World Finances Coming to a Breaking Point
March 16, 2010
CNN
By Fareed Zakiria
As a nationwide strike highlights Greece’s painful effort to fix its finances, much of the rest of the world is confronting an equally sobering reality, says analyst Fareed Zakaria.
“You can’t spend money you don’t have forever and hope people will lend you money, which is what has been going on,” Zakaria said in an interview with CNN.
He says governments, particularly in developed countries, rushed to bail out financial institutions in the economic crisis, leading to a massive increase in public debts. Now the bill is beginning to come due.
Zakaria says Greece has had chronic budget problems, and its plight is far more severe than that of other nations. In Athens, workers struck for 24 hours and thousands marched. Transit systems, schools, banks, television news and newspapers were closed down. Greece’s government is cutting services and raising taxes to bring down its budget deficit.
Zakaria, author and host of CNN’s “Fareed Zakaria GPS,” spoke to CNN on Thursday. Here is an edited transcript:
CNN: Is Greece’s financial crisis a sign of things to come for many more countries?
Zakaria: I tend to think that some of the panic about the lessons of Greece is overdone. Greece has been a very badly managed economy for a very long time. I read somewhere that Greece has been in some kind of state of default for about half of its existence as a nation since 1832.
To put it simply, Greece has been a basket case for a while. This recession has just dramatically exacerbated that problem and forced a crisis in Europe. We should be careful about drawing very broad analogies between Greece and other countries that are in very different situations.
That said, clearly the financial crisis has been transformed into a governmental crisis in this sense — basically the financial crisis was caused by the massive indebtedness of the financial system in many Western countries. Those debts have in effect been taken on by the government. The government had to bail out the financial industry.
All of that debt has been moved from the private sector to the public sector, and so you see in the United States that debt as a percentage of GDP [Gross Domestic Product] has gone up 20 percentage points in two years. That’s probably the fastest rise ever since World War II. It’s gone from roughly 50 percent of GDP to 70 percent in two years.
CNN: So at what level does it become unsustainable?
Zakaria: No one knows the answer to that question. At one level, it’s sustainable as long as the rest of the world has confidence in you. And clearly what happened to Greece was that the world lost confidence in Greece.
Japan has a massive debt to GDP ratio — 200 percent — but generally speaking, it’s still the second-largest economy in the world, there’s very large domestic savings so there’s a tendency to believe they’re good for their debt.
CNN: What’s the risk if countries do lose faith in the U.S.?
Zakaria: If people lose faith in a country, it means that you have to raise your interest rates to sell your debt. The only way people will lend you money is at very high interest rates.
If you can only borrow money at very high interest rates, the only thing you can do to get money is to kill your economy. If you raise interest rates, it kills economic activity in your own country.
CNN: The government made a choice during the financial crisis to take on debt to stimulate the economy, but at a certain point, do governments have to turn away from stimulating the economy and turn their focus to fighting inflation?
Zakaria: They certainly have to turn their attention away from stimulating the economy and toward having stable finances. I’m not sure inflation is the great danger, but you can’t run huge deficits forever, you can’t have your debt-to-GDP ratio keep going up.
This crisis has exacerbated a problem that existed within the Western world, which is very large structural deficits, which exist because we’re basically been unwilling to cut spending or raise taxes. So the result is you have these big gaps between what we want from our government in terms of services and what we’re willing to pay … the United States has a particularly bad case of this. The deficit is now 10 percent of GDP.
The basic problem is that we want more government than we are willing to pay for. Either we have to accept the reality of higher taxes or we have to accept the reality of significant cuts in spending.
Click here for the full report.
Nearly 20% of Workers Underemployed
February 23th, 2010
gallup.com
By Jenny Mariar
Gallup’s daily measure of U.S. employment reveals that 19.9% of the U.S. workforce was underemployed during the month of January, translating to close to 30 million Americans who are working less than their desired capacity. Those who were underemployed reported spending 36% less than those who were employed, $48 per day versus $75 per day.
