Archive for the ‘Economics’ category

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New Bank Stress Tests

November 28th, 2011

Can the big banks survive another economic situation like the crisis of late 2008? That’s what federal reserve regulators want to find out. They had more than 30 banks participate in new stress tests after the close of business on Tuesday last week. These are the largest banks in the country, all with assets of $50 billion or more.

The banks are expected to have plans in place for how to have or arrange for sufficient capital to survive a major shock. More specifically regulators will look at whether the banks will be able to continue consumer and business lending even when facing a crisis situation. But the biggest of the big will be tested even more severely. According to an article on CNN.com;

 

Six banks with large trading operations will have an even higher hurdle to clear, simulating a more severe global financial meltdown. Those banks are Bank of America, Goldman Sachs, Citigroup, JPMorgan Chase, Morgan Stanley and Wells Fargo.

…The Fed issued specific instructions that vary depending on » Read more: New Bank Stress Tests

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It’s Not Over Till It’s Over

November 14th, 2011

We would like to think that the housing crisis is past and now all we have to do is wait for prices to rebound. Unfortunately foreclosures are still happening at higher-than-normal rates all over the country. That is putting pressure on the big mortgage funds. For example, according to MoneyNews.com;

 

Fannie Mae, the biggest source of money for U.S. home loans, on Tuesday said it needed a further $7.8 billion in federal aid to stay afloat as a shaky housing market widened its third-quarter loss to $5.1 billion.

 

Fannie Mae also attributed the deeper cash drain to losses on derivatives that are used to hedge the firm’s exposure to swings in interest rates and expenses related to home loans made prior to the 2008 financial collapse. In the year-earlier quarter it had a loss of » Read more: It’s Not Over Till It’s Over

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Posted in Economics, Real Estate

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Another Financial Crisis?

November 2nd, 2011

The collapse of the global financial services firm Lehman Brothers triggered, which filed for Chapter 11 bankruptcy protection on September 15, 2008, is considered to be one of the triggers of the financial crisis that unfolded in the following months. Are we going to see another crisis happen, perhaps triggered by another large investment firm going bankrupt? It is possible, according to an article in the New York Times;

“Federal regulators have discovered that hundreds of millions of dollars in customer money has gone missing from MF Global in recent days, prompting an investigation into the brokerage firm, which is run by Jon S. Corzine, the former New Jersey governor, several people briefed on the matter said on Monday.”

The firm was hoping to find a buyer, but plans for that fell through when it became known that there is money missing. Instead MF Global filed for bankruptcy on Monday. Regulators are now investigating the matter. It is speculated that the firm may hav » Read more: Another Financial Crisis?

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Best Small Businesses?

October 31st, 2011

Which are the best small businesses during these relatively tough times? Who is still doing well despite the state of the economy? Here is what a recent article on CNN.com found:

“The economy is weak and consumers aren’t spending freely.

But here’s the good news: There are small business sectors that are growing — and where the chances of success are higher, according to Sageworks, a financial software and information company.

To name a few: Child care. Liquor stores. Services that help people with their finances.”

The article expanded on a few of the small businesses listed;

“Financial investment activities: This sector includes » Read more: Best Small Businesses?

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Posted in Economics, Making Money

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Euro Zone Crisis Update

October 28th, 2011

Will the the euro zone debt crisis be resolved anytime soon? It seems that it will be “sort of” fixed in a temporary way, as is the fashion with these sorts of long-term problems that are addressed by short-term political thinking. There is some sort of agreement as of Thursday morning, but it isn’t quite final.

For starters it will involve a larger bailout of Greece; 130 billion euros, or $180 billion. There may be a bigger write-down or payoff of debt as well. The European Financial Stability Facility, or EFSF will apparently get new powers to guarantee sovereign debt purchases made by private bondholders.

