November 2006 - Posts

• Unemployment insurance claims

  The number of unemployment insurance claims rose 34,000 during the week that ended the 25 of November in relation to the week before, completing a total of 357,000 claims, according to the labor department. Analyst expected 316,000 claims for last week. This is but one more sign that the economy is slowing down adding to the number of indicators that point to a possible recession next year. Posted Nov 30 2006, 05:40 PM by amparo with no comments

• The dollar going down

  The dollar dropped considerably yesterday against several major world currencies. The Euro went as far as $1.30 for the first time in a year and a half. The British pound for instance traded at $1.9317 up from $1.9156. The dollar fall could have been related to the weakness of the American Economy, meanwhile abroad other major economies continue to expand. The huge trade unbalance with China ( the largest part of the USA commercial deficit came from China) and the slowing domestic housing market are among the most important reasons about why the economy was perceived as weak. Because of Europe’s economic growth it is possible that a substantial share of foreign investment, that would that gone to the US, might be moving soon towards that sector of the world investment market (European bonds). A continue dollar drop against major world currencies will make some American companies, a cheap bargain for foreign investors, threatening to some extend our financial stability and integrity. Is curious that as we invest ungodly amounts of money abroad we loose more economic power at the core. Could it be that greed is killing us?, the more we invest in China the more powerful they get and the weaker we get, the more we practice outsourcing the worst for us. But of course a few of us are getting wealthier, they claim that if they don’t do it (invest in China) somebody else will. We have to look for new ways to become more competitive so our investors stay at home. Posted Nov 25 2006, 07:50 PM by amparo with no comments

• The price of oil

  The Italian company Eni in Nigeria was attacked a couple of days ago by a guerrilla separatist group making oil prices go up world wide. The WTI for January delivery went up 52 cents reading 59.76 a dollar per barrel. Cheap oil prices so far have been an important variable in keeping the United States inflationary rate low, this last hike however did not appear relevant enough to become a real threat to our economy. Posted Nov 24 2006, 06:09 PM by amparo with no comments

• Yahoo and newspapers alliance

  Yahoo’s alliance with seven newspapers chains, that make a total of 175 newspapers, was a sound strategic decision. Yahoo will handle the chain’s news contents and also lend them technical support. The agreement initially will allow in its first phase for Yahoo to post on internet jobs ads from the newspapers. Later on the goal is to post news contents from the newspapers too. This really was a good deal for Yahoo who has been loosing commercial and financial territory to Google lately. Posted Nov 22 2006, 06:47 PM by amparo with no comments

• Milton Friedman's death

  The death of Milton Friedman ( 94 years old) means a painful lost to the scientific community. Friedman who won the novel prize in economics work hard to improve our economic stability as well as the quality of our lives. The core of Friedman’s work and contribution was monetary supply, which he recommended as a tool to help economic growth and control inflation. He thought a healthy economy could grow gradually at stable rhythm through a good handling of monetary policy. Friedman opposed economic salaries and price controls and criticized the Federal Reserve for its interfering with the economy. “Among economic scholars, Milton Friedman had no peer,” Ben S. Bernanke, the Federal Reserve chairman, said yesterday. “The direct and indirect influences of his thinking on contemporary monetary economics would be difficult to overstate.” Posted Nov 17 2006, 05:40 PM by amparo with no comments

• The economy

  Capital investment flow fell 53 thousand an 700 millions dollars in September since the reduction of 97 thousand and 100 millions in august; according to the treasury department the amount was insufficient to finance Septembers commercial deficit, that was 64 thousand 300 millions dollars. On the other hand industrial productions mines and public service corporations went up 0.23% during October less than expected but better than September’s rate, economist in general expected a rate increase of 0.3% an not of 0.23%. September’s 0.6% rate fall reflected a pronounced negative outcome that most analyst did not expect. Also employees real earnings income went up 1.3% in October. In spite of the salary increase inflation will probably stay stable since oil prices are relatively low. Posted Nov 16 2006, 06:20 PM by amparo with no comments