These results are based on January interviews with more than 20,000 adults in the U.S. workforce, aged 18 and older. Gallup classifies respondents as “employed” if they are employed full time or are employed part time but do not want to work full time. Gallup classifies respondents as “underemployed” if they are employed part time but want to work full time or are unemployed.
As unemployment rates remain high, reduced spending by millions of underemployed Americans has obvious implications for economic recovery. Spending is, however, just one of many ways underemployment costs the U.S. and hurts its workforce. Gallup’s employment measure also reveals further disparities between the employed and the underemployed on vital indicators such as attitudes toward money, access to healthcare, demographics, and wellbeing.
Personal Finances
Underemployment is generally associated with a less-than-desired income, and Gallup data highlight the stark contrast in spending attitudes between the employed and the underemployed. Sixty percent of employed respondents feel good about the amount of money they have to spend, while only half as many (29%) of the underemployed report feeling good. Further, the underemployed are less likely than the employed to say they are able to make a major purchase, such as a car or home repair, if needed (25% vs. 58%, respectively).
Click here for the full report
Ron Paul: The Government Is Too Big to Succeed
January 20, 2010 by joel
Filed under Government
January 20, 2010
Campaign for Liberty
By Ron Paul
Last week, the Financial Crisis Inquiry Commission kicked off their first round of hearings on the
causes of the economic meltdown on Wall Street. The commission is being compared to the the
Pecora Commission launched in 1932 to investigate the causes of the Great Depression. The
Pecora commission is beloved by those who believe the solution to every problem is more laws
because it was used to justify a number of new laws, including Glass-Steagall. Of course, none of
those laws addressed the real causes of the Great Depression. It was the introduction of unsound
monetary policy and central economic planning pursued by the Federal Reserve that really threw
everything off balance. The Fed was founded in 1913 to stabilize the economy and prevent a
recurrence of the short-lived Panic of 1907, but instead it promptly produced the Great Depression
which lasted more than 15 years.
The Pecora Commission was stacked with big government sympathizers who blamed the free
market and the gold standard without question, and without any consideration of government
interference in the economy. This panel is no different. Never will they contemplate how
government steered us into this crisis, and what perverse incentives can be removed or repealed so
that the market will function more smoothly. Never will they discuss how investment should come
from savings, not debt. Never will it occur to them that fiat money, artificially low interest rates and
the whole Federal Reserve System might be unwise and unstable, not to mention unconstitutional.
The answer will always be more government regulation and oversight. It is predictable that this
government panel will eventually come to the firm conclusion that government needs to be bigger,
and that the market is just too free.
Is The U.S. Economy Being Tanked By Mistake or By Intent?
January 20, 2010 by joel
Filed under Government
January 20, 2010
Lew Rockwell
By Bill Sardi
The government wants Americans to believe the greatest economic collapse in history was the result of ineptness and mistakes yet still have confidence in their financial institutions.
Should American bankers be let off the hook because they self-declare, before an investigational panel, that the failure of their newly invented risk swaps and other highly leveraged investment schemes was simply due to “mistakes”? Not malfeasance – just every-day mistakes? Bankers just fell asleep at the helm at a critical juncture in American history. Is that what we are being led to believe?
Oh well, it’s just 18 million American homes that now lay empty in the wake of unprecedented foreclosures, and the bankers have collected obscene bonuses for reckless lending of their depositors’ money. It’s like the captain and crew of a ship saying, not to worry, twenty-percent of the passengers were lost overboard, but this was due to unavoidable mistakes, and then being rewarded with bonuses when they reach port.
Are Americans to believe that the Federal Reserve lowered interest rates to create a false bubble in the economy, at the same time the Securities Exchange Commission allowed investment banks risky reserve ratios and exerted lax control over investment tycoons like Bernie Madoff, and in lock step, the credit rating agencies (Fitch, Moody’s and Standard & Poor’s) handed out sterling A+ credit ratings on risky mortgage-backed securities, while the US Treasury Department stood by and did nothing?
Shall Americans conclude the world’s largest economy is beyond the management skills and regulation of virtually every financial arm of government and the private sector? If so, widespread incompetence would suggest Americans had better come up with some institution or instrument of their own invention to protect their money.
