America is losing control of its economy and is now quietly being taken over by foreign countries through their purchase and control of our strategic industries (TV manufacturing is now 100% foreign owned, sound recording industry 97%, movie industry 75%, metal ore industry 65%, book publishing 63%, cement industry 81% and many of our other major industries are now foreign owned).
The American economy is no longer competitive. We can't compete with Chinese wage rates nor Japanese technology. Any business that can’t be competitive will soon go out of business. Many of our major businesses are now non-competitive and are forced to outsource their manufacturing, close up or sell out. We have sold almost 14,000 of our major companies since 1980 (Click to see the list of companies sold).
We have become uncompetitive through the effects of ill-conceived policies, disastrous trade agreements (W.T.O., Nafta and Cafta), escalating trade deficits, crumbling industrial infrastructure, and the sale of our most valuable companies.
We now no longer produce enough for ourselves and are increasingly compelled to live on imports, borrowed money, and the income from the sale of our best companies.
Balance of Trade Deficits (The means through which foreign countries accumulate our money to buy us out)
2001 - $363 billion = $690,000 per minute
2002 - $421 billion = $801,000 per minute
2003 - $495 billion = $942,000 per minute
2004 - $611 billion = $1,200,000 per minute
2005 - $711 billion = $1,400,000 per minute
2006 - $765 billion = $1,450,000 per minute
These are funds accumulating in foreign hands from selling us more than we can sell them. Foreign companies and governments use this money to buy any US company they like (most of our companies are for sale on the open stock market).With the sale of these companies go our future production, profit, technologies, taxes and the means through which we became a super power. As more of these companies fall into foreign ownership and control we have fewer American owned companies remaining that can produce products to sell, so our balance of trade deficits are destined to increase yearly with no hope of stopping or reversing this trend until we have no companies left to sell.
We will then have developed the profile of a third world country. Our lifestyle will revert back to conditions similar to those when we were subjected to live under colonial rule when England controlled America.
Through their foreign trade surpluses, countries like Japan and China each now have accumulated $1 trillion of currency reserves. General Motors has a stock market value of $20 billion, Japan or China could theoretically buy GM for only 2% of its present amount of our money they have in the bank. These funds are economic bullets poised to strike and take out most of our companies listed on our stock exchanges.
Many countries, particularly Japan and China manage the political and economic matters of their country like they were conducting a war - to destroy competitors. America has just lost the all important economics war. We lost it because we didn’t even know we were in it, so we planned no defenses like tariffs to protect our industries. We had no offense to create conditions that would allow our manufacturers to profit in America without outsourcing its manufacturing.
We have been totally misled and blinded to reality. We are now being controlled by our competitor bankers (Japan, China, UK and others) from whom we have borrowed and now owe trillions of dollars (Click here to view countries to whom we are now indebted, and the amounts).
In globalization, an advantage for one country often results in a disadvantage for another.
Presently we won’t or can’t compete with Chinese wage rates, as a result, they had a $230 Billion balance of trade surplus in 2006 alone. We can’t compete with Japanese superior technology, as a result, Toyota had an approximate $10 billion dollar profit last year. General motors had an approximate $10 billion loss and Ford lost over $12.7 billion.
We are now in the Iraq and Afghanistan wars, we have no plan to win these wars and we have no exit strategy. We are presently bleeding to death and to debt in these wars. If we admit defeat and pull out we will survive. We have just lost the larger economics war. We may survive but not like we were. Our standard of living will become greatly diminished. We presently have no plans to change or overcome the devastating effects of this loss.
We are temporarily supported through the good graces of Japan and China from whom we receive much of our needed merchandise and loans to run our government.
What is the matter with us? Are we blind, are we stupid? Can we not see we can’t continue like this, living on imports, debt, and from the sale of our best companies? Please ask your congressional leaders what they are doing about this.We invite criticism and suggestions relating to this article.
Wednesday, October 31, 2007
White House threatens veto of trade job-loss bill
The White House threatened on Tuesday to veto a bill to expand federal assistance for retraining workers who have lost their jobs because of trade, but said it wanted to work with Congress to revamp the program.
The veto threat prompted a Democratic warning that the Bush administration's hopes of winning Congress's approval of trade agreements with Peru, Panama, Colombia and South Korea were at risk.
The bill, headed to a vote this week in the House of Representatives, fails to make needed reforms and instead converts the federal trade adjustment assistance program "from a trade-related program to a universal income-support and training program," the White House budget office said in a statement.
"Accordingly, if this bill were presented to the president in its current form, the president's senior advisors would recommend he veto the bill," it said.
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The veto threat prompted a Democratic warning that the Bush administration's hopes of winning Congress's approval of trade agreements with Peru, Panama, Colombia and South Korea were at risk.
The bill, headed to a vote this week in the House of Representatives, fails to make needed reforms and instead converts the federal trade adjustment assistance program "from a trade-related program to a universal income-support and training program," the White House budget office said in a statement.
"Accordingly, if this bill were presented to the president in its current form, the president's senior advisors would recommend he veto the bill," it said.
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Vallourec To Buy Three U.S. Businesses For $800M
Vallourec, a French maker of steel tubes, said Tuesday it agreed to buy U.S.-based Atlas Bradford Premium Threading & Services, TCA and Tube-Alloy from Grant Prideco for US$800 million (euro555 million).
The three businesses had combined revenue of US$229 million (euro158.9 million) for the 12 months ended Sept. 30.
TCA specializes in heat treatment operations and markets tubular products. Tube-Alloy produces and repairs down-hole tubular accessories for the oil and gas industry and specializes in complex threading and machining for custom-made orders.
The agreement is subject to customary regulatory approvals.
Vallourec shares dropped 2.9 percent to euro205.55 (US$296.29) in Paris.
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The three businesses had combined revenue of US$229 million (euro158.9 million) for the 12 months ended Sept. 30.
TCA specializes in heat treatment operations and markets tubular products. Tube-Alloy produces and repairs down-hole tubular accessories for the oil and gas industry and specializes in complex threading and machining for custom-made orders.
The agreement is subject to customary regulatory approvals.
Vallourec shares dropped 2.9 percent to euro205.55 (US$296.29) in Paris.
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Canadian Dollar Rises to 47-Year High Before U.S. Rate Decision
Canada's dollar rose to the highest since 1960 before the Federal Reserve's interest-rate meeting where economists forecast borrowing costs will be cut to prevent the world's largest economy from falling into a recession.
Canada's dollar rose to $1.0496 at 4:48 p.m. in Toronto, from $1.0482 yesterday. It touched $1.0511, the highest since March 28, 1960. One U.S. dollar buys 95.26 Canadian cents.
The U.S. central bank is expected to cut borrowing costs a quarter-percentage point to 4.5 percent tomorrow, according to interest-rate futures traded on the Chicago Board of Trade. That would eliminate the U.S. benchmark rate advantage over Canada. Bankers' acceptances futures suggest the Bank of Canada will keep the key lending rate unchanged at 4.5 percent this year.
``The market is in a holding pattern before the U.S. rate decision,'' said Matthew Strauss, a senior currency strategist at RBC Capital Markets in Toronto. ``If the Fed's statement is more dovish than the market expects, it will fuel more gains in the Canadian dollar.'' Strauss said the currency may sustain its gains around the $1.05 level by the end of this year.
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Canada's dollar rose to $1.0496 at 4:48 p.m. in Toronto, from $1.0482 yesterday. It touched $1.0511, the highest since March 28, 1960. One U.S. dollar buys 95.26 Canadian cents.
The U.S. central bank is expected to cut borrowing costs a quarter-percentage point to 4.5 percent tomorrow, according to interest-rate futures traded on the Chicago Board of Trade. That would eliminate the U.S. benchmark rate advantage over Canada. Bankers' acceptances futures suggest the Bank of Canada will keep the key lending rate unchanged at 4.5 percent this year.
``The market is in a holding pattern before the U.S. rate decision,'' said Matthew Strauss, a senior currency strategist at RBC Capital Markets in Toronto. ``If the Fed's statement is more dovish than the market expects, it will fuel more gains in the Canadian dollar.'' Strauss said the currency may sustain its gains around the $1.05 level by the end of this year.
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Data add to gloom on US economy
A build-up of bearish data fuelled fears of a US economic slowdown on Tuesday as consumer confidence slumped to a two-year low and house prices in big cities suffered their biggest drop in 16 years.
The growing evidence that the credit squeeze and housing meltdown are spreading to the rest of the domestic economy will increase pressure on the Federal Reserve to set aside concerns over rising inflation and cut interest rates on Wednesday.
Blue chips such as Procter & Gamble and US Steel added to the gloom with results that disappointed investors and contributed to a 0.7 per cent fall in the S&P 500 by the close in New York trading.
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The growing evidence that the credit squeeze and housing meltdown are spreading to the rest of the domestic economy will increase pressure on the Federal Reserve to set aside concerns over rising inflation and cut interest rates on Wednesday.
Blue chips such as Procter & Gamble and US Steel added to the gloom with results that disappointed investors and contributed to a 0.7 per cent fall in the S&P 500 by the close in New York trading.
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Tuesday, October 30, 2007
Consumer confidence lowest since 2005
'May very well be a prelude to lackluster job growth,' says a business research group.
A key barometer of consumer sentiment dropped to the lowest level in two years, igniting concern that the upcoming holiday shopping season would be lukewarm.
The New York-based Conference Board said Tuesday that its Consumer Confidence Index fell to 95.6 from a revised 99.5 in September. The reading marked the lowest level since October 2005 when it was 85.2. Analysts had expected 99.5.
"Further weakening in business conditions has, yet again, tempered consumers' assessment of current-day conditions and may very well be a prelude to lackluster job growth in the months ahead," said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. "In addition, consumers are growing more pessimistic about the short-term future and their rather bleak outlook suggests a less than stellar ending to this year."
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A key barometer of consumer sentiment dropped to the lowest level in two years, igniting concern that the upcoming holiday shopping season would be lukewarm.
The New York-based Conference Board said Tuesday that its Consumer Confidence Index fell to 95.6 from a revised 99.5 in September. The reading marked the lowest level since October 2005 when it was 85.2. Analysts had expected 99.5.
"Further weakening in business conditions has, yet again, tempered consumers' assessment of current-day conditions and may very well be a prelude to lackluster job growth in the months ahead," said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. "In addition, consumers are growing more pessimistic about the short-term future and their rather bleak outlook suggests a less than stellar ending to this year."
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U.S. home prices fall again
Down for the eighth consecutive month; index of 10 large U.S. cities shows a price drop of 5% in August, the largest since 1991.
U.S. home prices fell nationwide in August for the eighth consecutive month, according to the S&P/Case-Shiller index released Tuesday.
And things could get worse, said Yale economist Robert Shiller, who helped create the index.
"There is really no positive news in today's report," said Shiller, chief economist for MacroMarkets, which collaborated with S&P on the indicator.
Home prices as measured by the index have fallen more every month since the beginning of the year. August is the 21st month of decelerating returns.
An index of 10 U.S. cities fell 5 percent in August from a year ago. That was the biggest drop since June 1991. The lowest ever was a decline of 6.3 percent in April 1991.
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U.S. home prices fell nationwide in August for the eighth consecutive month, according to the S&P/Case-Shiller index released Tuesday.
And things could get worse, said Yale economist Robert Shiller, who helped create the index.
"There is really no positive news in today's report," said Shiller, chief economist for MacroMarkets, which collaborated with S&P on the indicator.
Home prices as measured by the index have fallen more every month since the beginning of the year. August is the 21st month of decelerating returns.
An index of 10 U.S. cities fell 5 percent in August from a year ago. That was the biggest drop since June 1991. The lowest ever was a decline of 6.3 percent in April 1991.
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Dollar sinks to new low against euro amid expectations of another US rate cut
The dollar descended to new long-term lows Monday against several widely traded counterparts, including the euro and Canadian dollar, as investors pondered the likelihood of a reduction in benchmark U.S. interest rates.
Ahead of the decision Wednesday by the rate-setting Federal Open Market Committee, the greenback stayed mostly range-bound in New York trading, although those ranges were in record-low territory.
The euro hit an all-time high of $1.4439 during the overnight session, while the greenback bottomed out in afternoon trading at C$0.9517 - its lowest level in 37 years.
Sterling traded at three-month highs against the greenback on news that consumer lending in the U.K. shot up to year-high levels, signaling that the recent slew of discouraging U.S. economic reports are primarily of U.S. concern. The pound remained within striking distance of the 26-year highs it reached in July.
The Australian dollar pressed to a fresh 23-year high at 0.9272, mainly on expectations the Reserve Bank of Australia will raise interest rates, said analysts.
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Ahead of the decision Wednesday by the rate-setting Federal Open Market Committee, the greenback stayed mostly range-bound in New York trading, although those ranges were in record-low territory.
The euro hit an all-time high of $1.4439 during the overnight session, while the greenback bottomed out in afternoon trading at C$0.9517 - its lowest level in 37 years.
Sterling traded at three-month highs against the greenback on news that consumer lending in the U.K. shot up to year-high levels, signaling that the recent slew of discouraging U.S. economic reports are primarily of U.S. concern. The pound remained within striking distance of the 26-year highs it reached in July.
The Australian dollar pressed to a fresh 23-year high at 0.9272, mainly on expectations the Reserve Bank of Australia will raise interest rates, said analysts.
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What would it take to send the U.S. economy—and New York’s—into free fall?
Peter Schiff is laughing at me. I’ve just asked him to entertain the following notion: that we dodged a bullet during August’s financial-market turmoil and, with the stock market bouncing right back from every dip, things might be okay. So why worry?
He stops laughing. “Why worry?” he asks. “Because we dodged a bullet but are about to step on a hand grenade.”
Sitting in a corner office of a nondescript building just off I-95 in Darien, Connecticut, Schiff, the president of brokerage Euro Pacific Capital, and author of Crash Proof: How to Profit From the Coming Economic Collapse, will spend the next hour spelling out a singularly pessimistic view of the American economy. And he will do so while exhibiting a curious juxtaposition unique to the bearish prognosticator: He speaks of disaster with a smile on his face. No, he’s not happy about our impending doom. But he is happy that people are finally taking him seriously.
Some people, anyway. The recessionary fears that were sparked by the global liquidity crisis in August have eased, largely because of a resilient stock market and a belief that the Federal Reserve’s interest-rate cut in September curtailed deeper losses. When Goldman Sachs invested in its own imploding Global Equity Opportunities hedge fund in August, calling it an “opportunity” and not a “rescue,” people laughed. Guess who laughed last? Goldman, which had reportedly enjoyed a $370 million gain on its $2 billion rescue by October. The optimists stay focused on stories like Steve Jobs’s next stroke of genius.
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He stops laughing. “Why worry?” he asks. “Because we dodged a bullet but are about to step on a hand grenade.”
Sitting in a corner office of a nondescript building just off I-95 in Darien, Connecticut, Schiff, the president of brokerage Euro Pacific Capital, and author of Crash Proof: How to Profit From the Coming Economic Collapse, will spend the next hour spelling out a singularly pessimistic view of the American economy. And he will do so while exhibiting a curious juxtaposition unique to the bearish prognosticator: He speaks of disaster with a smile on his face. No, he’s not happy about our impending doom. But he is happy that people are finally taking him seriously.
