Europe again

An interesting article that discusses the bond buying plan in Europe, and that maybe it isn't the best idea.

http://online.wsj.com/article/SB10001424052748704366504575277950210434916.html?mod=WSJ_WorldMarkets_LeadStory

I agree w/ Bundesbank here. Greece relys too much on foriegn debt, and that they are only digging themselves a deeper hole. They should focus on countries that are not so dependent because they will be able to sustain themselves after a little help - where Greece probably won't be able to.

Increased and cautious optimism that the US is heading in the right direction

In this time series poll of about 1000 people, an increasing percent think the US is headed in the right direction. Note, however, that a majority believe it is heading in the wrong direction.

Welcome to the AP-GfK Poll Homepage

Shorting Reform

Here's a satire by Michael Lewis, giving Wall Street advice on how to control the senators they have in their pockets, so as to make the banks even more powerful and bring in more money.

http://www.nytimes.com/2010/05/30/opinion/30lewis.html

More Small Banks Being Shut Down

http://www.usatoday.com/money/industries/banking/2010-05-28-more-banks-shut_N.htm

The article focuses on how the FDIC closed down 5 more "small" banks Friday. With 78 bank closures this year alone and projections of over 140 total by the end of the year, it looks like the "big" banks are only going to gain more power and influence. What does the demise of all these small banks mean for us and for small businesses?

A Reason for Decreasing National Debt

Here's a video that discusses what could be gained by decreasing the national debt.

http://money.cnn.com/video/news/2010/05/28/n_ss_fiscal_debt.cnnmoney/

Thoughts?

Big 6

http://baselinescenario.com/2010/05/30/the-consensus-on-big-banks-shifts-but-not-at-treasury/#more-7668
This is a good article related to the thoughts on breaking up the big 6. I think that it could have, and probably should have happened. I think that we could have survived the failure, and that we took a lot of steps back down into a hole when we decided to bail them out. Anyone's thoughts?

I recommend you panic...

http://www.youtube.com/watch?v=nuysYXlJ43I

A good video on bailouts vs. failure and the recoveries that follow. What are your thoughts??

Euros/USD

http://freetradepicks.com/05-2010/how-i-made-4000-in-one-day-with-the-eurusd-and-how-you-can-do-it-too-2/
This is just a short, funny article about US dollars v. the Euro. Thought you all might like it!

The Beginning of Increased Savings?

After months of consumer spending growing at a higher rate than income, this trend has reversed. Some speculate the higher spending was due to high foreclosure rates and people having more expendible income. What's your opinion?

http://money.cnn.com/2010/05/28/news/economy/personal_income/index.htm

American Recovery Hinging on European Recovery

Although the countries in the Eurozone only account for about 15% of American exports, some economists speculate the deteriorating economic situation in Europe could prevent American economic recovery. Others speculate that Europe's problems could "aid consumer recovery in the United States, not slow it." What is your opinion on how large of an effect Europe can have on America's economic recovery?

http://www.nytimes.com/2010/05/30/business/30fund.html?ref=business

Growth in Sovereign Wealth Funds to Continue Unabated

More on sovereign wealth funds. Does the US have one?

Research Recap » Blog Archive » Growth in Sovereign Wealth Funds to Continue Unabated

real verus nominal

Live from the Ocean Floor: New Oil Leak Widget Features 'Spillcam' | The Rundown News Blog | PBS NewsHour | PBS

Another example of why looking at statistical data is important

Someone tells us that an index says something. But what goes into the index and how is it put together?

Good Government vs. Less Government « The Baseline Scenario

Senate bills: what they are becoming

“Geithner’s team spent much of its time during the debate over the Senate bill helping Senate Banking Committee chair Chris Dodd kill off or modify amendments being offered by more-progressive Democrats. A good example was Bernie Sanders’s measure to audit the Fed, which the administration played a key role in getting the senator from Vermont to tone down. Another was the Brown-Kaufman Amendment, which became a cause célèbre among lefty reformers such as former IMF economist Simon Johnson. ‘If enacted, Brown-Kaufman would have broken up the six biggest banks in America,’ says the senior Treasury official. ‘If we’d been for it, it probably would have happened. But we weren’t, so it didn’t.’”
This is just a quote that hits a topic that I'm seeing a lot throughout a few recent financial blogs. The bills were definitely high in regulation and were critizing Wall Street to get to where they got. But as we discussed in class, those that are sitting in the House & Senate often have ties to the big companies, and therefore there have been numerous amendments. The bills are not nearly as regulatory as they began, and some wonder if it's even worth it...What are your thoughts/concerns?

