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/

US housing starts is going through a bad patch

New US housing construction plunged sharply and more than expected in March, reversing a big jump from the previous month. The hopes were tempered and the effect is: the housing market stability is on the horizon.

The Commerce Department said Thursday that the construction of new homes and apartments dropped 10.8 percent last month to an adjusted annual rate of 510,000 units. The cause of the decline is due to a decrease in construction of multi-family homes. But there is also good news: the single-family activity may finally by stabilizing.

Some figures: the drop in construction in March followed a 17.2 percent surge in February, which was an unexpected gain. The 510,000 unit pace for total construction is one of the lowest in government records dating to January 1959. The record low was a 488,000 unit pace set in January.

The US economist at Capital Economics said even if the housing activity has turned the corner, it is still very weak. In spite of the disappointing results The National Association of Home Builders reported Wednesday that its gauge of builder sentiment posted its biggest one-month jump in five years in April. The US housing market has been badly hit as the credit crisis has made obtaining a mortgage even more expensive. Moreover the number of US workers filing new claims for jobless benefits fell last week, but so-called continued claims rose to a fresh record as the recession bit.

According to me, the housing market suffers severely from the financial crisis. The impact is considerable, so the government has to tackle the problem by drawing up a plan and lending financial support. Furthermore the consumers are put off by this crisis, but actually their behaviour has to be the same like before the crisis, so there is not an arrest of growth.

Written by Marie Maes

Source: The Financial Times
Article: US housing starts fall 10.8% in March
Published: April 16, 2009
By Alan Rappeport in New York

Podcast 2

The link to our 2nd podcast can be found here:

http://rapidshare.com/files/226018299/podcast_2.mp3

The American Economy team out!

Microsoft suffers first sales dip

For the first time in 23 years, Microsoft has announced a quarterly sales drop of 6% comparing to the previous year. Most of its profit is made by selling its operating system Windows and its business software, like Microsoft Office. The sales drop resulted from a fall of sales of personal computers bought by consumers and businesses.

According to Steve Ballmer, Microsoft’s chief executive, the bad news is a result of the downturn in the world economy. They expect the weakness will last at least till the end of the next quarter. The situation is worse than analysts had been expecting. It looks like the demand and consumer preference had reached their maximum. But there are also positive elements, Microsoft is controlling costs and getting that under control.

To solve this issue, Microsoft has cost-cutting plans. Last January, Microsoft announced a disappearance of 5,000 jobs over the following 18 months.

Businesses all over the world are suffering from the financial crisis. So it’s quite normal, Microsoft is also having problems. According to me, the situation is not very alarming. In times of a bad economic market, sales figures are falling in all areas.
The job losses are more alarming. Certainly in countries with a bad system of social security. A lot of families will have problems.

Source: http://news.bbc.co.uk/2/hi/business/8015623.stm

Ford loses $1.4 billion

Ford company announced this week a lower than expected loss for the first quarter in 2009. Also the company announced that it remains on track to meet its financial targets despite the worst quarter for the car constructors since 25 years.

Ford is the only car constructing company in the U.S. that didn’t receive loans from the government to help avoid bankruptcy, but this quarter it made net losses of $ 1.4 billion. There is not only the loss of $ 1.4 billion, but also the revenue dropped with 37% to $ 24.8 billion in the this quarter. Ford is already making losses since 2005, what brings the total losses just under $ 40 billion. Unless the bad results Ford is doing better than expected, Wall Street was expecting a revenue of only $ 22 billion. It’s also doing better than its two U.S.-based rivals.

Based on what Ford said in its statement that it still does not intend to ask for federal aid, it’s also going to restructure its debt and make changes in its labor contract with the United Auto Workers union.

According to me the financial crisis keeps making victims in the car industry and all the other sectors. At this moment buying a car is not the priority for the most people so the car industry is collapsing. It’s important that the government keeps supporting G.M., Ford and Chrysler because otherwise the damage will be disastrous not only for the economy but also the unemployment rate will raise again.

Source:http://money.cnn.com/2009/04/24/news/companies/ford_results/index.htm?postversion=2009042408

Obama to lean on credit card CEOs

Finally the measures to protect consumers against the credit card market might be legalized. Years ago, the measures have been introduced but there was no legislation yet. On April 21, Barack Obama announced that there will be a meeting of administration officials of the congress and card company executives on Thursday. This could finally be the break-through where a lot of people have been waiting for.

The measures are there to protect the consumer. A system of bills would be used and these would be responsible for banning card companies who ask ridiculous high interest rates and fees. It would also prevent young adults from getting credit cards and run up debts. Now more than ever credits cards are having bad influences on consumers’ wallets. In February the amount of money credit card companies can’t collect from their customers reached a new peak; it’s never been this high during the last 20 years.

Though there are a lot of people who are against these measures. Banking lobbyists warn us that these new and tougher rules could make credit card lending more costly. This could slow down the recovery of the credit markets that are undergoing hard times. During the 2008 elections, the credit card sector gave about $7.3 million to lawmakers in both political parties. The company Visa spent $1.7 million on lobbying according to the government lobbying registries.

I really hope that these measures will be legalized. It’s unbelievable how much interest some of the companies ask. A lot of normal people just don’t know how easy it is to run up debts and are likely to spend more money than they can actually have. I also find that young adults shouldn’t be able to get their hands on a credit card; they don’t know the value of money yet and it’s really dangerous for them also to build up debts.

I can conclude that the credit card market needs governmental guidance for the safety of the average consumer.

Source: http://money.cnn.com/2009/04/21/news/economy/credit_card_crackdown/index.htm?postversion=2009042115

663,000 jobs lost in March

Three months into the year, the unemployment rate has already soared to 8.5 percent. The official figures showed that it was the highest level in more than a quarter-century, as the recession savaged the labour force.

The non-farm payrolls data presents that about 663,000 jobs disappeared from the American economy last month. Moreover between January and March, more than two million jobs were lost, according to the employment report, released Friday. So in all, the total number of layoffs swelled beyond five million jobs.

The job losses weren’t large and widespread across the services sectors, that is in contrast with the improvement in the manufacturing activity. The government expects and hopes the world economy stabilizes in the second half of the year, before the market recovers. So the government’s purpose to the downturn is being put to a strenuous test. Further president Barack Obama requested the US and the developing countries to spend more as part of a global rebalancing of demand in the years ahead.

Ben Bernanke communicated the purchases of government securities and debt were having beneficial effect, which is positive. We can conclude the decline in full-time jobs is very worse, there is a loss of 1,188,000 jobs but in spite of this there is an increase of 373,000 in people working part-time.

According to me, unemployment is something that is related to the economy. Especially in these hard times companies purpose is: continuing their activity. People haven’t enough time anymore in these outpaced society, and so part-time jobs grow in significance. The government has to recover the economy by supporting the market financially.

Written by Marie Maes

Source: The Financial Times
Article: US unemployment hits 8.5%
Published: April 3, 2009
By Krishna Guha in Washington

As Economy Is Down, Vitamin Sales Are Up

“As Economy Is Down, Vitamin Sales Are Up” was the first title that really caught my eye.
I did not know what to make of it so I decided to clear it out.

