Just about everyone whom has every watched TV, listened to the radio, or read newspapers and magazines has heard of it, but few really understand what it means. It is one of the most important and influential prices in finance for the entire world. Not only that, but nearly everyone is affected by it through mortgages, personal loans, and even pensions. The LIBOR, London inter-bank offered rate, is one of the most essential pieces of the world of finance but recently it appears that more than just traditional calculations are pushing the LIBOR to artificial levels creating far reaching effects all over the globe. Continue reading
Economy
Reality Check: $5 For Gas?
I remember a story I heard a few years ago about gas prices. My youth leader told me about how only a decade before whenever he and his friends were bored on the weekend they would all pitch in a dollar, fill up a tank of gas, and simply cruise around town. Personally, the notion of four or five dollars to fill up a tank of gas for a weekend is hard to believe after dropping $55 to fill up my Toyota Camry the other day. Continue reading
Congress and the Deficit Deal: The Buck Stops Somewhere Else
“You can’t always get what you want,” says Mick Jagger, “but if you try sometime, you might find, you get what you need.” Congress got neither with the deficit reduction plan passed last Monday. Instead, it got what it deserved on Friday as Standard and Poor’s dropped the United States sovereign debt to AA+ from AAA. Global markets responded quickly, with the Dow Jones Industrial average shedding approximately 7%, Tokyo losing 5.5% (4% on Friday alone), and London down almost 11%. This is hardly good news. However, several prominent market analysts are saying the credit rating cut isn’t necessarily bad news, either. Continue reading
Structural Unemployment – Part Deux
I painted a fairly bleak picture of structural unemployment in my previous post. First, let me reiterate economists do not agree on any quantitative measure of structural unemployment in the economy, nor do they agree that it is a pressing issue moving forward. Paul Krugman has argued that structural unemployment is a non issue under present circumstances, while Narayana Kocherlakota of the Minneapolis Fed is worried that structural unemployment is ultimately eroding the Federal Reserve’s capability to fight high unemployment through conventional monetary policy tools. I’ll let the experts continue haggling over the precise extent of the problem. If President Kocherlakota is correct, however, policy makers need to ask some serious questions about the efficacy of monetary policy moving forward. Continue reading
Are you cyclically or structurally unemployed?
The phrase “jobless recovery” is one we have become all too accustomed to hearing in the financial news. Economists assure us economic growth is underway, but most Americans take little comfort in knowing that the recession officially ended in June 2009. At that time, the official unemployment rate was 9.5%. Fast forward 24 months to the present, and the most recent figures from the Bureau of Labor Statistics place the official rate at 9.1%. Over the past 2 years, GDP has grown at an approximate average annual rate of 2.4%, while unemployment has only fallen by a net 0.4% over the same period. The failure of the recovering economy to create new jobs has led many economists to speculate that the labor market is suffering from something much more severe than simple lack of demand for workers. Continue reading
THE DEFICIT’S EASY IF YOU JUST PLAY NICE
I DOUBT we’ll ever pay it to zero, but we must trim our deficit. I doubt paying it to zero is even a worthy goal in our increasingly interdependent planetary system of government. Nonetheless, we must improve our debt-to-available-credit ratio to keep from going the way of Greece or Portugal. So how do we do it? Continue reading
OBAMA USES S&P DOWNGRADE TO PUSH BUDGET
HE HASN’T yet, but President Obama could use Standard & Poor’s (S&P) recent negative revision of its US debt outlook to force action on Capitol Hill.
On 18 April 2011, S&P gave its vote of no confidence on the US budget debate, changing its opinion of America’s ability to pay off its debts in the future. Its “AAA” credit rating has gone from “stable” to “negative”, implying that it could drop if Congress doesn’t agree a fiscal plan soon. Continue reading
FINLAND SETS PRECEDENT FOR GERMANY
FINLAND went to the polls this weekend to tell the European Union they’re not happy about Eurozone bailouts.
This noble land of Thor, reindeer and saunas* doesn’t make the financial news very often. On the one hand, its stable economy keeps it out of articles focusing on troubled countries like Greece and Portugal. On the other hand, its modest wealth keeps it out of articles focusing on richer countries like France, Germany and the United Kingdom. Continue reading
Ditch Social Security and Holiday Instead
When I was a kid we used to tell each other a comedy-horror story about a man pursued by a monkey. Continue reading
Status of the Economy: A Week in Review 1/31/11 – 2/07/11
Report to CIO
Week 3: 1/31/11 – 2/07/11
Team Supreme
Team Members:
Maryam Farooq, Patrick Hand, Alex Pellas, Griffin Roer,
Paul Rosser, Ben Shaver, Cole Taylor, Brian Trentacost Continue reading
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