Stocks sink on recession fears

Stocks slumped Thursday after comments from Fed chair Ben Bernanke on the banking sector and weak reports on economic growth and the jobs market revived worries about a recession.

The Dow Jones industrial average (INDU) lost 0.9%, while the broader Standard & Poor's 500 (SPX) index fell 0.9%. The Nasdaq composite (COMP) declined 0.9%.

GDP. A revised reading of gross domestic product, the broadest measure of the nation's economic activity, showed fourth-quarter growth remained at the same tepid 0.6% rate initially reported. Economists surveyed by Briefing.com thought growth would be revised up to 0.8% in the quarter.

Jobless claims. Separately, the number of Americans filing new claims for unemployment rose unexpectedly to 373,000 last week from a revised 354,000 in the previous week. Economists expected 350,000 new claims.

Financials fall. The financial sector led the stock downturn after weak earnings from mortgage lender Freddie Mac and comments from Bernanke that while large U.S. banks will likely recover from the recent credit crisis, smaller, regional ones could fail.

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Chairman of the Fed, Ben Bernanke made comments on the banking sector, and these comments alon with bad GDP, the decreasing value of the dollar, and the increasing of oil and gold prices, have caused stocks to slump and the fear of an oncoming recession to increase. The Dow Jones, S&P 500, and NASDAQ all declined .9% and according to Bernanke, these problems are not going to go away any time soon.

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Oil hits new record

Crude prices rebounded Thursday, shooting up nearly $3 a barrel to another new record as a falling dollar and the prospect of lower interest rates attracted fresh money to the oil market. Retail gas prices, meanwhile, rose closer to records above $3 a gallon.

A pair of dismal economic reports Thursday drew more money into the oil market, as did Federal Reserve Chairman Ben Bernanke's comments that the economy is not immediately threatened with stagflation, a combination of economic weakness and rising inflation. The Commerce Department said gross domestic product grew at only a 0.6% rate in the fourth quarter, below estimates and at only a fraction of the previous quarter's growth rate, while the Labor Department said applications for unemployment benefits rose by 19,000 last week, more than expected.

Rather than viewing such news as bad for oil demand, investors chose to see it as confirmation of their beliefs that the Fed will continue cutting interest rates to try to shore up the economy. Interest rate cuts tend to weaken the dollar, and crude futures offer a hedge against a falling dollar. Also, oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

Light, sweet crude for April delivery rose $2.95 to settle at a record $102.59 a barrel on the New York Mercantile Exchange. Prices continued rising after the Nymex closed, setting a new trading record of $102.97.

Crude prices are within the range of inflation-adjusted highs set in early 1980. A $38 barrel of oil then would be worth $97 to $104 or more today, depending on the how the adjustment is calculated. A direct comparison with daily Nymex prices is difficult because historical data, gathered before the crude futures contract was created in 1983, are based on average monthly prices posted by oil producers.

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On Thursday, the price of crude oil rose to an all new record high of almost $3 a barrel, and gas prices rose to around $3 a gallon. Crude oil prices are reaching all-time highs because the worth of the dollar is continuing to drop and because of the possibility of decreased interest rates. It is expected that the Fed will continue to cut interst rates in hopes of helping the economy as a whole. Lower interest rates tend to lower the value of the dollar, and crude futures help prevent the dollar from falling too much.

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Wholesale Prices Surge in January

Inflation at the wholesale level soared in January by the fastest pace in 16 years, pushed higher by costs for food, energy and medicine.

The Labor Department said Tuesday that wholesale prices rose 1% last month, more than double the 0.4% increase that economists had been expecting.

The worse-than-expected performance was certain to capture attention at the Federal Reserve, which has chosen to combat a threatened recession by aggressively
cutting interest rates in the belief that weaker economic growth will keep a lid on prices.

But the combination of rising inflation and weaker growth raises the threat of "stagflation," the economic malady that plagued the country through the 1970s, when a series of oil shocks left households battered by the twin problems of stagnant growth and rising prices.

Read the full story here.

This article concerns the rising inflation rates that the United States's economy has been experiencing. This increase is attributed to rising costs for food, energy, and medicine. This article also addresses the Federal Reserve's attempt to avoid a recession by drastically cutting interest rates hoping that the "weaker economic growth will keep a lid on prices." Because of these two decisions, there are concerns that the United States's economy will become stagnant, a fear they called "stagflation." There has also been an increase in wholesale prices which the government is going to attempt to fight with one of the previous mentioned methods. The Federal Reserve's role in fighting the stagnation, inflation, and interest rates shall be evident in the next few months to see the measures they take to change these three problems the United States's economy is experiencing.

