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Economy Tag

Posted by New Neo on October 01, 2015 35 Comments
Is this the wave of the future?:
Central bank policymakers had believed they had run out of room to support their respective economies, with their interest rates held close to the floor. ...Cut rates too deeply, [they thought], and savers would end up facing negative returns. In that case, this could encourage people to take their savings out of the bank and hoard them in cash... [But as] central bank rates have turned negative, the rates offered on bank deposits have followed. Yet rather than stuffing cash under mattresses, people have left their money in the bank or spent it.
This is already happening in Sweden. One of my first thoughts on reading that people are not pulling their money out of the banks was that perhaps the Swedes are just used to the habit of banking and don't quite know where else to put their money. After all, a few hundred thousand kronor would be hard to stuff under a mattress, and perhaps anxiety-provoking. And it is true that Sweden already has a very high savings rate.

Posted by Mike LaChance on September 05, 2015 17 Comments
Democrats are probably very happy with the August jobs report and the new unemployment rate of 5.1, but if you look closely at the issue, there's no reason for turning cartwheels just yet. Susan Jones of CNS News:
Record 94,031,000 Americans Not in Labor Force; Participation Rate Stuck at 38-Year Low for 3rd Straight Month A record 94,031,000 Americans were not in the American labor force last month -- 261,000 more than July -- and the labor force participation rate stayed stuck at 62.6 percent, a 38-year low, for a third straight month in August, the Labor Department reported on Friday, as the nation heads into the Labor Day weekend. The number of Americans not in the labor force has continued to rise, partly because of retiring baby-boomers and fewer workers entering the workforce. In August, according to BLS, the nation’s civilian noninstitutional population, consisting of all people 16 or older who were not in the military or an institution, reached 251,096,000. Of those, 157,065,000 participated in the labor force by either holding a job or actively seeking one.

Posted by Amy Miller on August 24, 2015 2 Comments
Greece's wild ride through the wake of the Eurozone mega-bailout continued to bounce along today as far-left lawmakers split off from the (already far-left) Syriza party to form their own rebel faction. Former energy minister Panagiotis Lafazanis and his fellow malcontents now have three days to bolster the new Popular Unity party and cobble together a coalition government. (Previous efforts to seize control by Syriza's main opponent, the conservative New Democracy party, failed.) Lafazanis has no grand illusions about being able to do so, which means that Greek voters will head to the polls as early as September 20 to elect new representatives. The early election cycle snapped into place after embattled Greek Prime Minister Alexis Tsipras resigned last week amid harsh criticism from his colleagues over the terms of the multibillion dollar bailout. More from the New York Times:
"Some people think they can hide the consequences of the (bailout agreements) from the Greek people," Lafazanis said, commenting on Tsipras' decision to trigger elections, as he met with President Prokopis Pavlopoulos to receive the mandate to form a government. "This is democratic backtracking, if not an undemocratic aberration."

Posted by Amy Miller on July 27, 2015 13 Comments
Late last month, Illinois Governor Bruce Rauner (R-eal Life Republican) made headlines after he allowed his government to go into a partial shutdown rather than succumb to Democrats' demands for a tax-and-spend budget. Now, almost a month later, democrats are still pushing for more taxes and more entitlement spending---but Rauner isn't backing down. At the forefront of the assault against Rauner's efforts to curb Illinois' $6 billion dollar deficit (the largest in the nation) are the state's infamous unions. AFSCME's (the state, local, and municipal workers' union) contract ran out with the State of Illinois on June 30, and officials are warning Rauner that if he refuses to deal, union members will go on strike. Back in May, Illinois' Democrat-controlled legislature passed a bill that would bring in an arbitrator if either the State or the union declares an impasse in contract talks; Rauner, however, is expected to veto that bill, which means that a union strike could be in the cards. For their part, Rauner's administration seems to be preparing for much worse than a slowdown. According to a report by the State Journal-Register, staffers have been contacting retired state employees and floating the idea of short-term contract work in the event that the union decides to strike.

