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Posts tagged ‘Federal Reserve System’

Obamacare Train Wreck Could Derail US Recovery.

The U.S. economy is gaining strength, but the Obamacare train wreck, festering problems in far away China and uncertain leadership at the Federal Reserve could derail the recovery.

No small courage will be required for good sense to finally restore American prosperity.

Here are three things that could derails a full economic recovery.


President Barack Obama is imposing the Affordable Care Act on a justifiably unwilling citizenry. The botched rollout is laying bare the absolute incompetence of the Washington bureaucracy, but that is not the worst of it.

Editor’s Note: Should ObamaCare Be Defunded? Vote in Urgent National Poll 

Many young Americans have decided that Obamacare health insurance is too expensive for their needs, and insurers face financial ruin paying claims to a less healthy population of policyholders than anticipated. They will charge higher rates in 2015 and may require a bailout.

Don’t count on Republicans winning the Senate and putting Obamacare out of its misery — the electorate may prove too cynical.

In the 2013 Virginia gubernatorial election, voters, angry about Obamacare, blamed Democrat Terry McAuliffe. Yet, he managed a narrow victory by promising free health care to 300,000 citizens by expanding Medicaid.

Lest jobs creation and growth be handicapped by an excessively expensive and bureaucratic health care system, “makers” may simply have to tell the “takers” enough is enough, march on Washington and demand radical changes.

Don’t productive Americans deserve a civil rights movement too?

China’s Banking Mess

China’s economic miracle may prove a bigger fraud than the American pre-crisis prosperity built on shabby lending and consumer spending on steroids.

Many Chinese businesses that stock Wall-Mart with unimaginably inexpensive gadgets were built on loans they can’t repay. Similarly, banks have financed provincial governments to build cities occupied by displaced farmers that have no jobs.

Beijing has raised interest rates to gradually deflate bubbles in stock and land prices, but now borrowers cannot pay those rates and banks and private lenders could face ruin.

A financial crisis won’t end the rise of China, but it would expose a great fraud: the superiority of state-directed capitalism over western democracy and free markets.

No one would be more disappointed than the collectivists at National Public Broadcasting and other liberal media, who celebrate each Chinese achievement with the enthusiasm the French cheered General Washington’s victories over the British.

The simultaneous debunking of the ACA and Chinese miracle offer conservatives the opportunity to refocus the debate in America from the shortcomings of free markets and private enterprise to helping those thrive and contribute to middle class prosperity as they did in the 1980s and 1990s.

Federal Reserve

During the financial crisis, the Federal Reserve balked at bailing out GM. The Fed could have bought the automaker’s bad debt, just as it took bad mortgages off banks’ books. Ben Bernanke pronounced assisting GM would be “industrial policy” and limited the Fed to extraordinary measures to stabilize banks and credit markets.

Obama used TARP—the Treasury fund established by President Bush and Congress—to rescue both GM and American International Group, an insurance company.

The next financial crisis well could be defined by the coincident plights of health insurance companies under Obamacare, and the sagging fortunes of American companies who invested in China’s “recession proof” economy.

New Fed Chairman Janet Yellen is well known for her very liberal political views, which not so incidentally color her economics. In a crisis, she could see the limits of Fed policy discretion very differently than Bernanke.

Using the Fed’s money printing machinery to bail out health insurance companies and Obamacare could put America on a path to inflation and corruption similar to Latin American nations during the 1970s and 80s.

It would be up to Republicans in the Senate to shut down the chamber if necessary to force hearings and compel Chairman Yellen to defend the dollar, not debase the currency.

Standing up to the failures of liberalism, when it counts, has never been politically easy—and Republicans like Speaker Boehner and Congressman Ryan are rightly the targets of Tea Party criticism.

All along, at crisis moments like these, they have capitulated. Now standing strong for America is even more difficult, but if not now then when?

