for more efficient models. Stocks on Wall Street edged up after the data and on a late rebound in crude oil. US Treasuries weakened and the greenback fell.The European currency's gains versus the dollar accelerated after breaking through a key level of $1.4280, according to BNP Paribas currency strategist Andrew Chaveriat, Bloomberg reported.

The Federal Deposit Insurance Corp. added 111 lenders to its list of 'problem banks.' A total of 416 banks with assets of about US$300 billion have failed the FDIC's grading system. That's the most since June 1994 and will add to pressure on the FDIC's shrinking reserve fund after it increased loss provisions by US$11.6 billion. The US has taken over 81 banks this year.

Labels: US Economy

Real US unemployment rate at 16 pct: says US Fed official

AFP:The real US unemployment rate is 16 percent if persons who have dropped out of the labor pool and those working less than they would like are counted, a Federal Reserve official said Wednesday. "If one considers the people who would like a job but have stopped looking -- so-called discouraged workers -- and those who are working fewer hours than they want, the unemployment rate would move from the official 9.4 percent to 16 percent, said Atlanta Fed chief Dennis Lockhart. He underscored that he was expressing his own views, which did "do not necessarily reflect those of my colleagues on the Federal Open Market Committee," the policy-setting body of the central bank. Lockhart, who heads the Atlanta, Georgia, division of the Fed, is the first central bank official to acknowledge the depth of unemployment amid the worst US recession since the Great Depression.

Labels: Unemployment, US Economy

US deficit climbs to 1.3 trillion US dollars

The US budget deficit reached 1.3 trillion US dollars for the current fiscal year in July, official data showed, news set to fuel opposition to US President Barack Obama's ambitious health care and climate change proposals. The deficit for the first 10 months of fiscal year 2009, which began October 1, reached 1.3 trillion US dollars, close to 880 billion US dollars greater than the deficit recorded through July 2008, said the US Congressional Budget Office (CBO). Outlays rose by almost 530 billion US dollars, or 21 percent, and revenues fell by more than 350 billion US dollars, or 17 percent, compared with the amounts recorded during the same period last year, the non-partisan CBO said.

Labels: US Deficit, US Economy

New US jobless claims fall 550,000 in week

The United States had 6.310 million workers claiming unemployment benefits, up from 6.241 million in the week ended on July 18. Widely considered a lagging indicator, unemployment is expected to get worse even as the economy begins to stabilise and recover from the worst slump since the Great Depression was easing.

Note EU-Digest: The latest so-called positive unemployment data which has been jumped on by the Wallstreet "casino" and boosted stock market numbers around the world is somewhat bogus to say the least. The fact is that the drop in unemployment even as job losses continued to mount was the result of two separate surveys, one of individuals and a smaller one of employers. Eugenio Aleman, a senior economist at Wells Fargo, explained the shock figures by saying that a significant number of disenchanted workers had left the labor force and weren't therefore listed as unemployed. "I was surprised about the unemployment number coming down to 9.4 percent, but that was because of people dropping out of the labor force, so that is probably not going to be repeated in the future," Aleman said. Unemployment could still hit as high as 10 percent, even with an improving economy, he warned.The goods-producing sector lost 128,000 jobs, including 52,000 in manufacturing. But the agency estimated the auto sector added 28,000 jobs due to recalls from extensive plant shutdowns earlier this year. The services sector shed 119,000 jobs including 44,000 in retail. Sectors adding jobs were education and health care (17,000); leisure and hospitality (9,000); and government (7,000). The number of people unemployed for 27 weeks or more rose by 584,000 over the month to 5.0 million.

Labels: employment, US Economy

US economy - Obama braces US for bad economic figures

US President Barack Obama braced the country for more bad economic news on Thursday, saying second-quarter GDP figures would show the economy contracted and job losses were still a "huge" problem. Obama, speaking to reporters in the Oval Office after a meeting with Philippine President Gloria Macapagal Arroyo, said the US credit and banking systems had settled down - a sign the economy had stepped away from a dangerous ledge. Obama said he had not seen the GDP figures, which are to be released today, but he referred to consensus by economists that the US economy had seen a "significant slowing down of the contraction over the last several months."

Labels: Barack Obama, US Economy

The NEW US (World) Economy - Truly A Joke - by David Spurr

The US economy has officially involved into a farce. It’s a joke. It’s surreal. Everyday CNBC talks about endless bailouts of private businesses. Banks are insolvent. There is no doubt about it. They would all have failed had it not been for the TARP money and the endless expansion of the Federal Reserve’s balance sheet. Money managers try to define rational suggestions for asset values. The chatter continues. Bottoms are called. Bottoms are broken. Markets gyrate each day, but make no real forward progress. The days of BUY and HOLD are dead on arrival. You can no longer survive in the “New US Economy” unless you have a trader’s mentality.