Some people, anyway. The recessionary fears that were sparked by the global liquidity crisis in August have eased, largely because of a resilient stock market and a belief that the Federal Reserve’s interest-rate cut in September curtailed deeper losses. When Goldman Sachs invested in its own imploding Global Equity Opportunities hedge fund in August, calling it an “opportunity” and not a “rescue,” people laughed. Guess who laughed last? Goldman, which had reportedly enjoyed a $370 million gain on its $2 billion rescue by October. The optimists stay focused on stories like Steve Jobs’s next stroke of genius.
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Wal-Mart’s Low Prices- A High Cost for America
American consumers believe that they get a benefit from Wal-Mart's low prices, while American workers believe that they pay a high price in jobs, dignity, security, and even national survival. So who is right? The answer is that they both are. But the costs and benefits are not symmetric.
Americans do get lower prices, in the short-term. But only at the cost of enormous and unsupportable trade imbalances, imbalances that most, sooner or later, come out in higher prices, taxes, interest rates, and “reduced” employment (e.g., replacing well-paying factory jobs with poorly-paid “service” economy jobs, like maids or hamburger flippers).
Wal-Mart happens to be Communist China's largest trading partner, but its “low prices” are not the result of either a free market or of free trade. Rather, it is the beneficiary of government manipulation of the markets.
The Chinese have a way of “cheating” in the game of international trade. They simply “peg” their currency, the Yuan, at an artificially low rate. In effect, this is an export subsidy and an import tariff by another name.
What's to be done?
If the Chinese Communists persist in this trade war (to call it what it is), then we should “adjust” their currency for them, by gradually raising tariffs over a three to five year period to bring the costs of Chinese products to what they should be if their currency were correctly priced. On a level playing field, Americans can compete even with subsistence wages and low-cost lead painted products.
Of course, such a policy will not be painless. Prices at Wal-Mart will rise and the happy-face price-cutter will not be quite as happy. But the pain will be short-term, the gain will be long-lasting.
*The above article has been excerpted from John Médaille’s article “Subsidizing Wal-Mart,” featured in the blog The Distributist Review. Médaille teaches “Social Justice for Business Students” at the University of Dallas and has been a businessman for over 30 years. Read the entire article at http://distributism.blogspot.com/
Americans do get lower prices, in the short-term. But only at the cost of enormous and unsupportable trade imbalances, imbalances that most, sooner or later, come out in higher prices, taxes, interest rates, and “reduced” employment (e.g., replacing well-paying factory jobs with poorly-paid “service” economy jobs, like maids or hamburger flippers).
Wal-Mart happens to be Communist China's largest trading partner, but its “low prices” are not the result of either a free market or of free trade. Rather, it is the beneficiary of government manipulation of the markets.
The Chinese have a way of “cheating” in the game of international trade. They simply “peg” their currency, the Yuan, at an artificially low rate. In effect, this is an export subsidy and an import tariff by another name.
What's to be done?
If the Chinese Communists persist in this trade war (to call it what it is), then we should “adjust” their currency for them, by gradually raising tariffs over a three to five year period to bring the costs of Chinese products to what they should be if their currency were correctly priced. On a level playing field, Americans can compete even with subsistence wages and low-cost lead painted products.
Of course, such a policy will not be painless. Prices at Wal-Mart will rise and the happy-face price-cutter will not be quite as happy. But the pain will be short-term, the gain will be long-lasting.
*The above article has been excerpted from John Médaille’s article “Subsidizing Wal-Mart,” featured in the blog The Distributist Review. Médaille teaches “Social Justice for Business Students” at the University of Dallas and has been a businessman for over 30 years. Read the entire article at http://distributism.blogspot.com/
Monday, October 29, 2007
Vultures eyeing mortgage corpse
Opportunistic investors have raised huge sums to buy mortgage-backed debt, but are not yet swooping down - a sign the beleaguered securities have further to fall.
Since the subprime crisis erupted earlier this year, vulture investors looking for bargains have been circling battered securities backed by mortgages.
But the feeding has not yet begun in earnest - and that's not a good sign for the housing and credit markets.
While opportunistic investors may be reviled by some, their presence is often an indication that a beaten down market has reached a bottom. The longer they stay away, the more likely it is that turmoil will roil the market.
"[Distressed debt investors] are a good thing for the market - they're a new force for providing liquidity," said Mark Adelson, an independent mortgage securities analyst.
For sure, vulture investors are getting ready to strike. Fundraising in the first nine months of the year hit a record $6.6 billion, according to London-based Private Equity Intelligence.
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Since the subprime crisis erupted earlier this year, vulture investors looking for bargains have been circling battered securities backed by mortgages.
But the feeding has not yet begun in earnest - and that's not a good sign for the housing and credit markets.
While opportunistic investors may be reviled by some, their presence is often an indication that a beaten down market has reached a bottom. The longer they stay away, the more likely it is that turmoil will roil the market.
"[Distressed debt investors] are a good thing for the market - they're a new force for providing liquidity," said Mark Adelson, an independent mortgage securities analyst.
For sure, vulture investors are getting ready to strike. Fundraising in the first nine months of the year hit a record $6.6 billion, according to London-based Private Equity Intelligence.
Read Complete Story
For sale: 2 million empty homes
Number of vacant homes on the market nationwide equivalent to all homes in Detroit; another sign of weak housing market.
The number of vacant homes for sale rose in the third quarter, according to the latest government reading that casts new harsh light on the weakness of the housing market.
The Census Bureau report puts the number of vacant homes for sale at 2.07 million in the period, up about 2 percent from the second quarter, and 7 percent above year ago levels.
The number is down 5 percent from the record high reading reached in the first quarter, though.
For purposes of comparison for the current situation, imagine the Detroit metropolitan area, which the Census Bureau estimated had 2.08 million households in its 2000 Census. Now picture virtually every house or condo empty, with a for sale sign in the front yard of every home, from inner-city Detroit to its suburbs, all the way to nearby cities such as Flint and Ann Arbor.
There are always some homes vacant and for sale, even in a booming real estate market.
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The number of vacant homes for sale rose in the third quarter, according to the latest government reading that casts new harsh light on the weakness of the housing market.
The Census Bureau report puts the number of vacant homes for sale at 2.07 million in the period, up about 2 percent from the second quarter, and 7 percent above year ago levels.
The number is down 5 percent from the record high reading reached in the first quarter, though.
For purposes of comparison for the current situation, imagine the Detroit metropolitan area, which the Census Bureau estimated had 2.08 million households in its 2000 Census. Now picture virtually every house or condo empty, with a for sale sign in the front yard of every home, from inner-city Detroit to its suburbs, all the way to nearby cities such as Flint and Ann Arbor.
There are always some homes vacant and for sale, even in a booming real estate market.
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Here comes $100 oil, and $3 gas
With crude setting new highs every day, experts say there's no way motorists won't see a spike at the pump.
With oil prices setting records over $90 a barrel - and $100 looking ever more likely - experts say there's a good chance drivers will see $3 gasoline before the end of the year.
"Three dollar gasoline in this market is unavoidable," said Stephen Schork, publisher of the industry newsletter the Schork Report. "At this rate, we're going to see $4 a gallon."
Crude oil prices have soared nearly 30 percent over the last month, mainly over fears that supply won't meet demand, a falling U.S. dollar, and what some say is a high degree of speculative investment money.
But so far drivers have been lucky. The national average price for gasoline has risen barely one cent, going from $2.81 last month to $2.82 this month, according to the motorist organization AAA, although in many areas of the country gasoline is already over $3.
Analysts have said the relatively stable gasoline price is due to slack demand following the high-demand summer driving season.
Read Complete Story
With oil prices setting records over $90 a barrel - and $100 looking ever more likely - experts say there's a good chance drivers will see $3 gasoline before the end of the year.
"Three dollar gasoline in this market is unavoidable," said Stephen Schork, publisher of the industry newsletter the Schork Report. "At this rate, we're going to see $4 a gallon."
Crude oil prices have soared nearly 30 percent over the last month, mainly over fears that supply won't meet demand, a falling U.S. dollar, and what some say is a high degree of speculative investment money.
But so far drivers have been lucky. The national average price for gasoline has risen barely one cent, going from $2.81 last month to $2.82 this month, according to the motorist organization AAA, although in many areas of the country gasoline is already over $3.
Analysts have said the relatively stable gasoline price is due to slack demand following the high-demand summer driving season.
Read Complete Story
Caterpillar Recession Warning Dismissed by Executives
Caterpillar Inc., the world's biggest maker of bulldozers and excavators, says the U.S. economy may fall into a recession next year. Ford Motor Co., DuPont Co. and Intel Corp. disagree.
Caterpillar cut its profit forecast on Oct. 19 because of the U.S. housing slump and said the economy would be ``near to, or even in, recession'' in 2008. U.S. stocks fell the most in two months.
Peoria, Illinois-based Caterpillar remains an outlier among U.S. companies. While near-record oil prices, the housing plunge and mortgage defaults will cause the economy to slow, it won't slip into a recession, said executives including Joseph Moglia, chief executive officer of TD Ameritrade Holding Corp., the third-biggest online brokerage.
``The consumer is concerned about rising energy prices, what's going on in the credit cycle and the real estate market,'' Moglia said in an interview. ``I don't believe they can have those concerns and not have some impact on what they're doing. That does not mean we're headed for a recession.''
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Caterpillar cut its profit forecast on Oct. 19 because of the U.S. housing slump and said the economy would be ``near to, or even in, recession'' in 2008. U.S. stocks fell the most in two months.
Peoria, Illinois-based Caterpillar remains an outlier among U.S. companies. While near-record oil prices, the housing plunge and mortgage defaults will cause the economy to slow, it won't slip into a recession, said executives including Joseph Moglia, chief executive officer of TD Ameritrade Holding Corp., the third-biggest online brokerage.
``The consumer is concerned about rising energy prices, what's going on in the credit cycle and the real estate market,'' Moglia said in an interview. ``I don't believe they can have those concerns and not have some impact on what they're doing. That does not mean we're headed for a recession.''
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China Threatens To Cripple U.S. Economy
China now has accumulated $1.3 trillion of currency reserves, of which $407 billion are in U.S. treasury bonds. This has happened through their escalating balance of trade surpluses with America - they sell to us much more than we sell to them. In the process, China has been instrumental in putting many of our American manufacturers out of business.
Now with this huge stockpile of money and the leverage it gives them, they are threatening to dump these bonds and our U.S. dollar on the market. If they take this irresponsible action, it would immeasurably devalue the worth of our money, send the cost of goods skyrocketing, and cripple our economy.
This condition has been building up for a long time and puts America in a precarious and vulnerable position, as we have been producing less each year and have increasingly been surviving on imports.
Most of us don’t realize these dramatic changes are taking place. America is becoming a much different country then it was when you grew up in it. You will be leaving your children with a legacy that they had not expected and will be very disappointed with.
These are the issues our political leaders should be attempting to resolve. We must do something about this now.
Send this article to your congressional representatives and demand that:
1. A crash program to reindustrialize America be developed
2. Free trade agreements with foreign countries are changed to a tit-for-tat trade policy
3. We create conditions that will allow us to get out of our massive debts and once again become a productive, self-sustaining nation.
These economic issues affect us all and should take precedence over present “wedge” issues that are often concocted to gain votes. America needs a change in direction, and our political representatives need to start fighting for sound economic policy that supports the American worker.
Now with this huge stockpile of money and the leverage it gives them, they are threatening to dump these bonds and our U.S. dollar on the market. If they take this irresponsible action, it would immeasurably devalue the worth of our money, send the cost of goods skyrocketing, and cripple our economy.
This condition has been building up for a long time and puts America in a precarious and vulnerable position, as we have been producing less each year and have increasingly been surviving on imports.
Most of us don’t realize these dramatic changes are taking place. America is becoming a much different country then it was when you grew up in it. You will be leaving your children with a legacy that they had not expected and will be very disappointed with.
These are the issues our political leaders should be attempting to resolve. We must do something about this now.
Send this article to your congressional representatives and demand that:
1. A crash program to reindustrialize America be developed
2. Free trade agreements with foreign countries are changed to a tit-for-tat trade policy
3. We create conditions that will allow us to get out of our massive debts and once again become a productive, self-sustaining nation.
These economic issues affect us all and should take precedence over present “wedge” issues that are often concocted to gain votes. America needs a change in direction, and our political representatives need to start fighting for sound economic policy that supports the American worker.
Friday, October 26, 2007
Industrial Collapse: America Forced to Import Bullets
Since the advent of free trade agreements such as NAFTA (the North American Free Trade Agreement), the United States has lost hundreds of thousands of manufacturing jobs to countries that pay little more than lip service to worker protection and environmental standards. For the most part, Corporate America has responded with yawning indifference, arguing that American workers need to "adapt and evolve" to a changing global marketplace and retrain themselves for higher skilled jobs. The result has been the hollowing out of many communities throughout Northern California and across the country as jobs move offshore and tax bases dissipate.
These days, there seems to be no winning, for even where American workers have honed the most advanced technological skills anywhere in the world, our government still seems poised to kick them in the teeth.
Once considered the "arsenal of democracy," America's manufacturing base has shrunk so dramatically in the last 40 years that in 2003 we even faced a shortage of the most basic defense materiel - ammunition - forcing us to resort to foreign suppliers in Israel, Taiwan and Britain. This kind of blind outsourcing of critical defense items gives foreign suppliers the equivalent of a veto power on U.S. national security matters.
To a divided Washington bureaucracy, it seems impossible to reconcile free trade with competitive contracting. However, just as American workers have retrained themselves for higher skilled jobs, bureaucrats must retrain themselves as well. Competition may be the fuel of excellence, but if one team is on steroids, then the cause of competition is hopelessly distorted.
*The above article has been excerpted from Rich Michalski’s article “Refueling tanker contract pits trade policies, jobs,” featured in San Francisco Chronicle. Rich Michalski is a vice present of the International Association of Machinists and Aerospace Workers. Read the entire article at: http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/10/24/EDEDCHSUPEN.DTL.
These days, there seems to be no winning, for even where American workers have honed the most advanced technological skills anywhere in the world, our government still seems poised to kick them in the teeth.
Once considered the "arsenal of democracy," America's manufacturing base has shrunk so dramatically in the last 40 years that in 2003 we even faced a shortage of the most basic defense materiel - ammunition - forcing us to resort to foreign suppliers in Israel, Taiwan and Britain. This kind of blind outsourcing of critical defense items gives foreign suppliers the equivalent of a veto power on U.S. national security matters.
To a divided Washington bureaucracy, it seems impossible to reconcile free trade with competitive contracting. However, just as American workers have retrained themselves for higher skilled jobs, bureaucrats must retrain themselves as well. Competition may be the fuel of excellence, but if one team is on steroids, then the cause of competition is hopelessly distorted.
*The above article has been excerpted from Rich Michalski’s article “Refueling tanker contract pits trade policies, jobs,” featured in San Francisco Chronicle. Rich Michalski is a vice present of the International Association of Machinists and Aerospace Workers. Read the entire article at: http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/10/24/EDEDCHSUPEN.DTL.
Chinese Wage Rates Decimate California Industries, U.S.
Tucked away in an industrial section of Sun Valley, QMP Inc. has built a steady flow of international customers for its water filtration systems.
But now the global economy is biting back.
"We've been losing customers because they want us to match the price of the Chinese products, which is impossible," said Vidal, whose business employs 65. "If the situation doesn't change soon, we'll have to either close the company or play the same game and move our manufacturing operation to China."