Editor’s Note: Should ObamaCare Be Defunded? Vote in Urgent National Poll 

© 2013 Moneynews. All rights reserved.


Nigeria And Her Gross Domestic Poverty(GDP) By Showunmi Rex.

Whenever senior government officials score their administration excellence with the growth rate of the economy’s GDP it raises concern. It suggests they’re just making statements filled with ambiguities.

I thought for once whether the GDP means something else. If these learned adults can be so confident about the GDP growth (with a deficiency in development) then GDP meant something else that most of us misconceive.

GDP has a new meaning in Nigeria—Gross Domestic Poverty which is the product of our hardworking “Harvard trained” co-ordinator and colleagues. The reality that an average Nigerian can attest to.

In fact the growth rate of this GDP is increasing by the second. Now, it is up to 80% of the population living below $2 per day. There’s likely the possibility that before 2015 the per cent would have increased.

Maybe more companies would have folded up leaving more people out of jobs; inflation would have reduced the value of the take home pay of  both civil servants and private business employees.

Surely, the tertiary institutions would have turned out more half-baked graduates seeking non-available jobs. And Banks in a bid to make profits as well as meet up with their capital base would have laid off more workers and deny more loans or with outrageous interest rates. We are transforming gradually.

If you are an optimist you may look at this as a cynical forecast. But I plead with you to analyse the reality objectively. Our development is traversing towards retrogression while the rich and powerful service their frivolities— very soon, if the report is true, we shall have our 11th Presidential Eagle…

Although, Progressive development is not an impossibility if sincerely pursued but the “body language” of  my “Oga at the rock” does not negate popular speculations. It is almost impossible to witness meaningful development without fighting corruption–the monster that now sits on “the high table”.

In conclusion, if government really wants to be serious about curbing corruption (that has led to several abnormalities including poverty) it must admit that a crusade of such importance does not consecrate any sacred cow irrespective of whatever she is ministering.

*SHOWUNMI REX  (@remirex on twitter)

The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of SaharaReporters

Senate Confirmation of Yellen Delayed.

Image: Senate Confirmation of Yellen Delayed

By Melanie Batley

A final vote in the Senate expected this week to confirm Janet Yellen as chairman of the Federal Reserve has been postponed until early January as part of a deal with Republicans to secure the confirmations of three other presidential nominees.

The decision by Senate Majority Leader Harry Reid was an attempt to break a stalemate between the parties which reached fever pitch after Democrats changed the filibuster rules to ram through appointments that had been stalled for months, according to Bloomberg. Republicans have since been digging in their heels by dragging out debate on each appointment.

“I think the solution to this is not to throw daggers at each other but to sit down and talk this through,” Indiana GOP Sen. Dan Coats said on the Senate floor shortly after the agreement was announced, according to The Washington Post.

Senators will vote to end formal debate on Yellen’s nomination Friday, take a two-week holiday break, then return Jan. 6 for the final vote, Bloomberg reports.

In exchange, votes to confirm three other presidential nominees are set for Friday, including John Koskinen as commissioner of the Internal Revenue Service, Alejandro Mayorkas as deputy secretary of the Department of Homeland Security, and Brian Davis to be a federal judge in Florida.

Under the new filibuster rules, Yellen needs the support of a simple majority of the Senate’s 100 members to become the 15th chairman and first woman to head the central bank in its 100-year history. If confirmed, she will replace Ben Bernanke whose term expires on Jan. 31.

“We need her expertise at the helm of the Fed as our nation continues to recover from the great recession, completes Wall Street reform rule-makings and continues to enhance the stability of our financial sector,” Senate Banking Chairman Tim Johnson, a South Dakota Democrat, said in a floor speech, according to Bloomberg.

Yellen said at her Nov. 14 confirmation hearing that she will maintain current policies until “strong recovery” allows the bank to scale back monetary accommodation.

Related stories:

© 2013 Newsmax. All rights reserved.

Moms Can Feel Inflation Even If Obama Economists Can’t.