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Dollar Hits Record Low Versus Euro

The dollar sank to a new low against the euro after the release of three disheartening economic reports Tuesday.

The dollar also hit floating-era lows against the Brazilian real and New Zealand dollar, or "kiwi."

The 15-nation euro leaped to $1.4982 before settling at $1.4967, its previous record, in late New York trading. On Monday, the euro was worth $1.4825. The euro's previous high of $1.4967 was set on Nov. 23.

The New York-based Conference Board said its Consumer Confidence Index fell to 75 in February from 87.3 in January, the index's lowest level since February 2003. The reading was below analysts' expectations.

Read the full story here.

This article addresses the recent economic report that was released regarding the value of the American dollar and the euro. According to the article, the dollar hit an all-time low compared to the euro, the Brazilian real, and the New Zealand dollar ("kiwi"). Also the Consumer Confidence Index has fallen to seventy-five which is an all-time low since February 2003, dropping from 87.3 in January. Also the inflation rate has increased by one percent which is more than anticipated; this rise is contributed to the rising oil and food costs. This article shows the fluctuation of the United States's economy. It is the government's "job" to make the economy achieve more stable levels, so the government should attempt to implement policy to allow this to occur.

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Credit crisis hits Main Street

Wilkes-Barre, which suffers from a weak BBB credit rating, depends on bond insurance to issue municipal bonds at favorable rates. If Ambac were to lose its AAA rating and its credibility, it could mean higher taxes, fewer services and lost jobs for the people of Wilkes-Barre.

"Without affordable funding, projects don't get built, streets don't get repaved," Leighton said.

"It affects the people driving on those roads and the people paving those roads."

The credit crisis that began in the subprime mortgage market last year has now spread to municipal bonds. Governments and public authorities face steep increases in borrowing costs because investors are losing confidence in the credit markets and the companies that insure the debt.

Public officials nationwide are now weighing whether to restructure their debt to lower rates - if they have good enough credit ratings - or to ride out the storm with the hope that investors will return. However, some are concerned they may have to raise taxes or cut services to balance their budgets.

This spike in borrowing costs comes at a time when governments can least afford it. Many are already facing a budget squeeze from the national economic downturn. The drop in housing prices and sales and increase in foreclosures mean they are taking in less revenue from transaction fees and property tax revenue. On top of that, the pullback in construction and consumer spending translates into fewer sales tax dollars.

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Because of the struggling bond market, municipal borrowing has become more expensive . This

problem will more than likely result in increased taxes and fewer services. Many larger governments have faced unexpected interest rate spikes when auctions of their debt drew no bidders. The interest rate on this debt is variable so it increased after the auctions failed. This lack of faith in the bond insurers is wreaking particular havoc on smaller and weaker municipalities as well. More money is being given toward interest expense, therefore, less is being allocated elsewhere. A solution to the problem may be to reduce the use of bond insurance.

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The 44th president's $4 trillion headache

According to the Congressional Budget Office (CBO), the annual budget deficit will improve during the next president's four-year term and end in a surplus of $61 billion by 2013.

But that baseline projection is based on financial assumptions that no one expects to pan out. Two of the biggest roadblocks threatening to upend budgetary nirvana: What to do about the looming expiration of tax cuts enacted in 2001 and 2003, and the growing cost of fixing - or nixing - the Alternative Minimum Tax (AMT).

Depending on how you address them, those two factors alone could add close to $4 trillion to the federal budget deficit by 2018, according to estimates by the Tax Policy Center.

Add in the costs of the wars in Iraq and Afghanistan and the growing costs of Medicare and Social Security, and you end up with something more like a budgetary nadir.

"A substantial reduction in the growth of spending, a significant increase in tax revenues relative to the size of the economy, or some combination of the two will be necessary to maintain the nation's long-term fiscal stability," the CBO warned in a recent report.

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Due to many factors, most notably the looming expiration of tax cuts enacted in 2001 and 2003, and the growing cost of fixing the Alternative Minimum Tax, the federal budget will be at a deficit of around 4 trillion dollars by 2018. The next president must act on this problem by reducing spending, increasing tax revenues, or a combination of the two. Experts don't believe that any of the presidential candidate's plans will help with this issue although each candidate has said that his/her proposals are fiscally responsible and, at the very least, will not add to the deficit.

