Friday, June 25, 2010

6/25/10 Post

Mortgage Rates, Stocks Drop
Treasury Yields Fall Amid Hunt for Safety, Pushing Home-Loan Rates to Lowest in Nearly 40 Years.
A New Plan for Valuing Pensions
At the heart of the dispute is the way governments gauge the value of the pensions they owe future retirees in today’s dollars — a commonplace financial calculation known as discounting.
Jobless Bill Dies Amid Deficit Fears
Spooked by concern about deficits, the Senate shelved a spending bill that included an extension of unemployment benefits, suddenly cutting off a federal cash spigot opened by President Barack Obama when he took office 18 months ago.
Greece starts putting island land up for sale to save economy
Desperate attempt to repay debts also driven by inability to find funds to develop infrastructure on islands
Sanders Estate-Tax Proposal Would Hit Wealthy Harder
Under the proposal, as in 2009, the exemption would be $3.5 million for an individual, or as much as $7 million for a couple, with a tax rate of 45%. But estates with taxable assets between $10 million and $50 million would pay a 50% rate, and estates valued above $50 million would pay 55%. A further 10% surtax would apply to assets above $500 million.
Two Ships Passing in the Night: Asian Millionaires Pass European Counterparts
According to a report out by Merrill Lynch, the number of individuals with at least $1 million in investable assets in Asia surpassed the number of Europeans bearing the same distinction.
In Europe, U.S. Allies Target Defense Budgets
U.K. Is Latest to Seek 'Ruthless' Cuts, Auguring Trouble for Afghan Effort
Banks win battle for limits to Basel III
Plans by global regulators to compel banks to set aside billions of dollars in extra capital to cope with future crises are to be pared back after intense lobbying by the industry.
For Gold Investors Who Want It 'To Go'
The bull market in gold has sparked a new growth industry: providing a venue for investors to buy and store their personal stash.
Dollar Weakens Against Euro, Yen
The U.S. dollar declined against the euro and yen but gained against some other growth-linked currencies as the Federal Reserve's subdued statement on the economic outlook kept demand for risk in check.
Seeing Economic Rebound, Firms Step Up Spending
Companies are stepping up spending on equipment as the recovery that first took hold in manufacturing broadens to other areas of the economy.
U.S. economic growth revised lower to 2.7% for first quarter
First-quarter growth, originally estimated two months ago at a 3.2% annualized rate, was revised down to 3.0% growth in last month's estimate and now is down to 2.7%.
Highlights from the financial regulation bill
A 10-member Financial Services Oversight Council made up of the treasury secretary, Federal Reserve chairman, a presidential appointee with insurance expertise, heads of regulatory agencies and a new consumer protection bureau would monitor financial markets and watch for threats.
Congress reverses Medicare cuts
The House voted Thursday to reverse a 21% cut in government fees paid to doctors who treat Medicare patients.
Corporate Bond Sales in U.S. Slump 19%
U.S. corporate bond sales tumbled from $140.1 billion in March, the most since January 2009, to $32.9 billion last month amid concern among investors that the sovereign debt crisis in Europe would stifle global economic growth.

Conference Agrees on Financial Regulation Details: "We'll See How It Works..."
My first reaction to news that the Congressional conference had finally agreed on language for the financial services regulatory overhaul: numbness.
Time to Take on the Welfare State
Trillions in welfare spending will drive America to bankruptcy unless Congress puts on the brakes and encourages able-bodied adults to seek work and act responsibly.
Misc: Quote of the Day, Greece Bond Spreads increase Sharply, and Market Update
"Given the depth of the nation’s recessionary impacts on homeowners, a considerable number of customers will transition from homeownership over the next two years."
What Do Mortgage Lenders Want? is not in the interest of private sector lenders to deliberately make loans that have a high probability of default.
Not from the Onion: EPA Classifies Milk as Oil
New Environmental Protection Agency regulations treat spilled milk like oil, requiring farmers to build extra storage tanks and form emergency spill plans.
Secondary Sources: Krugman on Yuan, Home Buyer Credit, Fiscal Adjustment
...the net benefits from the home buyer tax credit were small compared to the cost.

Research, Reports & Studies
Immigration, Remmittances and Business Cycles
During recessions, established migrants are deterred from returning to their country of origin, which places an additional downward pressure on the wage of native unskilled workers. Thus, migration barriers reduce the ability of the stock of immigrant labor to adjust during the cycle, enhancing the volatility of unskilled wages and remittances.
News and Sovereign Default Risk in Small Open Economies
News shocks affect equilibrium outcomes because they contain information about the future ability of the government to repay its debt.
Confronting the Unsustainable Growth of Welfare Entitlements: Principles of Reform and the Next Steps
As government spending on means-tested welfare approaches $1 trillion per year, it is time to reboot the other poverty programs to control costs and promote greater self-reliance.
Should We Raise Taxes on the Middle Class? We Already Are
But by 2020, income tax receipts are projected to rise to 9.5 percent of GDP, even if all of President Bush’s tax cuts are made permanent. By 2030, income tax receipts will rise to 10 percent of GDP, 22 percent higher than the historical level.
Current Regulatory Developments in the United States
The danger is that politicians will not bother to learn the proper lessons of the causes of the financial crisis and will sow the seeds for the next crisis.

Graphic of the Day
Oh, To Be a Government Worker
See: Real GDP Q1 2010 revised to 2.7%
See also: New Home Sales Plunge

Economists’ Comments & Opinions
What the U.S. can learn from Canada at the G20
...President Obama would be smart take a long moment during his Toronto visit to learn some lessons from the Canadian way of growing an economy. It starts by relying on the private sector for job growth instead of government help, as Obama has so far futilely offered.
Why banks aren't afraid of reform
JPMorgan Chase and other big banks are betting that when the rules are written, they will permit the activities that banks deem crucial.
Financial Reform Bill Won't Stop Next Crisis
Until Washington takes a long, deep look at its own role in causing the financial crisis, we will have little hope for avoiding another one
A Budget Deal That Did Reduce the Deficit
Budget experts now agree that the Budget Enforcement Act of 1990, which was strengthened in 1993 by another budget deal that was opposed by all Republicans, deserves much of the credit for the subsequent improvement in the deficit, which shrank from 4.7 percent of GDP in 1992 to virtual balance in 1997 and gave us budget surpluses from 1998 to 2001.

It takes extraordinary wisdom & self control to accept that many things have a logic we do not understand that is smarter than our own. -Nassim Taleb, Twitter

Book Excerpts
"I genuinely do not know whether we will or will not ultimately survive the desperate damage our government has done to our economy. The potential power of the economy is immense, and its regenerative power in freedom is incalculably great. I am prepared to say, however, that a financial collapse is not only possible but probable unless we reverse almost half a century of irrational and unrealistic policies." -William E. Simon, A Time for Truth (1978)

"Did You Know"
Government now spends 13 times more on welfare, adjusting for inflation, than when LBJ declared the nation’s War on Poverty some 45 years ago. Welfare is the fastest-growing portion of government spending, nearly quadrupling from fiscal 1979 to fiscal 2008.