The article tells us how people like Ms. Parham are skipping a (necessary) doctor visit due to the financial crisis or due to the loss of their job in order to make some savings.
Ms. Parham said she spent $50 a month on prescriptions for her asthma, allergies and other chronic problems. Now, she pays $6 a month for over-the-counter protein supplements and oregano oil capsules. Nothing to worry about according to you? I see it differently.

All right, it can be that those protein supplements are helping for her allergies and maybe for her asthma and even for her chronic problems, but I think it is very difficult to know where to draw the line here. Like I said, there is no problem when it helps for allergies and so on, but I fear she will take simply more supplements if those supplements do not help anymore in the near future.
There is even a distinct possibility that some people will become their own ‘doctors’ over time wich will cause only more bigger problems.
So I am convinced that those proteins can not be a substitute for traditional health care.

But a lot of consumers seem to be doing the same math as Ms. Parham.
Sales of vitamins and nutritional supplements have grown consistently for years and doctors are warning for the problems on long-term.
Others are even replacing fresh fruits and vegetables with fish oil capsules and antioxidant supplements. This is just too crazy.

Source: http://www.nytimes.com/2009/04/05/business/05vitamins.html?_r=1&ref=us

2 million jobs lost so far in '09

The unemployment rate in the U.S. reached 8.5%, that’s the highest point in 25 years. In March this year there are already 663,000 jobs lost and since the beginning of 2008 already 5.1 million.

Since the beginning of 2009 there are already 2 million jobs lost. In March the job losses were felt in all areas of the economy, in the manufacturing and construction sectors as well as the business and professional services industries,… but they were not the only sectors, also the government trimmed some jobs. The only sectors that added some jobs were the education and the health care services, with 8,000 jobs.

Experts are not optimistic at all, the chief executive of Adecco Group, one of world’s largest employment staffing firm, said that many of the layouts announced in recent months have yet to be implemented. He also predicts that the job loss in April will be between 600,000 and 700,000 and after that in May and June between 300,000 and 400,000. Another expert said that the rising unemployment could influence the consumer confidence and spending, which would lead to more job cuttings.

Not only experts are worried also the government is taking steps to take care of the problems in the job market, with the earlier announced economic stimulus plan.

I think the growing unemployment rate is normal for an economic crisis because a lot of companies have problems and the first thing they do to lower their costs is fire people. But it’s the task of the government to resolve such situation by creating jobs. There is already a stimulus plan for the economy but I don’t think the plan is working because the unemployment rate is still rising so the government has to come with new solutions. But instead of creating jobs they also fire people…

Source:http://money.cnn.com/2009/04/03/news/economy/jobs_march/index.htm?postversion=2009040310

Funeral cost-cutting boosts cremations

In the United States the recession has not only caused the fact that people are saving on living expenses but also on their dying expenses. More and more people economize on their funerals by not hiring limousines and cutting back on wakes and embalming. They also start to prefer cremations above burials, since a cremation can be up to $4000 cheaper.

Passing away is simply not a choice and you also can’t choose to postpone the expenses caused by it. And when there are no funds available for a traditional funeral, people choose something less expensive.

While the average funeral cost at Hollomon-Brown general Home and Crematory is $8500, the cost of a cremation is between $3000 and $5000. This has a clear effect on the figures National Vital Statistics Department shows. In 2006, about 34% of deaths in the United States were cremated in 2006. If we keep following the current evolutions that number will be 40% in 2010 and even 60% in 2025.

Some people just stick with funerals. Though they try to find measures to save some money. For instance it’s possible to have the visitation the same day of the funeral instead of having it the night before. This measure can save you up to $600. It’s also possible to not opt for a limousine service, which can save you $375. Another popular measure is skipping the viewing which makes it legal to skip the embalming also. Embalming can cost $500 to $700.

Moloney, co-owner of Long Island, N.Y.-based Moloney Family Funeral Homes says that he and his colleagues are doing everything they can to help bring down the costs. Though that’s not really simple because of the utility costs that are going up in the meanwhile.

This article really shows how big the impact of the economical crisis really is. How cruel it sounds, people are even forced to economize on burying family. Since I don’t have got any experience with arranging a funeral, I was really shocked when I saw the average price of $8500 for a funeral.

It’s a good thing that owners of funeral companies try to help out customers as much as possible by cutting in certain elements. Nevertheless a funeral stays really expensive and since you can’t really postpone it I hope the crisis will end soon.

Source: http://money.cnn.com/2009/04/02/news/economy/recession_funerals/index.htm?postversion=2009040212

Honda makes cuts in North America

As a result of the bad sales figures, Honda has created a program of cost cutting measures in North America. Honda employs more than 30,000 workers in the US and has already announced 3,100 job cuts and a reduced production by 56,000 vehicles in Japan.

The program includes five factors. First of all, they will cut pay. Secondly, factories will be closed for 13 days. Further, Honda will reduce its production by 62,000 vehicles. Fourthly, bonuses will be cut. Finally, an improved retirement packages will be offered, but basis pay will not be changed.

Comparing to March 2008, the sales figures in Japan were 24.5% higher than March 2009. But Honda is not the only carmaker who’s suffering from the financial crisis. The situation of other Japanese carmakers is worse. For example, the sales figures of the biggest carmaker of the world, Toyota, decreased 31.9%. Toyota took measures in the UK; employees have to work less hours. This resulted in a basis pay cut of 10%. Toyota also decided to close its production plant for four months.
The measures taken in the US are less drastic. Toyota only announced production cuts at several plants hoping to reduce its stock of cars.

According to me, Honda and other carmakers hadn’t no other choice to take these measures. These area is suffering from the economic crisis. Decisions have to be taken to make the situation of today better. These measures have bad consequences, but in my opinion everything is better than a failure of a carmaker.


Source: http://news.bbc.co.uk/2/hi/business/7975920.stm

New Economy in the Rural Northwest?

Booming timber towns with three-shift lumber mills are a distant memory in the densely forested Northwest. Now, with the housing market and the economy in crisis, some rural areas have never been more raw. Mills keep closing.

People keep leaving. Unemployment in some counties is near 20(!) percent.

Yet in parts of the region, the decline is being met by an unlikely optimism.
Some people who have long fought to clear-cut the region’s verdant slopes are trying to reposition themselves for a more environmentally friendly economy, motivated by changing political interests, the federal stimulus package and sheer desperation.

So far the good news. I understand the government is trying to help unemployed people by creating jobs, but this is a waste of money and effort according to me.
Before I turn down the whole idea, it might be easier to be something more specific about the plans.

The general idea is to create jobs and help the environment in one action.
Unemployed loggers are looking for work thinning federal forests, a task for which the stimulus package devotes $500 million; the goal is to make forests more resistant to wildfires and disease. I really can not believe it.

$500 million… $500 million for thinning federal forests.

In a region with an unemployment of almost 20%, they are giving $500 million for thinning federal forests.

It is good that the government wants to invest in orde to give unemployed people a decent job of course and it is even better that they are helping nature in the same way but there must be other ways to invest those $500 million.
Even if we presume that you can put more than half the people of that 20 percent to work, those jobs will only be created on short-term. It would be much better to invest on long term.

