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