Posted by Amy Miller on July 20, 2015 2 Comments
For the first time in three weeks, Greek banks opened for business; but for account holders, that renewed access to cash comes at a price. Although doors opened and ATMs were stocked, Greeks looking to cash out were met with the continuation of withdrawal restrictions of 60 euros per day; the government slightly relaxed the rules put in place during its negotiations with the rest of the Eurozone, and set an additional 420 euro per week limit, eliminating the need for daily runs on ATM machines and bank tills. Checking transactions are limited to deposits, and account holders are still restricted from taking out cash while abroad. Shoppers saw a 10% hike in the country's VAT tax approved by parliament on Thursday; parliament also agreed to reforms of pension and early retirement programs that have Greek citizens worried. The Wall Street Journal has on the ground coverage: Of course, those worrisome cuts were demanded by creditors for very good reasons.

Posted by Mike LaChance on July 16, 2015 7 Comments
After a full month of drama, Greece and its creditors finally agreed on a multi-billion dollar bailout package. One of the bailout's most controversial conditions is a list of new austerity measures, and we all know how many Greeks feel about those. Anti-austerity violence broke out on the streets of Athens last night. Megan Specia of Mashable reported:
Tensions were high on Wednesday night outside the Greek parliament building on Athens' Syntagma Square, which was the center of violent anti-austerity protests in years past. And while the streets of Athens were largely calm for much of the day, despite thousands marching against austerity measures tied to the country's new bailout agreement, the night took a more violent turn. As night fell, clashes broke out between protesters waiting to hear the fate of their country's economic future and the police sent to keep them calm.

Posted by Amy Miller on July 13, 2015 16 Comments
After 22 hours of fierce negotiating, the Eurozone summit has come up with a deal that will keep Greece in the Eurozone in exchange for both budget cuts and tax hikes. For those who oppose austerity and "euro"centric economics, the deal is a huge blow. Europe has agreed to advance Greece 10 billion Euros to help the flailing country pay down it's 3.5 billion euro debt to the IMF. Greece will also receive around 77 billion dollars in aid over three years in part to help strengthen it's banking system. European officials will also review Greece's total debt, but will not (!) reduce the amount to be paid back. In return, Greek officials have agreed to a line of policy changes that include cuts to pensions and an increase in the sales tax, with the goal of increasing the budget surplus. They must also make steps to privatize much of the economy, which will (hopefully) increase competition in local markets, and contribute 50 billion euros worth of privatized assets into a fund that will be used to help Greece pay off its debt. In short, it's an activist's worst nightmare. More via the Wall Street Journal:

Posted by Jay Caruso on July 07, 2015 6 Comments
Things are bad in both of China's big exchanges; both the Shanghai and Shenzen are seeing companies halting their trading on both:
Over 700 Chinese companies have halted trading to "self preserve," according to the state media. That means about a quarter of the companies listed on China's two big exchanges -- the Shanghai and Shenzhen -- are no longer trading. China's stock markets are in trouble. The Shanghai Composite Index has fallen over 25% since mid-June. The Shenzhen, which has more tech companies and is often compared to America's Nasdaq Index, is down even more.
Government intervention has not helped:
Chinese stocks fell on Tuesday, taking little comfort from a slew of support measures unleashed by Beijing in recent days, and unnerved by Chinese Premier Li Keqiang's failure to mention the market chaos in a statement on the economy. Before the market opened, Li said in comments posted on a government website that China had the confidence and ability to deal with challenges faced by its economy, but had nothing to say on the three-week plunge that has knocked around 30 percent off Chinese shares since mid-June.
Morgan Stanley Asia Chairman Stephen Roach said some of China's problems can be traced back to issues related to the debt-to-GDP ratio:

Posted by Amy Miller on July 06, 2015 5 Comments
US stock prices sank into the negative this morning in the wake of Greece's landslide "no" vote rejecting a referendum that would have created yet a new layer in the flailing country's creditor-debtor relationship with more stable Eurozone countries. In the US, the Dow showed a mid-morning flatline, but recovered by the afternoon. Markets in Asia, however, experienced a more dramatic response, and Japan and South Korea both closed under significant decline. The response of the European market was more modest, but still reflected uncertainty as Greece pushes its creditors for a mercy ruling. More via USA Today:
"There's been no panic of any kind," Paul Hickey, co-founder of Bespoke Investment Group told clients. "The market remains faithful that the European Central Bank and other European institutions have done an adequate job firewalling the eurozone against Greece." Investors, at least so far, are behaving as if they do not fear financial contagion from the Greek crisis, unlike the financial infection that spread globally after Wall Street bank Lehman Brothers filed for bankruptcy back in the fall of 2008. "The week ahead will be dominated by Greece and the implications of the landslide 'No' vote," says David Kelly, chief global strategist at JPMorgan Funds, adding that he expects difficult negotiations ahead between the two parties.

Posted by Mike LaChance on July 01, 2015 7 Comments
What was once considered unthinkable has now happened. Having missed the June 30th deadline for payment on its debt, the country of Greece has effectively defaulted. This is going to have a considerable effect on the economy of the European Union, which Greece might now leave. It's likely that this situation will get worse before it gets better. First, the basic facts. Michael Birnbaum of the Washington Post:
Greece fails to make key IMF debt payment Greece lost its financial lifelines Tuesday, as the country missed a crucial payment to the International Monetary Fund amid growing questions about whether it would be able to remain in the euro zone. Greek leaders had made a last-ditch attempt to come up with the necessary cash, asking European countries for a new bailout hours before its last ones were set to expire, but E.U. finance ministers rejected the request as unrealistic. The missed payment, confirmed by the IMF, was a landmark moment in Europe’s five-year battle to preserve its common currency. The E.U. finance chiefs were set to reconvene Wednesday as Greece’s cash dwindles and its banks remain closed. The ministers’ decision to hold firm was a sign that they believed they had successfully put in place the defenses­ against instability in Europe if a country left the euro zone. But as Greece became the first developed nation to miss a payment to the IMF, E.U. leaders were confronting the prospect of a European country plunging into intense financial misery as it was forced to abandon the currency.
In the coming days, you're going to hear some quibbling about whether or not this was a default.

Posted by Amy Miller on June 30, 2015 27 Comments
Illinois' new budget year starts tomorrow, and unless Republicans and Democrats can come to an agreement on fiscal policy, the state will kick things off without the ability to pay the bills. Illinois has a reputation for being largely rural, yet bafflingly Democratic. The Chicago machine---not those languishing in my old stomping grounds in the capitol of Springfield---runs things, but for the first time in over a decade, a solidly Democratic legislature is dealing with a Republican governor. Bruce Rauner has spent his time bucking the trends that have run Illinois into the ground, but Democrats have, in turn, bucked his pro-business agenda and are demanding a massive tax increase to make up for a $4 billion dollar shortfall. The AP has the back story:
The back-and-forth is the latest in a months-long fight between Rauner and majority Democrats over how to resolve Illinois' massive financial problems and — more recently — who will take the blame if state government begins grinding to a halt and critical services are cut off. The two sides have been deadlocked over how to eliminate a deficit that's the largest of any state in the U.S. Illinois already is billions behind in paying its bills and has the nation's worst-funded state pensions, with a more than $100 billion shortfall.