Source: http://www.nytimes.com/2009/03/29/business/energy-environment/29forests.html?pagewanted=2&em

Protectionism or free trade?

The world is slipping dangerously into protectionism, threatening to strangle global economic recovery, the World Trade Organization said. WTO, in its stern advisory, also has communicated that the effect of protectionist measures by some countries would be devastating for our society. The effect: far-reaching consequences, for instance; measures will strangle the international trade and hinder the global recovery, are hard to avoid.

The WTO is bent to step up its monitoring of trade policies introduced by governments struggling to cope with the worldwide economic crisis.

WTO Director-General Pascal Lamy said free trade has suffered "significant slippage" this year as countries have established new barriers to import, for instance tariffs, subsidies and other measures designed to protect domestic industries.
Lamy also requested the government to avoid trade restricting and distorting measures otherwise the restrictions could gradually suffocate international trade.

Furthermore the WTO catalogued higher tariffs, new on-tariff barriers and more resort to trade defence measures, which increased by a quarter in 2008. Besides the actions of the major traders, that restrict the import of footwear, offer assistance to the domestic car industries, are hazardous. They will create a situation of uncompetitive industries and sectoral overcapacity.
As well as higher border barriers decrease the impact of fiscal and financial stimulus packages. These packages serve for stimulating the aggregate demand.
The WTO announced earlier this week that commercial activity was expected to shrink by 9 percent this year, the worst collapse since World War II.

According to me, we have to encourage free trade because of its advantages. First and foremost in case of free trade companies produce low-priced products and products of superior quality. Secondly the prosperity will increase. On the other hand protectionism boosts the employment and the ‘infant industry’, they have the possibility to develop into market leader.

Written by Marie Maes

Source: The Financial Times
Article: WTO warns against protectionism
Published: March 27, 2009
By Frances Williams in Geneva

Obama tells banks 'work together'

This week President Obama has met with top US bankers to discuss with them about his new plan to stabilize the US financial system and to boost the economy.

Obama told the bankers that they were in this together and that he wants the bankers to show some restraint, he wants the bankers to show that everyone has to make sacrifices and not only the normal people. After the meeting all bankers were optimistic and they said that their problems would be solved but it would take some time and they have to work hard, but they already see results that some measures are really working. They also said that the money spent on stimulating and saving the economy is spent wisely.

The chief executive of Goldman Sachs said there are three measures necessary to turn the economy around ; stimulating the economy, stop the fall in asset prices and fixing the financial system.

The plan Obama talked about is called The “Public-Private Investment Programme” where the US government will work together with banks and private investors. The plan is designed to buy up to $1 trillion worth of toxic assets to help repair the banks’ balance sheet. But another part of the plan is an outline of a far-reaching plan to strengthen government authority over the US financial system. All the measures discussed here are designed to prevent a new financial crisis like we notice today.

I think this is one of the best measures that Obama could take because the financial sector is the most important part of the economy, when you fix the main point you can fix the other sectors too. It’s also good that those top bankers want to help Obama, but on the other hand this is normal because they are one of the factors that caused the financial crises. I also hope that these measures restore the confidence of the people in the financial sector, especially after what happened by AIG a week ago…

Source: http://news.bbc.co.uk/2/hi/business/7968705.stm

US plans to rein in Wall Street

US Treasury Secretary, Timothy Geithner, has developed plans to make the authority over the US financial system better. These plans will avoid banks to take the same risks that have contributed to the current financial crisis. According to Geithner, a simpler, more effective system is a necessary.

First of all, in the current financial system, there are fundamental gaps. These gaps are responsible for the loss of confidence in the basic of our financial system. New rules are really needed. The new developed plans have to be subject to strong oversight by the government. Openness and more transparency among financial institutions and more integration among regulators are also key subjects.

Further, Mr Geithner outlined five key elements to achieve his aim. Now, it’s the perfect moment to implement these five elements. But the foreign country has an important role in the reforming of the US financial system. The US have to work together with the Europeans to realize their plans.
However, a few weeks ago, Geithner had another opinion. According to him, the US couldn’t wait for consensus with the rest of the world. There’s a limit to how long the US could wait for global co-operation.

According to me, this plan will have positive results. The gaps in the financial system have to disappear. The new rules in the US financial system will give the Americans more confidence in the financial system. I think this is a necessary. The situation in the US is worse, measures have to be taken to repair these confidence.

Source: http://news.bbc.co.uk/2/hi/business/7966023.stm

Some hope for retail execs

There is some good news for retail executives. These store managers and district managers might end up as white-collar professionals. They might climb the corporate ladder and become vice president or even something higher after leaving chains such as Linens ‘N Things, Circuit City and Fortunoff. It’s like people say: one company’s loss might be another business’ treasure.

Kevin Rigsby is 27 years old and used to be a district service manager with Circuit City. He was responsible for home theater selling and installation but because of the crisis the company went bankrupt and Rigsby lost his job. But he is one lucky guy. He now has a Snap-on franchisee and sells professional hand tools and power tools to repair shops, auto dealers and industrial manufacturers. He was able to do this by studying. He got an education and learned about profit and loss management and customer service and now his advice to everyone else who has lost their job in the retail sector: “it’s not because you’ve been selling electronics that you can’t learn to sell something else”.

The president of Snap-on, Barrie Young, declared that 40% of the new franchisees over the last nine months have had jobs like store manager or district manager in merchants such as Circuit City, OfficeMax and Home Depot. Young says that his business requires people with professional skills and that he finds this with people like Kevin Rigsby. The only problem that these people might experience is the extremely high cost to start-up a franchisee.

It’s great to hear that some people can finally stop suffering from the economical crisis. It’s absolutely true that people who work in the retail sector can learn to sell anything else. In the end selling is in their blood and they would do anything to keep working in that sector.

Education is a great way to create jobs; people are needed to educate and the people who get educated will be likely to find a new job. This is a great impulse for the improvement of the American economy.

Source: http://money.cnn.com/

Tax change would boost jobs

The Treasury in the US drew up a plan to impose “a tax on jobs”, this plan become valid in April. There is only one real problem, namely the opposition of the business leaders, also the CBI and the recruitment companies criticize the plan.

The financial sector has also joined the protest over the plan to cancel the VAT staff hire concession, warning it will deprive the economy of 150,000 temporary jobs.
Faced with having to pay VAT on temporary workers’ salaries for the first time since 1997, clients in the tax, banking and investment circles will respond by dismissing their temporaries.

The CBI employers and the REC asked and hoped to postpone the value added tax changes until 2011, this is the moment that they hope the job market will be re-established. But unfortunately the Treasury rejected the proposal. Besides the director of HR policy at the CBI said the plan was drew up at a bad moment, namely in hard times of financial crisis. The market still needs assistance to survive the recession. But it’s very disappointing that the government decided not to defer the tax on jobs, even they knew the plan scourge up to 150,000 temporary jobs.

Especially the extra VAT will hit many sectors, for instance financial and public services, in which tax plays an important part. The REC predicted the VAT changes will be worth $390 million. The recruitment companies said the proposals of the additional tax on jobs were drew up at a time of recession, which isn’t very promising.