Whatever or whomever did bring down the American economy, it appears to be an orchestrated effort. If one arm of the financial industry had objected or performed their job responsibly, the whole economic collapse could have been averted. The credit rating agencies alone could have put an abrupt halt to what amounts to a financial collapse of western civilization.
Lenses into the future: a planned default?
Americans cannot see the economy as the elites do. The elites have lenses into the future. They have access to information that foretells the future of our economy. They can see a better picture of when mounting debt will rise beyond the ability to repay.
They certainly can see pension funds, private and public, are under-funded and there is no way, with Baby Boomers now entering their retirement years, these obligations can be met. Medicare expenses are totally out of control with enrollees able to rack up bills in the tens of thousands of dollars beyond what they ever paid into the system.
At some point, seeing no way out, maybe a decision was made to default on our debts. There are rumblings that the world economy is being intentionally brought to its knees in order to usher in a one-world currency.
There are other hints that the US is intentionally tanking its economy.
As of March 23, 2006, the M3 money supply is no longer published by the US central bank. So Americans can’t get a full view of what government is doing with the total money supply. The M3 is now estimated by two websites – ShadowStats.com and NowAndTheFuture.com. A severe contraction in the M3 money supply began to be reported in August of 2008. It appears there has been a sudden downturn in M3 funds, which could choke the economy at a critical time.
Obama to Ask For $1.35 Billion More For Education
January 19, 2010 by joel
Filed under Government
January 19, 2010
Breibart
By Darlene Superville
President Barack Obama announced Tuesday he’ll ask Congress for $1.35 billion to extend an education grant program for states, saying that getting schools right “will shape our future as a nation.”
Obama outlined the proposal that will be part of his budget request for this year at an elementary school here, where he also held a short discussion with sixth-grade students.
The $787 billion economic stimulus program that Obama signed into law soon after taking office included $4.3 billion in competitive grants for states, nicknamed the “Race to the Top” fund. States must amend education laws and policies to compete for a share of the money.
The deadline to apply for the program is Tuesday, and officials expect more than 30 states to apply. The Education Department is expected to announce its first of two rounds of awards in April—with Obama saying that not all who enter will get a grant.
The president said that extending the program would allow more states to win grants. He also wants to use some of the $1.35 billion for a similarly competitive grant program for local school districts.
“Offering our children an outstanding education is one of our most fundamental—perhaps our most fundamental—obligations as a country,” Obama said in brief remarks. “Nations that outcompete us today will outcompete us tomorrow and I refuse to let that happen.”
With the grant programs, Obama is trying to make federal education spending more of a competitive endeavor to encourage states and school districts to do better, rather than a solely formula-driven effort in which states and districts look forward to receiving a certain amount of money each school year, regardless of how good a job they do educating students.
To that end, Obama sees the use of student test scores to judge teacher performance and the creation of charter schools, which are funded with public money but operate independently of local school boards, as solutions to the problems that plague public education.
National teachers’ unions disagree. They argue that student achievement amounts to much more than a score on a standardized test and that it would be a mistake to rely heavily on charter schools.
The “Race to the Top” fund—and the opportunity to compete for the billions of dollars it holds—was designed to encourage states to rework their education systems and bring them more in line with Obama’s vision. Education is largely a state and local responsibility.
So far, more than a dozen states have changed laws or policies to link data on student achievement to the performance of teachers and principals, or pave the way for opening more charter schools.
Rep. George Miller, D-Calif., chairman of the House Education and Labor Committee, called the administration’s plans “exciting.”
Click here for the full report
Climate Plan to Tax $3,000 a Year
December 18, 2009 by Andrew
Filed under Government
December 18, 2009
The Chronicle Herald
By Kevin Gaudet
Would you be upset if you knew your government was about to get duped in a con that would cost your family at least $3,000 a year in new taxes? That is exactly what is happening in Copenhagen right now.
The developing world has teamed up with global warming activists in Copenhagen at the world climate conference. Together they are planning the big con. Key to the con is to play on the eco-guilt of the developed world, using it to scam cash from “rich countries” and transferring it to the developing world, all in the name of “ending climate change.” The Copenhagen grifters are hoping to cash the cheques before the developing world wakes up to the con.