That cheap offshore production, combined with the region's shrinking defense industry, has caused steady manufacturing job losses in the county over the last decade. Apparel, furniture, plastics and fabricated metal products industries have been hit the hardest.
Although Los Angeles County remains the nation's largest manufacturing center, average annual manufacturing employment fell 27% to 462,000 jobs from 1996 to 2006.
*The above article has been excerpted from Richard Verrier’s article “Standing up to China,” featured in the Los Angeles Times.
But now the global economy is biting back.
"We've been losing customers because they want us to match the price of the Chinese products, which is impossible," said Vidal, whose business employs 65. "If the situation doesn't change soon, we'll have to either close the company or play the same game and move our manufacturing operation to China."
That cheap offshore production, combined with the region's shrinking defense industry, has caused steady manufacturing job losses in the county over the last decade. Apparel, furniture, plastics and fabricated metal products industries have been hit the hardest.
Although Los Angeles County remains the nation's largest manufacturing center, average annual manufacturing employment fell 27% to 462,000 jobs from 1996 to 2006.
*The above article has been excerpted from Richard Verrier’s article “Standing up to China,” featured in the Los Angeles Times.
Home builders: Worst is yet to come
Economists offer dour outlook for housing prices and construction, citing continuing credit crisis - weakness is likely to persist into 2009.
The battered markets for real estate and home building still have farther to fall, according to a range of economists who spoke Wednesday at a forecast conference sponsored by the National Association of Home Builders.
The economists agreed that the problems with home finance markets will continue to hit housing into next year, and that even when there is a recovery, it will be a slow process that will see weakness continue into 2009.
While most said they believed the overall U.S. economy can weather the housing downturn, several saw significant risk of a recession. Mark Zandi, chief economist of Moody's Economy.com, said that large areas of the country will fall into recession, if they haven't done so already.
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The battered markets for real estate and home building still have farther to fall, according to a range of economists who spoke Wednesday at a forecast conference sponsored by the National Association of Home Builders.
The economists agreed that the problems with home finance markets will continue to hit housing into next year, and that even when there is a recovery, it will be a slow process that will see weakness continue into 2009.
While most said they believed the overall U.S. economy can weather the housing downturn, several saw significant risk of a recession. Mark Zandi, chief economist of Moody's Economy.com, said that large areas of the country will fall into recession, if they haven't done so already.
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US dollar touches a new euro low
The US dollar tumbled to yet another new low against the euro, as speculation mounted that US interest rates would be cut again next week.
The euro traded as high as $1.4375, breaking the record set last Friday, when one euro bought $1.4319.
The dollar did recover slightly to $1.4369 against the euro bloc currency.
A slew of weak data - including a drop-off in durable goods sales and plummeting demand for new homes - has underlined woes in the US economy.
Rate cut risks
The Federal Reserve is due to meet next week, having last month reduced interest rates from 5.25% to 4.75% in a bid to rejuvenate the economy.
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The euro traded as high as $1.4375, breaking the record set last Friday, when one euro bought $1.4319.
The dollar did recover slightly to $1.4369 against the euro bloc currency.
A slew of weak data - including a drop-off in durable goods sales and plummeting demand for new homes - has underlined woes in the US economy.
Rate cut risks
The Federal Reserve is due to meet next week, having last month reduced interest rates from 5.25% to 4.75% in a bid to rejuvenate the economy.
Read Complete Story
Oil cracks $92
Tension in the Middle East and supply concerns push the price of crude to a record trading high.
Crude oil prices spiked above $92 a barrel Friday on tensions in the Middle East and renewed concerns about supply.
The United States announced new sanctions against Iran on Thursday, targeting the elite Revolutionary Guards, which Washington accuses of backing Shiite militants in Iraq. A confrontation between the world's largest oil consumer and its fourth-largest oil producer could upend markets.
Parallel to fears of a broader conflict in the Middle East were new oil supply concerns.
Light, sweet crude for December delivery rose 88 cents to $91.34 a barrel in electronic trade on the New York Mercantile Exchange by early afternoon in Europe. It briefly rose to a new trading record of $92.22 during Asian trading.
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Crude oil prices spiked above $92 a barrel Friday on tensions in the Middle East and renewed concerns about supply.
The United States announced new sanctions against Iran on Thursday, targeting the elite Revolutionary Guards, which Washington accuses of backing Shiite militants in Iraq. A confrontation between the world's largest oil consumer and its fourth-largest oil producer could upend markets.
Parallel to fears of a broader conflict in the Middle East were new oil supply concerns.
Light, sweet crude for December delivery rose 88 cents to $91.34 a barrel in electronic trade on the New York Mercantile Exchange by early afternoon in Europe. It briefly rose to a new trading record of $92.22 during Asian trading.
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Bad loan crisis affects all of us
More than 6,329 Chicago residents became homeless as of June this year. That is -- they lost their homes.
That's 34 percent more than last year from January to June. The ZIP code with the highest foreclosure rate is 60628 -- the Pullman and Roseland neighborhoods. There, more than 408 homeowners received default notices, the first step in foreclosure.
Perhaps you're thinking: What does this matter to me? I pay my mortgage on time, every month.
But here's the sad truth of this whole subprime loan crisis: We're all going to pay -- one way or another -- for these bad loans. For starters, we'll be paying higher property taxes to offset the slump in real estate prices, which took a nose dive partly because no one is going to pay a premium when there are fire sale prices on foreclosed homes.
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That's 34 percent more than last year from January to June. The ZIP code with the highest foreclosure rate is 60628 -- the Pullman and Roseland neighborhoods. There, more than 408 homeowners received default notices, the first step in foreclosure.
Perhaps you're thinking: What does this matter to me? I pay my mortgage on time, every month.
But here's the sad truth of this whole subprime loan crisis: We're all going to pay -- one way or another -- for these bad loans. For starters, we'll be paying higher property taxes to offset the slump in real estate prices, which took a nose dive partly because no one is going to pay a premium when there are fire sale prices on foreclosed homes.
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Thursday, October 25, 2007
Chinese workers lose their lives producing goods for America
The patients arrive every day in Chinese hospitals with disabling and fatal diseases, acquired while making products for America.
On the sixth floor of the Guangzhou Occupational Disease and Prevention Hospital, Wei Chaihua, 44, sits on his iron-rail bed, tethered to an oxygen tank. He is dying of the lung disease silicosis, a result of making Char-Broil gas stoves sold in Utah and throughout the U.S.
Down the hall, He Yuyun, 36, who for years brushed America's furniture with paint containing benzene and other solvents, receives treatment for myelodysplastic anemia, a precursor to leukemia.
In another room rests Xiang Zhiqing, 39, her hair falling out and her kidneys beginning to fail from prolonged exposure to cadmium that she placed in batteries sent to the U.S.
"Do people in your country handle cadmium while they make batteries?" Xiang asks. "Do they also die from this?"
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On the sixth floor of the Guangzhou Occupational Disease and Prevention Hospital, Wei Chaihua, 44, sits on his iron-rail bed, tethered to an oxygen tank. He is dying of the lung disease silicosis, a result of making Char-Broil gas stoves sold in Utah and throughout the U.S.
Down the hall, He Yuyun, 36, who for years brushed America's furniture with paint containing benzene and other solvents, receives treatment for myelodysplastic anemia, a precursor to leukemia.
In another room rests Xiang Zhiqing, 39, her hair falling out and her kidneys beginning to fail from prolonged exposure to cadmium that she placed in batteries sent to the U.S.
"Do people in your country handle cadmium while they make batteries?" Xiang asks. "Do they also die from this?"
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Optimism in the U.S. Economy Falls Sharply Among Industrial Manufacturers
Optimism in the U.S. economy dropped significantly among industrial manufacturers during the third quarter of this year, according to PricewaterhouseCoopers' Manufacturing Barometer. Less than half of those surveyed -- 45 percent -- are optimistic about the domestic economy, a 17-point drop from the 62 percent level of optimism reported last quarter.
Consistent with previous quarters, high oil and energy prices are the most likely barrier to growth during the next 12 months, cited by 57 percent of the respondents. However, lack of demand (cited by 53 percent), legislative/regulatory pressures (50 percent) and decreasing profitability (48 percent) all showed significant increases as potential barriers to future growth.
"Ongoing concerns about high energy costs are now being coupled with similar concerns about lower demand and decreasing profitability," said Barry Misthal, partner and industrial manufacturing sector leader, PricewaterhouseCoopers. "Mix in uncertainty about legislative and regulatory pressures and it's not hard to see why manufacturers are less optimistic about the U.S. economy. However, healthier international prospects are offsetting these lowered expectations on the domestic front."
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Consistent with previous quarters, high oil and energy prices are the most likely barrier to growth during the next 12 months, cited by 57 percent of the respondents. However, lack of demand (cited by 53 percent), legislative/regulatory pressures (50 percent) and decreasing profitability (48 percent) all showed significant increases as potential barriers to future growth.
"Ongoing concerns about high energy costs are now being coupled with similar concerns about lower demand and decreasing profitability," said Barry Misthal, partner and industrial manufacturing sector leader, PricewaterhouseCoopers. "Mix in uncertainty about legislative and regulatory pressures and it's not hard to see why manufacturers are less optimistic about the U.S. economy. However, healthier international prospects are offsetting these lowered expectations on the domestic front."
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Not Just India And China Vying For U.S. Tech Jobs
Touring the exhibit hall at OutsourceWorld New York this morning, I was struck by the number of booths touting services from vendors in countries beyond the usual suspects. Outsourcing, and IT jobs, are truly going global.
Offshore outsourcing and India have been virtually synonymous for some time now. And, of late, China has become a more prominent player in the conversation. But it's not just the big two vying for IT work originating in the U.S., and the jobs that go with it.
At OutsourceWorld, a conference that's operating in conjunction with Interop this week at New York's Javits Center, the vendor booths added up to a virtual United Nations of offshoring.
Beyond India and China, there were vendors from Brazil, Australia, Costa Rica, Canada, and Hungary. And even tiny Mauritius was represented.
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Offshore outsourcing and India have been virtually synonymous for some time now. And, of late, China has become a more prominent player in the conversation. But it's not just the big two vying for IT work originating in the U.S., and the jobs that go with it.
At OutsourceWorld, a conference that's operating in conjunction with Interop this week at New York's Javits Center, the vendor booths added up to a virtual United Nations of offshoring.
Beyond India and China, there were vendors from Brazil, Australia, Costa Rica, Canada, and Hungary. And even tiny Mauritius was represented.
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Canada dollar hits 33-year high against soft US$
The Canadian dollar shot to a 33-year high against a broadly weaker U.S. dollar on Thursday, as oil and gold prices firmed, giving the commodities-based currency a boost.
Domestic bonds rose after some weaker-than-expected U.S. economic data, and ahead of a report on U.S. new-home sales, which could provide give more clues as to the U.S. Federal Reserve's direction for monetary policy when it meets next week.
At 9:17 a.m. (1317 GMT), the Canadian dollar was at 96.50 Canadian cents to the U.S. dollar, or US$1.0363, up from Wednesday's close of 96.91 Canadian cents to the U.S. dollar, or US$1.0318.
The Canadian dollar touched US$1.0403 shortly after the release of U.S. durable goods data, which came in much weaker than expectations. It was the highest level for the Canadian dollar since May 1974.
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Domestic bonds rose after some weaker-than-expected U.S. economic data, and ahead of a report on U.S. new-home sales, which could provide give more clues as to the U.S. Federal Reserve's direction for monetary policy when it meets next week.
At 9:17 a.m. (1317 GMT), the Canadian dollar was at 96.50 Canadian cents to the U.S. dollar, or US$1.0363, up from Wednesday's close of 96.91 Canadian cents to the U.S. dollar, or US$1.0318.
The Canadian dollar touched US$1.0403 shortly after the release of U.S. durable goods data, which came in much weaker than expectations. It was the highest level for the Canadian dollar since May 1974.
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Wednesday, October 24, 2007
UPDATE 2-National City net sinks 80 pct, 2,500 jobs cut
National City Corp (NCC.N: Quote, Profile , Research), a large U.S. Midwest bank, on Wednesday said third-quarter profit fell 80 percent, as mortgage losses mounted even after the sale of a subprime lending unit to Merrill Lynch & Co (MER.N: Quote, Profile , Research).
The ninth-largest U.S. bank also said it has eliminated 2,500 jobs, or roughly 7 percent of its work force, as it reduces costs companywide, with 1,700 of the cuts related to mortgages. Last month, the bank had said it was eliminating 1,300 mortgage jobs.
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The ninth-largest U.S. bank also said it has eliminated 2,500 jobs, or roughly 7 percent of its work force, as it reduces costs companywide, with 1,700 of the cuts related to mortgages. Last month, the bank had said it was eliminating 1,300 mortgage jobs.
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U.S. Economy: Existing Home Sales Decline More Than Forecast
The U.S. housing industry slid deeper into recession last month as the August credit-market rout made it harder for buyers to obtain loans.
Sales of previously owned homes fell 8 percent in September to an annual rate of 5.04 million, the fewest since records began in 1999, the National Association of Realtors said in Washington. The decline was almost twice as steep as economists forecast, while the median price dropped the most in almost a year.
Traders added to bets that the Federal Reserve will be forced to cut interest rates again next week to prevent the two- year real-estate slump from bringing the expansion to an end. Stocks retreated and Treasury notes climbed.
``The worst isn't behind us, the worst is here right now,'' said Jonathan Basile, an economist at Credit Suisse Holdings in New York. ``Housing is going to be a significant drag on the third quarter and fourth quarter.''
Economists had forecast resales to fall 4.5 percent to an annual rate of 5.25 million from a previously reported 5.5 million pace in August, according to the median estimate of 76 economists in a Bloomberg News survey. The previous month's sales were revised to 5.48 million.
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Sales of previously owned homes fell 8 percent in September to an annual rate of 5.04 million, the fewest since records began in 1999, the National Association of Realtors said in Washington. The decline was almost twice as steep as economists forecast, while the median price dropped the most in almost a year.
Traders added to bets that the Federal Reserve will be forced to cut interest rates again next week to prevent the two- year real-estate slump from bringing the expansion to an end. Stocks retreated and Treasury notes climbed.
``The worst isn't behind us, the worst is here right now,'' said Jonathan Basile, an economist at Credit Suisse Holdings in New York. ``Housing is going to be a significant drag on the third quarter and fourth quarter.''
Economists had forecast resales to fall 4.5 percent to an annual rate of 5.25 million from a previously reported 5.5 million pace in August, according to the median estimate of 76 economists in a Bloomberg News survey. The previous month's sales were revised to 5.48 million.
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WEAK DOLLAR IS CANARY IN PROVERBIAL ECONOMIC COAL MINE
THE DROP IN THE DOLLAR'S VALUE AGAINST LEADING CURRENCIES WILL HAVE REPERCUSSIONS, WHATEVER THE IMMEDIATE CONSOLATIONS23 October 2007
Americans living overseas see the front edge of the dollar collapse. Life in Europe seems to be twice as expensive as just a few years ago, as Euro-driven price-inflation meets the rapid drop in the value of the dollar against major currencies, like the Euro and the British Pound Sterling. Americans at home are facing higher food prices, higher fuel costs, and an overall slowdown in home-buying.