According to me, the government makes a grave mistake by approving the plan of the Treasury. The economy has to stabilize before to execute plans, for instance tax changes. So the proposal to postpone the VAT changes, is better to survive these hard times. It is significant to concentrate on the balance between the economy and the consumers.

Written by Marie Maes

Source: The Financial Times
Article: Warning of tax change threat to 150,000 jobs
Published: March 21, 2009
By Andrew Taylor

AIG chief asks for bonuses back

The executives of AIG (American International Group) received bonuses that are way too high and this in the middle of the financial crisis. The chairman of AIG Edward Liddy called the bonuses paid to the executives “distasteful”, the total amount of the bonuses is $165 million. Those bonuses paid to the executives have received a lot of criticism in the U.S. because the greatest part is paid by the taxpayers. But also because AIG has taken $170 billion aid from the government.

Lawmakers are taking steps to recover a part of the bonuses and Edward Liddy also asked to the executives who received more than $100,000 in bonuses to pay at least the half of it back. Some of the executives has answered this question.

In The House of Representatives is voted on a legislation for recovering the AIG bonuses. The bill would apply a tax rate of 90% on bonus income of $250,000 that was paid to companies who received more than $5 billion in bail-out money.
But not only the chairman of AIG is disappointed also President Obama is angry about the bonuses and called them "inappropriate use of taxpayer money". He’s also discussing with his economic council to create new legislation that gives the government more authority over financial institutions like AIG.

I think that those bonuses that were paid to the executives of AIG are distasteful as the chairman of AIG said. This is really a slap in the face of many people in the U.S. because the country has so many troubles and than the people who caused those problems are rewarded. The tax on the bonuses that is voted in The House of Representatives is a good measure and instead of giving executives of big companies such high bonuses it should be better to give that money to the shareholders or reinvest the money in the company. The proposal of Obama is also good and that will help in the future.


Source: http://news.bbc.co.uk/2/hi/business/7950452.stm

What about deficits?

Disagreement about deficits is a common theme nowadays.
Even among Republicans, there is no unity on this issue.
Defending his recent proposal to freeze government spending, Representative John A. Boehner, the House minority leader, said that we simply cannot afford to mortgage our children and grandchildren’s future to pay for this big government spending spree. I told you before I disagree with this opinion because I think we must invest huge amounts of money in order to solve the financial problems.

Martin Feldstein , the Harvard economist and adviser to the past three Republican presidents, shores my idea.
He is certain that short-run deficits help end recessions.
When a downturn throws people out of work, they spend less, causing still others to be thrown out of work, and so on, in a downward spiral.
Failure to use short-run deficits to stimulate spending amplifies that spiral, causing further declines in tax receipts and even bigger deficits.

In 1929, President Herbert Hoover thought that the best response to a collapsing economy was to balance the federal budget. With incomes and tax receipts falling sharply, that meant cutting federal spending. Today we all know President Hoover was mistaken.

But what about long-run deficits?
To think more clearly about them, we must recognize that carrying debt is costly.
Because the government needs to pay interest on its debt each year.
John A. Boehner said we even mortgage our children’s future with it but that is not true according to me.
I understand it can be difficult to understand for someone without an economic background. Martin Feldstein has an example to make things less complicated. It is just like a homeowner’s monthly payment. The payment is larger with a 10-year mortgage than with a 30-year one. But the total burden of the various repayment options (in technical terms, their “present value”) is exactly the same. It’s a simple trade-off between intensity of burden and duration of burden.

So only one question remains, how are we going to pay for these interests on the long term?
One part can be reimbursed thanks to the economic growth in the near future I guess, but we need some good measures as well.
I suspect that the Harvard economist reads my blog because he has given the same example I did three weeks ago. Namely a tax on gasoline.
A $2 tax on each gallon for example, would generate more than $100 billion in additional revenue a year.
He says that there are many ways to pay down debt without requiring painful sacrifices but I wonder in wich intensity politicians will be able to collaborate in order to pass their new provisions.

Source: http://www.nytimes.com/2009/03/22/business/economy/22econ.html?_r=1&ref=economy

US plan to help small businesses

The government of the United States created a plan including measures to help domestic small businesses which are having problems as a result from the economic problems of today. Every bank in the country has to do everything they can to provide credits to small companies. This small business package is the latest measure taken by Obama to stimulate the economy of the United States.

First of all, this plan includes an amount of $15bn to increase liquidity to encourage lending to small businesses.
Further, an amount of $730m is meant to fund tax cuts and incentives. These incentives reduce lending fees and increase loan guarantees.
The plan also includes measures to make health insurance cheaper for small businesses.
Finally, banks must report their loans to small businesses.
So firstly, the government encourages banks to lend more. Secondly, they seek to improve the flow of credit to small businesses.

I know for sure that this measure taken by the Obama Administration will result in an economic recovery in small businesses. I’m really a fan of the manner which Obama uses to help his country. I think he tries to do all the possible he can to solve the economic situation. This measure costs a lot of money, but I think it will have positive results.

Source: http://news.bbc.co.uk/2/hi/business/7946359.stm

Bill would tax bonus cash

The idea to tax bonuses given to employees and coming from companies came up a while ago. Today the democratic leaders of the United States are willing to legalize this measure. This would mean 5 billion dollars more tax income each year. More money for the government could lead to an improvement of the American economy.

The measure would not only affect employees but also former employees. Bonuses for people with an income of more than 250 thousand dollars will be taxed at a 90% rate. The tax will affect every bonus that has been given after January the first of this year.

One of the democratic leaders said about the AIG executives who received bonuses that they’re not the type of people who can define equity and justice nor they know the difference. These people just don’t realize how rich they are and how many other Americans are undergoing financial problems. They don’t know how many pain they’ve caused for millions of Americans by receiving their huge bonuses.

A lot of tax money goes out to American companies. One of the objectives of this measure is to make sure that the money won’t be used again for paying employees by giving bonuses and until now people didn’t have to pay taxes on these bonuses. It was a sort of payment given to employees but the government couldn’t tax it. This measures solves this problem.

My personal opinion about this measure is pretty positive; I think it’s justified because most of the time it are rich Americans who have a nice job and get big bonuses and the normal Americans usually don’t get things like that. So the rich people become more rich and the poor ones become more poor. That’s just not fair so the measure certainly is a great idea to try to solve the gap between rich and poor in a capitalistic country like the United States.

Source: http://money.cnn.com

Podcast 1

The link to our podcast can be found trough the following link:

http://rapidshare.com/files/211004946/PODCAST_1_AMERICAN_ECONOMY.mp3

Stijn, Marie, Hanne, Maxime and Niels out!

Freedom To Spend Act

I have been reading an interisting opinion lately of someone who proposes the
“Freedom to spend act”. At first, he says the underlying theme of this economic crisis is the lack in confidence. Many are simply waiting for the sentiment of all that it’s OK and the people need to move forward.
Secondly, both sides of the isle of the U.S. government, Democrat and Republican, have ideologies that are limiting their scope on how to handle the financial crisis according to him.
Well, I wrote the exact same things some weeks ago so I defenitely agree with him. But further in his text, he pretends to have an idea about how to restore confidense.