Sovereign Wealth Fund Watch

The last book for the class discusses sovereign wealth funds a lot. These are stocks of money held by the government (usually central bank) of a country. The following blog link follows daily actions in these funds. Looking at the headlines while reading the book, especially the first chapters, is kind of fun.

Sovereign Wealth Fund Watch

OECD says Rich Countries are Recovering Faster than Expected but Unemployment Still High

The article states that the OECD boosted their projections for economic growth in 2011 and 2012, yet there is still the ever-present issue of unemployment that needs to be dealt with. They also give unemployment projections that are looking very dim (almost double digits for Europe and the US). How important is it for the future growth of Western countries to prevent this kind of long-term unemployment?

New Macro

We have talked a few times in class about needing new theories, our old macroeconomics models no longer stand. This is an article that goes a little more in depth. Any comments?

http://www.nakedcapitalism.com/2010/05/alford-why-we-need-a-new-macroeconomics.html

China Giving Ground as Relations Improve?

U.S. and China talks have been taking place on several issues including trade, currency exchange, and the new "rational and mature manner" or conflict resolution between the two countries. Apparently, China has pledged to reform its exchange rate but hasn't given a timetable. Do you think they will actually go through with this? If so what do you think a reform would completely do away with a fixed currency?


http://online.wsj.com/article/SB10001424052748703341904575266291812173592.html?mod=wsj_india_main

and you thought you were depressed

See what Simon Johnson wrote today (one of the authors of 13 Bankers). Run for the hills????

The Last Hold Out: Senator Blanche Lincoln Against 13 Bankers « The Baseline Scenario

EconomPic: U.S. Economy on Continued Life Support

GDP = C + I + G + X - M

China is increasing I; we increased G. Both increase GDP. The circular flow is working (the increase in G is multiplied) but not as much as we need it to do.

EconomPic: U.S. Economy on Continued Life Support

How Small Business are Getting Creative During the Recession

I came across this video on a unique example of how small business are trying to stay afloat during the decrease in retail sales that hit during the recession. Two unlike stores moved in together to increase sales and get customers to buy from both of their stores. The results were positive and helped the two from going bankrupt when so many other small business have had to close. Just seemed like a very creative and inspiring idea---that maybe there are some good things that can result from a poor situation.

10 Most Corrupt US Capitalists | The Big Picture

I've wondered when the social unrest would erupt from the economic unrest. The Big Picture blog is a fairly conservative investment guy one: I was surprised to see this entry on this particular blog.

10 Most Corrupt US Capitalists | The Big Picture

Your Household's Share Of The September 2008 Economic Collapse: $104,350 - The Consumerist

Thought you would find this interesting.

Your Household's Share Of The September 2008 Economic Collapse: $104,350 - The Consumerist

U.S. abandons case against AIG

In the video contained in this article, former AIG CEO Hank Greenberg comments on the future of AIG. He claims the best move is to continue to fund the recovery of AIG so they can make money to repay the taxpayers, rather than selling off the vital parts of the company. He also says that it wasn't lack of regulation that led to the crisis but rather lack of enforcing regulation on the part of the regulators. What do you think?

http://money.cnn.com/2010/05/24/news/companies/aig_probe/index.htm

GM to Fund German Recovery?

The strong turnaround of General Motors has caused the German government to deny the responsibility of bailing out Opel, a German unit of General Motors. GM doesn't want to fund the total 3.7 billion euro bill stating that since Opel is a European car company it's a problem of the European tax payers. Who do you think should pay for the bailout? Or should Opel fail?

http://www.reuters.com/article/idUSTRE64N3HV20100524

Economist's View: Modern Macroeconomic Theory and Fiscal Policy

Fiscal policy is sometimes necessary which implies running a deficit is sometimes necessary. This is one of the lessons of Keynesian economics, a form of macroeconomics that we didn't teach much of for the past 20 years. But "

Generally, demand side policies are the solution when the economy is stuck at the zero bound. Supply side polices such as a capital gains tax cut actually make things worse. The reason is that an increase in supply when demand as already insufficient causes prices to fall, and the fall in the price level raises the real interest rate. At the zero bound, the rise in the real interest rate cannot be offset by the Fed. Away from the zero bound, the Fed can stabilize the real rate and the policy has positive effects, but it depends critically on the Fed's ability to offset increases in the real rate and the nature of the reaction.