A leaked draft version of the agreement on the table at the Copenhagen climate conference reveals plans for a massive transfer of wealth out of Canada. This transfer will come in the form of new taxes and the establishment of a new world government body for climate change housed in the World Bank.
Lord Christopher Monckton is reported to have obtained a working copy of the draft agreement. He warns that the secretive draft version of the Copen-hagen climate change treaty represents a global government power grab on an “unimaginable scale,” and mandates the creation of 700 new bureaucracies as well as a colossal raft of new taxes including two per cent levies on GDP and a two per cent tax on every international financial transaction.
The draft agreement also reportedly contains a provision for a “uniform global levy of $2 per tonne of CO2 for all fossil fuel emissions,” as well as an additional tax on every commercial plane journey, except ones that go in or out of poorer countries.
Of course, in addition to these various taxes, the draft agreement, reportedly pushed by President Barack Obama, the U.K. and Denmark, would require auctioning of allowances to emit carbon dioxide — a cap-and-tax scheme. Failing to purchase permits would be met with financial penalties or outright prohibitions against such emissions.
The two per cent tax on GDP alone would cost Canada some $26 billion. The $2-a-tonne tax would add up to $500 million per year. And the tax on international financial transactions would soak untold billions. This total tax grab is at least $26.5 billion, or over $3,000 a year for every Canadian family — not including the tax on financial transactions or plane trips.
This idea would be bad enough even if the cash was meant to stay in Canada. But it is not. The scheme is designed to send this cash to 49 developing nations for them to reduce their CO2 emissions and to create so-called green projects. These 49 countries include the likes of Uganda, Burundi and Sudan.
There is a perception that taxing CO2 will only hurt Canada’s West. However, CO2 emission data from Environment Canada for 2008 reveals that Alberta won’t be alone to feel the pain. While Alberta would bear 42 per cent of this burden, Ontario would have to pay for 26 per cent, due mainly to its substantial reliance on coal for electricity. Moreover, while the energy may be produced in Alberta, a large percentage of Alberta’s oil and gas is consumed in Eastern Canada and many of those taxes will be passed along.
Further, imposing a tax on international financial transactions will place new pressures on Canada’s banks, which, so far, have survived sub-prime mortgage challenges and have weathered the global economic storm.
Canadian families work too hard to see thousands of their tax dollars go from their pockets to some “green” project in Sudan. The Harper government should save Canadians from this international massive tax grab.
Economists Warn Against Federal Debt Spending
December 18, 2009
Info Wars
222 economists have signed on to the following statement:
The country’s economic future depends on Congress’ ability to rein in the growth of federal spending. Failing to restrict spending growth will further balloon the national debt, impede economic growth, and threaten the long-term economic health of our Nation. Controlling spending growth to reverse our dangerous debt accumulation can be done without endangering the near-term economic recovery, and will prove beneficial over the longer horizon.
The 2009 near-term “stimulus” has proven to be an inefficient spur to job creation and does not merit repeating. Any further policy efforts should be focused on opening borders to free trade, cutting burdensome regulations, and providing necessary tax relief to employers and employees.
Population Control Key to Copenhagen Deal for China
December 11, 2009 by Andrew
Filed under Government
December 11, 2009
China Daily
By Li Xing
Population and climate change are intertwined but the population issue has remained a blind spot when countries discuss ways to mitigate climate change and slow down global warming, according to Zhao Baige, vice-minister of National Population and Family Planning Commission of China (NPFPC) .
“Dealing with climate change is not simply an issue of CO2 emission reduction but a comprehensive challenge involving political, economic, social, cultural and ecological issues, and the population concern fits right into the picture,” said Zhao, who is a member of the Chinese government delegation.
Many studies link population growth with emissions and the effect of climate change.
“Calculations of the contribution of population growth to emissions growth globally produce a consistent finding that most of past population growth has been responsible for between 40 per cent and 60 percent of emissions growth,” so stated by the 2009 State of World Population, released earlier by the UN Population Fund.