The typical American mom must think government economists have rocks in their head.

According to the number crunchers at the Labor Department, over the last year, prices were up only 1.2 percent, and for the month of November, inflation was zero, nada, zilch!

Surely economists don’t eat, or at least shop, where mom does. Sliced bread and hamburger, staples in her family’s diet, were up a lot last month. And she faces higher health insurance costs and co-pays, thanks to Obamacare.

Editor’s Note: Obama’s Budget Takes Aim at Retired Americans 

The government’s Consumer Price Index tries to measure gains in prices across the entire economy, but that stat is only an average. Most Americans simply need some items more than others, and sometimes it is those necessities that rise the most.

For example, average consumer prices were flat in November largely because gasoline prices were down, but most of everything else was up. For the mom in Brooklyn who rides the subway to work, lower driving costs are not much help. Heating oil, which many families must purchase in New England, rose at a nearly four percent annual pace.

Back to the food aisle. The price of steak was down but most moms don’t buy much sirloin these days, and must purchase about the same amount of hamburger each month.

It may be great that restaurants catering to hedge fund managers got a break on bovine protein, but mom can’t mix a porterhouse to fashion a meatloaf to feed her hungry family.

Over the last decade, many Americans have not had much in the way of pay raises, and some who lost their jobs have new ones that pay less or no job at all. Even if inflation had been zero, they would be worse off.

The bite of state and local taxes has increased, even as community services have declined and more children are required to pay for school supplies. All that leaves moms with less to spend on rent and groceries, but the CPI misses all that.

Also, the CPI does not consider new products that have become necessities, unless a mom wants her children to be grossly disadvantaged.

Internet, smart phones and tablets were not in the family budget at the turn of the century. All that technology is great, but kids don’t eat fewer peanut butter and jelly sandwiches now that they have iPads.

Prices of some essentials — or things that should be — never fall, no matter what!

During the financial crisis many Americans put off treating less than urgent medical conditions, and some health care providers were less busy than they would like. When was the last time your dentist sent a flier announcing “inventory clearance on kids’ checkups and crowns — 30 percent off”?

Times have been tough for most Americans, and it is natural to focus on the rising price of hamburger and ignore the falling price of chicken, but in 2013, families were asked to endure more than $200 billion in higher federal taxes.

The bigger tax bite left mom with less to buy what her family needs but the government doesn’t include its take in the Consumer Price Index-even though it could.

You can bet the gang at the White House or on Capitol Hill will never publish data on the skyrocketing cost of government.

Politicians don’t struggle on a budget quite the same way mom does. They can print money, or borrow and never repay, in ways she can’t.

Politicians can simply tax mom, as she strolls down the supermarket aisle and doesn’t adequately appreciate how great it is to live in a nation without inflation.

Editor’s Note: 
Obama’s Budget Takes Aim at Retired Americans 

© 2013 Moneynews. All rights reserved.

By Peter Morici Twitter @pmorici1

WSJ: Bernanke Gets Mixed Grades as Fed Tenure Ends.