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Windows Vista boast a more streamline monitor display, improved hardrive, and many myriads of new software. It also carries the lie that many computers are Vista capable, when in fact they cannot handle most of Vista's new programming, as stated below.

"The lawsuit said Microsoft's labeling of some PCs as "Windows Vista Capable" was misleading because many of those computers were not powerful enough to run all of Vista's features, including the much-touted "Aero" user interface.

U.S. District Judge Marsha Pechman certified the class action suit but whittled down its scope to focus primarily on whether Microsoft's "Vista Capable" labels created artificial demand for computers during the 2006 holiday shopping season, and inflated prices for computers that couldn't be upgraded to the full-featured version of Vista, which was released at the end of January 2007."

In Microsoft's defense, neither of the two participants in the lawsuit attempted Microsoft's recommended program designed to help upgrade their computers to Vista. Although they still argued that those who used older computer models suffered from being able to use only a basic version of Vista, the judge ruled that unless a plaintiff who had used the upgrade program, yet still suffered from the same results as these two, was found, they could not continue with this course of action

The entire argue can be viewed at CNN.com here

- Brady Ayres. (Grade this post, or if it's too late, this is my first post for next week.)

Starbucks slashing 600 office jobs

SEATTLE - Starbucks Corp. said Thursday it has laid off about 220 support staff who worked at the coffee retailer's headquarters and in field operations, and will leave about 380 open jobs unfilled.

Chairman and Chief Executive Howard Schultz announced the 600 job cuts in an e-mail to Starbucks' more than 170,000 employees, calling it a difficult decision aimed at sharpening the company's focus on customers.

"We realize that we are operating in an intensely challenging environment, one in which our customers and (employees) have extremely high expectations of Starbucks," Schultz wrote. "And we have to step up to the challenge of being strategic as well as nimble as our business evolves. Unfortunately, we have not been organized in a manner that allowed us to have a laser focus on the customer."

Entire Story

Cutting jobs is definitely an indicator of decreased demand and therfore decreased sales in a market. Competitors in the coffee industry are doing consumers a service by challenging the $5 cup of coffee that Starbucks sells on a regular basis which is hardly a variant of the competitors. Now Starbucks must take necessary action in order to regain another edge, besides the ubiquitous Starbucks logo. Howard Schultz, the CEO, iniated the cutting of jobs: reducing the costs of production. If demand goes back to normal or better, then the managerial step was a success even at the expense of people's jobs. Hopefully because of the increased competition, consumers will see Starbucks lower their prices but probably increase adverstising, a nonprice form of competition, will occur.

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Spring training grows up into big business

VERO BEACH, Fla. - On a February morning, where the sky and the “Welcome to Dodgertown” sign are both etched in blue, more than 100 fans congregate behind a rope off Vin Scully Way. Their eyes stare at the wide hill, where five pitchers hurl balls at fully equipped catchers, over and over again. Nearby, other pitchers and catchers lie on their bellies and stretch on grass as finely cut as a putting green.

The languid atmosphere belies the fact that this time next year, the Los Angeles Dodgers — who have trained at Vero Beach since 1948, the year after Jackie Robinson broke the color barrier — will get in shape at a new facility costing more than $80 million in Glendale, Ariz., one they’ll share with the Chicago White Sox.

Once a six-week haven where little thought was given to maximizing revenue, spring training, more and more, is becoming a big business. Exhibition homes of the Toronto Blue Jays and St. Louis Cardinals are among those boasting luxury suites (air-conditioned ones at the Cardinals’ Roger Dean Stadium in Jupiter, Fla.). State-of-the-art merchandise stores attract shoppers in no rush except to load up on their favorite teams’ souvenirs. Video scoreboards at places like Bright House Networks Field, home of the Philadelphia Phillies in Clearwater, Fla., are becoming the norm rather than the exception.

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There is no doubt that Major League Baseball teams bring a multitude of economic stimuli, but spring practice as well. Obviously, the demand to see these athletes is high enough to create tickets sales that are beginning to mirror regular season games. Speaking of economic impact, the article notes the $300 million economic spark from the Super Bowl in Glendale; hardly equal, preseason sales from the White Sox and Dodgers could produce a potential $19 million contribution to Glendale. The demand of the entertainment of professional sports continues to produce fans willing to spend money and stimulate the economy in spite of the"harshness" of the current "receesion."