The government is now so deeply involved in the calculation of asset values, that the “free market” as we knew it, prior to 1987 is dead. This is now a market that is manipulated and controlled by the US Government.

Numbers printed on financial statements are about as worthwhile as toilet paper."

Labels: Green Shoots, US Economy, Wall Street

US economy: Total number of federally insured banks closed in 2009 reaches 64 after regulators shut 6 Ga banks, 1 in New York state

Regulators on Friday shut six banks in Georgia and a small bank in New York state, raising to 64 the number of federally insured banks to fail this year. The Federal Deposit Insurance Corp. was appointed receiver of the banks: six bank subsidiaries of Security Bank Corp., based in Macon, Ga.; and Waterford Village Bank of Clarence, N.Y. The six Security banks had total assets of $2.8 billion and deposits of $2.4 billion as of March 31. State Bank and Trust Co., based in Pinehurst, Ga., has agreed to assume all of the banks' deposits and $2.4 billion of the assets, the FDIC said. In addition, the FDIC and State Bank and Trust signed an agreement to share losses on around $1.7 billion of the six banks' assets.The Treasury Department has launched a program in which financial firms will buy as much as $40 billion worth of banks' soured, mortgage-linked investments. That amount is far below the potential $1 trillion in assets that the government originally hoped to take off the banks' books through the program and another that would have targeted bad loans.

The Treasury Department has launched a program in which financial firms will buy as much as $40 billion worth of banks' soured, mortgage-linked investments. That amount is far below the potential $1 trillion in assets that the government originally hoped to take off the banks' books through the program and another that would have targeted bad loans.

Labels: US Economy

US Senate agrees to cut off new spending for F-22 jets - can Britain and the Netherlands still afford to buy the plane?

The Senate has sided with the Obama administration in agreeing to cut off new spending for the F-22 jet fighter program. The 58-40 vote removes $1.75 billion set aside in a defense policy bill to build seven more F-22 Raptors, adding to the 187 stealth technology fighters already in the pipeline.Defense Secretary Robert Gates has said that the Pentagon has enough of the $140 million jets to meet operational needs and President Obama has threatened to veto the defense bill if Congress ignores the request that the program be terminated.

Note EU-Digest: Both Great Britain and the Netherlands have their eyes on the Lockeed F22.Given the US cancellation in ordering this plane the question could be asked if Britain and the Netherlands can afford ordering this aircraft given the deteriorating economic environment in their countries which requires different priorities than military ones.

Labels: US Economy

Geithner jetsets across globe to peddle US debt

Timothy Geithner, architect of bank, auto and economic rescue plans, has another high-stakes job these days: traveling bond salesman.The recession, financial crisis and two wars have pushed the federal deficit above $1 trillion, a record level that makes the Treasury secretary's role as chief marketer of US debt tougher than any of his recent predecessors'.In March, Chinese Premier Wen Jiabao said his country was concerned about the "safety" of the large amounts of money it had lent to the United States.The deficit-cutting proposals the administration has so far revealed would fall far short of what is needed. "If the Obama administration has a credible plan to bring the deficits down, they are keeping it a deep secret at the moment," said Michael Mussa, senior fellow at the Peterson Institute and former chief economist at the International Monetary Fund.

With nearly three months left in the budget year, the Obama administration forecasts that this year's deficit will total $1.84 trillion, more than four times the size of last year's record tally. The nonpartisan Congressional Budget Office estimates the annual deficits under the administration's spending plans will never drop below $633 billion over the next decade. And it forecasts an additional $9.1 trillion added to the debt held by the public - the amount that Geithner has to finance with bond sales.

Note EU-Digest: The above paints an extremely gloomy economic situation for the US, which also indicates how little flexibility Mr. Geithner has.

Labels: Timothy Geithner, US Budget Deficit, US Economy

Testimony--Ben Bernanke, Semiannual Monetary Policy Report to the Congress

"At the time of our February report, financial markets at home and abroad were under intense strains, with equity prices at multiyear lows, risk spreads for private borrowers at very elevated levels, and some important financial markets essentially shut. Today, financial conditions remain stressed, and many households and businesses are finding credit difficult to obtain. Nevertheless, on net, the past few months have seen some notable improvements. For example, interest rate spreads in short-term money markets, such as the interbank market and the commercial paper market, have continued to narrow. The extreme risk aversion of last fall has eased somewhat, and investors are returning to private credit markets. Reflecting this greater investor receptivity, corporate bond issuance has been strong. Many markets are functioning more normally, with increased liquidity and lower bid-asked spreads. Equity prices, which hit a low point in March, have recovered to roughly their levels at the end of last year, and banks have raised significant amounts of new capital."