He says that the government must give every American family $20,000 and individual $10,000 to spend freely as they wish. He thinks that if you give a substantial amount of cash to “the people”, they will spend, pay off credit cards, pay their mortgages, buy cars and homes, they’ll go on vacations, they will give to charities, they’ll invest again and what’s more important, they’ll be “confident” again to move America forward.

I agree that that the government must undertake actions because the problem won’t be solved by its own but this is a few steps too far. First of all, where will the governement get that much money? And I am certain that the governemnt won’t see even half the money back through taxes and so on, so I think that we will have an even bigger problem in the future.

In my opionin, it would be more achievable to stimulate the employment but it would be too easy to eliminate this proposal focusing on this part. I think there are some good parts in his Freedom to spend act too. The only solution is indeed to invest a huge amount of money in the economy in order to give the people a clear sign that the government itself believes it will get better. While doing it, we are making the people part of the solution, restoring their confidence and half the problem will be solved by then.

Source: http://economix.blogs.nytimes.com/2009/03/12/david-swensen-says-buy/#comment-42765 (the second comment)

US trade deficit

Which influence has the US trade deficit on its likely future evolution, on how the dollar will behave in the long-term, on the political aspects of the trade deficit, and on how European and Asian countries will deal with it? These questions depend on how the economy fluctuates and evolves.

A tendency: the US imported less in these hard times of economic slowdown. Furthermore the skidding oil prices caused the US trade deficit in November, these deficit was on its lowest level in five years. The Commerce Department communicated that the gap between the value of exports and imports decreased quite a lot, namely 28.7 per cent in one month.

Two affaires gives occasion to the trade deficit. First and foremost the American consumers clipped their demand for foreign-made consumer goods. Secondly the falling energy prices slashed the value of imported gas and oil. Even when we take no account of energy prices, the trade deficit still narrowed in November. The American import fell by 12 per cent or some $25 billion, which is incredibly much in comparison with the export. Contrary the imbalance with China declined 17.5 per cent, which was a negligible decline since June.

Chief US economist, Nigel Gault communicated that the US cut its demand very quickly equated to the rest of the world who cut its demand for US exports. This saying might moderate the US downturn but it isn’t so effective. Since the summer of 2008, the trade between the US and the world has shrank. This is the moment that the financial crisis scourged the global, financial markets.

In my opinion, there aren’t so many effective measures to recovery the US trade deficit. The deficit fluctuates according to circumstances, for instance the financial crisis. So the government hasn’t any impact on it, the countries in the world regulate the import and export and these two factors are very important for the trade. A deficit or surplus have you to interpret as something who evolve with the economy.

G.M. says it won’t need finance infusion in March

After all the troubles with G.M. there is finally some hope. G.M. has already borrowed
$ 13.4 billion from the U.S. government and asked an additional loan of $ 2 billion for the month of March. But the car constructing company said this week that it doesn’t need the loan of March to avoid bankruptcy.
This development shows that the restructuring plan works and they achieved more progress in reducing costs than expected. G.M. will also remain in contact with the presidential task force on the auto industry to look if the company makes further progress.

However it’s not sure if G.M. needs the other loans the request about 2 months ago for the month April ($2.6 billion) and the $4.5 billion in 2010. Although G.M. is doing well in the U.S., in Canada G.M. and Chrysler are seeking financial aid. When they don’t get help from the Canadian government it’s most likely they have to close their plants. Chrysler is not only doing bad in Canada, it also asked for another $5 billion above the $4 billion they already borrowed of the U.S. government. It’s however most unlikely that G.M. and Chrysler get financial support from the Canadian government because the government says that the current agreement is unacceptable.

This is finally some good news about the car industry in the U.S., after Ford also G.M. is trying to work further without government aid and I think G.M. has to try to keep up this good work. I also think that this is a signal that restructuring plan works and they have to do the same in Canada and the rest of the world. It’s necessary that G.M. and Chrysler do something about the situation in Canada because it’s not very likely that they get a loan under the current conditions, unless they change a lot of things.

Source: http://www.nytimes.com/2009/03/13/business/13auto.html?ref=business

Q&A: Obama stimulus plan

A few weeks ago, Barack Obama signed the $787bn stimulus plan after weeks of political wrangling. He hopes the signing of this plan means the end of the economic problems of today.

The economic stimulus plan has three posts. At the beginning, this hopeful plan includes a lot of measures, such as tax cuts, which are created to maximize its political support.
Further, a big part of the money will be spend on aid to states to close their budget gaps. With the signing of this plan, the government hopes to create or save jobs. The US jobless rate is surging, measures has to be taken to make the employment better in the US.
Finally, the last portion is money to invest in infrastructure projects. Roads, bridges, classrooms,… are in bad condition. This money creates a possibility and an opportunity to repair it.

The big stimulus plan has been proposed because the US economy is suffering from the worst crisis since the 1930s. Without this plan, the financial crisis could last well into 2010. The signing of this plan has the intention to make the economic situation better.

The plan is supported by 246 Democrats. Almost 200 Republicans were against. The original plan was delayed by wrangling between Democrats and Republicans. The first version of the plan hadn’t any Republican support. Modifications were necessary to gain the support of moderate Republicans, so Democrats accepted a plan with more tax cuts and less money for aid to states and local governments.

To realize this plan, they have to borrow money, but the US budget deficit is already so high this year. According to the US government, this measures are temporary. After a time, it will bring the budget back into balance.

At first sight, I thought this plan was an excellent idea. Jobs will be saved or created, Americans have to pay less taxes,… In short, I was pleased to hear that Obama tries to make an end on the economic troubles.
But after reading this article, I changed my mind. In my opinion, this plan is really too rosy. I have one essential question: “How will it be paid for?”. The US budget deficit is already that high. According to me, this plan is too expensive for the United States. This plan could push up the cost of government borrowing. The future US generation will be a victim of the troubles of today, because they will have to pay the borrowing costs.

Source: http://news.bbc.co.uk/2/hi/business/7874407.stm

Geithner: G20 must boost spending

Timothy Geithner, the U.S. Treasury Secretary, said on Wednesday some very important things about helping the global economy out of the financial and economical crisis. His main point is boosting the consumer’s spending, but also a lot of other things to prevent a next recession will be mentioned during the first coming G20 meeting.

Geithner said that is extremely important for the G20 nations to commit it selves to necessary actions for the period that matches the duration of the global crisis. The U.S. Treasury Secretary will explain everything during a weekend meeting in the southeast of Britain where all the finance ministers from G20 and developing nations will be present.

Geithner also explained to the press that it is necessary for all countries to decide to take actions in order to strengthen their financial regulatory system. He will also tell more details about actions that the United States will take. He is going to do this before another G20 meeting in April where all political leaders will try to put an end to the global recession.

There have been a lot of talks about reformations, but now it is time for action. While doing this, the G20 nations must work together to restore global growth. Geithner also mentioned that it’s important to build up a strong supervisory and financial regulatory framework at the same time. That is in order to prevent that a crisis like this would occur again.

