Posts Tagged ‘recession’

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The Recession Might Be Over For US, But Not For Those Who Didn’t Cause It

Thursday, September 24th, 2009

The recession hit hard here in the U.S., but people in poor countries are really out of luck.

  • More and more people are being pushed into extreme poverty by the global recession, and the World Bank is asking the 20 largest countries to lend a hand.
  • Poor countries that didn’t have a hand in creating the global recession are being hit really hard. They are often forced to cut funding for vital programs in education, health care, and basic infrastructure.
  • To build a more sustainable future, the World Bank is pressing for global economic growth to be less dependent on U.S. consumer spending and for less-developed nations to play a more significant role. But to do so, they need aid and access to financing.

Facts and Figures

  • The Group of 20 meeting is scheduled for this week with the goal of evaluating the state of the world economy.
  • By 2010, the recession will have pushed 89 million people into extreme poverty.
  • Last year the top eight economies pledged to give $20 billion in agricultural aid to poor countries, but these pledges haven’t been entirely fulfilled.

Best Quote

“The April summit was for the financial sector, this summit needs to be for responsible globalization.” – Robert B. Zoellick, President of the World Bank Group

First Health Insurance, Now Bank Insurance

Thursday, September 24th, 2009

It’s not just the healthcare industry that’s compensating for costs by raising premiums. Check out the FDIC’s plan to finance the next wave of bank failures.

  • The Federal Deposit Insurance Corp. exists to protect customer deposits at banks up to $250,000. But with so many banks failing in the past year, the FDIC has had to pay out more than they expected, and projections indicate their fund will be out of cash early in 2010 if action is not taken.
  • To combat the drain without relying on government assistance or increasing the rate it charges to banks for customer deposit insurance, the agency’s board has decided to propose a kind of advance in premium payments from the banks it insures – to the tune of $45 billion, or three years’ premium payments.
  • Banks have been mostly supportive of the plan, expressing relief that the rates – which have already been increased once this year – will not go up again.

Facts & Figures

  • So far in 2009, 94 banks have failed.
  • FDIC projections indicate a potential $100 billion increase in failed bank payments through 2013.
  • Banks are already paying $17 billion into the fund this year, including the rate increase.

Best Quote

“It’s clear that the American people would prefer to see an end to policies that look to the federal balance sheet as a remedy for every problem. In choosing this path, it should be clear to the public that the industry will not simply tap the shoulder of the increasingly weary taxpayer.” – Sheila C. Bair, FDIC Chairwoman

Is There Any Logic Behind The Price Of Petroleum?

Tuesday, August 18th, 2009

Why does it seem like the pundits are unable to guess what’s going to happen to the price of oil?

  • Since last summer, oil prices have gone from record highs to extreme lows and then doubled again, in swings that don’t seem to be related to market fundamentals – supply and demand.
  • The apparent disconnect between market fundamentals and oil price has reignited the debate about the role of speculators in commodity markets, as governments and investors fear a return to record oil prices in the current economic climate.
  • In contrast to last year, the recent upswing in oil prices is happening in a recession and, therefore, not sustained by high demand. This will almost certainly result in even greater losses for the already struggling automobile and airline industries.

Facts & Figures

  • Compared to last summer’s high of $145 a barrel, oil has increased from only $33 to $70 a barrel in just the past 7 months.
  • Petroleum-based fuel accounts for 1/3 Southwest Airlines’ operating costs.
  • The airline industry is projected to lose $9 billion this year, after losing $10.4 billion last year.

Best Quote

“To call this extreme volatility might be an understatement. Over the past 15 to 18 months, this has been unprecedented. I don’t think it can be easily rationalized.” – Laura Wright, Chief Financial Officer at Southwest Airlines

The Crisis of Credit Visualized

Tuesday, July 7th, 2009

Enjoy!

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Reposted from www.crisisofcredit.com.

Moral Cleanup Or Reckless Crackdown?

Wednesday, July 1st, 2009

Here’s an interesting topic for debate: how should anti-vice programs be carried out? Below is the Russian government’s solution to the problem, but it’s a very controversial one.

  • In accordance with Prime Minister Putin’s anti-vice plan, the Russian government is closing every casino and slot-machine parlor in the country. This move will result in the loss of hundreds of thousands of jobs.
  • Casinos’ only option will be to relocate to one of four remote, backwoods areas of the country. However, none of these regions are prepared for such a move, and it is expected to take at least several years before a casino will be able to reopen there.
  • The gambling industry has proposed the creation of a regulatory body to keep the casinos clean and safe, but the government has refused to compromise.

Facts & Figures

  • The World Bank estimates that the Russian economy will decline by 7.9% in 2009.
  • According to the gambling industry, 400,000 workers will be thrown out of work as a result of the ban.
  • The gambling industry pays an estimated $1 billion in taxes annually.

Best Quote

“The authorities are taking this step without thinking at all. They have not considered what this decision means for the workers. With the crisis, it is going to be very difficult for us.” – Irina Mysachka, Supervisor at Moscow’s Shangri-La Casino

An I.O.U. From The Government?

Wednesday, June 24th, 2009

Everyone is cutting back now that we’re in a recession, even the government. You might want to know what this means for you, but also how it is going to affect your community and neighbors – it isn’t that great.