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Research In Motion Ltd., maker of the BlackBerry e-mail phone, climbed the most in four months after saying subscriber gains in the current quarter will exceed its original projection by as much as 20 percent.
Customer gains will amount to as much as 2.18 million instead of the 1.82 million the company predicted in December. Total subscribers will climb to about 14 million by the end of the quarter, Waterloo, Ontario-based Research In Motion said today in a statement.
The BlackBerry sold better than expected over the holidays, winning corporate and consumer clients, Co-Chief Executive Officer Jim Balsillie said in the statement. New models with video and music players fended off competition from Apple Inc.'s iPhone and e-mail devices from Nokia Oyj and Motorola Inc.

Read more at http://www.bloomberg.com/apps/news?pid=20601103&sid=as7lKuWooZT4&refer=us.

Motion Ltd., makers of the BlackBerry phone claim that the phone sold better than they had expected and predict that subscribers will reach 14 million by the end of the quarter. The BlackBerry had the most United States shipments with 41 percent market share, while Apple's iPhone had 28 percent and Palm Inc., maker of the Treo, had 9 percent. As the testaments about the company's good services grow, so are their buyers. This article relates to economics because it deals with supply and demand and expansion of a company.

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Industrial Production Up Slightly

Industrial production grew slightly in January, according to a report released Friday by the Federal Reserve.

Industrial production rose 0.1% in January from the previous month, meeting the growth expectations of economists surveyed by Briefing.com.

Capacity utilization for all industries, a measure of operating rates for the nation's factories, remained flat at 81.5%. Economists had expected utilization to slip to 81.4%.

Industrial production has been volatile over the last year, registering up and down growth since January 2007.

Read the full story here.

This article addresses the various effects that the declining economy is having on various types of production. According to the article, while some industries did see increases (industrial production and production of consumer goods), others have seen a serious decline in productivity (production of appliances, furniture, and carpeting and automotive production). This shows the staggering effects that the economy can have on various aspects of life in the United States. If the economy continues to worsen, there will most likely be even less productivity which can eventually lead to a loss of jobs which is harmful for the economy. Therefore, immediate action must be taken so that the United States will not see this destruction come about.

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Oil Muscles Past Faltering U.S. Economy

There was a time when oil prices needed the backing of a strong U.S. economy to reach record levels, but oil prices hit all-time highs again Wednesday even as a recession looms.

Clearly, a strong economy is still necessary to keep oil prices high, but it seems the United States is no longer oil's main driver.

"The really strong economy is on the other side of the world," said Peter Tertzakian, chief energy economist at ARC Financial, a Calgary-based private equity firm.

Read the full story here.

This article addresses the recent rise in the cost of a barrel of oil for the United States. According to the article, the US is losing its status as the "main driver" of the price of oil because of its weakening economy. This article also compares the anticipated growth of the United States's economy (1.8 percent) with that of the developing countries (an average of eight percent). This shows the staggering stagnancy that has developed in the US's economy. This article also compares the prices that United States's consumers are paying for gas with the prices others are paying. (The US price: $3. European price: $7. Chinese price: $2.65. Indonesian price: $1.82. Iranian cost: $0.42. Saudi Arabian cost:$0.45.) This comparison shows the amount of taxes the United States is paying for oil, and it also represents the severity of the inflation occurring in the United States.

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Wal-Mart Profit Rises, Revenue Up

Wal-Mart Stores Inc., the world's largest retailer, said Tuesday its renewed focus on low prices paid off with a 4 percent rise in profit for its fourth quarter as holiday shoppers bought discounted groceries and home electronics as well as health and wellness products.

International growth also helped boost profit and sales. Stores in 13 countries outside the U.S. accounted for about 25 percent of total company sales in the quarter, up from 23 percent a year earlier.

Wal-Mart said net income in the quarter ended Jan. 31 rose to $4.096 billion, or $1.02 per share, compared to $3.94 billion, or 95 cents a share, a year earlier.

Net sales grew 8.3 percent to $106.27 billion, helped by 18.8 percent international growth and 5.0 percent growth at U.S. Wal-Mart stores. Overall revenue including membership fees rose to $107.43 billion from $99.078 billion a year earlier.