This is partly due to the US dollar's reduced ability to 'capture' wealth from abroad, via currency exchange, and by extension, via trade. As the dollar falls in value —losing 10% of its value against the Euro in just a few months, and roughly 41% of its value against the Euro since November 2000, when a Euro cost just $0.83—, it less likely that additional wealth will flow into the US economy by means other than the export of manufactured or agricultural goods. And, it is important to note that those exports need not increase in proportion to the dollar's decline.
For now, China has helped by aggressively promoting its exports to the United States, but should it feel able to free up some of that economic might for other pursuits —for instance, to double the EU market for Chinese exports—, the US could see the current economic bubble become suddenly very visible and very brittle.
We need a strong dollar; it is at once the foundation of and an expression of a healthy economy. The 1990s boom enjoyed a "strong-dollar policy", whereas current economic policy seems adjusted to take advantage of the temporary 'cover' to be had in increasing US exports via the weak dollar.
Indeed, EU ministers have complained the current weak-dollar policy is an attack on European manufacturing and foodstuffs, making it harder for Americans to pay for imports from Europe. But the fact that the long term effect is to weaken the buying power of US consumers and the lending power of banks means the weak dollar is undermining as-yet untapped potential for future economic growth, putting the US at a long-term disadvantage in a global economy that requires quick adaptation and elasticity.
We also have to face the very tough reality that volatility in the dollar means oil prices are less likely to stay low. We find that with the falling dollar, oil prices keep climbing, making the impact of the price rise double what it might otherwise be. Having not had reports of massive slowdown across the US economy as a result of escalating fuel prices only means the moment is on the horizon.
We need economic policies that contemplate:
1) a strong-dollar policy shows faith in the capacity of the American system to produce, to innovate and to compete, and that draws investment, which aids in all of these categories;
2) energy security requires not only more favorable pricing and a shift away from fossil fuels, but sweeping investments in renewable resources;
3) the new boom economy will be the overhaul of our energy economy, the dollar needs to be strong to drive this boom.
Americans living overseas see the front edge of the dollar collapse. Life in Europe seems to be twice as expensive as just a few years ago, as Euro-driven price-inflation meets the rapid drop in the value of the dollar against major currencies, like the Euro and the British Pound Sterling. Americans at home are facing higher food prices, higher fuel costs, and an overall slowdown in home-buying.
This is partly due to the US dollar's reduced ability to 'capture' wealth from abroad, via currency exchange, and by extension, via trade. As the dollar falls in value —losing 10% of its value against the Euro in just a few months, and roughly 41% of its value against the Euro since November 2000, when a Euro cost just $0.83—, it less likely that additional wealth will flow into the US economy by means other than the export of manufactured or agricultural goods. And, it is important to note that those exports need not increase in proportion to the dollar's decline.
For now, China has helped by aggressively promoting its exports to the United States, but should it feel able to free up some of that economic might for other pursuits —for instance, to double the EU market for Chinese exports—, the US could see the current economic bubble become suddenly very visible and very brittle.
We need a strong dollar; it is at once the foundation of and an expression of a healthy economy. The 1990s boom enjoyed a "strong-dollar policy", whereas current economic policy seems adjusted to take advantage of the temporary 'cover' to be had in increasing US exports via the weak dollar.
Indeed, EU ministers have complained the current weak-dollar policy is an attack on European manufacturing and foodstuffs, making it harder for Americans to pay for imports from Europe. But the fact that the long term effect is to weaken the buying power of US consumers and the lending power of banks means the weak dollar is undermining as-yet untapped potential for future economic growth, putting the US at a long-term disadvantage in a global economy that requires quick adaptation and elasticity.
We also have to face the very tough reality that volatility in the dollar means oil prices are less likely to stay low. We find that with the falling dollar, oil prices keep climbing, making the impact of the price rise double what it might otherwise be. Having not had reports of massive slowdown across the US economy as a result of escalating fuel prices only means the moment is on the horizon.
We need economic policies that contemplate:
1) a strong-dollar policy shows faith in the capacity of the American system to produce, to innovate and to compete, and that draws investment, which aids in all of these categories;
2) energy security requires not only more favorable pricing and a shift away from fossil fuels, but sweeping investments in renewable resources;
3) the new boom economy will be the overhaul of our energy economy, the dollar needs to be strong to drive this boom.
US Economy Gradually Sliding Into Recession
This week's chart shows U.S. economy gradually sliding into recession. This indicator is the average year-to-year change of about twenty measures. Many are real measures, like tons or units, so some of false impressions created by incorrect price calculations are avoided. Only recently has the collapse of the housing sector been acknowledged as a serious negative on U.S. economy. Many have mistakenly believed Wall Street could “feed” the nation.
Then, CAT reported earnings last week, slapping the deluded economic prognosticators awake. Burlington Northern has reported that shipment volumes fell 5% in last quarter. A freight car not carrying corn, is a freight car in a recession. As shown in the chart, the U.S. economy is moving toward stagnation, and will deteriorate further in 2008.
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Then, CAT reported earnings last week, slapping the deluded economic prognosticators awake. Burlington Northern has reported that shipment volumes fell 5% in last quarter. A freight car not carrying corn, is a freight car in a recession. As shown in the chart, the U.S. economy is moving toward stagnation, and will deteriorate further in 2008.
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America Is Heading Toward Economic Meltdown
Watch this CNN video of Pete Peterson, the former Secretary of Commerce, as he discusses America's lack of savings and dependence on borrowed money that has made the country vulnerable..
http://www.youtube.com/watch?v=lowq9vm412U&mode=related&search=
We are presently spending more than we earn and borrowing more than we can ever pay back, which is totally irresponsible and calls for major changes to our economic policies.
If our debt lenders decide to pull the loans that in recent years have been the primary support of our economy, we will have a black day in our markets and economy that will surpass anything previously experienced in America.
Without these loans, our ability to function as a society will grind to a halt and our future standard of living will dramatically decline.
It is time for us as Americans to demand that our leaders adopt a platform of fiscal and common sense policies to reduce our deficits, implement mandatory savings (like Peterson suggested) and reinvigorate American industry.
http://www.youtube.com/watch?v=lowq9vm412U&mode=related&search=
We are presently spending more than we earn and borrowing more than we can ever pay back, which is totally irresponsible and calls for major changes to our economic policies.
If our debt lenders decide to pull the loans that in recent years have been the primary support of our economy, we will have a black day in our markets and economy that will surpass anything previously experienced in America.
Without these loans, our ability to function as a society will grind to a halt and our future standard of living will dramatically decline.
It is time for us as Americans to demand that our leaders adopt a platform of fiscal and common sense policies to reduce our deficits, implement mandatory savings (like Peterson suggested) and reinvigorate American industry.
Tuesday, October 23, 2007
America: The Land of No Industry
If America is the locomotive that drags the world along the economic track, what happens when the engine disappears up a branch line and hits the buffers?
Now don't get me wrong. This is not 1929 and businessmen are not currently throwing themselves out of the windows of tall buildings. But it is still a delicate time for investors.
There are two main factors at work. First, the United States is moving out of manufacturing, except at the level of high technology. Second, the country relies increasingly on China and the Gulf states both to take up the slack in manufactured goods and - ironically - to invest the profit in the US economy, including the dollar.
I am no economist, but it seems to me that this is not a recipe for long-term growth and stability.
Imagine a group of 10 people living in a gated community on which rent is due. Each of the 10 starts out with $100,000. One of them runs a gas station; one is a banker. Of the rest, one is in charge of security; one rents DVDs, one is a lawyer and another a journalist. One is retired and the remaining two run a small restaurant.
Over time, as the retailers buy in the materials necessary to keep their businesses afloat and everybody pays rent to the owners of the facility, money becomes scarce. The banker helps out by borrowing from the outside and lending it to his co-residents at less than a commercial rate, which is all they can afford. But eventually everyone runs out of cash and the restaurant goes bust. At this point, the banker's debt is called in and the pensioner takes up busking. Is this the way America is going? Maybe and maybe not.
Those in charge of the economy insist that the underlying strength of the nation's economy will see it through the trials ahead. Money being made is being invested in industry, they say. Yet, as in Britain, including Northern Ireland (where, as my brother-in-law recently remarked, everyone will soon be employed selling coffee to everybody else), the trend is inescapable. The only way nations grow richer is by making, or recovering, things that they then sell, which can be anything from aircraft, to computers, to feature films, to oil and gas, or else by providing expensive, top-end financial services to the rest of the world.
In the 1950s and '60s, the US did both to a degree unparalleled in human history. Cars, airplanes, fridges, ships, oil, weapons, wars, movies, popular music, business consultancy, insurance, banking, you name it, they did it, and nobody did it bigger or better.
This is not the case today. In the 21st century, there are still big US manufacturing companies. In the computer sector we have Microsoft, Oracle, Hewlet-Packard and IBM; in aviation and defense, Boeing, Lockheed Martin and Northrup Grumman; and in engineering, General Electric. And there are others. These are huge businesses that, in spite of everything, have held on to their competitive edge. At a pinch, we could add to these Google and Yahoo - assuming, that is, that information really is a commodity.
But, increasingly, jobs in the US, as in the UK, are service-based. If we strip out public servants, including the armed forces and police, and the oil sector (clearly a wasting asset), most Americans work in banks, insurance offices, real estate, legal practices (there are more than one million registered lawyers), smalltime workshops and retail. Retail remains crucial, with monster chains like Wal-Mart, Target, Sears and Home Depot. Well, China needs outlets for its goods. But it is in financial services that we see the most astonishing growth.
In 1982, according to All the Money in the World, a new study of America's richest, by journalists Peter W Bernstein and Annalyn Swan, manufacturing accounted for 22% of America's wealth, and oil for 23%. Today, the figures are 8% and 18%. Financial services, by contrast, have rocketed from less than 5% to 25% - fully a quarter of all the nation's worth.
In New York last year alone, another 24 billionaire money men emerged, most of them hedge fund tycoons. One in every fourteen dollars in America is now controlled by hedge fund managers. You want to make money? Then make money is my advice. But what happens when the Chinese, and the Indians, and the Saudis, and the Qataris and, Lord help us, the Vietnamese call in their debts? And what happens when nobody makes anything anymore and everyone from sea to shining sea is selling each other annuities? I have no idea but, fortunately, I don't think I'll be around to find out.
*The above article has been excerpted from Walter Ellis’ article “America's debt to other countries,” featured in The Belfast Telegraph. Read the entire article at http://www.belfasttelegraph.co.uk/news/opinion/article3044970.ece.
Now don't get me wrong. This is not 1929 and businessmen are not currently throwing themselves out of the windows of tall buildings. But it is still a delicate time for investors.
There are two main factors at work. First, the United States is moving out of manufacturing, except at the level of high technology. Second, the country relies increasingly on China and the Gulf states both to take up the slack in manufactured goods and - ironically - to invest the profit in the US economy, including the dollar.
I am no economist, but it seems to me that this is not a recipe for long-term growth and stability.
Imagine a group of 10 people living in a gated community on which rent is due. Each of the 10 starts out with $100,000. One of them runs a gas station; one is a banker. Of the rest, one is in charge of security; one rents DVDs, one is a lawyer and another a journalist. One is retired and the remaining two run a small restaurant.
Over time, as the retailers buy in the materials necessary to keep their businesses afloat and everybody pays rent to the owners of the facility, money becomes scarce. The banker helps out by borrowing from the outside and lending it to his co-residents at less than a commercial rate, which is all they can afford. But eventually everyone runs out of cash and the restaurant goes bust. At this point, the banker's debt is called in and the pensioner takes up busking. Is this the way America is going? Maybe and maybe not.
Those in charge of the economy insist that the underlying strength of the nation's economy will see it through the trials ahead. Money being made is being invested in industry, they say. Yet, as in Britain, including Northern Ireland (where, as my brother-in-law recently remarked, everyone will soon be employed selling coffee to everybody else), the trend is inescapable. The only way nations grow richer is by making, or recovering, things that they then sell, which can be anything from aircraft, to computers, to feature films, to oil and gas, or else by providing expensive, top-end financial services to the rest of the world.
In the 1950s and '60s, the US did both to a degree unparalleled in human history. Cars, airplanes, fridges, ships, oil, weapons, wars, movies, popular music, business consultancy, insurance, banking, you name it, they did it, and nobody did it bigger or better.
This is not the case today. In the 21st century, there are still big US manufacturing companies. In the computer sector we have Microsoft, Oracle, Hewlet-Packard and IBM; in aviation and defense, Boeing, Lockheed Martin and Northrup Grumman; and in engineering, General Electric. And there are others. These are huge businesses that, in spite of everything, have held on to their competitive edge. At a pinch, we could add to these Google and Yahoo - assuming, that is, that information really is a commodity.
But, increasingly, jobs in the US, as in the UK, are service-based. If we strip out public servants, including the armed forces and police, and the oil sector (clearly a wasting asset), most Americans work in banks, insurance offices, real estate, legal practices (there are more than one million registered lawyers), smalltime workshops and retail. Retail remains crucial, with monster chains like Wal-Mart, Target, Sears and Home Depot. Well, China needs outlets for its goods. But it is in financial services that we see the most astonishing growth.
In 1982, according to All the Money in the World, a new study of America's richest, by journalists Peter W Bernstein and Annalyn Swan, manufacturing accounted for 22% of America's wealth, and oil for 23%. Today, the figures are 8% and 18%. Financial services, by contrast, have rocketed from less than 5% to 25% - fully a quarter of all the nation's worth.
In New York last year alone, another 24 billionaire money men emerged, most of them hedge fund tycoons. One in every fourteen dollars in America is now controlled by hedge fund managers. You want to make money? Then make money is my advice. But what happens when the Chinese, and the Indians, and the Saudis, and the Qataris and, Lord help us, the Vietnamese call in their debts? And what happens when nobody makes anything anymore and everyone from sea to shining sea is selling each other annuities? I have no idea but, fortunately, I don't think I'll be around to find out.
*The above article has been excerpted from Walter Ellis’ article “America's debt to other countries,” featured in The Belfast Telegraph. Read the entire article at http://www.belfasttelegraph.co.uk/news/opinion/article3044970.ece.
Number of U.S. Foreclosures Three Times Higher Than Last Year
Last week was a tough one for the markets. Oil rose over US$88 and the Dow got clobbered. It fell 366 points on Friday. The euro rose to almost US$1.43.
The Boston Globe gives us a quick update on the housing picture:
“‘You can see that it’s a crisis,’ said John L. O’Brien, registrar of deeds for southern Essex County, based in Salem [Massachusetts]. ‘It’s starting to take on a life of its own.’”
Foreclosures in the yankee state are running three times last year’s level. And losses are working their way up the socio-economic ladder. Goldman Sachs’ (NYSE:GS) Trust 2006-S3 is a sophisticated investment instrument containing 8,274 mortgages. One out of every six of those mortgages is in default – only 18 months after the thing was put together. When that many people stop paying, it wipes out the entire capital value of the derivative. And since speculators usually take leveraged positions, the losses can go much further.
We don’t know whose mortgage is going unpaid…or who invested in the trust…but according to former colleague Adrian Ash, after Goldman created the derivative and sold it to its customers, it then sold its own monster creation short in order to protect itself.
Goldman is a smart operator. The typical fellow has no obvious way to protect himself.
His house falls in value…his earnings go down in value…his living costs go up…and he’s out of luck. And not all the big players are as smart as Goldman. There always has to be someone on the other side of these trades. Also last week, two major financial companies – one in London, the other in Düsseldorf – defaulted on US$7 billion worth of debt.