Geithner ended his press meeting with probably the most important thing: healing the global economy by boosting consumer’s spending. In order to do that it’s vital for the G20 nations to invest in the International Monetary Fund (IMF). When the IMF has more resources it can invest much more in publics works and create a lot of jobs. This would be a perfect impulse for boosting consumer’s spending and helping the entire world out of its recession.

I totally agree with the U.S. Treasury Secretary. As I mentioned before in previous blogs; I find it very important to work on the demand side of a national economy. Geithner does a great job here by planning on telling to the G20 and developing nations that it’s important to give a lot of attention to this element. Give resources to the IMF is a good start.

With his other measures I also agree; it’s important for a national economy to go its own way but sometimes (and especially nowadays) it’s vital for the health of the countries economics to have some governmental guidance. Building up a strong supervisory and financial regulatory framework to prevent a future crisis are examples of this guidance.

Source: http://money.cnn.com

US unemployment rate surges to worst since 1983

The US Department of Labor announced a surging US unemployment rate of 8.1%.
Further, during the month February, 651,000 people lost their job.
Those two figures were bigger than expected and are really alarming…

In every area, people lose their job. Retail, construction, financial services and factories,… no area is safe from the high jobless rate. The only areas which are showing a little rise in employment are: health, the government and education. The unemployment rate is at the highest level since 1983.

Last week, the president of the US signed a $787bn economic recovery plan. First of all, with this plan Barack Obama hopes to realize a stabilization of the economic situation of today. Further, the plan includes tax cuts and money for public projects to create and save jobs. The administration of Obama tries to do all the possible to break the destructive cycle of job loss in the US and put Americans, who lost their job, back to work.

According to economist, this situation is very serious. Firstly, there weren’t that much jobs lost during the last three months as at the end of the second World War.
Secondly, the jobless rate may put further pressure on high-street commerce and could lead to more liabilities for banks due to the problems of the consumers to repay debts.

According to me, the $787bn economic recovery plan is a good initiative. This plan will certainly result in more jobs for the Americans. But I think, he’s a little bit over-enthusiastic . This plan, will make the situation better, but the real problem will not be solved. The plan doesn’t take on the consequences of the high jobless rate, just like the defaults on mortgages, the defaults on personal loans,…

Source: http://www.guardian.co.uk/business/2009/mar/06/us-unemployment-rate-jobs

US jobless rate highest in 25 years

The nation’s jobless problem is getting worse, the official figures showed these hard times. Layoffs are spreading to almost every sector of the economy and also businesses are faced with falling orders and rising losses. The economy has lost a great deal of million jobs, namely 4.4 million US jobs since the recession began in 2007, more than in any other postwar recession. Most economists say they don’t expect to see much progress over the short term.

US unemployment has reached the highest rate in a quarter of century, namely 8.1 per cent in February. This is the highest level since 1939, so more than 650,000 posts have been shed in three months time. Investors predicted these figures, the US job market is totally scourged in their view.

Economists and policymakers affirm that there isn’t absolutely any bright spot in this dismal news. The consumers in America are suffering severely, so isn’t there a note of optimism? Fortunately president Barack Obama reached a solution, 787 billion dollar stimulus, this bill would create lots of jobs and rescue the economy by this large fiscal boost. The White House predicted in its budget that the joblessness reached the average for 2009, but some claimed that this forecast was too sanguine.

The joblessness have surges very fast of late years as US companies have moved quickly to retrench their workforces. These movements in the labour market bring about problems in the rest of the economy, and so more job losses and the unemployment rises.

This article shows that the economy is indispensable in a country. Joblessness has a lot of consequences for the man in the street, so a solution of the government is absolutely necessary to rescue the US job market. The measures who were drew up by the president are a good option, joblessness doesn’t fit with economy.

Written by Marie Maes

Source: The Financial Times – 6 March 2009
Article: US jobless figure is worst for 25 years
By Alan Beattie in Washington and Alan Rappeport in New York

Is there need to nationalize?

The financial crisis grows weirder by the day. When philosophical conservatives like Alan Greenspan start talking about nationalizing banks, you know you’ve passed into some kind of parallel universe. Why are so many people entertaining an idea that sounds vaguely Marxian?

The answer, I think, is simple. There are some pretty sick banks in America right now, some of which may not be viable in the long run. But putting a giant bank through bankruptcy is unthinkable. (Remember Lehman Brothers). So why not just bite the proverbial bullet and nationalize them?

Mr. Blinder believes in biting the bullet, but it matters which bullet you bite. Like Ben Bernanke, the Federal Reserve chairman, and Timothy Geithner, the Treasury secretary, he is not convinced that nationalization is the only, or even the best, way out.

Because “nationalization” can mean many things, let’s first clarify what the current debate is about. Don’t think Hugo Chavez or even Clement Attlee. Imagine instead that the government acquires a majority interest in — or perhaps 100 percent of — a bank, wipes out the existing shareholders and installs new managers. Then, sometime later, a healthy bank is sold back into private hands, and we all live happily ever after. At least that’s the idea.

Further in the article, Alan Blinders wonders where they need to draw the line. This is a very interesting question in my opinion. First of all, how do you decide whether a bank ‘deserves’ to be overtaken by the government or not. Secondly where do you stop, once you start?

Supposing that we nationalize four banks, this could mean a severe disadvantage for bank five. But we simply cannot ignore the financial problems like the government did with Lehman Brothers. Imagine that more banks go bankrupt, this would mean a huge disaster both for the financial world as for the employees. Like I said in my previous blogs, there is also the fact that the Americans want to hold on to their traditions. They simply refuse to lower the price for gasoline for example. And that is why I fear that American politicians can not sell such a ‘communist action’ as a bank nationalization to the American population.

Source: http://www.nytimes.com/2009/03/08/business/08view.html?_r=1&ref=business

Ford Seeks to Eliminate $10.4 Billion of Its Debt

Again an update about the struggling car industry in the U.S. The second biggest car constructing company in the U.S. after G.M. namely Ford Motor Company said this week that it hoped to eliminate $10.4 billion in debt by giving cash and stock to debt holders as part of a revamping of its sheet balance.

This move of Ford is similar to what G.M. and Chrysler had to do to get new loans from the federal government, but the Ford spokesman said it has no plans to seek federal aid. Ford will reduce its overall borrowing by 40 percent and at this moment Ford is the healthiest of Detroit’s auto constructors. This is because of their debt initiatives and an earlier agreement they made with the U.A.W. (United Automobile Workers) union.

Ford won the concessions from the union because of a good debt restructuring plan.
AlL the offers Ford had to make, were necessary as part of its agreement with U.A.W. to restructure the payments and retire trust. Another part of the contract with the union was to make other cost-saving changes.

I think this is a good action of Ford because they actually try to do something about this situation and not only count on the loans of the government to save the company like G.M. and Chrysler do.

We can see the debt restructuring plan works and I think G.M. and Chrysler have to take an example on Ford and do the same things, or make decision that have the same impact. It’s also good that Ford don’t need government loans and tries to save the company on his own strength.

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

Obama: Save $40B by cutting waste

President Obama came up with a new plan to help America get out of the economical recession that reigns the country nowadays. He will unveil his plan at a White House ceremony at 10 a.m. EST. The plan has the intention to reform the broken system of government contracting.