But as Michael Schuman says in a Time Magazine article;

“…the plan is ultimately no more than a politically determined collection of half-measures. With voters at home turning more and more sour on euro bailouts, the zone’s leadership has attempted to tackle the crisis with hardly any new money being put on the table. And, as the saying goes, you get what you pay for. The bank recapitalization plan calls for banks to » Read more: Euro Zone Crisis Update

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Posted in Economics, Politics

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Entrepreneurial Woman

October 17th, 2011

There are perhaps more young women than ever who are looking to pursue entrepreneurial ventures rather than getting a job. And they are starting out younger than before. A recent article on CNN.com reported on Lizzie Marie Likness, who at only 11 years old, runs Lizzie Marie Cuisine, a website offering cooking tips, product reviews, recipes and more.

Tavi Gevinson, at 15 years old, recently started “Rookie,” an online magazine. Thanks to a successful blog she has, thousands of people have offered to write for her new magazine.

Jessica Mah is only 21, but raised over $1 million to fund her start up, which helps small businesses with their accounting. According to the CNN article:

“Today, the company has six employees and over 20,000 » Read more: Entrepreneurial Woman

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Posted in Economics, Money Thoughts

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Tax on Millionaires?

October 12th, 2011

Should we tax the rich more heavily with a special tax on millionaires? Many economists say that this will reduce investment and so hurt job creation. But it could be a way to help reduce the deficit. According to a recent article on CNN.com;

“The Democrats’ proposed tax on millionaires would raise an estimated $453 billion, more than enough to pay for President Obama’s jobs bill.

That’s the latest from the Congressional Budget Office, which on Friday released its cost and revenue estimates for the American Jobs Act of 2011.”

That’s a lot of money, and some might argue that it will come from those who are most responsible for the economic crisis we have been facing. There is a sense of justice perhaps, when we consider those who got their big bonuses only because of » Read more: Tax on Millionaires?

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Posted in Economics, Opinion, Politics

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Median Household Income Drops

October 2nd, 2011

The recession may or may not be over, depending on who you ask. But the median household income in the United States continues to fall. On the other hand, it hasn’t fallen everywhere in the country. The following is from an article on CNN.com:

“Nationwide, median household income fell to $50,046 in 2010, down 1.4% from 2007, according to Census statistics released last week.

But while the Great Recession wreaked havoc across the nation, wide disparity among the states shows that not all the pain was shared equally. Some Americans were still able to get ahead despite soaring unemployment and the housing collapse.

In 21 states and the District of Columbia, households in the middle of the pay scale saw their incomes rise despite » Read more: Median Household Income Drops

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Posted in Economics

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Unintended Consequences

September 23rd, 2011

There are always some unintended consequences with government policies. Raise taxes on corporations, for example, in order to more fairly spread tax burdens paid by the middle class, and the corporations may just raise prices in order to maintain the same after-tax rates of return for shareholders. Then we will pay in higher prices what we theoretically save in taxes.

Even with quasi-governmental institutions there will always be unintended consequences to policy decisions. Consider the recent announcement by the Federal Reserve, for example. Pushing down rates on long-term government bonds, as they propose, will have cause serious problems for some, according to Yahoo News:

“The Federal Reserve’s latest move to stimulate credit for consumers and businesses, known as Operation Twist, is likely to threaten the earnings of some of the country’s largest » Read more: Unintended Consequences

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Posted in Economics, Politics

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Will You Be a Millionaire?

September 22nd, 2011

How many people will be a millionaire? It’s impossible to predict with any certainty, but at the moment the United States has the most millionaires (when measuring the wealth of citizens from other countries in dollars). In 2010 there were over 5 million of them here. That’s about 1 in 60.

But the question of who thinks they’ll be a millionaire is a different one altogether.  It seems we are an optimistic people, since about one in five in the U.S. think they will reach that goal. On the other hand, that is down from previous polls according to a recent article on Yahoo News:

“Reflecting the psychic toll of the global economic doldrums, solid majorities of Americans — 61 percent — and Britons — 63 percent — say it’s extremely or very difficult for their countrymen to become millionaires today…

On the flip side of the planet, just 35 percent of » Read more: Will You Be a Millionaire?

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Posted in Economics, Money Thoughts

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