Read more at http://news.aol.com/business/story/_a/wal-mart-profit-rises-revenue-up/n20080219100309990029

This article is about Wal-Mart's rising profits and international growth. The net income has risen from $3.94 billion to $4.096 billion this year (recorded at the end of January) from the previous year and net sales have increased 8.3 percent. Wal-Mart's growth relates to economics because their "price leadership" strategy of selling products at lower prices paid off in the long run while the economy was low. (The picture is Sam Walton's original "five and dime" store before it grew into what Wal-Mart is now).

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What is Happening?

Good job, Allison and Robert.

Pat, follow the rubric.

Brady, I am glad you found the time.


Natalie and Handley are you going to participate?

Goodbye gasoline? Not so fast

Gasoline use over the next two decades is expected to soar as developing nations get richer and more people there buy cars, but gas alone won't be able to shoulder the burden.

Along with their surging economies, the number of cars in India and China is expected to jump to 1.2 billion by 2050 from 20 million just a few years ago.

"Will oil be able to supply this increase in demand?" Jim Dalton, a director at Cambridge Energy Research Associates (CERA), asked at the group's annual energy conference here in Houston.

It will certainly supply a lot of it, he said. Dalton expects oil use in the worldwide transport sector to jump 50% by 2030. But it will need some help to meet the world's energy needs.

Experts here say the fuel mix of the future must rely not just on gasoline, but a variety of sources - everything from biofuels and electric power to synthetic fuels, natural gas and greater efficiency will all help meet this growing demand.

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Despite the invention of hybrids and new technology being put in to use to limit the amount of gas needed for vehicles, gasoline use is expected to increase tremendously over the next twenty years. Because the economies of countries in the east, like India and China, are surging, the number of vehicles in use are also expected to surge. This will make it difficult to supply all the vehicles in use with oil and gasoline without implementing new methods of running our vehicles. Two possible sources of energy that could run our vehicles include the biofuel solution which is a corn-based ethanol, and electricity and the plug-in hybrid.

(Grade this post)

Personal-finance lessons from George Washington

He led our fair nation to freedom, and his face stares at us from the ubiquitous $1 bill. He's none other than George Washington, the first president of the United States.

As one of our first elder statesmen, Washington left a wealth of memorable quotes, many of which apply to personal finance. He spoke much about integrity and character as well as discipline and service -- characteristics important in establishing a sound personal-finance life.

Let's take a look at the following nine quotes:

"Associate with men of good quality if you esteem your own reputation; for it is better to be alone than in bad company." With whom you spend your time affects how you behave, and that's certainly true when it comes to spending habits. If you want to save, hang out with frugal people. If you want to be financially savvy, hang out with financially savvy people. How many stories have you heard about people looking to save money but always going out to expensive restaurants and trendy bars with their friends? There are a lot of ways to have fun that cost very little. (Have a board-game night.) If you want to save up a few bucks, hang out with friends who appreciate not going out to expensive places. Don't fight the current; just find a more favorable current.

"Be courteous to all, but intimate with few; and let those few be well tried before you give them your confidence." When applied to personal finance, this speaks to how you should select any sort of adviser. Finances are very personal and, while you should give each adviser a chance, be very particular whom you trust with your treasure.

Read More at: http://blogs.moneycentral.msn.com/smartspending/archive/2008/02/12/personal-finance-lessons-from-george-washington.aspx

In the article, a man interprets quotations from George Washington in relation to personal finance. The wise first president touches on subjects such as who you should take financial advice from, the effect of money on people, and how you should treat fellow money spenders/savers. Interesting enough, the man on the $1 bill, obvisiously the most omnipresent piece of paper in America, imposes a consevative approach - spend to obtain what you need, stay out of debt. The author does stretch a few of Washington's words, but for the most part, they offer fitting advice for anykind of money spender and saver.

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Economy: Recession, or not?

Constantly, the news is plagued by the now redundant claims of a recession. CNN, NBC, and Fox economists have repeated the same song and dance: we're not in a recession yet, but mark my words, it's coming. Or is it? Treasury Secretary Henry Paulson, left, and Federal Reserve Chairmen Ben Bernanke, right, predict otherwise.
The two devoutly stated following the economic readings that have Wall Street in fear of a recession that while the economy was trouble, there was and is no danger of a recession. Both used the recent interest cuts by the and the economic stimulus order signed by President Bush for $170 billion dollars inserted into the economy. However, dark clouds still loom on the horizon.