Nine days after the summit where Obama discussed a total change in fiscal spending, he explains that with his new plan America can save up to 40 billion dollars a year. The plan contains a lot of measures that will reduce the spending on waste made by the U.S. government. A total new system of working with contractors will make sure that the government will stop wasting American people’s money.

The president said that if we let the government perform a lot of outsourcing services itself, make the contracting process accessible for small businesses, stop needless no-bid and cost-plus contracts and finally, make the oversight stronger to maximize accountability and transparency, we can make it possible to decrease the fiscal incomes by 40 billion dollars each year.

Obama finds it very important that the American people’s money is spent to make their lives better and not to fill the pockets of contractors or to maintain projects that don’t work. The president will also praise the Defense Secretary for the efforts he’s doing to reform the Pentagon spending policy but he will also tell him that he won’t accept him spending billions of dollars on waste expenditures.

Once again I am very pleased with the efforts Obama is doing for his country. He keeps on showing himself very motivated to help America out of this economical recession and according to me, he will definitely succeed.

He is doing a lot of research to find ways that would help solve the bad economical circumstances that rule the United States of America. Finding errors in the government contracting policy is something that according to me, a president like George Bush, would probably not have come up with.
Obama is definitely the man that will save America from this bad economical period.

Source: http://money.cnn.com/

House prices fall at record rate

Nowadays the financial crisis is a fact, not only Europe but also America, actually the whole world is scourged and suffers severely. This crisis has a gigantic impact on several sectors, for instance the banks, the companies,...and even it has an influence on the real estate.

In the US there is a remarkable trend for some time, a slumping sale and the foreclosures are rising. This cause the decrease in prices, so home prices in the US decreased at a record speed last year. More exactly a fall of 18.5 per cent in the Case-Shiller index, it was the biggest fall in December 2008 since the measure 21 years ago. Phoenix, Las Vegas and Minneapolis are the states who are confronted with the sharpest monthly declines. In the meantime consumer confidence sinks to a low level. These declines cause US households additional charges, $370 billion per month which is incredibly high.

The White House reached to a solution, namely a foreclosure prevention plan, because of the importance of the political issue concerning the housing market. The Republicans also desire that the government contribute his mite by subsiding mortgages to help homeowners.

The home price index has also fallen 26.7 per cent, since the peak of the housing market in July 2006. The situation of the prices is alarming for the US consumers, they are much worried because it is still continuing.

My opinion predicts that there will be a house price crash with profound effects on the economy. The house prices and the financial crisis are related, stable prices became a must. The government has to minimize and avoid the effects of fluctuations in prices, otherwise the consumers are again the victim.

Written by Marie Maes

Source: The Financial Times
Article: House price fall is biggest in 21 years – 25 February 2009
By Alan Rappeport

Obama sees $1.75 trillion deficit

President B. Obama has forecast a $1.75 trillion deficit in the budget of 2009. The main goals of that budget are overhauling the healthcare system and shoring up the U.S. economy. The budget reflects the delicate balance Obama has to make between making sure there is enough money to rebuild the economy and avoid excessive pressure on long-term finances. The first fundamental mission is to restore the health of the economy with public works spending, tax cuts and bail out the troubled financial industry.

The budget also includes money for healthcare reforms and for green energy to fight the global warming.

President Obama also said that he would halve the more than $1 trillion deficit president Bush left behind. Tax increases on wealthier Americans, eliminate subsidies for cotton storage and a troop drawdown from Iraq will help to bring the deficit down to $533 billion by 2013, this is also what Obama wants to reach.

It’s going to be a big challenge for Obama to sell this budget to the Congress because he also cuts in the farm subsidies and such programs are popular in the Congress.

I think it’s going to be really difficult for Obama to get this budget true the Congress because when he cuts into popular programs he can expect a lot of opposition. Although this is a good budget, first of all it’s meant to help the economy what I think is the most important issue at this moment and secondly; finally somebody wants to do something about the inefficient healthcare system in the U.S.

It’s also very good he wants to invest in green energy because it’s a great problem in the U.S. that the people consume a lot of energy.
Also the ways of saving money are good, this means the end of the war in Iraq and President Obama wants to do something about the very high incomes of some persons.

Source: http://money.cnn.com/2009/02/26/news/economy/Obama_budget.reut/index.htm

United States Economy

In 2007, the American economy began to slow significantly, mostly because of a real-estate slump and related financial problems. In December 2007, the economy entered a recession, according to a committee of academic economists.

The economy was last in recession in 2001. Contrary to widespread belief, the terrorist attacks of 2001 did not cause the downturn that year. The economy slowed as the dot-com bubble started leaking in early 2000 and began to shrink in early 2001. The recession ended in

November 2001.

Yet there are also now increasing worries that a boom in consumer spending, helped along by more consumer debt, played a large role in lifting economic growth over the last generation.

If this is the case and if the end of the debt boom leads to slower consumer spending, as seems to be happening, economic growth may slow significantly in coming years, even after the recession ends.

I have to be honest, these last sentences worries me a lot. Economic growth that’s payed by loans that people can’t repay... . It reminds me of The Great Depression in the early thirties. People bought there radios, fridges and cars by loaning money. Of course it isn’t a problem as long as there is a steady growth, but it is a complete other story when recession is around the corner.

And this is not only of cencern for the United States.
The United States produced roughly $15 trillion worth of goods and services in 2008, making it easily the largest in the world. China is next, at about $12 trillion. So these problems concern the whole world. From the United States to China and Japan to Europe and even Russia.

Source: An article by David leonhardt, Jan. 8,2009 on http://topics.nytimes.com/topics/reference/timestopics/subjects/u/united_states_economy/index.html

Blog written by De Clercq Stijn

Deflation warning bells ring louder

For the first time in almost 50 years American economists will be likely to determine a deflation again. There will probably be a year-over-year drop in prices and the last time something like this happened, was in 1955. The probable deflation will be reported Friday morning the 26th of February by the government.

A lot of people (and most likely shoppers) see this as good news. Though deflation might be a big threat to a country’s economics; while prices drop consumers and companies postpone their expenditures and investments because they are hoping to see the prices drop even more. In order to keep selling products, companies of course have to drop their prices. But in order to drop their prices they have to lower their costs. Mostly companies lower their costs by dismissing staff members or cut in salaries. These staff members then have a lower income and have to save on certain expenditures. So companies sell less than before and again, they are being forced to lower their prices, and again they have do to this by firing people and cutting in salaries. This is what we call a deflationary spiral.

Some people associate deflation with the Great Depression and fear the same consequences, but American economists can assure us that the year-over-year drop in January was only 0.1% and nothing alike 10% in 1932. So it will definitely not be as bad as the Great Depression of the 1930’s.

An important cause of the deflation is the drop in gas prices. Since gas is pretty much the source of everything in an economy, it has had a big influence on consumer prices.
This influence was mainly noticeable in food prices.

Deflation definitely is very bad for a country’s economics. According to me the consequences deflation carries along are much worse than inflation. If there is inflation prices rise but there is a price index that makes sure the salaries rise along with the prices. Also people aren’t going to postpone their expenditures, on the contrary: they’re going to spend as quick as possible when there is inflation.

