What else is needed for the economy to grow

Economy is growing for the last 15 months. The president top economy advisor, Austin Goolsbee, said we need faster growth to bring unemployment down quickly. If two present growth is not enough, what is?

To figure this out we need to evaluate how productive are the people that do have jobs. productivity is the rate of growth in which companies are evolving to get more product from fewer people. Right now productivity is at four percent rate; We need to get to four and a half percent. One way to do that is to export more. This is a problem because other countries want to do the same. It's not possible for everyone to export more. Some think it's not enough and that we need more domestic spending.

The Changing Face of Foreclosures

Interest rates for a 30 year mortgage are the lowest they have been in decades. Yet, stress among homeowners continues.  Obama has tried to help out these homeowners by creating a program to change the payment plans on some their loans. However, banks are unwilling to alter loans because they fear this will cause more people to come forward claiming to be unable to pay their loan and asking for changes as well. Still, for the few loans that were changed as a result of Obama's program, homeowners are still having trouble making the payments.

Plus, foreclosures are effecting people in large metropolitan areas such as Seattle, Chicago, and Houston. These are not areas typically associated with foreclosures.

Holding Banks Accountable

Interview with Peter Swire, law professor at Ohio State University:
Peter Swire says that a way to hold banks more accountable so a bailout is not needed again in the future is to have top officials in banks sign their names to say that they have the system back under control and operating smoothly. The idea is that if they have them personally certify the banks operations, they will be more diligent to see that the bank is operating appropriately.

(What would the penalty be if an official signed their name and did not have the banking under control for their company? They're needs to be a harsh penalty to for this to work.)

Will the federal reserve actions help the economy?

Gist: To further help the economy, the federal reserve will probably buy a lot of bonds which will push interest rates down. This will allow people to buy homes which will increase the demand for construction workers. Businesses might build more factories and more jobs will be created.

Economist Steven Leaves doesn't think it will help the economy to great extent. He says that previous attempts to do that ended with banks and companies "sitting on the money" instead of using it to hire new employees. Leaves believes that the problem isn't interest rates but confidence in the economy. Other economists think it will eventually turn around confidence and companies will start thinking about hiring new employees. Furthermore, they think if the federal reserve won't do anything the economy will suffer.

Unemployment rates, are we getting better?

New jobs are created in a rate of ninety five thousand a month but this rate is just enough to prevent the unemployment rate from going up. So are we at a stable state? Not really! new jobs pays slightly above minimum wage, most of them are entry level positions in food preparation or for temp employees. On the other side, people are getting fired from a higher paying professions like construction.

TARP Expires

TARP, the Troubled Asset Relief Program, passed by Congress in late 2008 expired on October 3, 2010. The entire value of TARP was 700 billion dollars. The reason it was created was because mortgages and other bank assets were losing value fast in 2008. The idea was for the government to buy these "toxic" assets from the banks so the banks could have nice, clean balance sheets and would continue doing their job. That is, lending money. In the end, only 475 billion of TARP was used. Also, not all of the TARP money was given to banks. Some was given to the automobile industry and other industries where relief was needed. 

(It seems that a large part of the economic problem right now is that banks are unwilling to lend money. How can TARP be viewed as a success if it did not prevent what it was supposed to prevent?)

Not only little citizens hoard their money, but big companies do

Gist: There is still looking good on earning numbers. However, it is not quite the sales do the jobs but the layoff helps the expense saved on personnel.

Many big companies now is cutting their expense and hoarding the cash in case of the rainy day. Personnel are usually the primary target that can save a lot of money when there is no sales number rising up. Nobody wants to spend money so that the demand in the market is falling. When there are no demands for companies’ products, there are no jobs for people to make those products. People do not get paid so they will not be willing to spend money on anything. This cycle then will keep running over and over until the recovery arrived.

China controls the rare minerals mining

Due to diplomatic spats, China has cut exports of 17 rare minerals to Japan. These minerals are used in many high tech industries and are irreplaceable. Due to low income, mines around the world stopped mining these metals and now China controls ninety five percent of this market. China is using it as a leverage, limiting exports and demanding that companies that want the raw materials will move to china. Due to the high demand of these minerals investors want to reopen some of the closed mines around the world. Five publically traded mining companies went up fifty percent and more.

The small business jobs act to revive economy

Gist: On Thursday, the government passed the small business jobs act which expand loans to small businesses and give them tax breaks.
Heidi Moore think it will help to fix a mistake done in the first TARP stimulus to banks, where billions of dollars were given to big banks hoping that they will lend it to small businesses. The new thirty billion plan is creating a fund which will be given to banks in hope they will lend to small businesses. Small business owners said that it took too long and that this is not enough. Felix Salmon disagree. He believes that this money will be leveraged and will be translated into hundreds of billions of dollars in landings to small businesses.

Brazil - top five oil suppliers in the world in five years.

An oil company in Brazil, Petro Brass, raised more than seventy billion dollars, a new world record. Big part of the money will go to deep water drilling. Investors are looking at the BP spill as a onetime incident and not as a proof that deep water drilling is unsafe.
Five years ago Brazil found one of the world's largest oil deposits along its coast. Analysts believe that in five years Brazil will become one of the top five oil suppliers in the world. Brazil hopes to use the money to fight poverty.

Unemployment Effects on the Elections

Gist: As the elections are nearing, many people who are unemployed are much less likely to get out and vote. As a result of this economic recession, the unemployed is a large group of people: 50,000 voters just in Ohio who are part of the working class. With the working class typically voting democrat, this is likely to effect the democrats at the polls.