• House market

  Home construction fell 14.6% in October, its lowest rate in more than six years. On the other hand new permits went down 6.3%. Economist expected new home construction to go down to 1,690 million units in September from the original 1,772 million. The weakness of the house market took away a point of growth from our GDP during the July-September trimester, some analyst think that in spite of the slowdown in the construction building industry, it won’t be enough to trigger a recession. Let’s hope the housing industry will recover soon. Posted Nov 15 2006, 09:23 PM by amparo with no comments

• Soft Economic Landing

  November 9, 2006 A soft economic landing might be unlikely since we are so much in debt and the house market which was keeping us moving forward in the past is now going down faster than expected. The usual Keynesian approach (on the monetary side), of cutting interest rates and the approach of cutting taxes (from the fiscal side) no longer work, unless we want to increase our twin deficits which are already very large already. If looks as if we might have to go through a tough period of tightening our belts and endure an unwelcome rate of unemployment in order to balance our finances and pay back some of the money we owe Posted Nov 09 2006, 03:07 PM by amparo with no comments

• A recession in sight?

  Most Americans are not well prepared for a recession, salary earnings are not high enough and insurance coverage is also insufficient. In deed wages have not grown sufficiently in the past three years in comparison with inflation and it will be a handicap in an economic situation as the one we might be facing soon. The wealthy mean while, who has benefited of tax cuts and also of corporate profits which have been rather high, would have little difficulty facing such a difficult period. Those Americans that have taken a second and even a third mortgage will have a hard time keeping up with payments with higher interest rates, particularly if one of the members of the household becomes unemployed. Future raising unemployment could increase the amount of housing foreclosures which in turn could damage even more the Real Estate market. Posted Nov 06 2006, 06:17 PM by amparo with no comments

• Prognosis

  On the 15 of October oil prices went down 20 percent from last month to about 60 dollars a barrel. Analyst in general considered this good news, low oil prices will ease inflationary pressures on the economy while also putting more money on everyone’s pockets; this will allow sales and real spending to increase and the economy to pick up pace. Unfortunately the low oil price is itself a consequences of a lower total demand of oil due to an economic slowdown, instead of being the result of an increase on the supply side. Low oil prices in this case could be a bad omen for the economy. In deed employment in September behave rather poorly and industrial production suffered a 0.6% reduction, the largest fall it had on this year. The effect of the adjustment on the average citizens spending has yet to be felt. The housing crack has hit mostly builders while USA GDP growth slowed down to a 1.6% on the third trimester (the lowest in more than three years), but unemployment remains low and as I said before lower oil prices has helped the average worker’s budget to recover some. A 1.6% third trimester GDP rate growth, coming from 5.6% in the first and 2.9 in the second represents a fairly large drop. One can not help but to wonder if a recession is not around the corner perhaps taking place in the first trimester of next year. Although Asian and European spending and consumption will probably help the global economy not to go into a recession, the drop in American buying and economic performance will affect negatively the world’s markets. Posted Nov 05 2006, 06:48 PM by amparo with no comments

• Possible Solution

  Our economic plight A possible solution to our economic plight is to cut government spending in order to slow down inflation. At the same time we should raise taxes on upper income Americans, something which will reduce capital flow and retrain inflation by itself. On the other hand if we reduce taxes to the poor as they consume a larger part of their income than the wealthy it will increase real spending and help stimulate economic growth. Posted Nov 03 2006, 06:44 PM by amparo with no comments

• Interest Rates and the Economy

  American productivity has slow down while labor wages has increased. The problem with this two factors is that their dynamic relationships yields an inflationary raise. If inflation goes up the feds will have no other choice but to raise interest rates at least a 1/4 point, growing interest rates will have a negative effect in the stock market performance and slow down investment having simultaneously a drop in consumption and spending, helping slow down the economy still further. The labor department said that the total number of jobless claims which are adjusted for normal seasonal variations was the highest since early July creating concerns about whether the slowing economy will put pressure on companies to lay off workers. Perhaps Mr. Bernanke should be lenient and avoid raising interest rates next time, in spite of the inflationary threat, to avoid unemployment growth and a greater economic decline. Posted Nov 01 2006, 06:38 PM by amparo with no comments