Archive for the ‘fiscal’ Category

Global Financial Crisis, Intertwined Economies, Too Much Debt: Now What?

November 16, 2008

Barack Obama surely has one of the toughest leadership challenges any incoming president has ever faced. We’re in the midst of a terrible economic meltdown, the current administration has lost all credibility, the House of Representatives is full of knuckle-dragging Neanderthals, and the public is being whipsawed between free-market fundamentalists preaching the virtues of just letting the market rip and left-wingers who think we can punish Wall Street while protecting Main Street. It feels like a mess with no one in charge.
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Now is when we need a president who has the skill, the vision and the courage to cut through this cacophony, pull us together as one nation and inspire and enable us to do the one thing we can and must do right now:

Go shopping.

Obama can’t wait until Jan. 20 to weigh in on this. If we don’t stimulate the global economy fast enough and big enough, some of Obama’s inaugural balls might be held in soup kitchens.

When President Bush told us to go shopping after 9/11, he was right. We needed to stimulate the economy then. The problem was that the Bush economic team never turned off the green light and told people to “go saving.” So with easy credit seemingly endlessly available, American consumers saved virtually nothing and bid up housing prices to record levels. Retailers expanded stores and China expanded factories to accommodate all the shopping. It was quite a party. We had banks in America giving mortgages to people whose only qualification “was that they could fog up a knife,” one mortgage broker told me.

By Thomas Friedman
The New York Times

But when something seems too good to be true, it usually is. When these reckless mortgages eventually blew up, it led to a credit crisis. Banks stopped lending. That soon morphed into an equity crisis, as worried investors liquidated stock portfolios. The equity crisis made people feel poor and metastasized into a consumption crisis, which is why purchases of cars, appliances, electronics, homes and clothing have just fallen off a cliff. This, in turn, has sparked more company defaults, exacerbated the credit crisis and metastasized into an unemployment crisis, as companies rush to shed workers.

Governments are having a problem arresting this deflationary downward spiral — maybe because this financial crisis combines four chemicals we have never seen combined to this degree before, and we don’t fully grasp how damaging their interactions have been, and may still be….

Read the rest:
http://www.nytimes.com/2008/11/16/
opinion/16friedman.html?scp=1&sq=jaws&st=nyt


“You’re gonna need a bigger boat.”

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Global Economic Mess Makes G-20 Summit Sober, Serious, Anti-Junket

November 14, 2008

There are no plans for sightseeing tours, shopping sprees or three-anything lunches when leaders from 20 countries, accompanied by large delegations of officials, business people and journalists, visit the capital during the next two days for a world economic summit.
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By Pamela Constable 
Washington Post Staff Writer

Instead, the event promises to be brief, sober and businesslike, in keeping with the grim financial outlook facing every country at the summit, including the host, and the timing of the meeting during a power lull between administrations in Washington.

“There will not be much time. Our delegation will arrive at 6 p.m. tomorrow and leave right after the meeting and possibly a press conference Saturday,” Emanuel Lenain, a spokesman for the French Embassy, said yesterday. Between formal discussions, he said, President Nicolas Sarkozy “will work and work.” His glamorous wife, former model Carla Bruni, will not be with him, and he will attend tonight’s White House dinner alone.

Read the rest:
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/13/AR2008111304039.html

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G-20 To Consider Monitoring World Banking Among Proposal

By Anthony Faiola and Glenn Kessler

Washington Post Staff Writers
Friday, November 14, 2008; Page A01

Nations are close to adopting a series of measures aimed at combating a global recession and laying the groundwork for a broad reconstruction of the international financial system, as world leaders arrive in Washington for a major economic summit this weekend.

Read the rest:
http://www.washingtonpost.com/w
p-dyn/content/article/2008/11/13
/AR2008111303844.html

China’s Economy: Weak Sister or Strong in Fundamentals?

November 14, 2008

Weakness in China’s economy is worsening and the government faces a severe challenge as it tries to avert a sharp downturn, an official said Friday, as new data showed investment growth cooling.

“The downturn trend in our economy is more obvious, especially since September. We hope a rapid downturn in growth will not occur,” Mu Hong, a deputy chairman of the nation’s main planning agency, said at a news conference.

Mu expressed confidence Beijing’s multibillion-dollar stimulus package would help the country weather the global downturn. But he said, “This international financial crisis is a new challenge for us. It is a severe challenge.”