Labels: US Economy

Miami Beach: the party is over

For the complete report from the South Florida Business Journal click on this link

US Economy: Florida ‘a state in deep trouble’

A report of key economic indicators from the Florida Center for Fiscal and Economic Policy's (FCFEP) finds that per person, income growth in Florida has fallen behind the rest of the nation and that the gap in income between the most affluent and those on the bottom rung of the economic ladder is among the widest in the nation – and getting wider. In addition to having one of the nation’s highest unemployment rates – in June, it hit 9.5 percent – many of Florida’s jobs are low paying. The national average annual earnings for all occupations were $42,270 as of May 2008. Florida’s average was almost 10 percent less, at $38,470.

The report noted these signs of trouble: * Florida's population growth, which has driven the state's economy since World War II, is stagnant. * Florida's rate of income growth has fallen to 45th in the country. * The real rate of growth in gross state product – the value of goods and services the state produces – has fallen to 47th in the nation. * With a poverty rate of 12.5 percent, the number of people living in poverty in Florida has increased by 180,000 in one year. * About 1.9 million Florida residents – about one in 10 – receive food stamps. * Foreclosures in Florida have quadrupled over the last three years. In the first four months of this year, new Florida foreclosure filings totaled 198,880, according to RealtyTrac. * Per-capita state government spending is 44th in the nation, and Florida spends proportionately more of its budget on corrections than all but two states and a smaller share on education than most states.

The FCFEP is a Tallahassee-based nonprofit organization that conducts independent research.

Labels: Florida, US Economy

U.S. economy's fate in Saudi hands - by Jim Jubak

Saudi Arabia is running the U.S. economy.

"I'm not sure the Saudis want the task, but they've got it. Because the United States still doesn't have a national energy policy, we've thrown decisions about how fast our economy grows and whether our standard of living rises or falls into the hands of Saudi Arabia's oil ministry. That's risky, since the economic self-interest of Saudi Arabia and the United States aren't always aligned, and because keeping the fractious and often dysfunctional governments of the world's oil producers on the same economic course is a whole lot harder than building consensus among the governors of the Federal Reserve.

Labels: Saudi Arabia, US Economy

Goldman Sachs has engineered every major market manipulation since the Great Depression: "America's Great Bubble Machine" - by Matt Taibbi

"The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. Any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy. They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They've been pulling this same stunt over and over since the 1920s — and now they're preparing to do it again, creating what may be the biggest and most audacious bubble yet."

Labels: Goldman Sachs, Investment Banks, US Economy

US economy - When Will It Turn?

The more important point question Democrats are asking themselves: when will the trend turn? When will Obama be able to argue that he has created jobs -- or a single job? The problem is that the unemployment rate is a big political number, and a rate that exceeds 10.0 -- another artificial level -- is tough. Democrats worry that if the UI rate isn't down substantially by the time voters make up their minds -- roughly, a year from now, mid-summer, 2010, their party will suffer. It's one thing to say that voters don't blame Democrats for the UI rate now -- they don't -- and it's entirely another to presume that voters won't be angrier at the slow pace of progress by this time next year. True, the administration's top economic thinkers, like Jared Bernstein and Christina Romer, projected a much different pathway for the unemployment rate. But so did private forecasters, who are able to quietly revise their forecasts weekly. It's clear that the Obama economic brain trust did not anticipate how bad January and February would be. Then again, few policy-makers, economists or otherwise, did.

If Democrats lose their cool and their patience, they could wind up hurting themselves even more. Democratic panic will turn the economy into a political weapon that Republicans can use against the Democrats.

Labels: Barack Obama, US Economy

U.S. Government debt may rise to 75 percent of gross domestic product by 2011 - by Guy Campanile

The International Monetary Fund warns that U.S. Government debt may rise to 75 percent of gross domestic product by 2011, nearly twice what it was in 2008. By September 1 out of 10 Americans will be out of work. Preventing a systemic failure due to over leverage based on real estate and credit is absolutely needed. The idea of a consumer protection for financial products is also long overdue.

The reality is there will be a future financial crisis. The when and how is anybody's guess. History has proven time and again that identifying financial risks before they develop into full blown bubbles is a tricky if not impossible business.