Posted by Mike LaChance on June 27, 2015 10 Comments
Greece and the Eurozone have been unable to reach an agreement ahead of a bailout deadline which quickly approaches on June 30th. If negotiations fail, Greece could leave the European Union and ultimately face economic collapse. The situation is already causing a dash for cash in the debt strapped country. Bloomberg reports:
Greeks Line Up at Banks and Drain ATMs as Tsipras Calls Vote Some Greek banks were beginning to limit cash transactions as hundreds of people lined up outside branches and drained cash machines after Prime Minister Alexis Tsipras called a referendum that could decide his country’s fate in the euro. Two senior Greek retail bank executives said as many as 500 of the country’s more than 7,000 ATMs had run out of cash as of Saturday morning, and that some lenders may not be able to open on Monday unless there was an emergency liquidity injection from the Bank of Greece. A central bank spokesman said it was making efforts to supply money to the system.

Posted by Mike LaChance on June 21, 2015 18 Comments
The new left-wing leaders in Greece have done little to stem the country's growing financial crisis and even members of the Obama administration are now urging them to act. NBC News reports:
Greece Debt Crisis: U.S. Warns Athens to Reach Deal or Face 'Decline' ATHENS, Greece — The United States turned up the heat on the Greek government over its debt crisis Saturday, urging it to reach a deal with creditors as wearied citizens braced for a national default. Treasury Secretary Jack Lew said in an interview that the government in Athens should make tough fiscal decisions or risk devastating both the country's economy and people. "I think we're at a moment now where the burden is on Greece to come back with a response that's the basis for reaching an agreement as quickly as possible," he said in an episode of CNN's "Fareed Zakaria GPS" program that will air on Sunday, according to a transcript provided to Reuters. "It's clear that within Greece, the consequence of a failure here would mean a terrible, terrible decline in their economic performance," he said. "It will hurt the Greek people. They will bear the first brunt of a failure here."

Posted by Amy Miller on June 17, 2015 38 Comments
Real talk: Uber is a fantastic service. Living in Washington, D.C., I've come to appreciate the availability of drivers who know the city well enough to not get me stuck in a quagmire when I'm making a quick trip across town. It's a rare thing, and 9 times out of 10, a true D.C. cabbie will do the job (at 50 miles an hour through Chinatown in the bike lane, but who's complaining?)---but what if there's no cabbie in sight? Call an Uber, silly. The Uber ride share service has taken America by storm, and for good reason; the unmitigated hassle of calling a cab company, finding an available car, and arranging a ride has been re-privatized using a single app and a network of drivers who are itching to take you where you need to go. It's usually cheaper than a cab (at least in my experience) and less dicey with regards to routes and payment. Everything is handled through the app, and if your driver takes you home via Timbuktu, you can complain and earn yourself a refund. (Try complaining to a cabbie---you're likely to get the cops called.) It's easy! It's wonderful! It's under fire from California bureaucrats! Of course.

Posted by Mike LaChance on February 10, 2015 41 Comments
Due to regulations imposed by Obamacare, some businesses are cutting the work hours of their employees. This was a known, predicted consequence of the Affordable Care Act. Staples is just the latest newsworthy example. Remember, businesses can only try to survive under the given set of rules---but some employees are having a hard time keeping that in mind when they see their pay stubs. Ashley Lutz of Business Insider:
Staples threatens to fire employees who work more than 25 hours a week Part-time Staples workers are furious that they could be fired for working more than 25 hours a week. The company implemented the policy to avoid paying benefits under the Affordable Care Act, reports Sapna Maheshwari at Buzzfeed. The healthcare law mandates that workers with more than 30 hours a week receive healthcare. If Staples doesn't offer benefits, it could be fined $3,000 in penalties per person. Buzzfeed spoke with several Staples workers who revealed their hours have been drastically cut over the past year. Many reported working as few as 20 hours. The workers started a petition on Change.org asking the company not to "cut part-time hours because of Obamacare."
It's terrible that these folks are losing work hours, but it's not unexpected, and it's not the fault of Staples---that's just as far as an employee wants to look when it's suddenly gotten harder to pay the bills and feed their families. You think it's bad now, wait until people start dealing with their tax returns.