Beijing is moving quickly to launch the package and will distribute most of a planned 100 billion yuan ($15 billion) in additional government spending within the next two weeks, Mu said. He said the money will be spent on housing, rural development, highways, public health and environmental protection.

Read the rest from CNN:
http://www.cnn.com/2008/BUSINESS/11/14/china.economy.a
p/index.html?section=cnn_latest

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China’s Economic Fundamentals Are Strong

BEIJING (AFP) – China said Friday the fundamentals of its economy remained strong amid the global financial crisis and it was confident of maintaining fast growth.

Following a slew of figures released this week showing growth in the world’s fourth largest economy was continuing to slow, senior government officials insisted the country was weathering the international storm.

A woman shops for vegetables in Beijing. The fundamentals of ... 
A woman shops for vegetables in Beijing. The fundamentals of China’s economy remain good despite the global financial crisis, with the government confident of maintaining fast growth, a senior official said(AFP/File/Frederic J. Brown)

“The origin of the financial crisis is outside the country and its impact on our financial system is limited. The fundamentals of our economy are still good,” National Development and Reform Commission vice chairman Mu Hong said.

Mu pointed to a stimulus package worth four trillion yuan (586 billion dollars) announced over the weekend as proof of the government’s ability and commitment to keeping the economy growing swiftly.

“I think the central government‘s decision to make significant changes to economic policy … showed its firm determination and confidence in stabilising the economy and maintaining fast growth,” he said.

“This determination and confidence are not baseless. They are based on the judgements of the domestic and international economic environment and the situation in China.”

Speaking at the same briefing on the financial crisis and China’s response, central bank vice governor Yi Gang said the nation’s banking system had plenty of money, indicating no concerns about a US-style credit crunch.

Read the rest:
http://news.yahoo.com/s/afp/20081114/bs_afp/finance
economychina_081114065615

China’s Premier Says Global Financial Meltdown “Worse Than First Thought” for China

November 13, 2008

China’s Premier Wen Jiabao said the effect of the global financial meltdown on the country was “worse than expected,” state media said Thursday, in a sign of growing concern at the impact of the crisis.

AFP

Chinese Premier Wen Jiabao at a press conference in Beijing. ... 
Part geologist, part economist, Chinese Premier Wen Jiabao at a press conference in Beijing. Wen Jiabao has said the effect of the global financial meltdown on the country was “worse than expected,” state media have said, in a sign of growing concern at the impact of the crisis.(AFP/File/Eric Feferberg)  

Wen was quoted as making the assessment by the director of the National Bureau of Statistics Ma Jiantang when he briefed his staff on Tuesday, according to the website of the bureau’s newspaper China Information News.

“The impact of the global financial crisis on the Chinese economy is much worse than many had expected,” Ma said according to the website, passing on remarks made by Wen.

China initially said the global financial crisis would not cause too much harm to its economy, but in recent days the signals from Beijing have changed markedly.

Wen’s comment comes after the Chinese government unveiled a four trillion yuan (586 billion dollars) economic stimulus plan on Sunday aimed at boosting domestic consumer demand in the face of flagging exports.

Reversal: $700 Billion Rescue Program NOT To Buy Troubled Assets

November 12, 2008

Treasury Secretary Henry Paulson said Wednesday the $700 billion government rescue program will not be used to purchase troubled assets as originally planned.

Paulson said the administration will continue to use $250 billion of the program to purchase stock in banks as a way to bolster their balance sheets and encourage them to resume more normal lending.

By MARTIN CRUTSINGER, AP Economics Writer

 
Treasury Secretary Henry Paulson said Wednesday the $700 billion government rescue program will not be used to purchase troubled assets as originally planned. Photo: Associated Press

He announced a new goal for the program to support financial markets, which supply consumer credit in such areas as credit card debt, auto loans and student loans.

Read the rest:
http://news.yahoo.com/s/ap/20081112/ap_on_bi_ge/
financial_meltdown;_ylt=AlOjuzzp7Mg
_YNmhDJGmChes0NUE

Poll Tells Obama: Fix Economy First; Tax Cuts When You Can

November 12, 2008

People want the tax cuts promised during the presidential campaign, but they may be willing to wait while President-elect Obama takes on the larger issue of fixing the economy.

Only 36 percent say trimming income taxes should be a top priority when the new president takes office in January, according to a new Associated Press-GfK poll. That was less than half the 84 percent who cited improving the economy as a No. 1 goal, and the 80 percent who said creating jobs should be a paramount task.