(I would think that if you are unemployed you would be more motivated to vote.)

Commodity Prices Rising

Gist: Recently, commodities have soared in the markets. The demand has increased from China and India and the supply has decreased because of poor crop output from unfavorable weather conditions in recent years. With most of the stock market trending flat, the commodity market is one of the view trending in one direction. Likewise, it is drawing attention from investors.

(How long can this trend last?)

China Accused of Artificially Controlling Currency

Gist: In the foreign exchange markets, the U.S. is accusing China of keeping their currency, the Yuan, artificially low contributing to the $250 billion trade gap between the two countries.

What advantage does China get undervaluing their currency?  Say a widget costs $18 to make in the US and 100 Yuan (currently $15) to make in China.  The US firm will have a tough time selling in China, all things being equal.  But if the Yuan were suddenly stronger, say 100 Yuan will now buy $20, then the US firm will have an easier time selling in China.  It works the other way, too.  The US dollar is artificially strong, so our dollar buys more Chinese goods.  This creates a big trade gap (we buy more from them than they buy from us).  US jobs are lost--at least in the short term.

Don't Trust Economists

Gist: We cannot predict the future. The Economic conditions are not predictable by using some theory models or computer calculations. Commentator Justin Wolfers , the professor from Wharton School of Business at the University of Pennsylvania, believes that economists should not be trusted.

When the weather man is wrong, we just got wet. When economists are wrong, we got Great Recession. Macroeconomists, academic economists are often building models trying to predict the next step. They failed. Statisticians try to figure out something in a bunch of numbers and make some prediction. They failed, too. No one successfully predict the 2007 recession. Those complicate economic models all failed to recognize the real world.

Economy is history. We can learn lessons from the past experience. We can make rules to prevent some situation. However, the future is unpredictable because of the changing condition by time.

The Econonmic Behind The Figures of Construction

Gist: The Commerce Department said that the housing starts were up 10.5 % in August. However, the single family building market somehow doesn’t show very good figures. Builders suffered as the government's home buyer tax credit expired, and people curtailed house-hunting. They seem to be trickling back into the market now, but very slowly. Economist Chris Christopher at IHS Global Insight said that housing often leads the way out of a recession. In fact, construction jobs have actually fallen 10%. The remaining recession helps explain that why the apartment construction is up because there are many people move out their home and into rental apartment. People are not able to pay the property loan. In addition, construction of apartment can also satisfy the demand for young people who is looking for a job and the retiring personnel.

Food pantries to help low income students

The great recession changed a lot of things in our lives. Last week we found out that 40 million people fall below the official poverty line. There is also an increase in demand for food banks. In Utah valley University, enrolment is way up as people out of work are going back to school, but tuition is up too. To help students, the state school is teaming with a local food bank and will open a food pantry funded by private donations. Food pantries exist in other universities as well. A little assistance can make the difference if a student will finish his studies. Richard Knollenberg from the century foundation said that low income student need special support and he hopes the pantries will stay after the economy improves.

Labor Market Turning Around?

Gist: The average number of new unemployment claims have been on the decline since mid-August, where it peaked.

Nigel Gault, Group Managing Director of the North American Macroeconomics Service of Global Insight, says that economists want a much larger decline in new unemployment claims to declare this as the economy recovering. Companies are still adding jobs slowly.

James Galbraith, American economist, says the economy lost over 8 million jobs in this recession. This is more than twice the number lost in the previous two recessions. The rate of job creation will have to increase dramatically to get us out of that hole.

With companies pursuing increased productivity so much it does not seem likely that they are looking to hire a lot of people.

(Why are companies so hesitant to hire more people? Labor too expensive? Not enough sales? What is the real cause of new unemployment claims?)

Gist: 67000 jobs added last month but unemployment percentage went up to 9.1%. Why are we so worried about those 9.1% and why is unemployment percentage rising?

According to Richard Moran a quarter of working adults were unemployed in one point during the recession and 9.1% are unemployed now so about one third of the US work force was affected by the recession.
The reason the unemployment number is going up is due to the fact that people are returning to look for jobs now that the job market is awaking. Up until now those people were under the radar.

Another ways to economic recovary

Gist: President Barack Obama introduced another stimulus plan for government infrastructure project which is going to cost another $50 billion.
In this section, they were going to question about whether pouring another $50 billion into stimulus after last year $800 billion in stimulus money or not. Howard Rosen from Peterson Institute for International Economics said it's time to switch the strategy from stimulating consumptions to stimulating investments. Cutting income taxes and some policies like that may be a help stoping the recession, but creating the stable empolyment can really raise the economy. However, Rober Shapiro, a commerce under-secretary in the Clinton Administration, indicate that investment-based tax credit will not drive the recovery. Business still need strong demand from market to balance the money put into investment. He recommanded the offering more support which can make the consumers feel more confident in spending.

The Real Issue in the Recession

Gist: Job loss the story of this recession. David Leonhardt, an economics journalist with the New York Times says that layoffs are the symbol of economic struggles but, they are not the main problem.

On the first Friday of every month the Labor Department releases a report with the net jobs lost and gained for the past month. This number can be very misleading. For example, last month the economy created 4 million new jobs and lost 4.1 million old jobs with a net loss of 100,000 jobs. The firing rate should not be as big of a concern as the hiring rate. In this recession, the rate of hiring has fallen much greater than the rate of firing has increased. The economy needs to create jobs. The government can help. However, they have cut back funding in education and science and research. Corporate investments are not creating much either.