  • States are experiencing huge budget deficits because the recession has slashed their tax revenues by billions of dollars. To close these budget gaps, states are proposing and approving policy measures that would never otherwise be considered.
  • Many state governors and legislatures are not able to come to a consensus and so several states are still struggling to approve a budget for next year.
  • Even if the recession were to quickly end, states would continue to experience budget shortfalls for many years because of high unemployment, lower tax collections, and increased demand for government safety net programs.

Facts & Figures

  • In the 2010 fiscal year, states will have a $121 billion budget gap.
  • Budget schemes include taxing candy and cellphone ring tones, releasing prisoners early, increasing sales taxes, selling state parks, and having state workers work for free three days a month.
  • Governors have proposed increasing taxes by roughly $24 billion dollars for the 2010 fiscal year.

Best Quote

“We still don’t know how bad it will be. The story is yet to be told, because in the next couple of weeks we will see some of the states with the biggest gaps have to wrestle this thing to the ground and make the tough decisions they’ve all been dreading.” – Susan K. Urahn, Managing Director of the Pew Center on the States

Breathe In, Breathe Out, Breathe In, Breathe Out… Overreacting During Difficult Times

Tuesday, June 23rd, 2009

Making investments can sometimes be stressful. Now add a recession and you might be swept up in some pretty powerful emotions. If you feel yourself feeling this way, you should check out what several respected financial psychologists have to say.

  • During stressful times (like a recession), people’s tendency to react emotionally to a situation is greatly exaggerated. Emotionally charged investment decisions usually do not lead to higher earnings.
  • Behavioral finance tries to understand how people react to stressful situations and how they affect people’s investment choices.
  • These ‘biases’ are hard to overcome – we are emotional beings, but understanding how emotions influence decision-making can reduce the degree and scope of their impact.

Facts & Figures

  • The ‘anchoring’ bias is where an investor gets too attached to an asset and cannot make practical decisions involving it.
  • The ‘loss aversion’ bias is where investors do not sell a falling asset because they would be acknowledging the loss.

Best Quote

“What was a great trait for surviving and thriving in the jungle doesn’t work so well in the stock market.” – Brad Klontz, Financial Psychologist.

Behind The Mask Lies A Friendly Face

Tuesday, June 23rd, 2009

Who knew that being unemployed was a superpower? This write-up describes people who have turned a frustrating, unfortunate situation into an opportunity to do something… super.

  • With the current economic downtrend, many of those who have lost their jobs are taking value in what they can do as opposed to what they have and are helping out in communities, having been labeled as “real-life superheroes.”
  • Some are completely dressed from head to toe in a cape and a mask while many just go out as regular citizens. Reactions from the public have been mixed; some see these superheroes as losers, but many respect them.
  • Although without super powers these superheroes are somewhat limited in what they can do, many help the homeless and patrol high-crime neighborhoods.

Facts & Figures

  • Estimates place the number of real-life superheroes between 250 and 300.
  • The superhero movement started on Myspace as fellow comic enthusiasts joined forces.
  • Homeless outreach is the most common form of help these superheroes undertake; one group raised $700 in gifts and brought them to St. Mary’s Children Hospital in New York.

Best Quote

  • “The movement is growing.” – Ben Goldman, historian of real-life superheroes

Dissecting the Past, Planning for the Future

Wednesday, June 17th, 2009
This is a great article if you want to understand where our current deficit comes from. The article strikes down many common misconceptions about the deficit and supports it all with well-presented data.
  • The national deficit puts the U.S. economy in an extremely precarious position because we are dependent on foreign lenders to pay for it.
  • The Obama administration maintains that health care reform is the key to eliminating the deficit. However, the administration is not promoting the kind of reforms that would most effectively decrease the debt.
  • Health care reform alone will not eliminate the national debt. No matter what solution is ultimately reached, it will have to include spending cuts and tax increases.

Facts & Figures

  • 2001 estimates for the years 2009-2012 was an $800 billion surplus per year. Today, the estimate is an annual deficit of $1.2 trillion.
  • The debt comes from four main sources: 37% from the business cycle, 33% as a result of the policies of George W. Bush, 20% from President Obama’s continuation of several of those policies, and 10% from new policies of Obama’s.
  • Obama’s goal is to achieve a deficit equal to no more than 3% of the GDP in the next five to 10 years, but current estimates are at least a 4% deficit.

Best Quote

“Bush behaved incredibly irresponsibly for eight years. On the one hand, it might seem unfair for people to blame Obama for not fixing it. On the other hand, he’s not fixing it. And not fixing it is, in a sense, making it worse.” – Alan Auerbach, Economist at the University of California, Berkeley

Housing Prices: How Low Can They Go?

Friday, June 12th, 2009

There are more markets than the stock and bonds ones and they are pretty important too. Housing markets are a key indicator of the economy’s health, so obviously you can’t pass it up.

  • Housing markets take longer to rebound after recessions even if other markets recover quickly.
  • Personal housing decisions don’t often follow the fluctuations of the housing market, but instead reflect personal and economic factors – the majority of people does not constantly sell or buy housing every time the price changes.
  • A significant upswing in the economy may reverse this downward trend, but it will most likely have little effect unless attitudes towards home ownership change significantly.

Facts & Figures

  • Prices have been declining for three years and are projected to fall 41% from 2006 through 2010.
  • Current market prices are encouraging people to sell their homes while not stimulating new demand for housing: a large supply with little demand.
  • Following the 1990-91 U.S. recession, housing prices didn’t move upwards till roughly six years later.
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