If the Fed can't lower interest rates, then monetary policy is practically useless. So deficits become an expansionary policy tool, rather than a symptom of profligate government. See
Economist's View: Modern Macroeconomic Theory and Fiscal Policy

Jobs and tax bill to cost $134 billion

http://money.cnn.com/2010/05/22/news/economy/tax_extenders_job_bill_cost/index.htm

Interesting article, is it worth to increase our deficit even if this means temporary relief and economic help?

Naked Credit Default Swaps - Credit Slips

Reading Stiglitz has led me to think about the differences between the real economy and the nominal economy. The real economy is made up of "things you can eat;" the nominal economy is made up of transactions and ownership rights. The issue of banning naked credit default swaps (see Naked Credit Default Swaps - Credit Slips)
is one of protecting the real economy from perverse incentives created in the nominal economy. That said, I do think that futures contracts for pork bellies are very different and very valuable than naked credit default swaps on Greek debt.

Double Recession

Here is an interesting video that provides Nouriel Roubini's views and thoughts on the possibility of a double recession. What are your thoughts? Will it happen? Why or Why Not?

http://www.cnbc.com/id/15840232?video=1499492692&play=1

Change in Ethics?

Harvard Business Students are joining "150 other business school students and faculty worldwide to campaign for the acceptance of an MBA ethics pledge modeled on the Hippocratic Oath taken by doctors. The aim is to get as many as 6,000 graduates at 50 MBA programs to swear they won’t put personal ambitions before the interests of their employers or society". Some students thought that it was just a cosmetic change and it will not have any effect unless there is a structural change in business. What do you think? Will this help curb unethical practices in business or will people just get caught up with greed and revert back to them?

http://www.bloomberg.com/apps/news?pid=20601109&sid=a1lZrOzMxnMM&pos=10

http://online.wsj.com/article/SB10001424052748703559004575256112299027150.html?mod=WSJ_WSJ_US_News_5

It seems that as our economy begins to slowly recover there are signs that give us the impression we are taking a step backwards. With the euro performing poorly and skepticism about their economies' strength do you think this is just a small bump in the road or should we be more cautious?

"The Euro Turns Radioactive"

http://online.wsj.com/article/SB10001424052748704691304575254683361456058.html?mod=WSJ_business_EconomyNewsBucket

Check this out, what do you think is in store for the Euro and will the dollar be able to hold long-term against the Euro?

Short Selling and Germany

We have talked about short selling as Matt explained it to us but if it is still a little murky even after watching the video that Dr. McKinney posted, here is a article that explains more about it. It also explains more about what Germany is doing and what they have banned.

http://money.cnn.com/2010/05/19/news/economy/naked_short_selling_wtf/index.htm

Wall Street Reform Is Shut Down

Today the new wall street reform was defeated 57 to 42 under Senate rules. But they only needed 3 more people to pass it to a final vote. Does it seem like we will pass any reform soon?

A couple of the key points in the reform are to:

"The legislation would establish a consumer financial protection regulatory agency that could write new rules to protect consumers from unfair or abusive mortgages and credit cards.

"It would create a council of regulators that would sound an alarm before companies are in position to trigger a financial crisis. The bill would also establish new procedures for shutting down giant financial firms that are collapsing."

These are two areas that could help us avoid such a collapse in the future and more people would be informed about what they are getting into. Do you like these aspects of the reform and what else would you add to it?

http://money.cnn.com/2010/05/19/news/economy/Wall_Street_reform/index.htm

Germany

The markets in Europe are confused.  See here.  What do you think will ultimately happen to the Eurozone?

A subprime crime in the making?