Posted by Mike LaChance on February 07, 2015 23 Comments
Progressives love the idea of raising the minimum wage and the City of San Francisco is taking the issue to new heights. Unfortunately, the success and survival of small businesses rarely figure into these decisions. One small but successful independent book store in San Francisco is now closing. The owner recently appeared on MSNBC's Morning Joe to discuss the situation. The Washington Free Beacon reported:
Bookstore Owner Describes How San Francisco’s Minimum Wage Increase Killed His Small Business What happens when the minimum wage is raised to double the current federal level? San Francisco is providing a perfect example–and the results are not all that surprising. Alan Beets, founder of independent bookstore Borderland’s Books, is closing his doors because the city raised the minimum wage to $15. The bookstore, which employs five people, has weathered challenges such as bigger bookstores and online shopping, but the minimum wage hike proved too much to overcome. “It’s not that I can’t afford to pay higher than minimum wage, but I can’t afford to pay minimum wage that gets that high,” Beets said. Raising the minimum wage is a challenge for all small businesses, but the increased cost for owners is especially troublesome for bookstores. Beets said that while other businesses mark up their prices, shifting the cost to consumers, his product, books, has a price labeled on it so he cannot do the same. “The long-term costs just end up getting too high,” Beets said. “About two years from now, I will be running in the red. It will get worse from there.”
Here's the video segment: People who support raising the minimum wage never seem to appreciate the effect it has on jobs.

Posted by Mike LaChance on February 03, 2015 17 Comments
Greece's new prime minister Alexis Tsipras is finding out that his country's massive debt won't go away just because he wants it to. Maybe that's why Germany has a strong economy and Greece doesn't. Jane Wharton of Express UK reported:
Merkel refuses to write off Greece's debt In her first interview since Syriza won the Greek election last weekend, Angela Merkel has made it clear the debt stands but she hopes they stay in the eurozone. The far-left party stormed to victory last weekend with 36 per cent of the vote, promising to ditch austerity and renegotiate the country's £180billion bailout from the European Union, the European Central Bank and the International Monetary Fund - also known as the troika. Their finance minister Yanis Varoufakis has said this troika of global institutions is "rotten" and has refused to work with them to renegotiate bailout terms. Syriza is now beginning to roll back on the austerity measures imposed by the EU on the previous administration in exchange for the loans. However this morning the German Chancellor said that while Europe will continue to show solidarity with Greece and other nations hit by Europe's debt crisis, the debts must be repaid in full. Speaking to Hamburger Abendblatt, she said: "I do not envisage fresh debt cancellation. "There has already been voluntary debt forgiveness by private creditors, banks have already slashed billions from Greece's debt."
It's amazing what can happen when a politician is told he can't spend money he doesn't have. The Tsipras administration, which knows it doesn't have the negotiating power (or money) to defy reality has quickly adopted a new position.

Posted by Casey Breznick on January 12, 2015 19 Comments
Entering 2015, most economists expected that the Federal Reserve would finally begin raising short-term interest rates. Fewer than two weeks in to the year and that thesis is already beginning to crumble. For seven years, the Fed kept interest rates at rock-bottom levels and employed a massive money-printing program called Quantitative Easing in the hopes of boosting the money supply, expanding credit, and causing inflation to jump-start the economy (so the theory goes). Many experts have long waited for the Fed to "normalize" policy and raise rates, for reasons that include a desire to stop expanding the money supply, and wanting the Fed to have a cushion to lower them once again when another crisis occurs. While credit finally appears to be coming more available, neither the mild-mannered inflation the Fed wanted nor the rampant hyperinflation Fed detractors prophesied has materialized. In 2014 the CPI inflation rate was 1.3%, the lowest since 2008. However, most economists, including those at the Fed, like to see 2% inflation. [caption id="attachment_112614" align="aligncenter" width="542"]InflationRates Graph from www.usinflationcalculator.com.[/caption]
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