I have been reading an interesting article about General Motors lately.
It seems that even after receiving $15.4 billion in federal loans, G.M. is once again on the brink of financial collapse.

What's more, Obama himself could be held responsible in a certain way.
By June 1, president Obama has to decide if the second restructuring plan is acceptable.
But it could be too late if he keeps waiting until the very last day of his own deadline.

Even after receiving $15.4 billion in loans, the financial problems of G.M. continue to deepen.
Apparently, G.M. is spending more than $113 million a day than it is taking in from sales of its vehicles around the world. So the company is getting closer to bankruptcy each day. Personally, I thought that president Obama would not allow G.M. to go bankrupt.
I assumed G.M. was just too big and too important, but what hope is there for a company that loses $113 million each day? According to analists like Brett D. Hoselton, the bankruptcy is looking like a real high probability.

Imagine the problems, imagine the chaos when one of the biggest companies in America stops to exist. Ten thousands Americans will lose their job directly. Ten thousands will follow for sure.
I fear that the consequences may even be harder then in the case of Lehman Brothers.
I realise it sounds harsh, but I think it is far more worse to lose your monthly revenue (without the possibilty to find one in the near future) then losing some money. Especially when you lost your savings earlier on.


Source: http://www.nytimes.com/2009/05/08/business/08auto.html?ref=economy

US personal income and spending worsen

The US personal income and spending data is generally weaker than expected. It is the first monthly decline in three months in March as incomes slide and people saved regularly. While they prove oneself equal to the crisis, for instance they try to cope with the recession.

In real terms, personal consumption expenditures sink by 0.2 per cent and this followed a revised increase in February. But in general, in the first quarter of this year consumption rose at an rate of about 2 per cent. The cause is cheaper petrol and a boost from tax rebates.
Moreover, the incomes also fell by 0.3 per cent and this for the third straight month in March. The decline is due to job cuts, pay freezes and eliminated bonuses, who savaged salaries recently.

The commerce department’s gauge of prices decreased by 0.2 per cent but was up when food and energy is exclude. Meanwhile the savings rate rose to 4.2 per cent. Chief US economist at IHS Global insight predicted that there will be a drop in employment and consumers have to be cautious.
New US jobless claims eased, a decline by 14,000 to 631,000. This is in contrast with the labour department figures, they showed a rose to a record of 6.27 million.

According to me, this situation of slowdowns in the different sectors, in the behaviour of consumers,...is normal in these hard times. We have to cope with the problems but in fact the decline in income and spending are just causes of the crisis. So we can speak of a vicious circle.

Obama says he's fighting for economy

In a press-conference on Wednesday night President Obama spoke about his efforts to rebuild the economy in his first 100 days as President of the U.S. He began his conference with mentioning that his economic recovery plan has already saved or created 150.000 jobs. But he also noticed that the nation is still facing the economic problems.

During the conference some questions were asked about the intervention of the government in the bank and car sectors. Obama made clear that he’s not interested in running private companies but he’s just trying to get those industries back on their feet.

When asked about the possible bankruptcy of Chrysler he said that Chrysler may be able to avoid bankruptcy and he also defended the government’s interventions in the car industry. But Obama will try to get the government as fast as possible out of the car industry in the U.S.

Obama also talked about his federal budget outline which is based on steps taken to recover the economy. The budget will also invest in education, worker training and will create renewable energy jobs.

According to me Obama is doing great because normally a President of the U.S. has to deal with some problems but not with that amount of problems Obama has to deal with. He is trying to solve the problems in a lot of sectors like the bank sector, the employment market,… He can’t possibly say what everyone has to do and he has to keep their different interests in mind. But the economic crisis in not the only problem, he also must realize some promises he made before he was elected as President; like the health insurance,… so it’s a great responsibility.

Source: http://money.cnn.com/2009/04/29/news/economy/obama_economy/index.htm?postversion=2009042921

Chrysler’s Fall May Help Administration Reshape G.M.

WASHINGTON — Fresh from pushing Chrysler into bankruptcy, President Obama and his economic team are hoping that the hard line they took last week gives them leverage to force huge changes in General Motors, a far larger and more complex company.

Officials say that, difficult as Mr. Obama’s decision was on Wednesday to take all the risks of a Chrysler bankruptcy, the politics of reshaping G.M. will be far harder. Already a shadow of the company that once dominated the American landscape, G.M. will be forced to dismiss 47 000 jobs worldwide, closing more than a dozen plants in the United States, eliminating four brands and shuttering 2 600 dealerships.

In Chrysler’s case, the tough job-cutting decisions had already been made and the government is taking only a small stake. An alliance with Fitat envisions selling the company’s cars in new markets around the world and adding cars that use Fiat’s fuel-efficient technology.

But in G.M.’s case, Mr. Obama needs to force deeper cuts and becoming the controlling shareholder. He will also be overseeing the radical downsizing of G.M.’s work force as he is trying to reverse rising unemployment.
That is why the recent decision about Chrysler is a very important one according to me. The threat of bankruptcy is very important in the negotiations with the bondholders. Without a clear and present danger to them, they won’t make a reasonable deal.

Bankruptcy may also be the only way to force the kind of paring down that Chrysler, with only a third of G.M.’s workers and half the number of plants, did not have to endure.