GM wants to sell to more subprime buyers
http://www.msnbc.msn.com/id/37179852/ns/business-autos/

How do you think this will turn out for GM? Do you think it's a good idea to be giving subprime loans out again? Do you agree that the market is prepared enough for GM to take on risky loans?

Great discussion on correlation assumptions in CDOs

The post is short and so are the comments.  Basically, the discussants are reviewing the formulas used to estimate the risk involved in a CDO.  Fascinating, especially in light of Tuesday's class.

AIG Stands by Its Banker — Goldman Sachs

Even after Goldman Sachs cost AIG a lot of money by being involved in risky investments and the Magnetar hedge fund; AIG has reported that they will stand behind Goldman Sachs and continue to0 conduct business with them. Their CEO Harvey Golub stated, “Goldman is a fine firm and does a lot of things extraordinarily well…where they can serve the purposes of AIG we will continue to use them….” This was suprising me a little after what Goldman Sachs has done and pretty much caused AIG to go under. Do you think that Goldman and AIG we working together in any of their financial investments? Or Do you think AIG knows that Goldman is going to change their ways and become a much safer investor?

http://blogs.wsj.com/deals/2010/05/12/aig-stands-by-its-banker-goldman-sachs/

Evidence and data: what caused the financial crisis?

One of my favorite bloggers, Barry Ritholz, has a great essay up on his blog today about the 30 year trajectory of American financial policy and innovation that underlies the crash.  The essay is short, to the point, and readable.  He says that data and evidence have to underlie explanation; ideological and political beliefs are not equivalent to data and evidence.  He says that many people are rewriting current history to absolve themselves and their pet political or ideological stance from blame. 

Fed and Wall Street Reform

http://money.cnn.com/2010/05/12/news/economy/Fed_Wall_Street_Reform/index.htm

Today Congress voted "90-9 on Wednesday to strip from the overall reform bill a provision reshaping the Fed as supervisor of only the nation's largest banks." Which does not change the Fed's regulatory power at all, do you think that this is a good thing? Or do we need to change the Fed's regulatory power? Also it seems that Congress wants to tighten the Fed's ability to loan out money in an emergency only allowing loans when "banks need access to credit -- not when banks are insolvent." Thoughts?

6 Big Changes

http://www.theatlantic.com/business/archive/2010/05/6-big-changes-the-fdic-intends-for-securitization/56622/


The FDIC is using regulatory power to make changes in securitization. The proposals currently stand in a 45 day comment period but many speculate no changes will be made. Do you guys think that the necessary changes have been made as far as their regulation limits go? Or do you think more needs to be done?

Is U.S. Greece's doppleganger??

This is an interesting article I just found on light of the recent Greece debt issues that discusses whether the U.S. debt problem is going to be Greece all over again. There is good argument for both sides, what do yall think?

States: Let taxpayers cover your mortgage

http://money.cnn.com/2010/05/12/news/economy/taxpayer_mortgages/index.htm

Check out this article. The Obama administration is using the Hardest Hit Fund to help those underwater and unemployed. Do you think the proposal will help those in trouble? Do you think the government should be supplied more money for this fund to make a proper impact? Will there be a moral hazard problem and will this dissuade people from finding work?

Euro Eating Earnings

http://money.cnn.com/2010/05/11/markets/thebuzz/index.htm

Above is an interesting article about how the downturn of the Euro is affecting American companies such as Priceline. Even as the dollar is rising in value compared to the Euro do you think that the Euro's plunge will have a great effect on Corporations or is this just a temporary shock because of the bailouts?

Goldman Sachs' moral obligation to Wall Street

http://money.cnn.com/2010/05/11/news/companies/goldman_sachs_obligation.fortune/index.htm

This is an interesting article and video regarding the opinions of Goldman Sachs shareholders. Although there still seems to be mixed emotions about Goldman's behavior, it definitely shows that people are becoming more aware about what has happened and are showing heightened levels of interest. Do you think the growing involvement of shareholders will help the S.E.C. in their suit or will it simply be another miniscule issue for Goldman to overcome?

Nouriel Roubini fears a new crisis

http://money.cnn.com/

The video is called "Nouriel Roubini fears a new crisis."