“I don’t think it’s going to work in this instance,” said Ryan Anderson, 31, a Democrat from Bloomington, Minn., who thinks tax reductions would have little impact on most families’ budgets. “That’s kind of like shooting a BB gun at a freight train.”

Obama promised to cut taxes for working families during the campaign.

By ALAN FRAM and TREVOR TOMPSON, Associated Press Writers

Even fewer — 29 percent — said another top priority should be Obama’s plan to allow tax cuts to expire for families earning more than $250,000 a year. He has said he would use the revenue that would raise to help finance some of his priorities.

Amid such talk, 72 percent in the AP-GfK poll voiced confidence Obama will make the changes needed to revive the stalling economy. Underscoring how widely the public is counting on its new leader, 44 percent of Republicans joined nearly all Democrats and most independents in expressing that belief.

Obama has called for about $175 billion in new stimulus spending, including for public works projects, and has said he would make it a top priority in January if it is not enacted by a lame-duck session of Congress and President Bush this year.

The poll shows trust in Obama’s ability to succeed is even broader, at least for now. Sixty-eight percent said they think when he takes office in January, the new president will be able to enact the policies he pushed during his presidential campaign.

Read the rest:
http://news.yahoo.com/s/ap/20081112/ap_on_go_
pr_wh/ap_poll_obama;_ylt=ArhlQW_
78Fn7nRDh2uPpJ_qs0NUE

Time To Manage Iraq and Russia like flashing traffic lights

November 12, 2008

“Ready, Fire, Aim” caricatures how U.S. administrations and governments often behave. Had George W. Bush  not succumbed to this syndrome in going to war in Iraq, President-elect John McCain might be fashioning his transition. Instead, millions at home and abroad are congratulating and saluting the next American president, Barack Obama.  

By Harlan Ullman
Op-Ed
The Washington Times

Flush with a historic victory, the Obama team is planning his administration. President Bush has promised full cooperation. Despite the danger warnings, will Mr. Obama and his senior advisors fall into the trap of ready, fire, aim in translating campaign promises and slogans into policies and in selecting people for high office? The electoral rout of Republicans giving Democrats large majorities in both Houses of Congress will add political adrenaline rather than restraint to this transition process.

Clearly, economic and financial crises along with the war in Iraq and the conflicts in Afghanistan and Pakistan will rise to the top of Mr. Obama’s already overcrowded agenda filled with a myriad of other competing pressures and decisions that must be made. So what can Mr. Obama and his team do to ensure that his administration will reflect aims and objectives based on the nation’s best interests rather than on campaign sound bites, political IOU’s and partisan biases? Step one is defining the problems and the possible corrective actions. Step two is identifying the skill sets that will be needed in assembling a team for governing. Step three is prioritizing step one and connecting with step two. Given the on-going wars and economic crises, Mr. Obama will be under great pressure to make these choices quickly if only to build public confidence in his ability to lead.

Russian President Dmitry Medvedev speaks during a meeting with ...
Russian President Dmitry Medvedev speaks during a meeting in the Kremlin in Moscow November 11, 2008.REUTERS/Natalia Kolesnikova/Pool (RUSSIA)

Consider three of the most pressing issues: the economy, Iraq and with President Dmitry Medvedev’s latest challenge to install short range missiles along its western borders to counter the missile defense systems being installed in Poland and the Czech Republic.

Mr. Obama’s economic team will extend far beyond his choice for Treasury. The heads of the National Economic Council and the Council of Economic Advisers are part of the team. The skill sets must include wide experience in economic crises; deep appreciation of macro-and microeconomics and business; and master political abilities to deal with diverse and often adversarial constituencies. No person has all of these qualities. But which are most important for each position? That judgment should drive the choice and not merely the need to name names of people who are competent but not necessarily in the crucial areas.

An employee shows dollar notes at a foreign exchange unit at ...

At the same time, Mr. Obama has promised to cut taxes for 95 percent of Americans. The other 5 percent however pay the lion’s share of taxes. And if the Bush tax cuts are not extended next year, everyone’s pocket book will be hit. A cardinal rule in times of recession is not to raise taxes. The new team better understand this reality, otherwise the economic mess will worsen irrespective of campaign slogans and promises.

Mahmoud Ahmadinejad
Iran’s Ahmadinejad

Read the rest:
http://www.washingtontimes.com/news/2008/n
ov/12/with-all-deliberate-speed/

Most Americans Believe Obama Will Fix Economy

November 11, 2008

In one of the economy’s darkest hours in decades, it looks as if people are taking Barack Obama up on his exhortations for hope and change.