As said by Bernanke: "More expensive and less available credit seems likely to continue to be a source of restraint on economic growth." Because of good capital bot the Secretary and the Chairman doubt a downturn of any kind. Rather both, both expect that it is merely a dip before a hill. The Council of Economic Advisors predicted a total of 2.7% growth by the end of the year, although the current forecast by the Fed is a considerably lower 1.8%. Bernanke stated that an updated forecast is soon to come. And with the two interest cuts by the Fed, totaling 1.25%, many have begun to support the two. The following is an excerpt from the article at CNN.com in which Paulson pleads his cause to the Senate.

"Sen. Robert Menendez, D-N.J., pointed out that Goldman Sachs is one of the growing number of investment banks forecasting a recession this year and suggested that Paulson and Bernanke "hit the snooze button" when alarm bells about the economy first went off last year.

Menendez said he wasn't trying to talk down the economy, but that he was looking for "honest assessments" from Paulson.

Paulson bristled at the comments, telling Menendez, "If you're trying to talk the economy up, I'd hate to see you talk it down."

Menendez shot back, "I'm just trying not to hide my head in the sand."

"I'm not either," responded the Treasury Secretary.

The two also were asked to explain why investments in many major banks and Wall Street firms by sovereign wealth funds should not be a concern.

Sovereign wealth funds - large pools of money controlled by foreign countries - have taken stakes in recent months in Citigroup (C, Fortune 500), Merrill Lynch (MER, Fortune 500) and Morgan Stanley (MS, Fortune 500).

Paulson said these investments are an important endorsement of the U.S. financial system and that they do not pose a risk of foreign governments having undue influence on major banks here.

"I think we need to be vigilant. I don't think we need to be fearful," said Paulson." (CNN.com).

In the above passage, Paulson defends the investment of foreign companies into American banks, saying that any such stimulus can only be beneficial to the economy, rather than spark a doomsday recession prophecy.

Paulson and Bernanke's overall point is that the current slide in the economy will be inevitably followed by a "slow growth." Confident of the recent stimulus plan, the two repeatedly state their lack of fear in regard to a recession. Below is a link to a CNN clip involving the current state of the Wall Street Exchange as well as commentary of Bernanke's and Paulson's meeting with the Senate Banking Committee.

CNN News clip.

The full article detailing Henry Paulson and Ben Bernanke's economic crusade can be viewed here.

- Brady Ayres. (Grade this post, please.)

In Search of an Insurance Policy

Preventing a global downturn is too big a job to be left just to American policymakers

IT IS not hard to worry about the world economy. America is either in, or perilously close to, recession, and other rich economies are weakening as the credit crunch tightens. In its new forecast, the International Monetary Fund expects global growth to slow from 4.9% last year to 4.1%: rich countries will manage only 1.8%. But that could prove optimistic. Since this slowdown came from a financial bust, the outlook is particularly uncertain. Nobody knows what financial calamities lurk under the surface or by how much credit will shrink. But one thing is clear. By adopting very different stances to the threat, policymakers are not helping to assuage the uncertainty.

In America politicians and central bankers are focusing on policy stimulus. The Federal Reserve has cut short-term interest rates by 1.25 percentage points in recent weeks, to 3%. Financial markets expect another half-point cut at (or before) the Fed's next meeting on March 18th. This week George Bush signed into law a package of tax rebates and temporary investment incentives worth $152 billion, or just over 1% of GDP.

One reason for this frenetic activity is undoubtedly politics. The prospect of elections in November explains why a fiscal-stimulus plan was agreed upon in record time. But there are two better reasons. There is, simply, the short-term need to respond to the downturn: employment is falling, consumer spending flagging and credit conditions tightening. But there is another rationale: both the Fed and the Treasury believe that by giving a stimulus now, they will minimise the odds of a nasty financial crisis and deep recession. This is their insurance policy.

Read the rest at:

http://www.economist.com/opinion/displaystory.cfm?story_id=10689567

The article reviews the fiscal/insurance policies of not only America but also Britian, Mexico, Russia, Canada, etc. Is it up to these countries, especially America, to panic and adjust when the rest of the world is faltering economically? No. The article says other countries should adopt a fiscal policy like that of America's - not perfect but fitting - plan to boost their independent economies. The trend of recession is not just barely visible only in America but of other countries who have produced entirely below their potential. The author of this article declares that America (the watchdog of the world) has found his collar too tight with struggling to lift foreign markets as well as its own.

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White House: Unemployment to stay near 5%

The Bush administration's top economists see annual unemployment remaining just below 5% through 2013, meaning an extended period when the jobless rate would top the full-year average in six of the last 10 years.