I certainly hope the United States’ economics isn’t going to end up in a deflationary spiral because this would be very bad news for a lot of American families and companies.

Source: http://money.cnn.com/

Obama signs $787bn stimulus plan

The new president of the United States, Barack Obama, has signed a $787bn economic recovery plan in Denver. With this plan, they hope the federal money starts to flow toward infrastructure projects, health care, renewable energy development and conservation programs.

According to Obama, this plan is supposed to be the best recovery plan in the history of the US. Obama knows for sure that the signing of the plan means the beginning of the end of the economic problems of today.
First of all, the recovery plan promises the Americans to create or save about 3.5 million posts. A lot of jobs will be available in areas such as roads and rail infrastructure, which are actually critical areas.
Besides, the plan has to boost the consumption and rebuild infrastructure. With this investment, Obama hopes there will be new discoveries and breakthroughs in science, in medicine and in energy. That would lead to a stronger economy, a safer nation and a safer planet for our children.

Republicans are critical of this hopeful recovery plan. At the beginning, they say that the tax cuts are insufficient. They are sure that it will result in a debt for the following years.
Secondly, the Republican chairman warns that there aren’t that much jobs available. He’s quite sure that Americans who are looking for a job will be disappointed.
Finally, they accused the Democrats to work on their own. According to Republicans, a plan is successful when Democrats and Republicans work together to solve the economic problems.

My opinion is a bit divided. According to me, this plan is hopeful and will lead to a better situation than today. When you do efforts to make a situation better, you always have positive results. It’s better than doing nothing, I guess.
But I think that Obama is too enthusiast. One plan can’t make a big difference. For example, the 3.5 million jobs which are promised are a bit over-estimated.
Although a lot of money has been invested in this recovery plan, I’m not sure at all the plan is worth it.
The plan got no Republican support; I understand their opinion. Democrats have to take into account Republicans. According to me, they must work together to make a successful plan.

Source: http://news.bbc.co.uk/2/hi/business/7895078.stm

Prices pass through hard times

What about the prices in the US? The country is faced with difficulties and competition for some time. Because of the economic crisis, not only the US but the whole world is suffering severely by this financial trouble. The US is confronted with numerous problems, for instance the unemployment keeps increasing, the companies become bankrupt, the trade is declining and now, the prices are rising. But is this increase worse than we think?

In 2008, US prices rose hardly anything, so there was merely a gain of 1.8 per cent on the year. The increase was the first time in six months after the fluctuations in energy prices. Although an increase in prices grate on people their ears, it is of little importance. So the Consumer Price Index rose only by 0.3 per cent in January. Core price inflation, which excludes food and energy, rose by 0.2 per cent and is much higher in comparison with December. The energy prices also rose, yet still remained below the peak level in July 2008.
Petrol was the cause for the prices who were pushed higher. Moreover prices for transportation, medical care, apparel, food and education also rose last month. Another reason for the increase in prices is due to companies raising prices for the new year after offering deep holiday discounts.
So we can conclude that the rebound is unfavourable and deflation remains a risk. Wholesale prices were down by 1 per cent, which is a big annual decline since 2006 and forms a sharply contrast with consumer prices. Successful the US Federal Reserve reached to a solution quite recently, the establishment adopted an inflation target of 2 per cent, so there is less risk of deflation.

The whole story kicks up a dust, the ultimate consumer experiences everything intense. So when the media publishes such information, the crowd believes it is bad, even when it is not. They change their attitude and the economy suffers under it. My opinion is to stimulate plans the government enforced, to keep the inflation stable is an important target for the economy. There must be trade to have a healthy economy.

Written by Marie Maes

Source: The Financial Times - 20 February 2009
Article: US prices rise by 0.3% in January
By Alan Rappeport in New York

California passes budget after scathing battle

Take-home pay for Californians is about to shrink. Jeans, hammers, burgers and fries will cost more. Public school children will have to use old textbooks and find more classmates sitting next to them. Parents will receive fewer tax benefits, and state university students will pay 9 percent more in tuition.

The pact contains $14.8 billion in spending cuts, including to public transit, health care, schools and the courts; $12.5 billion in tax increases; $5.4 billion in new borrowing; and the creation of a $1 billion reserve fund.

Personal income tax rates will rise by one-quarter of a percent, and the state sales tax will climb by 1 percentage point, to 6 percent, though each county will have different rates and the average will be 8.9 percent. The state’s vehicle license fee — which Mr. Schwarzenegger abolished with great theatrics when he took office in 2003 — will nearly double, to 1.15 percent of the value of the vehicle.
Left on the cutting-room floor was a proposed 12-cent increase in the gasoline tax lawmakers filled the gap instead with $600 million in cuts and an infusion of federal stimulus money.

Allright, every state in the United States has financial problems nowadays due to the economic crisis but I think that Mr. Scharzenegger and his colleagues are taking the wrong measures here.
Governments need to take measures that gives people the oppurtunity to spend more money in these times in order to increase prosperity according to me.
The more money that people have, the more they will spend and the more that others, including the government, will profit from it. Mr. Swarzenegger is doing the opposite now, fewer tax benefits, even an increase of taxes and an education that is getting more expensive (and worse!). An other problem is the fact that the government is creating a big problem for the future with the huge costs for the intrests of such a loan.
I really don’t understand that they didn’t approve the proposal for a 12-cent increase in the gasoline tax. It is common known that there are too many cars on the roads and that the U.S has difficulties with reaching their goals for less pollution. This could have been a win-win situation here. But I guess it is just un-American to raise taxes on gasoline.

Source: http://www.nytimes.com/2009/02/20/us/20california.html?pagewanted=2&_r=1

Obama to Treasury: Start cutting taxes

The new president of the United States, Barack Obama, has already done a lot of efforts for helping out the American economy, which has already known a lot of problems lately.
The plan to start cutting in taxes for 95 percent of the Americans is part of a $787 billion economic recovery plan that has been passed by the democratic party of the United States government.

The idea to let hard-working American families pay fewer taxes (up to $65 a month) came up a while ago and has the intention to improve the American economy. When people have to pay fewer taxes they can consume more and this causes a higher demand.
A higher demand should improve the well being of a country’s economics.

Included in the $787 billion economic recovery plan is of course the $282 billion for tax cutting, but also $120 billion for public works projects including highway and rail projects, which should be a minor solution to the fast growing numbers of unemployed people in the United States.

Barack Obama is very motivated and finds it very important for his presidency to save the economy of his country, since the economy is deteriorating even faster than in the great depression of the 1930’s.

Obama also stated that signing this plan into law is only the first step to a recovery of the American economy; he realizes that it will definitely not be easy!

I think this is an excellent idea of Barack Obama. Cutting in taxes is great news, everybody will love the idea and of course people will start consuming more. A higher demand is the base of a growing economy. Also, investing in public works is a great way to improve an economy by lowering the numbers of unemployed and again, causing a higher demand.

I think Barack Obama is a great president for the United States. He’s not only very sympathetic, he also is a very clever man and I think that everybody realizes that when looking to his ideas and plans.

Source: http://edition.cnn.com/US/