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The Boston Globe gives us a quick update on the housing picture:
“‘You can see that it’s a crisis,’ said John L. O’Brien, registrar of deeds for southern Essex County, based in Salem [Massachusetts]. ‘It’s starting to take on a life of its own.’”
Foreclosures in the yankee state are running three times last year’s level. And losses are working their way up the socio-economic ladder. Goldman Sachs’ (NYSE:GS) Trust 2006-S3 is a sophisticated investment instrument containing 8,274 mortgages. One out of every six of those mortgages is in default – only 18 months after the thing was put together. When that many people stop paying, it wipes out the entire capital value of the derivative. And since speculators usually take leveraged positions, the losses can go much further.
We don’t know whose mortgage is going unpaid…or who invested in the trust…but according to former colleague Adrian Ash, after Goldman created the derivative and sold it to its customers, it then sold its own monster creation short in order to protect itself.
Goldman is a smart operator. The typical fellow has no obvious way to protect himself.
His house falls in value…his earnings go down in value…his living costs go up…and he’s out of luck. And not all the big players are as smart as Goldman. There always has to be someone on the other side of these trades. Also last week, two major financial companies – one in London, the other in Düsseldorf – defaulted on US$7 billion worth of debt.
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Standing up to China
Tucked away in an industrial section of Sun Valley, QMP Inc. has built a steady flow of international customers for its water filtration systems.But now the global economy is biting back.
Related Stories
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Made in L.A.
QMP has lost about 40% of its customers in the last two years to Chinese firms that make filter systems for a third of its cost.Chief Executive Freddy Vidal isn't sure how much longer he can keep the family business in Southern California.Vidal's problem is shared by manufacturers across Southern California. Chinese manufacturing has become more sophisticated. At the same time, entrepreneurs there have gained a level of English proficiency that enables easier movement of design plans. Now, Southern California companies are finding that they can no longer compete simply by moving upscale and making small runs of specialized goods that couldn't be reproduced on a mass scale."We've been losing customers because they want us to match the price of the Chinese products, which is impossible," said Vidal, whose business employs 65. "If the situation doesn't change soon, we'll have to either close the company or play the same game and move our manufacturing operation to China."
QMP collects about $5 million in revenue annually from faucets and other products that go to customers such as Home Depot Inc. in California and filtration systems to such foreign retailers as Water Shop in Australia and Air River Co. in Japan.
Read Complete Story
Related Stories
-
Made in L.A.
QMP has lost about 40% of its customers in the last two years to Chinese firms that make filter systems for a third of its cost.Chief Executive Freddy Vidal isn't sure how much longer he can keep the family business in Southern California.Vidal's problem is shared by manufacturers across Southern California. Chinese manufacturing has become more sophisticated. At the same time, entrepreneurs there have gained a level of English proficiency that enables easier movement of design plans. Now, Southern California companies are finding that they can no longer compete simply by moving upscale and making small runs of specialized goods that couldn't be reproduced on a mass scale."We've been losing customers because they want us to match the price of the Chinese products, which is impossible," said Vidal, whose business employs 65. "If the situation doesn't change soon, we'll have to either close the company or play the same game and move our manufacturing operation to China."
QMP collects about $5 million in revenue annually from faucets and other products that go to customers such as Home Depot Inc. in California and filtration systems to such foreign retailers as Water Shop in Australia and Air River Co. in Japan.
Read Complete Story
Dollar May Decline Before U.S. Manufacturing, Housing Reports
The dollar may decline on speculation U.S. reports this week will add to evidence a housing recession is slowing economic growth in the world's biggest economy.
The dollar fell against 13 of 16 most-active currencies as the Richmond Federal Reserve Bank's manufacturing survey due for release today probably declined in October for the first time in four months. A separate report tomorrow may show existing home sales dropped to the lowest in almost six years. Traders increased bets that the Fed will lower interest rates this month.
``Any rise in the dollar is likely to be short-lived,'' said Tokichi Ito, deputy general manager of foreign exchange at Trust & Custody Services Bank Ltd. in Tokyo. ``The U.S. economy is in a very precarious state.''
The dollar traded at 114.48 yen at 11:54 a.m. in Tokyo from 114.55 late in New York yesterday when it weakened to 113.26 yen, the lowest since Sept. 10. It was also at $1.4203 per euro from $1.4181 yesterday when it reached a record low of $1.4348. The currency may fall to 114 yen today, Ito forecast.
The U.S. currency may extend the past month's 0.8 percent decline versus the yen as the Richmond Fed's survey of manufacturing in the Atlantic region declined to 8 in October from 14 in September, according to a Bloomberg News survey of economists. The Richmond Fed said Oct. 17 the economy in its region has cooled because of the housing market.
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The dollar fell against 13 of 16 most-active currencies as the Richmond Federal Reserve Bank's manufacturing survey due for release today probably declined in October for the first time in four months. A separate report tomorrow may show existing home sales dropped to the lowest in almost six years. Traders increased bets that the Fed will lower interest rates this month.
``Any rise in the dollar is likely to be short-lived,'' said Tokichi Ito, deputy general manager of foreign exchange at Trust & Custody Services Bank Ltd. in Tokyo. ``The U.S. economy is in a very precarious state.''
The dollar traded at 114.48 yen at 11:54 a.m. in Tokyo from 114.55 late in New York yesterday when it weakened to 113.26 yen, the lowest since Sept. 10. It was also at $1.4203 per euro from $1.4181 yesterday when it reached a record low of $1.4348. The currency may fall to 114 yen today, Ito forecast.
The U.S. currency may extend the past month's 0.8 percent decline versus the yen as the Richmond Fed's survey of manufacturing in the Atlantic region declined to 8 in October from 14 in September, according to a Bloomberg News survey of economists. The Richmond Fed said Oct. 17 the economy in its region has cooled because of the housing market.
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Could China Crash the US Dollar on a Whim?
Over the last 30 years, China’s economy has grown at an average annualized rate of nearly 10%. While this statistic alone is jaw-dropping, what is more impressive is the extent to which the nominally Communist country’s economy has become intertwined in the global economy. China now exerts enormous influence over the economies of virtually every country in the world, and a slight change in its domestic economic policy has the potential to send shockwaves rippling throughout the world. Nowhere is this more apparent-and frightening-then in China’s economic relationship with the United States, which is very much at the mercy of China when it comes to prices, wages, interest rates, most importantly, the value of the Dollar.
The precariousness of this relationship is already the subject of significant publicity, redolent of the Japanaphobia of the 1980’s that saw American economists scare-mongering about Japanese control of the US economy. [Of course this later turned out to be unfounded, but that is beyond the scope of our discussion.] With regard to China, most of the analysis is focused on its growing foreign exchange reserves, the majority of which are held in Dollar-denominated assets. This article will go beyond forex reserves and discuss several other facets of China’s economy. From US house prices to global commodity prices, from interest rates to inflation rates, we will explore how China could cripple the US economy, both willfully and unintentionally, if so desired.
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The precariousness of this relationship is already the subject of significant publicity, redolent of the Japanaphobia of the 1980’s that saw American economists scare-mongering about Japanese control of the US economy. [Of course this later turned out to be unfounded, but that is beyond the scope of our discussion.] With regard to China, most of the analysis is focused on its growing foreign exchange reserves, the majority of which are held in Dollar-denominated assets. This article will go beyond forex reserves and discuss several other facets of China’s economy. From US house prices to global commodity prices, from interest rates to inflation rates, we will explore how China could cripple the US economy, both willfully and unintentionally, if so desired.
Read Complete Story
Monday, October 22, 2007
Our Debts- A Ticking Time Bomb
America is sitting silently with a debt bomb, a bomb that affects every citizen, job and industry from coast-to-coast. The facts of this are known, the results could be catastrophic - but still our leaders do nothing.
Government debt is almost $9 trillion and costs approximately $1.1 billion per day in interest alone. This cost goes directly to our debt lenders, almost half of whom are foreign nations. Big lending countries like Japan and China channel much of these proceeds into their own domestic economies, as well as state-run Sovereign Wealth Funds (SWF). China’s SWF is currently worth $1.4 trillion, to put it in another way: they can buy almost any U.S. company they want (and most U.S. companies are for sale on the open stock market).
The debts around us continue to grow as we increasingly import more than we export:
Year US Balance of Trade Deficits
2001 $361 billion
2002 $421 billion
2003 $495 billion
2004 $611 billion
2005 $711 billion
2006 $765 billion
The world is fine with the U.S. trudging deeper into debt because they profit from it.
Foreign countries earn billions through ownership of U.S. debt. Much of that wealth is used to acquire American companies. Without domestic ownership American companies’ profits are sent overseas. The U.S. produces less at home, consumes more from abroad, and in doing so, amasses more debt. This increased need for loans and dependence on foreign countries to continue lending to us causes us to lose leverage in negotiations with these countries. As a consequence, we have given some companies in these countries advantages that have caused American owned companies to be uncompetitive and forced to lose money. Some major American industries are now teetering on the edge and could possibly collapse. Witness our auto industry.
This is the debt bomb's vicious circle.
You must ask yourself, do we want to live in a country where the effort of the American workforce resides in the profits of overseas countries and companies who have bought out America?
Our answer at EconomyInCrisis.org is no. We hope yours is too. Write to your congressional representatives and demand that we reduce our deficits. If we do not act soon the debt bomb may destroy the entire economy.
Government debt is almost $9 trillion and costs approximately $1.1 billion per day in interest alone. This cost goes directly to our debt lenders, almost half of whom are foreign nations. Big lending countries like Japan and China channel much of these proceeds into their own domestic economies, as well as state-run Sovereign Wealth Funds (SWF). China’s SWF is currently worth $1.4 trillion, to put it in another way: they can buy almost any U.S. company they want (and most U.S. companies are for sale on the open stock market).
The debts around us continue to grow as we increasingly import more than we export:
Year US Balance of Trade Deficits
2001 $361 billion
2002 $421 billion
2003 $495 billion
2004 $611 billion
2005 $711 billion
2006 $765 billion
The world is fine with the U.S. trudging deeper into debt because they profit from it.
Foreign countries earn billions through ownership of U.S. debt. Much of that wealth is used to acquire American companies. Without domestic ownership American companies’ profits are sent overseas. The U.S. produces less at home, consumes more from abroad, and in doing so, amasses more debt. This increased need for loans and dependence on foreign countries to continue lending to us causes us to lose leverage in negotiations with these countries. As a consequence, we have given some companies in these countries advantages that have caused American owned companies to be uncompetitive and forced to lose money. Some major American industries are now teetering on the edge and could possibly collapse. Witness our auto industry.
This is the debt bomb's vicious circle.
You must ask yourself, do we want to live in a country where the effort of the American workforce resides in the profits of overseas countries and companies who have bought out America?
Our answer at EconomyInCrisis.org is no. We hope yours is too. Write to your congressional representatives and demand that we reduce our deficits. If we do not act soon the debt bomb may destroy the entire economy.
India's firms build global empires
Once sheltered from overseas competition, Indian companies are now building empires - ramping up exports, making acquisitions in the U.S. and Europe, and attracting billions in foreign capital.
Tulsi Tanti made his fortune building windmills, not tilting at them. But executives at French nuclear energy giant Areva might be forgiven for conjuring images of Don Quixote when the 49-year-old Indian entrepreneur squared off against them this year for control of Germany's leading wind-turbine manufacturer.
Areva - controlled by the French government and boasting annual revenue of $13.7 billion - is one of the world's most powerful power companies. Tanti's Suzlon Energy is a family-owned venture, barely a decade old.
But Tanti's bid for Hamburg-based REpower was anything but quixotic. Back home in India, Tanti had reinvented the model for selling wind power, forsaking the fragmentation typical of the global industry for an end-to-end approach consolidating the entire process - surveying and purchasing sites for wind farms, building and maintaining turbines, and even distributing the power - under a single corporate roof. Suzlon's sales were soaring, its stock hitting record highs on India's stock exchange, and foreign bankers were tripping over one another to lend Tanti money.
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Tulsi Tanti made his fortune building windmills, not tilting at them. But executives at French nuclear energy giant Areva might be forgiven for conjuring images of Don Quixote when the 49-year-old Indian entrepreneur squared off against them this year for control of Germany's leading wind-turbine manufacturer.
Areva - controlled by the French government and boasting annual revenue of $13.7 billion - is one of the world's most powerful power companies. Tanti's Suzlon Energy is a family-owned venture, barely a decade old.
But Tanti's bid for Hamburg-based REpower was anything but quixotic. Back home in India, Tanti had reinvented the model for selling wind power, forsaking the fragmentation typical of the global industry for an end-to-end approach consolidating the entire process - surveying and purchasing sites for wind farms, building and maintaining turbines, and even distributing the power - under a single corporate roof. Suzlon's sales were soaring, its stock hitting record highs on India's stock exchange, and foreign bankers were tripping over one another to lend Tanti money.
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Stiglitz Says U.S. Housing Slump Will Stunt Consumer Spending
A slowdown in the U.S. economy may be prolonged as a house-price drop cuts off a source of funding for consumers, said Joseph Stiglitz, a Nobel economics laureate.
``The average price of housing in the U.S. is already falling,'' Stiglitz said in a speech in Tokyo today. ``That will be a big problem for the U.S. and if it is a problem for the U.S., it's going to be a big problem for the global economy.''
A U.S. real-estate recession sparked by defaults on home loans to borrowers with poor credit histories may worsen as stricter lending rules and higher mortgage rates make it more difficult for potential buyers to get financing. A drop in consumer spending in the world's biggest economy may depress demand for exports in countries from China to Germany.
Stiglitz estimates that last year between $850 billion and $950 billion was taken out of the value of homes in mortgage- equity withdrawals, with a ``significant fraction'' translated into consumption and helping to offset the effect of higher oil prices.
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``The average price of housing in the U.S. is already falling,'' Stiglitz said in a speech in Tokyo today. ``That will be a big problem for the U.S. and if it is a problem for the U.S., it's going to be a big problem for the global economy.''
A U.S. real-estate recession sparked by defaults on home loans to borrowers with poor credit histories may worsen as stricter lending rules and higher mortgage rates make it more difficult for potential buyers to get financing. A drop in consumer spending in the world's biggest economy may depress demand for exports in countries from China to Germany.
Stiglitz estimates that last year between $850 billion and $950 billion was taken out of the value of homes in mortgage- equity withdrawals, with a ``significant fraction'' translated into consumption and helping to offset the effect of higher oil prices.
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Hank Paulson, Larry Summers Concerned as Sovereign Funds Eye U.S. Assets
There is an interesting problem for the booming world of Sovereign Wealth Funds. These funds—controlled by national governments and funded by booming trade and petro-dollar surpluses—have a lot of dollars. They’ll want to spend those dollars before the greenback falls even further.
But that may not be as easy as you think, and not because there’s only so many assets you can spend US$200 billion on (the size of China’s state-run fund). The trouble is, policy makers in the US and Western Europe are just now realising that Sovereign Wealth Funds mean that foreign governments can quite legally acquire large and controlling interests in key companies or key industries.
Is that a bad thing? It depends on who you ask. Hank Paulson thinks it can be good, as long as Sovereign Wealth Funds behave the way he would like them too. He urged the International Monetary Fund to develop “best practices” for governing the investments of SWFs that, “demonstrate to critics that SWFs can be constructive, responsible participants in the international financial system.”