The annual outlook of the president's Council of Economic Advisors, released Monday, also projects that the economy will keep growing this year and avoid a recession. In fact, real gross domestic product is forecast to rise by a healthy 2.7% when comparing the fourth quarter of this year to a year earlier.

But the report projects the full-year unemployment rate will rise to 4.9% in 2007, up from 4.6% each of the last two years. And it expects the unemployment rate will stay at the 4.9% rate in 2009 before starting to retreating slightly to 4.8% in each of the following four years.

Read the full story here.

This article addresses the projected economy for the United States. According to the article, unemployment is projected to remain under 5% until 2013. Also according to Edward Lazear, there have been policies and legislations implemented that will hopefully keep the economy on the projected forecast. The Council of Economic Advisors sees soft job growth for the next six years. President Bush supports and has shown excitement about the new legislation that will give most taxpayers hundreds of dolalrs in tax rebates. Bush also asserted that the economy is sound for the long run, but there are uncertainties for the short run. This assertion shows that the government has made decisions to boost the economy in the long run, but now they must take action that will impact the economy in the short run as well.

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Bush: Economy faces risks but foundation sound

President George W. Bush said on Monday the U.S. economy was currently facing heightened risks, but its foundation was solid and its long-term outlook was strong.

"This report indicates that our economy is structurally sound for the long-term and that we're dealing with uncertainties in the short-term," Bush told reporters after signing his annual economic report to Congress.

The report did not alter the White House forecast that the U.S. economy would grow 2.7 percent in 2008, a far rosier picture than private-sector economists who have predicted growth of just 1.6 percent this year.

Read the full story here.

According to this article, President Bush believes that the United States's economy is stable for the long run, but does face some risks for the short run. The government has created a stimulus package amounting to $152 billion that supplies tax rebates and business incentives in order to lower the risk of a recession. Bush plans to sign the stimulus package on Wednesday, February 13, and rebates should begin going out in May. This article also focuses on external relations with other nations that can boost our economy, such as free trade agreements with Colombia, Panama, and South Korea. This article concludes with the assertion that we must just allow the economy to adjust and that there is no need to panic. This shows that the United States has learned from the past, as in the Panic of 1907 and the Great Depression. It is best to allow the economy to adjust and level out itself, rather than panicking and taking such drastic measures as withdrawing all of your money from an account. If we all panicked, there would be the possibility of a similar occurrence as the Great Depression.

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Downward Revisions Characterize the Short-run Outlook for Growth

The forecasters have cut their estimates for growth, but their revision is minor and largely confined to this year’s fourth quarter and next year’s first quarter. Growth this quarter will average 2.5 percent (annual rate), down just 0.1 percentage point from the previous estimate of 2.6 percent. Larger revisions (-0.2 percentage point) characterize the following two quarters, when growth is now expected to average 2.7 percent. Year over year, growth will average 1.9 percent this year, down from 2.1 percent in the last survey. The forecasters see growth rebounding, to 2.8 percent, in 2008.


Downward revisions to output growth are not translating into deteriorating conditions in the labor market. The unemployment rate is seen averaging 4.6 percent this year, unchanged from the estimate in the last survey, and 4.7 percent next year, down from 4.8 percent previously. Moreover, the forecasters are raising their estimate for monthly job gains this year, to 156,000 from 151,000 previously. Next year, payrolls will increase at a rate of 118,000 per month, down just a bit from the estimate of three months ago.


The accompanying charts provide some information on the degree of uncertainty the forecasters have about their views on year-over-year growth in real GDP in 2007 (see Chart) and 2008 (see Chart). Each chart presents, for the current and previous survey, the forecasters’ are raising their estimates of the probability that growth will fall into each of six ranges. The forecasters are raising their estimates of the probability that growth in 2007 will average either 1.0 to 1.9 percent or 2.0 to 2.9 percent, but they are cutting their estimates of the probability that growth will average even more. Their probability estimates for growth in 2008 are little changed from the estimates in the last survey.

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The article gives and explains the numbers and percentages, involving growth, unemployment, and real GDP growth, that economic forecasters have predicted for 2008. In 2007, overall growth was predicted to decline from 2.1% to about 1.9%, but growth is expected to rise to around 2.8% in 2008. In 2008, unemployment rate is expected to bel lowered and mor monthly jobs will be made available. The growth of real GDP is not expected to change much as seen in the charts.

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