Last Tuesday Tommy brought up the point about the possibility of America going into a second recession based on historical events. Although it is another gloomy video about the state of our economy, I thought it was ironic and humerous that Nouriel Roubini (Professor of Economics-NYU Stern School of Business) expressed this as a reality. Do you think this could actually happen?

After S.E.C. Suit Warning, Traders Flee Moody’s Shares

http://www.nytimes.com/2010/05/11/business/11moodys.html?src=busln

The S.E.C. appears to be continuing their efforts in exposing the major players responsible for the financial crisis. Recently there has been a lot of negative attention regarding Goldman Sachs however it seems agencies like Moody's and Standard & Poor's have gone untouched despite their shady involvement in rating risky M.B.S.'s and C.D.O's. How do you feel about the S.E.C. finally taking action against these companies? Will this information hurt the rating agencies more than a company such as Goldman?

Goldman Sachs In More Trouble

Goldman Sachs provided a more detailed view of its legal troubles Monday, acknowledging it faces a series of government probes over some of its business dealings.

Here is the link: http://money.cnn.com/2010/05/10/news/companies/goldman_legal/index.htm

Fannie Mae Asking For More Money

Fannie Mae is asking for another $8.4 billion dollars because it still expects its losses will continue because of the trends of the housing market. Should they be allowed to recieve more money from the government?

here is the link: http://money.cnn.com/2010/05/10/news/economy/fannie_earnings/index.htm?source=cnn_bin&hpt=Sbin

Wall Street's Rocky Week

http://www.cnn.com/video/

The "Wall Street's Rocky Week" video on CNN's website does a good job of analyzing what triggered the events of last Thursday. Hopefully this helps to provide a better understanding of what happened.

AIG Making ‘Real Money’ After $1.45 Billion Profit, CEO Says

http://www.businessweek.com/news/2010-05-08/aig-making-real-money-after-1-45-billion-profit-ceo-says.html

This article talks about some of the adjustments AIG has made in order to become profitable once again. I am however still skeptical about a positive report of company such as AIG because of their recent greedy past. Based on this article, do you think this is a legitimate turn around for AIG or is it another smokescreen intended to fool investors?

US Gains 290,000 Jobs

Is this another sign that our economy is turning around?

here is the link: http://money.cnn.com/2010/05/07/news/economy/jobs_april/index.htm?cnn=yes&hpt=T3

Sorry repost

I made this post without thoroughly reading all of the earlier posts. Couldn't figure out how to delete it so just check out this post instead: http://econ490.blogspot.com/2010/05/dows-crazy-day.html

Euro tumbles to 14-month low after Greek riots trigger stock selloff

http://www.marketwatch.com/story/euro-tumbles-to-new-14-month-low-vs-dollar-2010-05-06

We are starting to see the effects stemming from the recent bailout in Greece and as expected, the Euro has suffered. Do you think these negatives will be short term as they work through the bailout aftermath or is this just the beginning of more struggles to come?

Documents reveal AT&T, Verizon, others, thought about dropping employer-sponsored benefits

http://money.cnn.com/2010/05/05/news/companies/dropping_benefits.fortune/index.htm?cnn=yes&hpt=C2

This is an interesting article discussing some of the unintended consequences that might arise from Obama's Health Care reform. Many large companies such as ATT and Verizon have considered dropping their health care benefits for employees and simply paying the government penalty. What do you think about these interesting predictions within this article about how detrimental this trend could be for our budget deficit?

The DOW's crazy day

In one of the most gut-wrenching hours in Wall Street history, the Dow plunged almost 1,000 points Thursday, before recovering some, as on a technical glitch in the trading of Procter & Gamble stock and fears about the European debt crisis spreading.

Heres the link: http://money.cnn.com/2010/05/06/markets/markets_newyork/index.htm?hpt=T1&iref=BN1

Housing giants also insolvent

but are also too big to fail.  See here for an explanation of what Fannie and Freddie do and how they are structured. 

Is Spain Next?

http://money.cnn.com/2010/05/04/news/international/spain_debt.fortune/index.htm

Is Spain the next country to ask for money from the IMF and EU?

Goldman clients staying put

It has been nearly three weeks since the federal government stunned Wall Street by bringing civil fraud charges against Goldman Sachs.