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But that may not be as easy as you think, and not because there’s only so many assets you can spend US$200 billion on (the size of China’s state-run fund). The trouble is, policy makers in the US and Western Europe are just now realising that Sovereign Wealth Funds mean that foreign governments can quite legally acquire large and controlling interests in key companies or key industries.
Is that a bad thing? It depends on who you ask. Hank Paulson thinks it can be good, as long as Sovereign Wealth Funds behave the way he would like them too. He urged the International Monetary Fund to develop “best practices” for governing the investments of SWFs that, “demonstrate to critics that SWFs can be constructive, responsible participants in the international financial system.”
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China Sovereign Wealth Fund Could Buy Every Public U.S. Company
The average American has only gained wealth in the last five years because his house rose in price. Now even that is going away. And unfortunately for him…and for the US economy generally…he already spent the wealth that is now disappearing. Each year, the MEW (Mortgage Equity Withdrawal) grew higher…until it reached a peak in 2005/2006. Consumer spending rose too – and pushed GDP growth for the economy. Housing contributed 90% to 100% of the gains from the last five years, according to some estimates. But this year, MEW has been cut in half…and house prices nationwide are falling, for the first time since the Great Depression.
While wages in the USA haven’t risen in 30 years, in Asia they’re going up about 10% per year. The Asians are making money…and getting richer. And in the process they’re accumulating huge stacks of dollars. Many of those dollars end up in the new Sovereign Funds – immense private equity funds owned by governments. Lenin said that capitalists would sell the ropes that he’d use to hang them. Well, the communist Chinese are ready for a buying spree. Currently, those funds have about US$2 trillion in them. They’re expected to have about US$17 trillion by 2010 – enough to buy every publicly-listed company in America…with change left over.
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While wages in the USA haven’t risen in 30 years, in Asia they’re going up about 10% per year. The Asians are making money…and getting richer. And in the process they’re accumulating huge stacks of dollars. Many of those dollars end up in the new Sovereign Funds – immense private equity funds owned by governments. Lenin said that capitalists would sell the ropes that he’d use to hang them. Well, the communist Chinese are ready for a buying spree. Currently, those funds have about US$2 trillion in them. They’re expected to have about US$17 trillion by 2010 – enough to buy every publicly-listed company in America…with change left over.
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The Dollar: How Low Can It Go?
Last week the dollar touched a new low, and with economic news from the U.S. not making for entirely comfortable reading, there is likely more pain to come.
The Federal Reserve is due to meet again later this month, and it would surprise no one if the outcome of that meeting were to be another rate cut – perhaps by a quarter point following last month’s drastic half point cut.
Hence the dollar’s weakness this week, as it was the Fed’s last cut that set the currency sliding once again and gave the gold price the energy it needed for its run up to current levels.
But why are people so confident in the Fed’s next move? Well, economic indicators from the U.S. still aren’t looking good, despite the Fed’s last rate cut. The recent poor financial results from Bank of America, the jump in unemployment benefit claimants, and the news that U.S. home starts are significantly down all sow the seeds of worry.
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The Federal Reserve is due to meet again later this month, and it would surprise no one if the outcome of that meeting were to be another rate cut – perhaps by a quarter point following last month’s drastic half point cut.
Hence the dollar’s weakness this week, as it was the Fed’s last cut that set the currency sliding once again and gave the gold price the energy it needed for its run up to current levels.
But why are people so confident in the Fed’s next move? Well, economic indicators from the U.S. still aren’t looking good, despite the Fed’s last rate cut. The recent poor financial results from Bank of America, the jump in unemployment benefit claimants, and the news that U.S. home starts are significantly down all sow the seeds of worry.
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Friday, October 19, 2007
Liveris: Make goods in U.S.
Dow Chemical Co. CEO Andrew Liveris issued a call to action to Hub business and political leaders yesterday, challenging them to keep America’s economy strong by retaining U.S. manufacturing jobs.
“Today I believe the American economy is under siege . . . and the greatest threats to the United States and its world leadership are internal,” said Liveris, adding that the manufacturing sector where workers are “making stuff” is crucial to innovation and a strong economy.
Speaking at a Boston College Chief Executives’ Club luncheon, Liveris said corporate taxes, government overregulation, high energy prices, an expensive tort system and costly pension and health-care mandates make it hard for companies to do business in the United States.
Dow Chemical recently decided to build a plant in Germany because it was more cost-efficient than building it in Texas, he said.
Calling for reform, Liveris, a native Australian, said: “America matters to the world much more than Americans think.”
“Today I believe the American economy is under siege . . . and the greatest threats to the United States and its world leadership are internal,” said Liveris, adding that the manufacturing sector where workers are “making stuff” is crucial to innovation and a strong economy.
Speaking at a Boston College Chief Executives’ Club luncheon, Liveris said corporate taxes, government overregulation, high energy prices, an expensive tort system and costly pension and health-care mandates make it hard for companies to do business in the United States.
Dow Chemical recently decided to build a plant in Germany because it was more cost-efficient than building it in Texas, he said.
Calling for reform, Liveris, a native Australian, said: “America matters to the world much more than Americans think.”
Foreign central banks net buyers of U.S. debt -Fed
Foreign central banks were net buyers of U.S. Treasuries and agencies last week, Federal Reserve data showed on Thursday.
The Fed said its holdings of Treasury and agency debt kept for overseas central banks rose $12.57 billion in the week ended Oct. 17, to stand at a total of $2.025 trillion.
The breakdown of custody holdings showed overseas central banks bought $10.10 billion in Treasury debt to stand at a total $1.237 trillion.
The foreign institutions bought securities from government-sponsored agencies like Fannie Mae (FNM.N: Quote, Profile , Research) and Freddie Mac (FRE.N: Quote, Profile , Research), adding $2.47 billion to their holdings, to stand at a total $787.71 billion.
Overseas central banks, particularly those in Asia, have been huge buyers of U.S. debt in recent years, and own over a quarter of marketable Treasuries.
Banks borrowed an average $240 million a day at the Fed's discount window in the latest week, down from $257 million a day in the week ended Oct. 10.
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The Fed said its holdings of Treasury and agency debt kept for overseas central banks rose $12.57 billion in the week ended Oct. 17, to stand at a total of $2.025 trillion.
The breakdown of custody holdings showed overseas central banks bought $10.10 billion in Treasury debt to stand at a total $1.237 trillion.
The foreign institutions bought securities from government-sponsored agencies like Fannie Mae (FNM.N: Quote, Profile , Research) and Freddie Mac (FRE.N: Quote, Profile , Research), adding $2.47 billion to their holdings, to stand at a total $787.71 billion.
Overseas central banks, particularly those in Asia, have been huge buyers of U.S. debt in recent years, and own over a quarter of marketable Treasuries.
Banks borrowed an average $240 million a day at the Fed's discount window in the latest week, down from $257 million a day in the week ended Oct. 10.
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Treasuries Rise in Longest Rally Since August on Credit Rout
Treasuries rose for a fourth straight day after trading losses at Bank of America Corp. renewed concern that a credit-market rout may deepen, threatening economic growth.
The longest rally in U.S. government debt since August pushed yields lower for all maturities as investors sought shelter in the safest of securities. In another sign that investors are paring risk, yields on Treasury bills tumbled for a third day, causing the difference between the interest that banks and the U.S. government pay for three-month loans to increase to 1.45 percentage points, the widest since Sept. 28.
``The market believes the housing and subprime mess is going to take us to recession,'' said Charles Comiskey, head of U.S. government bond trading in New York at HSBC Securities Inc., one of the 21 primary securities dealers that trade directly with the Fed.
The yield on the two-year note fell 5 basis points, or 0.05 percentage point, to 3.94 percent at 1:56 p.m. in New York, according to bond broker Cantor Fitzgerald LP. The price of the 4 percent security due in September 2009 rose 3/32, or 94 cents per $1,000 face amount, to 100 1/8.
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The longest rally in U.S. government debt since August pushed yields lower for all maturities as investors sought shelter in the safest of securities. In another sign that investors are paring risk, yields on Treasury bills tumbled for a third day, causing the difference between the interest that banks and the U.S. government pay for three-month loans to increase to 1.45 percentage points, the widest since Sept. 28.
``The market believes the housing and subprime mess is going to take us to recession,'' said Charles Comiskey, head of U.S. government bond trading in New York at HSBC Securities Inc., one of the 21 primary securities dealers that trade directly with the Fed.
The yield on the two-year note fell 5 basis points, or 0.05 percentage point, to 3.94 percent at 1:56 p.m. in New York, according to bond broker Cantor Fitzgerald LP. The price of the 4 percent security due in September 2009 rose 3/32, or 94 cents per $1,000 face amount, to 100 1/8.
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Dollar weak on worries about health of US economy
The ailing dollar hit a near three-weak low against the yen and was close to a record nadir versus the euro Friday as the market fretted over gloomy prospects for the US economy, dealers said.
They said players became more risk averse ahead of a meeting of finance chiefs from the Group of Seven (G7) industrialised nations even though few expected any coordinated action to try to bolster the greenback.
The dollar fell to around 114.96 yen in Tokyo afternoon trade -- the lowest level since October 1 -- from 115.62 in New York late on Thursday.
The euro was at 1.4293 dollars after 1.4296, remaining close to Thursday's all-time high of 1.4310. The euro fell to 164.47 yen from 165.67.
Nervousness about the health of the global economy and Friday's G7 meeting pushed up the yen, which is often sold by speculators to fund risky "carry trade" investments in high-yielding assets, dealers said.
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They said players became more risk averse ahead of a meeting of finance chiefs from the Group of Seven (G7) industrialised nations even though few expected any coordinated action to try to bolster the greenback.
The dollar fell to around 114.96 yen in Tokyo afternoon trade -- the lowest level since October 1 -- from 115.62 in New York late on Thursday.
The euro was at 1.4293 dollars after 1.4296, remaining close to Thursday's all-time high of 1.4310. The euro fell to 164.47 yen from 165.67.
Nervousness about the health of the global economy and Friday's G7 meeting pushed up the yen, which is often sold by speculators to fund risky "carry trade" investments in high-yielding assets, dealers said.
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The Growing Price of U.S. Debt
The U.S. public debt is currently $9 trillion. That's an average debt for 303 million U.S. residents of about $30,000, or for 135 million U.S. taxpayers of about $67,000. (The numbers are about six times bigger if we add unreported U.S. liabilities.) This debt is being financed by our children and by the rest of the world, at the cost of U.S. influence in the world arena.
U.S. debt has grown 14-fold in real terms over the past 65 years. It grew five-fold during World War II and since Reagan's accession it has grown another 350 percent. Under Reagan the United States flipped from being the world's largest creditor nation to being the world's largest debtor nation. The growth of the national debt slowed and briefly reversed during the Clinton years, but then resumed its rapid upward march. (See chart.)
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U.S. debt has grown 14-fold in real terms over the past 65 years. It grew five-fold during World War II and since Reagan's accession it has grown another 350 percent. Under Reagan the United States flipped from being the world's largest creditor nation to being the world's largest debtor nation. The growth of the national debt slowed and briefly reversed during the Clinton years, but then resumed its rapid upward march. (See chart.)
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Thursday, October 18, 2007
Mortgage lender to cut staff 25%
Residential Capital LLC, the home lending arm of the former General Motors finance unit GMAC, announced it is cutting 3,000 jobs, or 25 percent of its already reduced staff, in the latest fallout from the meltdown in mortgage markets.
ResCap, as it is known, said most of the cuts taking place will come during the fourth quarter. It anticipates taking a charge of between $90 million to $110 million to cover severance and office closings.
The company said the restructuring will allow it to scale operations up or down as the market changes.
The cuts come on top of 2,000 positions already reduced from a staff that stood at 14,000 at the start of the year.
"They've taken some pretty significant actions to date and we'll continue to adjust operations to be more in line with the current environment," said Gina Proia. "We continue to focus on turning the business around. We think ResCap will continue to be a significant player in the mortgage business."
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ResCap, as it is known, said most of the cuts taking place will come during the fourth quarter. It anticipates taking a charge of between $90 million to $110 million to cover severance and office closings.
The company said the restructuring will allow it to scale operations up or down as the market changes.
The cuts come on top of 2,000 positions already reduced from a staff that stood at 14,000 at the start of the year.
"They've taken some pretty significant actions to date and we'll continue to adjust operations to be more in line with the current environment," said Gina Proia. "We continue to focus on turning the business around. We think ResCap will continue to be a significant player in the mortgage business."
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U.S. Initial Jobless Claims Rose 28,000 to 337,000 Last Week
The number of Americans filing first- time claims for unemployment benefits increased more than forecast last week, adding to concern the job market is softening.
Initial jobless claims rose by 28,000, the biggest jump since February, to 337,000 in the week that ended Oct. 13, the Labor Department said today in Washington. The four-week moving average, a less volatile measure, gained to 316,500 from 310,500.
Companies are growing more reluctant to hire workers, as the deepening slump in housing and a squeeze on credit curtail demand, economists said. Slower job growth may restrain consumer spending, which accounts for more than two-thirds of the economy.
``The labor market doesn't look in as good a shape as it did a few months ago,'' Ellen Zentner, an economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York, said before the report.
``Businesses are becoming more cautious, not only with their investment plans but hiring plans as well. We'll get a job market that's growing at a much slower rate.''
Economists had forecast initial jobless claims would rise to 312,000 after a 308,000 level reported the prior week, according to the median estimate of 42 economists in a Bloomberg News survey. Estimates ranged from 310,000 to 340,000.
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Initial jobless claims rose by 28,000, the biggest jump since February, to 337,000 in the week that ended Oct. 13, the Labor Department said today in Washington. The four-week moving average, a less volatile measure, gained to 316,500 from 310,500.
Companies are growing more reluctant to hire workers, as the deepening slump in housing and a squeeze on credit curtail demand, economists said. Slower job growth may restrain consumer spending, which accounts for more than two-thirds of the economy.
``The labor market doesn't look in as good a shape as it did a few months ago,'' Ellen Zentner, an economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York, said before the report.
``Businesses are becoming more cautious, not only with their investment plans but hiring plans as well. We'll get a job market that's growing at a much slower rate.''
Economists had forecast initial jobless claims would rise to 312,000 after a 308,000 level reported the prior week, according to the median estimate of 42 economists in a Bloomberg News survey. Estimates ranged from 310,000 to 340,000.
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200 to lose Novell jobs in Provo
About 200 Novell Inc. workers in Provo will lose their jobs this week as the company moves most of the positions to India.
The Massachusetts-based technology company will have 1,200 employees in Provo after the positions are moved.
The company has about 4,600 workers, and the Utah actions are part of 250 jobs being moved off-shore, according to Kevan Barney, a Novell spokesman in Provo. Most of the affected workers are involved in software development.
"All year, we've been talking about this restructuring and also talking this year about our focus on three primary areas to increase efficiency," he said. "One of those was product development, and a key element of product development is the balancing of on-shore and off-shore resources. And that's what this week is about as far as what's affecting Provo right now, that on-shore/off-shore balance."
The company also has development centers in Germany and other parts of Europe.
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The Massachusetts-based technology company will have 1,200 employees in Provo after the positions are moved.
The company has about 4,600 workers, and the Utah actions are part of 250 jobs being moved off-shore, according to Kevan Barney, a Novell spokesman in Provo. Most of the affected workers are involved in software development.