Although China’s family planning policy has received criticism over the past three decades, Zhao said that China’s population program has made a great historic contribution to the well-being of society.
As a result of the family planning policy, China has seen 400 million fewer births, which has resulted in 18 million fewer tons of CO2 emissions a year, Zhao said.
The UN report projected that if the global population would remain 8 billion by the year 2050 instead of a little more than 9 billion according to medium-growth scenario, “it might result in 1 billion to 2 billion fewer tons of carbon emissions”.
Meanwhile, she said studies have also shown that family planning programs are more efficient in helping cut emissions, citing research by Thomas Wire of London School of Economics that states: “Each $7 spent on basic family planning would reduce CO2 emissions by more than one ton” whereas it would cost $13 for reduced deforestation, $24 to use wind technology, $51 for solar power, $93 for introducing hybrid cars and $131 electric vehicles.
She admitted that China’s population program is not without consequences, as the country is entering the aging society fast and facing the problem of gender imbalance.
“I’m not saying that what we have done is 100 percent right, but I’m sure we are going in the right direction and now 1.3 billion people have benefited,” she said.
She said some 85 percent of the Chinese women in reproductive age use contraceptives, the highest rate in the world. This has been achieved largely through education and improvement of people’s lives, she said.
This holistic approach that integrates policy on population and development, a strategy promoting sustainable development of population, resources and environment should serve as a model for integrating population programs into the framework of climate change adaptation, she said.
2010 Deficit Higher than 2009 in First 2 Months of Year
December 9, 2009
Reuters
By Andy Sullivan
In October and November, the government spent $292 billion more than it took in, the nonpartisan Congressional Budget Office said.
That was even worse than the same period last year, when the government was on its way to posting a record $1.4 trillion deficit for the fiscal year that ended Sept. 30.
The federal budget has been battered by the worst economic downturn since the Great Depression of the 1930s, as tax revenues have plunged and spending on safety-net programs like unemployment insurance have skyrocketed.
The budget deficit was $176.4 billion in October, according to Treasury Department records, and the CBO estimated the deficit for November will have come in at $115 billion.
The CBO gave its figures in billions of dollars and said numbers may not add up to the totals because of rounding.
Receipts totaled $132 billion in November, the CBO estimated, down 9 percent from the same month last year. That was partly due to new legislation that gives increased tax write-offs to corporations.
Geither Wants TARP Extension Until October
December 9, 2009 by Andrew
Filed under Government
December 9, 2009
Bloomberg
By Robert Schmidt and Rebecca Christie
Treasury Secretary Timothy Geithner plans to tell Congress that the Obama administration will extend the $700 billion financial-rescue program until next October, according to people familiar with the matter.
While the Troubled Asset Relief Program expires on Dec. 31, Geithner can extend it by notifying Congress. A letter notifying Congress of the extension could come as soon as today, said the people, who declined to be identified. Andrew Williams, a Treasury Department spokesman, declined to comment.
The TARP, passed in October 2008 to prevent a collapse of the financial system, has drawn criticism from Congressional opponents of taxpayer-funded bailouts of banks including Citigroup Inc. The Obama administration, preparing the ground for an extension, has emphasized that the program may also be used to aid homeowners and small companies.
“There has rarely been a less loved or more necessary emergency program than TARP,” President Barack Obama said yesterday in a speech in Washington. “I’m asking my Treasury secretary to continue mobilizing the remaining TARP funds to facilitate lending to small businesses.”
In public comments about the program over the past several weeks, Geithner has cautioned that shutting it down too soon could hurt the economic recovery.
Unemployment Rate
Unemployment at 10 percent has sapped Obama’s approval ratings and threatens to cut into the Democratic Party’s majorities in Congress.
A year into Obama’s presidency, only 32 percent of poll respondents believe the country is headed in the right direction, down from 40 percent who said so in September, according to a Bloomberg National Poll.
The poll of 1,000 U.S. adults was conducted Dec. 3-7 by Selzer & Co., a Des Moines, Iowa-based firm. The margin of error is plus or minus 3.1 percentage points.