Since then, the firm has endured a firestorm of criticism and a rash of lawsuits But so far, that has done little to scare off long-standing Goldman customers.

Looks like people still trust Goldman.

The economic risks and rewards of offshore drilling

http://money.cnn.com/2010/05/04/news/economy/oil_drilling/index.htm
http://money.cnn.com/2010/05/04/news/economy/gasoline_prices/index.htm

For my final post this week, I wanted to address a topic that I am personally concerned about. This may be slightly off topic, but thinking about future economic issues is relevant to this class in my opinion. With the disaster of the Gulf oil spill and the halt on Obama's offshore drilling plan, I wanted to address a couple of questions about the future economic effects related to our energy sources and the spill. This article I read seems to support expanding offshore drilling even after this most recent disaster. While the first article claims that 160,000 new jobs would be created, I am skeptical if that would be worth it at all. The second article I linked to argues that even with an expanded offshore drilling program, prices may not drop. Are the severe environmental risks worth it? This first article seems to think so, arguing that, "It would reduce the trade deficit, lower interest rates and boost the dollar" & that "It would generate tax revenue: The $60 billion or so in value from an extra two million barrels a day, at today's prices, might generate $30 billion a year for the federal government, once royalties and corporate taxes are paid." It seems to me that moving towards greener technology would not only create more jobs and do all of the things this article argued, but lead us away from the economic problems of another energy crisis. We are all familiar with the consequences of an energy crisis are after the 1970s. Are we eventually headed towards another energy crisis that could have severe economic effects?

No Greek tragedy for the mighty dollar

http://money.cnn.com/2010/05/03/markets/thebuzz/index.htm

We have talked about the future of the Euro in class many times already, but I found this article interesting because I think it shows that our bleak outlook for the Euro could be pretty accurate. Even with the Greek bailout, the Euro is projected to continue to drop. With Portugal and Spain looking like they may be in trouble, it could hurt it even more. In addition, according to this article, the U. S. is on the faster path to recovery and if they begin to raise interest rates first, could strengthen the dollar even more against the Euro. How much patience will countries like German and France have if the currency struggles even more?

Change Business Schools?

After reading all the information of financial crises and the current one and realizing that we were wrong about many things and how our practices and theories are not really applicable in the real world, should there be a push to change what we are teaching in our business schools? Do you think there should be a major reform especially after this current financial meltdowns? What are your thoughts?

Here is an article by the Chief Executive of The Association of MBAs on the topic:

http://business-ethics.com/2010/01/16/mba-ethics-governance-risk-management-sustainability/

US economy grows by 3.2% in first quarter

http://news.bbc.co.uk/2/hi/business/10093870.stm

I found this article interesting but I am also skeptical.

"The economy grew at a rate of 5.6% in the final quarter of 2009.

Part of the reason for the slower growth was reduced government spending and a fall in exports."

What exactly are these rates based on? Are they accurate or is there a bit of cooking in those numbers? Could the previous quarters higher rate be attributed to the holiday season when people spend the most? Obviously, longer term growth signals, such as a drop in unemployment have not come yet. And can we truly recover with the interest rate being basically 0?

Wall Street Cartoon

Here is a funny cartoon about wall street and their bailouts. There is also a bunch more that you can scroll through.

http://politicalhumor.about.com/od/economy/ig/Economic-Cartoons/Wall-Street-Redux.0ymR.htm

If you've got an hour...

Lloyd Blankfein on the Charlie Rose show. He says some really interesting things including claiming he actually supports many of the reforms that his firm has been accused of lobbying against.

http://www.charlierose.com/view/content/10989

Debt roulette: Is Portugal next?

http://money.cnn.com/2010/04/30/news/international/portugal_debt.fortune/index.htm

Sticking with the international theme, I found this article to be quite interesting. If Greece gets bailed out, the experts seem to think that Portugal will be the next to default, followed by Spain. If Greece gets bailed out, why not Portugal? If Greece does default and then Portugal does, could there be a chain reaction? What are the consequences of the Euro? I think it could end up being a chain reaction of bailouts. When do we let a country simple go under and default?

Great little cartoon

http://www.ritholtz.com/blog/2010/04/portfolio-of-securitized-souls/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29&utm_content=My+Yahoo