"All year, we've been talking about this restructuring and also talking this year about our focus on three primary areas to increase efficiency," he said. "One of those was product development, and a key element of product development is the balancing of on-shore and off-shore resources. And that's what this week is about as far as what's affecting Provo right now, that on-shore/off-shore balance."
The company also has development centers in Germany and other parts of Europe.
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The 3Com-Huawei deal: Get lost!
Blocking the merger of a U.S. computer security company and a Chinese firm -- one with direct ties to Beijing's military -- sends a clarion message to China's techno-thieves that can't be said loud enough: Get lost.
Legislation introduced by House Republicans urges President Bush to prevent the $2.2 billion proposal by the investment company Bain Capital Partners LLC and China's Huawei Technology to buy 3Com Corp. The latter sells hacker protection to the Pentagon.
The Bush administration says Congress shouldn't pre-empt a national-security investigation. But it's the same type of review that last year gave a thumbs-up to the scuttled United Arab Emirates' deal to buy operational control of six U.S. ports.
Bain Capital insists "Huawei will not have any access to sensitive U.S.-origin technology or U.S. government sales as a result of this transaction." Excuse us, but past experience with aggressive Chinese computer hackers and Huawei's business partners leaves us less than convinced.
Legislation introduced by House Republicans urges President Bush to prevent the $2.2 billion proposal by the investment company Bain Capital Partners LLC and China's Huawei Technology to buy 3Com Corp. The latter sells hacker protection to the Pentagon.
The Bush administration says Congress shouldn't pre-empt a national-security investigation. But it's the same type of review that last year gave a thumbs-up to the scuttled United Arab Emirates' deal to buy operational control of six U.S. ports.
Bain Capital insists "Huawei will not have any access to sensitive U.S.-origin technology or U.S. government sales as a result of this transaction." Excuse us, but past experience with aggressive Chinese computer hackers and Huawei's business partners leaves us less than convinced.
US dollar near record low vs euro on Fed rate cut speculation
The US dollar was hovering near an all-time low against the euro in late afternoon trade in Asia Thursday on speculation that weak US housing data and stable inflation may prompt the Federal Reserve to cut rates again this quarter.
US Commerce Department data showed housing starts and building permits fell to a 14-year low last month, an offshoot of the subprime mortgage crisis. A separate report showed that core inflation, excluding food and energy prices, was steady at 0.2 percent for the fourth month in September.
'The dollar's weakness is a response to the US data releases overnight,' said Thomas Lam, treasury economist at United Overseas Bank. 'The readiness is still there that the Fed will reduce rates by the fourth quarter.'
The Fed may trim rates by a quarter of a percentage point, he said.
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US Commerce Department data showed housing starts and building permits fell to a 14-year low last month, an offshoot of the subprime mortgage crisis. A separate report showed that core inflation, excluding food and energy prices, was steady at 0.2 percent for the fourth month in September.
'The dollar's weakness is a response to the US data releases overnight,' said Thomas Lam, treasury economist at United Overseas Bank. 'The readiness is still there that the Fed will reduce rates by the fourth quarter.'
The Fed may trim rates by a quarter of a percentage point, he said.
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Wednesday, October 17, 2007
U.S. To Go Broke Funding Social Security for Baby Boomers
“Challenge for the USA, the retirement of the baby boomers.”
La Nacion reports on another reason why it is probably late in the cycle for the United States: the country has obligations it cannot meet. The first baby boomer, a woman named Kathleen Casey - who was born on January 1, 1946 - will turn 62 in three months. If we read the article correctly, she’ll be able to begin to collect Social Security. Behind her are 84 million others, almost every one of them counting on getting something from the government - either Social Security, Medicare or Medicaid.
“How about you, Bill?” asked a friend last night. “Are you going to go for partial payments at 62…or wait until 65 to get the whole enchilada?”
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La Nacion reports on another reason why it is probably late in the cycle for the United States: the country has obligations it cannot meet. The first baby boomer, a woman named Kathleen Casey - who was born on January 1, 1946 - will turn 62 in three months. If we read the article correctly, she’ll be able to begin to collect Social Security. Behind her are 84 million others, almost every one of them counting on getting something from the government - either Social Security, Medicare or Medicaid.
“How about you, Bill?” asked a friend last night. “Are you going to go for partial payments at 62…or wait until 65 to get the whole enchilada?”
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China, Russia, India Growth Offsets Loss of Western Output, IMF Says
WASHINGTON -- Economic growth in China, India and Russia is helping to offset some of the lost output from industrialized countries suffering from a credit crisis, the International Monetary Fund said Wednesday.
"These three countries alone accounted for one-half of global growth over the past year, but other emerging market and developing countries have also maintained robust expansions," the IMF said in its latest World Economic Outlook.
The IMF predicted 2007 global economic output would grow 5.2%, unchanged from the previous update of forecasts released in July. For 2008, the IMF shaved 0.4 percentage point from its forecast for global ...
"These three countries alone accounted for one-half of global growth over the past year, but other emerging market and developing countries have also maintained robust expansions," the IMF said in its latest World Economic Outlook.
The IMF predicted 2007 global economic output would grow 5.2%, unchanged from the previous update of forecasts released in July. For 2008, the IMF shaved 0.4 percentage point from its forecast for global ...
Grim Forecast for State Budgets
If the economy is booming, then why are so many states struggling with budget issues? Stateline.org takes a look at this issue in State budgets tenuous heading into '08
States awash in surpluses for the past two years are now treading water, with several desperately looking for lifelines to help them get out of budget trouble.
A slumping housing market and skimpier sales tax collections are busting budgets from California to Florida at a time when national job growth is sluggish and consumer confidence is at a nearly two-year low.
“The forecast is looking pretty grim,” Sujit M. CanagaRetna, a state tax expert for the Council of State Governments, said. “The implications for states are serious.”
Nasty budget brawls broke out this year in California, Georgia, Illinois and Rhode Island as states’ financial picture appears in transition. (Wisconsin is the only state in the country without a budget plan yet for the new current fiscal year, which for all but four states began July 1.)
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States awash in surpluses for the past two years are now treading water, with several desperately looking for lifelines to help them get out of budget trouble.
A slumping housing market and skimpier sales tax collections are busting budgets from California to Florida at a time when national job growth is sluggish and consumer confidence is at a nearly two-year low.
“The forecast is looking pretty grim,” Sujit M. CanagaRetna, a state tax expert for the Council of State Governments, said. “The implications for states are serious.”
Nasty budget brawls broke out this year in California, Georgia, Illinois and Rhode Island as states’ financial picture appears in transition. (Wisconsin is the only state in the country without a budget plan yet for the new current fiscal year, which for all but four states began July 1.)
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Is There a Productivity Crisis in Our Future?
The real economic crisis, by John Schmitt and Dean Baker, Comment is Free: All the bad news about the bursting of the US housing bubble ... has deflected the world's attention from what is arguably an even more fundamental problem...: the sharp deceleration in productivity growth since the middle of 2004. ...
For Europeans, long-encouraged to see the United States as the flexible economic ideal, the productivity slowdown sounds another note of caution about the US model. Europeans already know that the US economy generates substantial inequality. The last three years of slow productivity growth now suggest that all that inequality apparently doesn't even guarantee faster growth.
Economists ... agree that the growth rate of productivity is the single most important determinant of the long-run prospects for a country's standard of living.
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For Europeans, long-encouraged to see the United States as the flexible economic ideal, the productivity slowdown sounds another note of caution about the US model. Europeans already know that the US economy generates substantial inequality. The last three years of slow productivity growth now suggest that all that inequality apparently doesn't even guarantee faster growth.
Economists ... agree that the growth rate of productivity is the single most important determinant of the long-run prospects for a country's standard of living.
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Job rate masks manufacturing decline
Oregon's unemployment rate remained flat in September at 5.3 percent. But behind the figures released Monday is a continuing decline in manufacturing jobs this year as sawmills close and truck and recreational-vehicle makers gear down.
Although factory employment held even last month, avoiding a usual seasonal drop, economists cited a longer-term trend: the loss of 6,900 manufacturing jobs, or 3.3 percent, in a year.
The decline contributes to a slowing state economy as the national housing market turns down. Conditions would be worse if Oregon restaurants, bars and retailers weren't hiring so many workers to keep up with in-migration and restaurant-chain expansion. Health care and education jobs are also up.
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Although factory employment held even last month, avoiding a usual seasonal drop, economists cited a longer-term trend: the loss of 6,900 manufacturing jobs, or 3.3 percent, in a year.
The decline contributes to a slowing state economy as the national housing market turns down. Conditions would be worse if Oregon restaurants, bars and retailers weren't hiring so many workers to keep up with in-migration and restaurant-chain expansion. Health care and education jobs are also up.
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U.S. Dollar in Race for Most Worthless Currency
On Aug. 1, I-35W Mississippi River Bridge collapsed in Minneapolis USA… killing 13 and injuring 100 motorists. Since August 1, the dollar’s value has collapsed 3.4% against the world’s major currencies. Maybe there’s a connection… at least metaphorically.
For decades, United States federal inspectors knew that a flaw in the structure of the eight-lane I-35W bridge over the Mississippi could easily take down the entire structure. But year after year, the government let the bridge pass inspection.
According to the U.S. Department of Transportation, 756 steel deck truss bridges span America’s waterways, just like the one in Minnesota.
Built in the 1950s and 1960s… approximately 11% of these steel bridges have weaknesses much like the one that caused the I-35W bridge’s collapse. 80+ bridges at $250 million each?
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For decades, United States federal inspectors knew that a flaw in the structure of the eight-lane I-35W bridge over the Mississippi could easily take down the entire structure. But year after year, the government let the bridge pass inspection.
According to the U.S. Department of Transportation, 756 steel deck truss bridges span America’s waterways, just like the one in Minnesota.
Built in the 1950s and 1960s… approximately 11% of these steel bridges have weaknesses much like the one that caused the I-35W bridge’s collapse. 80+ bridges at $250 million each?
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Tuesday, October 16, 2007
Bernanke warns of economic 'drag'
The slump in the US housing market will prove a "significant drag" on economic growth, Federal Reserve chairman Ben Bernanke has warned.
Financial markets had stabilised since this summer's turbulence, he noted, but the full effects of the credit squeeze may not yet have been felt.
The Fed moved to restore confidence in financial markets by cutting interest rates by a half point last month.
Mr Bernanke pledged to act "as needed" to underpin the economy.
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Financial markets had stabilised since this summer's turbulence, he noted, but the full effects of the credit squeeze may not yet have been felt.
The Fed moved to restore confidence in financial markets by cutting interest rates by a half point last month.
Mr Bernanke pledged to act "as needed" to underpin the economy.
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Lennox closing Illinois plant
Lennox International Inc. is closing its refrigeration plant in Danville, Ill., the company said in a regulatory filing Wednesday.
The Richardson-based company also said its would consolidate its Danville manufacturing, support and warehouse functions in its Tifton and Stone Mountain, Ga., plants.
The consolidation is expected to be completed over the next 18 months, Lennox said in a Wednesday filing with the Securities and Exchange Commission.
As a result of the plant closing, 270 workers will lose their jobs, Lennox spokeswoman Karen O'Shea told the Dallas Business Journal Wednesday.
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The Richardson-based company also said its would consolidate its Danville manufacturing, support and warehouse functions in its Tifton and Stone Mountain, Ga., plants.
The consolidation is expected to be completed over the next 18 months, Lennox said in a Wednesday filing with the Securities and Exchange Commission.
As a result of the plant closing, 270 workers will lose their jobs, Lennox spokeswoman Karen O'Shea told the Dallas Business Journal Wednesday.
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Hibbing plant closing to put 200 out of work
About 200 employees of Kimball Electronics in Hibbing received the somewhat expected but bitter news today that their jobs will disappear by March.
“I think everyone was just hoping some miracle would happen and they’d keep it open,” said Bonnie Fena, who helped launch the electronics-manufacturing facility 33 years ago as Hibbing Electronics Inc.
She said most everyone knew that Kimball Electronics Group had been considering a plant closure for months.
“The truth is that I think they had made their decision back in August, when they started communicating to customers that they might cease production in Hibbing,” said Fena, adding: “You don’t say something like that, unless that’s your intention.”
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“I think everyone was just hoping some miracle would happen and they’d keep it open,” said Bonnie Fena, who helped launch the electronics-manufacturing facility 33 years ago as Hibbing Electronics Inc.
She said most everyone knew that Kimball Electronics Group had been considering a plant closure for months.
“The truth is that I think they had made their decision back in August, when they started communicating to customers that they might cease production in Hibbing,” said Fena, adding: “You don’t say something like that, unless that’s your intention.”
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Peter Grandich predicts 'unprecendented economic tsunami'
More than 20 years after calling for the biggest market crash in history, Peter Grandich is warning investors to “Man your battle stations.” In a special alert to readers of The Grandich Letter on Sunday – a day before the 20th anniversary of 1987’s Black Monday market collapse – Mr. Grandich predicted that an “unprecedented economic tsunami” will hit American beginning in 2008.
However, he said most of what he is forecasting won’t coming in the next month or year, but many years in the future.
He said the U.S. Federal Reserve is running out of tricks after its shift to easing mode on interest rates a few weeks ago was the final silver bullet for many on Wall Street.
And what are the factors leading Mr. Grandich to the most bearish position in his career? The aging crisis and geopolitical time-bombs.
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However, he said most of what he is forecasting won’t coming in the next month or year, but many years in the future.
He said the U.S. Federal Reserve is running out of tricks after its shift to easing mode on interest rates a few weeks ago was the final silver bullet for many on Wall Street.
And what are the factors leading Mr. Grandich to the most bearish position in his career? The aging crisis and geopolitical time-bombs.
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Monday, October 15, 2007
Aussie dollar to hit 91 US cents today
The Australian dollar opened at its strongest level since 1984 today to start the week well above 90 US cents as an optimistic outlook for the global economy fuelled demand for high interest rate currencies.
The Australian dollar then reached a new 23-year high about 20 minutes after the local session opened.
It touched $US0.9068 at 7.21am to achieve its best result since May 3, 1984 when it closed at 0.9323 in the New York session.
At 7.28am, the dollar hit $US.9074.
The Australian dollar is tipped to reach 91 US cents today as traders take a more sanguine view of the American economy.
At 7am, the Australian dollar was trading at $US0.9048/52, up sharply from Friday's close of 0.8971/75.
During the offshore session, it traded between a low of $US0.8952 and a high of 0.9053.
Bank of New Zealand currency strategist Danica Hampton said an improved appetite for risk boosted the Australian dollar during the offshore weekend session.
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The Australian dollar then reached a new 23-year high about 20 minutes after the local session opened.
It touched $US0.9068 at 7.21am to achieve its best result since May 3, 1984 when it closed at 0.9323 in the New York session.
At 7.28am, the dollar hit $US.9074.
The Australian dollar is tipped to reach 91 US cents today as traders take a more sanguine view of the American economy.
At 7am, the Australian dollar was trading at $US0.9048/52, up sharply from Friday's close of 0.8971/75.
During the offshore session, it traded between a low of $US0.8952 and a high of 0.9053.
Bank of New Zealand currency strategist Danica Hampton said an improved appetite for risk boosted the Australian dollar during the offshore weekend session.
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Credit crunch, weaker dollar take toll on US economy
Newly released research by Ernst & Young, shows that in the September quarter, 11 US companies cited the weakening dollar in their profit warnings. For many exporters and companies with significant US operations, the weak dollar will continue to drag on profits as 2007 draws to a close.