Seven in 10, or 72 percent, voice confidence the president-elect will make the changes needed to revive the stalling economy, according to an Associated Press-GfK poll released Tuesday. Underscoring how widely the public is counting on its new leader, 44 percent of Republicans joined nearly all Democrats and most independents in expressing that belief.

Associated Press

The poll shows that faith in Obama is even broader, at least for now. Sixty-eight percent said they think that when he takes office in January, the new president will be able to enact the policies he pushed during his presidential campaign.

People signaled a willingness to wait on one of the keynote items of his agenda — tax cuts. Only about one in three, or 36 percent, said they wanted Obama to make income-tax cuts a top priority when he takes office, and even fewer wanted higher taxes on the rich to be a primary goal.

Instead, 84 percent said strengthening the economy should be a top-tier priority. Eighty percent also named creating jobs as a No. 1 order of business.

Majorities in both parties said those issues should be top priorities, though Democrats were a bit likelier than Republicans to say so.

With Obama ending the GOP‘s eight-year hold on the White House under President Bush and about to become the first black president, the AP-GfK poll showed three quarters saying the election made them feel hopeful, six in 10 feeling proud and half expressing excitement.

Read the rest:
http://news.yahoo.com/s/ap/20081111/ap_on_el_pr/ap_poll_obama;_ylt=AjMe_qSqvDLMn_4ni6BOWMSs0NUE

China: Protecting domestic economy is top priority

November 11, 2008

China’s government indicated Tuesday it would resist pressure to contribute to a global bailout fund, saying that ensuring the country’s economic stability is the most important step it can take to tackle the financial crisis.

President Hu Jintao is due to attend next weekend’s summit in Washington of leaders from 20 major economies to discuss a response to the crisis. British Prime Minister Gordon Brown has called on China, which has nearly $2 trillion in reserves, and oil-rich Middle Eastern nations to fund the bulk of an increase in an IMF bailout fund.

Associated Press

“We should put our own house in order and we should stabilize our own financial market and maintain market order,” said a foreign ministry spokesman, Qin Gang. “I believe this is the most effective contribution China can make to tackling this financial crisis. It will help to maintain the sound and steady development of the world economy.”

Graphic charting China's consumer price index, which hit ... 
Graphic charting China’s consumer price index, which hit a 17th-month low of 4.0 percent in October(AFP/null)

China, the world’s fourth-largest economy, unveiled a 4 trillion yuan ($586 billion) stimulus package Sunday, which Premier Wen Jiabao said was its “biggest contribution to the world.”

The plan calls for higher spending through 2010 on airports, highways and other infrastructure, more aid to the poor and farmers and tax cuts for exporters.

Economic growth slowed to 9 percent in the last quarter, down from last year’s stunning 11.9 percent rate and the slowest growth in five years. Export orders have fallen sharply as global demand weakens, leading to layoffs and factory closures.

Loss of Tax Revenue, Plus More Students Makes For Ugly School Prognosis

November 10, 2008

Schools all over Ameroca are discovering that the global economic crisis means smaller tax revenues to spend on schools.  Plus many areas have more new students, many of them immigrants needing additional help and special teachers.  Here is a report from two big counties near washington DC….

By Michael Alison Chandler and Daniel de Vise
Washington Post Staff Writers
Monday, November 10, 2008; 4:13 PM

Leaders of the region’s two largest school systems outlined today their grimmest scenarios to date for how looming budget shortfalls could play out in classrooms, with Fairfax County schools facing an average increase of 2 1/2 students per class and Montgomery County forced to renegotiate teacher pay increases or cut positions.

Fairfax Superintendent Jack D. Dale sketched a proposal to close a $220 million projected shortfall for the fiscal year that begins in July by eliminating summer school, except for certain special education students, and cutting more than 1,000 positions, including custodians, office workers and teachers.

The $2.2 billion spending plan would be only slightly smaller than the current budget but would absorb about $50 million in lost state revenue and $46 million in added expenses because of projected enrollment increases. Officials expect the 169,000-student system, the region’s largest, to grow to 174,000. The proposal assumes no increase in Fairfax County’s share of the budget.

“It will take decades to recover” from such cuts, Dale said. “We hope this is the worst-case scenario.” The superintendent will present the proposal Friday to the Board of Supervisors, which funds nearly three-quarters of the school system’s budget.

Read the rest:
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/10
/AR2008111002066.html?hpid=topnews