Labels: US Economy

U.S. Economy Trending Towards an Inflationary Depression

In the US, the privately owned Fed plays the role of our central bank, and it presides over our nefarious banking system, which is a fiat-money, debt-based, European form of fractional reserve banking that once powered the British mercantilist system. All major US inflationary issues and debacles can therefore be squarely placed at the doorsteps of the Fed, and of our Treasury Department, which is little more than a doormat for the Fed, which together with Wall Street, runs a revolving door with the Treasury. In fact, our current Treasury Secretary is the former President of the New York branch of the Federal Reserve Bank. So much for checks and balances and avoidance of conflicts of interest. We now have the US Fed increasing total money and credit (M3) at a rate of 18% while our GDP is contracting at a rate of minus 6%. That is a 24% differential, and that means that the amount of goods and services being produced has an ever-growing supply of money chasing after it, money and credit that is growing at a pace that is 24% more than the pace at which goods and services are growing. Based on all the foregoing, we'll give you three guesses as to what the outcome will be somewhere down the road when the Fed's ever-burgeoning money blob starts chasing after a shrinking supply of goods and services.

The world banking system, as we know it is about to slide into history, as did the Oracle at Delphi, which so long ago played central bank and eventually brought tragedy to Greece. The days of our current elitists are numbered. We are not children to be simply dealt with. We may think our republic is democratically free, but it isn’t. It is controlled by a privately owned Federal Reserve just as England is with the Bank of England. The next move by BRIC nations will be to extend their influence throughout Asia and bring an end to American and British meddling in the region. This will be done in part by not recycling dollars – or in fact refusing to use them. No more dollar losses and no more funding for America’s military machine. It means the end of American dominance. There now will be a race to dump dollars.

Labels: US Economy

USA Economy: Who Would Lose Under Obama’s Financial Reforms - by Rick Newman

President Obama’s ambitious overhaul of the financial regulatory system would create a new layer of consumer protections, expand the Washington regulatory establishment and change the way America’s banks do business. The goal is to provide more stability to the financial system, which would benefit most Americans. But such abrupt change would also cause some casualties. Here’s who stands to lose under Obama’s reforms:Big Money, Overpaid CEOs,Fannie Mae and Freddie Mac, S&Ls,Standard & Poor’s and Moody’s, Shadow banks, and Consumers. Sure, there will be a lot of new rules designed to protect the US population, but if the government’s got our back, why bother looking out for ourselves? Financial illiteracy has been a major contributor to the economic meltdown, and for some people, more government responsibility will lead to less personal responsibility. Buyer beware, whether the government’s on the case or not.

Labels: Barack Obama, US Economy

Top European and U.S. Stocks: Who Will Lead Who?

While the two economies may take different paths, I wanted to see how the markets in Europe and the US are reacting to the various stimulus programs being implemented. I used the Dow Jones Index as the sample index for the US market and the DJ Euro Stoxx 50 Index for Europe. The DJ Stoxx 50 was not used since it includes the UK and I wanted to exclude the UK as it is facing similar problems to those of the US. Like the Dow Jones index, the DJ Euro Stoxx 50 Index is comprised of fifty of the largest companies in continental Europe.

The fact of the matter is that Europe's largest stocks ran much higher than the US's. And after March lows, the European stocks have rebounded and are leading US stocks again. On a 6-months basis, the DJ Euro Stoxx Index is slightly ahead of the Dow Jones Industrial Average as well. Overall these two indices closely track each other.

Labels: EU, EU Economy, Stock Market, US, US Economy

BRIC summit watched for signals on dollar

When the leaders of Brazil, Russia, India and China gather for their first full-fledged summit, they will be closely watched for signs of policy shifts that could affect the global role and strength of the U.S. dollar. During the summit Tuesday in the Ural Mountains city of Yekaterinburg, Russian President Dmitry Medvedev is likely to reprise Russia's call for a new global reserve currency to augment the dollar. The Russian proposal reflects both the Kremlin's push for greater international clout and a concern shared by other so-called BRIC members that soaring U.S. budget deficits could spur inflation and weaken the dollar.

Labels: US Economy

Mounting deficits spark US economy jitters

Gaping US trade and budget deficits and a weak auction of government debt that pushed interest rates higher pointed to a bumpy road to recovery for the world's largest economy on Wednesday. A Federal Reserve report noting businesses see some signs of moderation in the contraction, even though conditions were weak or deteriorated further in May, failed to ease anxiety about the economy. Instead, financial markets found new reasons to worry that massive government spending and Fed cash infusions will lead to dangerous inflation and undercut any fledgling rebound.