The report shows profit warnings from UK-listed companies in the third quarter (Q3) remained stable at 86, compared with 88 in Q2 and 85 in Q3 2006.
Andrew Wollaston, Ernst & Young corporate restructuring partner, said he had been expecting a correction in the debt markets for some time.
'In our view, the "credit crunch" will begin to impact UK consumer confidence and therefore consumer demand in the current quarter,' he said. 'Looking forward, UK plc needs to factor this into forecasts to avoid a rise in profit warnings in Q4 this year.'
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The report shows profit warnings from UK-listed companies in the third quarter (Q3) remained stable at 86, compared with 88 in Q2 and 85 in Q3 2006.
Andrew Wollaston, Ernst & Young corporate restructuring partner, said he had been expecting a correction in the debt markets for some time.
'In our view, the "credit crunch" will begin to impact UK consumer confidence and therefore consumer demand in the current quarter,' he said. 'Looking forward, UK plc needs to factor this into forecasts to avoid a rise in profit warnings in Q4 this year.'
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Why a Weak US Dollar Hurts U.S. Manufacturers
The vast majority of economists are currently hailing the freefall of the dollar as a windfall for American business. While some domestic manufacturers may enjoy some initial benefits from a weaker dollar, they will ultimately suffer many adverse consequences as well. More importantly, the dollar's demise is a disaster for American consumers.
A cheaper dollar helps domestic manufacturers because it makes local costs, such as wages and rents, decline in relation to the costs borne by international competitors. While this is true, it also means that American workers and landlords see a corresponding decline in the real values of their pay and rent. Given that such declines negatively impact living standards, such developments hardly seem worth celebrating.
Too often overlooked however is how the weakening dollar also works to increase costs for domestic manufacturers. A falling dollar raises the costs of raw materials, such as oil and metals, while simultaneously decreasing the relative costs that foreign competitors pay for the same supplies.
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A cheaper dollar helps domestic manufacturers because it makes local costs, such as wages and rents, decline in relation to the costs borne by international competitors. While this is true, it also means that American workers and landlords see a corresponding decline in the real values of their pay and rent. Given that such declines negatively impact living standards, such developments hardly seem worth celebrating.
Too often overlooked however is how the weakening dollar also works to increase costs for domestic manufacturers. A falling dollar raises the costs of raw materials, such as oil and metals, while simultaneously decreasing the relative costs that foreign competitors pay for the same supplies.
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Second Credit Crunch Set For 2008 When $512b in Subprime Loans Reset
“Every election is a sort of advance auction of stolen goods,” wrote H.L. Mencken, an American journalist during the early part of the 20th century. Politics, like prostitution and other vices, hasn’t changed much. If anything, the two have become virtually indistinguishable.
Get ready for six weeks of politicians making promises they can’t possibly keep.
Did you like the original credit crunch? It was an action-packed drama filled with plot twists and suspense. Ultimately, our hero Ben Bernanke saves the world with an audacious double-barrelled interest rate cut to save America’s Empire of Debt from certain financial ruin.
Well, if you liked the original, you’re going to love the sequel. Some US$512 billion in adjustable rate subprime mortgage loans will reset in the first six months of 2008. If the first relatively modest wave of resets was enough to destabilise the global credit market, what do you think the next wave will do?
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Get ready for six weeks of politicians making promises they can’t possibly keep.
Did you like the original credit crunch? It was an action-packed drama filled with plot twists and suspense. Ultimately, our hero Ben Bernanke saves the world with an audacious double-barrelled interest rate cut to save America’s Empire of Debt from certain financial ruin.
Well, if you liked the original, you’re going to love the sequel. Some US$512 billion in adjustable rate subprime mortgage loans will reset in the first six months of 2008. If the first relatively modest wave of resets was enough to destabilise the global credit market, what do you think the next wave will do?
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Why the U.S. Central Bank Wants to Create Inflation, Destroy U.S. Dollar
The falling dollar is not just a speculator’s plaything. It is the dollar in which almost all Americans’ hopes and dreams are calibrated. If a house is worth 300,000 dollars…those 300,000 pieces of paper may represent a lifetime’s worth of past effort…and it may also represent hope for future repose. Pensions, insurance plans, stock portfolios, bonds…everything we earn and everything we spend – it’s almost all in dollars.
It’s the end of the world as we know it…and we feel fine!
India is booming. China is booming. The latest news from the Middle Kingdom tells us that its trade surplus is rising at a 56% annual rate.
Heck, even Argentina is booming. Its economy has been growing about three times faster than the US model for the last five years.
Last week, your editor and his old friend Doug Casey were invited to lunch at the American Club in downtown Buenos Aires. Our hosts were mostly men who have been living and doing business in Argentina for decades. They’ve seen it all – corruption, hyperinflation, defaults, chaos, riots, depression…you name it. “What’s the real story down here?” we wanted to know.
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It’s the end of the world as we know it…and we feel fine!
India is booming. China is booming. The latest news from the Middle Kingdom tells us that its trade surplus is rising at a 56% annual rate.
Heck, even Argentina is booming. Its economy has been growing about three times faster than the US model for the last five years.
Last week, your editor and his old friend Doug Casey were invited to lunch at the American Club in downtown Buenos Aires. Our hosts were mostly men who have been living and doing business in Argentina for decades. They’ve seen it all – corruption, hyperinflation, defaults, chaos, riots, depression…you name it. “What’s the real story down here?” we wanted to know.
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Living In Debt - A Summary of America's Current Economic Condition
America today is burdened with deeply rooted and unsustainable economic challenges. From credit debts, to loss of manufacturing nationwide, these issues impact every citizen. Here are 16 major problems the American economy faces today:
1. Wholesale sellout of core strategic assets to foreign acquirers: according to official figures, more than 8,815 American companies have been sold to foreign corporations in the last 10 years for at least $1.3 trillion.
2. Subprime Fallout: Millions of Americans took mortgage rates that reset to a higher value, resulting in a steep rise in foreclosures nationwide and over 161 subprime lenders to go bankrupt as of October, 2007. It also shook the 6.5 trillion mortgage-backed investment market, notably causing two Bear Stearns hedge funds to lose nearly all their value. Worries remain about contagion and subprimes fallout on the housing market and broader U.S. economy.
3. Housing Bubble Burst: market value of residential real estate was inflated to a record-high 38 percent of household net worth, now real estate value is in a free fall nationwide. In October, 2007 the National Association of Realtors estimated that home sales will drop 10.8%, the lowest level in a decade
4. Decline of vital industries through bankruptcy, foreign predatory competition, and foreign acquisition: examples include steel, publishing, textiles, machine tools, automobiles, electronics, movies and others
5. Inability to manufacture competitively: American manufacturers suffer a 22 percent structural cost disadvantage compared to overseas competitors through taxes, health and pension benefits, litigation, regulation, and unequal environmental protection
6. Overdependence on imports: $1 in $4 of US consumption of manufactured goods now goes immediately and directly to imports
7. Massive wealth transfer to foreign ownership: our trade deficit, at $765 billion in 2006
8. Loss of job and career opportunities for people at all educational levels: 3 million high-paying manufacturing jobs lost over past 5 years
9. Insourcing of foreign manufacturers destroys our domestic industries, takes profits and taxes overseas, and provides only low-skill jobs for American workers: foreign manufacturers operating in the US now account for over 20 percent of our exports and manufacturing assets, and a large percentage of our employment
10. Dependence on foreign financing of vast majority of government debt: foreign countries now control 44% of our total federal deficit and finance nearly 100 percent of all new borrowings – our competitors are now our bankers
11. Outsourcing key manufacturing, research, and design: unchecked offshore outsourcing benefits individual companies and shareholders but destroys entire industries and communities
12. Transition to services-oriented economy: high-paying goods-producing industries have lost net employment over the past 25 years while lower paying non-tradable service-providing employment has nearly doubled
13. Lost scientific, engineering, technological prowess: in 2004, China and India graduated a combined 950,000 engineers versus 70,000 in the US. US ranks near the bottom of science/math proficiency
14. Record levels of personal and government debt: household liabilities at record levels, federal government adding record levels of debt each year financed mostly by foreign countries, trade deficits transferring unprecedented accelerating amounts of wealth to foreign hands each year. In 2005, the average U.S. savings rate was a negative 1%
15. Misleading commonly used economic statistics: misleading incomplete statistics like GDP, job creation, and productivity belie our crumbling economic infrastructure. In June 2007, Businessweek reported that 40% of the gains in manufacturing could be non-existent due to a miscalculation known as “phantom GDP.”
16. Proven failed trade policies and other legislation contributing to our demise continue unchallenged: destroying our industry and allowing our assets to be sold or taken from us
1. Wholesale sellout of core strategic assets to foreign acquirers: according to official figures, more than 8,815 American companies have been sold to foreign corporations in the last 10 years for at least $1.3 trillion.
2. Subprime Fallout: Millions of Americans took mortgage rates that reset to a higher value, resulting in a steep rise in foreclosures nationwide and over 161 subprime lenders to go bankrupt as of October, 2007. It also shook the 6.5 trillion mortgage-backed investment market, notably causing two Bear Stearns hedge funds to lose nearly all their value. Worries remain about contagion and subprimes fallout on the housing market and broader U.S. economy.
3. Housing Bubble Burst: market value of residential real estate was inflated to a record-high 38 percent of household net worth, now real estate value is in a free fall nationwide. In October, 2007 the National Association of Realtors estimated that home sales will drop 10.8%, the lowest level in a decade
4. Decline of vital industries through bankruptcy, foreign predatory competition, and foreign acquisition: examples include steel, publishing, textiles, machine tools, automobiles, electronics, movies and others
5. Inability to manufacture competitively: American manufacturers suffer a 22 percent structural cost disadvantage compared to overseas competitors through taxes, health and pension benefits, litigation, regulation, and unequal environmental protection
6. Overdependence on imports: $1 in $4 of US consumption of manufactured goods now goes immediately and directly to imports
7. Massive wealth transfer to foreign ownership: our trade deficit, at $765 billion in 2006
8. Loss of job and career opportunities for people at all educational levels: 3 million high-paying manufacturing jobs lost over past 5 years
9. Insourcing of foreign manufacturers destroys our domestic industries, takes profits and taxes overseas, and provides only low-skill jobs for American workers: foreign manufacturers operating in the US now account for over 20 percent of our exports and manufacturing assets, and a large percentage of our employment
10. Dependence on foreign financing of vast majority of government debt: foreign countries now control 44% of our total federal deficit and finance nearly 100 percent of all new borrowings – our competitors are now our bankers
11. Outsourcing key manufacturing, research, and design: unchecked offshore outsourcing benefits individual companies and shareholders but destroys entire industries and communities
12. Transition to services-oriented economy: high-paying goods-producing industries have lost net employment over the past 25 years while lower paying non-tradable service-providing employment has nearly doubled
13. Lost scientific, engineering, technological prowess: in 2004, China and India graduated a combined 950,000 engineers versus 70,000 in the US. US ranks near the bottom of science/math proficiency
14. Record levels of personal and government debt: household liabilities at record levels, federal government adding record levels of debt each year financed mostly by foreign countries, trade deficits transferring unprecedented accelerating amounts of wealth to foreign hands each year. In 2005, the average U.S. savings rate was a negative 1%
15. Misleading commonly used economic statistics: misleading incomplete statistics like GDP, job creation, and productivity belie our crumbling economic infrastructure. In June 2007, Businessweek reported that 40% of the gains in manufacturing could be non-existent due to a miscalculation known as “phantom GDP.”
16. Proven failed trade policies and other legislation contributing to our demise continue unchallenged: destroying our industry and allowing our assets to be sold or taken from us
Friday, October 12, 2007
U.S. manufacturers fear Doha trade round failure
World trade talks could be headed for failure if advanced developing countries like Brazil and India balk at opening their markets to more foreign manufactured goods, U.S. industry officials said on Wednesday.
"When you have a group of countries that say we don't want to liberalize, how can you move ahead?" said Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers. "If they persist in this direction, it could be the end of the Doha round."
Vargo's comment echoed those U.S. trade officials made on Tuesday, after major developing countries outlined a proposal that would give the United States and other rich countries few, if any, new export opportunities in exchange for cutting their farm subsidies and tariffs.
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"When you have a group of countries that say we don't want to liberalize, how can you move ahead?" said Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers. "If they persist in this direction, it could be the end of the Doha round."
Vargo's comment echoed those U.S. trade officials made on Tuesday, after major developing countries outlined a proposal that would give the United States and other rich countries few, if any, new export opportunities in exchange for cutting their farm subsidies and tariffs.
Read Complete Story
U.S. Existing Home Sales May Drop to Five-Year Low
Existing home sales this year probably will fall to a five-year low, worse than forecast, signaling the U.S. housing market is far from hitting bottom.
New-home sales may decline 24 percent to a 10-year low of 804,000 and existing home sales will fall 11 percent, the National Association of Realtors said in a news release today. It was the 10th time this year the Chicago-based group lowered some part of its monthly housing and economic forecast.
Home resales tumbled to a five-year low in August as prices declined, subprime mortgage defaults soared and lenders such as Countrywide Financial Corp. raised standards even for borrowers with the best credit. Federal Reserve policy makers have said the housing market is ``exceptionally weak'' and some economists think the slump may push the U.S. into a recession.
``The credit tightening is knocking homebuyers out of a market that already was quite weak,'' said Brian Bethune, an economist at Global Insight Inc. in Lexington, Massachusetts.
Read Complete Story
New-home sales may decline 24 percent to a 10-year low of 804,000 and existing home sales will fall 11 percent, the National Association of Realtors said in a news release today. It was the 10th time this year the Chicago-based group lowered some part of its monthly housing and economic forecast.
Home resales tumbled to a five-year low in August as prices declined, subprime mortgage defaults soared and lenders such as Countrywide Financial Corp. raised standards even for borrowers with the best credit. Federal Reserve policy makers have said the housing market is ``exceptionally weak'' and some economists think the slump may push the U.S. into a recession.
``The credit tightening is knocking homebuyers out of a market that already was quite weak,'' said Brian Bethune, an economist at Global Insight Inc. in Lexington, Massachusetts.
Read Complete Story
Indirect steel trade deficits continues to rise
The latest American Iron and Steel Institute (AISI) (www.steel.org) analysis of U.S. “indirect” steel trade shows that U.S. indirect steel imports reached a new high of 39.8 million net tons in 2006 – up 8 percent from 2005 and up 22 percent since 2000 – while indirect U.S. steel exports reached a new high of 20.6 million net tons in 2006, a 2 percent gain from 2005 and up 15 percent from 2000.
The AISI analysis identifies indirect steel trade as the volume and value of steel incorporated in finished products in eight major consumer markets imported and exported between the United States and 11 major countries in four regions.
Since indirect import gains outpaced the rise in indirect exports, the indirect steel trade deficit increased in 2006 to 19.2 million NT. This is 15 percent greater than 2005 and only 4 percent below the record year of 2002.
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The AISI analysis identifies indirect steel trade as the volume and value of steel incorporated in finished products in eight major consumer markets imported and exported between the United States and 11 major countries in four regions.
Since indirect import gains outpaced the rise in indirect exports, the indirect steel trade deficit increased in 2006 to 19.2 million NT. This is 15 percent greater than 2005 and only 4 percent below the record year of 2002.
Read Complete Story
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