We have to remain realistic though, Mr. Obama is not going to allow G.M. to be broken up, its assets sold or abandoned. Mr. Obama could afford to take a hard line when dealing with Chrysler, but when dealing with a company as politically sensitive and as large as General Motors, he will have a far harder time separating the economic decisions from the political challenges.
But I am sure we all agree that we must take action in order to save as much of General Motors as possible. It will be hard to make G.M competitive again, especially when Obama is trying to reach his fuel-efficiency and low-emission goals at the same time.


Source: http://www.nytimes.com/2009/05/03/business/03auto.html?_r=1&ref=business

US homeowners turn to roommates during recession

Rob Martin is one of the homeowners in the United States who gave up a part of his privacy in an effort to make an end on the economic troubles. In his student life, Rob Martin has already lived with a stranger. But according to him, it was quite strange having new roommates. Before renting one of his bedrooms, he screens the candidates to be sure to have a suitable renter.

With the renting of his rooms, he can earn $700 a month extra. This monthly extra money makes it more easier for him to pay his bills.
But of course, you have to invest to make your house attractive to hire. Also Mr Martin did efforts, such as the installation of a cable television and the cranking of the thermostat to make it more cozy.

This project is perfect for divorced people or people who are in the inability to sell homes that are too big or too expensive to maintain. This second reason is the story of Chris LaRocco. He owns an exquisite villa. But as a result of his unemployment, it’s difficult for him to take care of his house. Also the housing crisis makes it not easy to sell his house.

Renting a bedroom in your house has also negative points. It’s not that easy for the house owner. First of all, you had to face with their personal stuff. Secondly, family and friends of your renter will certainly visit him in your house. Finally, it's possible to be faced with the emotional problems of the renter. So finding a suitable candidate requires a lot of efforts.

In my opinion, I think it’s really difficult to have a roommate. You have to give up a lot of privacy. But I think in the situation of this persons, they have no other choice.
First of all, their house is less worth as a result of the US housing crisis. So when they sell their house in times of a bad economic situation, they won’t receive the money their house is worth. So in this case, it’s better to take a roommate.
Further, in the economic crisis, people have no money to buy a house. They have other priorities. So it would be very difficult to find a financially strong person who’s interested in your house.

Source: http://www.guardian.co.uk/business/2009/apr/27/homeowners-roommates-recession

Optimism about economy grows - poll

More and more people are starting to believe in an improving national economy. A CNN/Opinion Research Corporation survey cleared it all out for us. The survey also showed some figures concerning the new president Barack Obama, who has had his first 100 days in the office. The results are satisfying.

48% of the people questioned in May believed that the current economic conditions are really bad. In February this figure was even higher – about 66% had negative ideas about the nation’s economy. In April this percentage has come down to 37%, which is a positive thing. Civilians who are having positive visions about the improvement of the homeland economy is an important step to actually reach the wanted improvements, since a bad economy is the most important thing on a public’s mind.

Another important figure is showing that 63% of the people who participated the questioning think that Obama is doing a good job. He pays enough attention to the most important problems that the United States is facing these days and he also has the right priorities. Compared to the statistics that were relevant a couple of years ago this is a good thing. Only 46% thought the same thing about president Bush in 2001 and only 37% about Bill Clinton in 1993.

The survey also showed that about 68% of the people questioned believe that Obama is doing a good job in keeping his promises that he made during the campaigns for the White House. 30% say that he’s doing a bad job. This is while only 30% believed that Clinton did a good job here. The conclusion is pretty simple: in almost every area Obama is doing better than Bush and Clinton.

It’s a good thing that people start to think more positive about the future economy of the United States. This will make them consume again and as read in previous blogs I find the demand side of the economy the most important thing. It will cause an even bigger improvement real soon.

I’m also not really surprised about the statistics that concern Obama. I already knew that he is a great president for the United States. I just couldn’t find myself with the ideas president Bush had. He was way too radical. Obama is just more neutral and has much more empathy. I also find it important that there finally is a black president in the United States. I would definitely be part of the 63% of the people who think that Obama is doing a good job.

Source: http://money.cnn.com/2009/04/29/news/economy/obama_economy_100days/index.htm?postversion=2009042911

Obama changes approach to Cuba

President Obama has decided to change the relations with Cuba significantly. He has directed his administration to allow travel and money transfers by Cuban Americans to family in Cuba.

I am sure this will be in the benefit of the Cuban people. It will increase the freedom they have because Obama has also directed his administration to lift restrictions on communications. But more importantly, these measures will allow Cuban Americans to see their families again and send them money of course. Some say that this is the best way to gain the sympathy of the Cuban people. After all, Obama said in a campaign speech that there are no better ambassadors for freedom than Cuban Americans. And I think we must all agree with him. Nevertheless, the Republicans do have criticism. They say that the Cuban dictatorship is one of the most brutal in the world and that the U.S. economic embargo must remain in place until tyranny gives way to freedom and democracy. The Republicans are afraid that the Communist Party in Havana will benefit from this new evolution.

I am of the opinion that the past shows us that the Republicans are wrong.
First of all, Obama is not planning to stop the embargo completely, for example sending money to senior government officials and Cummunist Party members remains prohibited.

Secondly, while the embargo was in place, the Cuban economy proved that it did not need the U.S. economy at all. Maybe it is not bad to try something completely different.
It will help Cubans to become more independent of the state and I think this is the right way to ‘free’ the Cuban people.


Written by De Clercq Stijn

Source: http://www.foxnews.com/politics/2009/04/13/obama-eases-restrictions-cuban-americans-traveling-cuba/