Note EU-Digest: European Union countries in March rejected calls by U.S. officials and European trade unions to increase spending further to boost growth. Earlier this month, German Chancellor Angela Merkel criticized Britain and the United States over the amount they're spending on stimulus programs. When talking about root causes of the economic crises everybody agrees that the problems in U.S. economy has played the biggest role in causing the crises,so it seems somewhat illogical for the EU to listen or to copy the US remedies to solving the financial crises.

Labels: US Economy

America's economic power on the Global Stage Waning - by Mallory Factor

The global stage may appear complex, but there are really just two kinds of players: creditor nations and debtor nations. Today, autocratic oil-rich Islamic states such as Saudi Arabia and Kuwait and resource-rich states such as China and Russia are developing huge holdings in Western currency, debt, and industries, while democratic Western governments slip deeper and deeper into debt. Though these countries are not richer than the United States or other Western nations, they are now the creditors of those nations. The power is shifting. A new relationship is emerging, one that no longer favors the West. The West’s poor fiscal discipline and failed economic policies have allowed this shift to happen. The economic power of these rising nations began with their central banks purchasing excess reserves of dollars and duros and, later, U.S. and European debt. More recently, many countries have established new financial vehicles called Sovereign Wealth Funds to make direct investments in global companies and industries, thereby extending their nation’s financial influence. Guided by the best and brightest from Wall Street and making more and more sophisticated investments in our economy, these foreign governments are aiming for greater returns, both economic and political, from their investments.

Given their growing economic might, the new “creditor nations” will have the power to further their geopolitical ambitions by using a weapon of international diplomacy and warfare that hasn’t been seen in centuries: economic statecraft. In the emerging world order, global dominance will not be decided only by armies and aircraft, but by greenbacks and euros, rubles and renminbi as well. And the US can no longer simply impose their views on the world. Creditor nations are now projecting power with their economic might — and in new and innovative ways.

Labels: New World Order, US Economy

Green Shoots or Yellow Weeds? - by Nouriel Roubini

Recent data suggest that the rate of contraction in the world economy may be slowing. But hopes that “green shoots” of recovery may be springing up have been dashed by plenty of yellow weeds. Recent data on employment, retail sales, industrial production, and housing in the United States remain very weak; Europe’s first quarter GDP growth data is dismal; Japan’s economy is still comatose; and even China – which is recovering – has very weak exports. Thus, the consensus view that the global economy will soon bottom out has proven – once again – to be overly optimistic.

Labels: US Economy

U.S. Inflation to Approach Zimbabwe Level, Faber Says

The U.S. economy will enter “hyperinflation” approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said. Prices may increase at rates “close to” Zimbabwe’s gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabwe’s inflation rate reached 231 million percent in July, the last annual rate published by the statistics office. “I am 100 percent sure that the U.S. will go into hyperinflation,” Faber said. “The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.”

Federal Reserve Bank of Philadelphia President Charles Plosser said on May 21 inflation may rise to 2.5 percent in 2011. That exceeds the central bank officials’ long-run preferred range of 1.7 percent to 2 percent and contrasts with the concerns of some officials and economists that the economic slump may provoke a broad decline in prices. “There are some concerns of a risk from inflation from all the liquidity injected into the banking system but it’s not an immediate threat right now given all the excess capacity in the U.S. economy,” said David Cohen, head of Asian economic forecasting at Action Economics in Singapore.

Labels: Inflation, US Economy

70% of the estimated $1.95 billion dollars of China's reserves is in US treasuries, and China also holds about a quarter of US debt held by foreigners

Blogging Stocks and the Financial Times report that China’s official foreign exchange authority is still buying record amounts of US government bonds, in spite of Beijing’s increasingly vocal fear of a dollar collapse, according to officials and analysts. Senior Chinese officials, including Wen Jiabao, the premier, have repeatedly signalled concern that US policies could lead to a collapse of the dollar and global inflation.

China still buys US treasuries because it is the most liquid and largest world trading market. China's State Administration of Foreign Exchange (Safe) said that it would disrupt any other world market if China shifted its assets elsewhere. The actual amount of China's reserves is a state secret. However it is assumed the 70% of the estimated $1.95 billion dollars of China's reserves is in US treasuries, and that China holds about a quarter of US debt held by foreigners. Bottom line is that if the US economy crashes, so will the Chinese. So it is quite clear that over the long term China wants to cut its exposure to US treasuries and consequently has already eased restrictions for state owned companies to acquire competitors abroad.

Labels: China, US Economy