By Elliot Jager

The Federal Reserve’s inability to achieve a robust recovery raises questions about what more — or different — outgoing chairman Ben Bernanke could have done, according to a Wall Street Journal assessment of his tenure.
Bernanke’s eight-year term ends Jan. 31. If confirmed this week by the Senate, Vice Chairwoman Janet Yellen will replace Bernanke at the helm.
Coming into the chairmanship in 2006, Bernanke was disinclined to pursue interventionist policies. As a student of economic history he was, nevertheless, “passionate” about the failure of the Fed to intervene during the Great Depression of the 1930s,according to New York University Economics Professor Mark Gertler.
Confronted with the worst economic downturn — which began roughly between the summer of 2007 and the beginning of 2008 — since the Depression, Bernanke came to pursue the interventionist policies that have characterized his stewardship.
He pumped cash into the financial system, kept interest rates as low as possible and oversaw the purchase of $3 trillion in bonds. These “controversial” policies “averted an economic calamity,” according to the Journal.
The central bank’s cheap-credit policies were intended to help create jobs. Unemployment currently stands at 7 percent, up from 4.6 percent when the crisis began, but down from 9 percent in 2011.
By way of comparison, the rate of unemployment in the eurozone, where central banks are less-interventionist, stands at 12.1 percent, according to the Journal.
The dollar’s value against foreign currencies has held steady roughly since 2007, under Bernanke.
His policies have seen inflation averaging 2 percent since the crisis. Aggregate government spending, excluding entitlements, has fallen 6.1 percent.
Still, economists are debating why the financial system has not bounced back more vigorously.
Some blame the aftershocks of the housing bubble and say earlier Fed interest policies contributed to the crisis.
Bernanke has argued that in Britain, Sweden, and Australia, where more restrictive interest-rate policies were in place, housing booms were far more volatile.
Others believe the failure can’t be attributed to Fed policy or to any single factor but to chronic and multifaceted labor and productivity conditions.
Under Bernanke, the central bank has tried to guide overall fiscal policy which is made by the president and Congress. He met regularly with lawmakers and White House officials urging “less fiscal restraint in the short run alongside more deficit reduction in the long run,” according to the Journal.
His advice was mostly disregarded.
Bernanke’s policies avoided an economic meltdown, but the Fed alone was not in a position to grow the economy despite undertaking extraordinary interventionist measures, the Journal concluded.
Related Stories:

© 2013 Newsmax. All rights reserved.

Fed Pullback More Likely as Economy Adds 203,000 Jobs.

The Labor Department reported the economy added 203,000 jobs in November, in line with the progress of recent months.

Overall, the economy should be stronger in 2014, permitting the Federal Reserve to ease back on monthly bond purchases and let longer term interest rates rise modestly.

These purchases of government securities lowered mortgage rates and made home buying easier. These have helped push up housing values — and stock prices, too. These have had their desired effect, and now new ways to stimulate the economy must be found.

Editor’s Note: Seniors Scoop Up Unclaimed $20,500 Checks? (See If You Qualify) 

The unemployment rate fell to 7.0 percent, mostly because furloughed government workers returned to their jobs.

With third-quarter GDP growth at 3.6 percent, businesses should be adding more jobs but much of that growth was from additions to business inventories as consumers remain tightfisted and goods stay on the shelves. Overall consumer demand contributed about 1 percentage point to growth, whereas inventories accounted for 1.7 percent.

Major apparel retailers report huge stocks of unsold goods entering the final weeks of holiday shopping.

More broadly, Black Friday weekend disappointed their expectations for stronger sales than last year. These indicate much slower fourth-quarter growth, as businesses slow purchases and retailers trim headcount more than usual in January.

Auto sales and rising home values remain a bright spot. With the uncertainty of new U.S. military activity in the Middle East and effects of another government shutdown receding, consumers’ confidence should strengthen through December and into the New Year.

Overall growth will be between 1 percent and 2 percent in the fourth quarter and then strengthen to 2.5 percent to 3 percent in 2014. However, hiring will likely continue at its present pace or improve only moderately. Good-paying full-time jobs will continue to be scarce.

Overall, jobs creation is well short of the 365,000 needed each month to reduce unemployment to 6 percent over a period of two or three years, but that would require GDP growth in the range of 4 percent to 5 percent. Over the last four years, the pace has been a paltry 2.3 percent.

Obamacare health-insurance mandates are increasing benefits costs for full-time employees.

Along with anticipated penalties for not covering all employees working more than 30 hours per week in 2015, these will cause employers to either reconfigure toward more part-time workers or to only cautiously add workers.

Strident anti-business campaigns targeting McDonald’s, Wal-Mart and other employers of lower-skilled workers add to pressures to substitute machines for workers or move to a more part-time economy in hospitality, retailing and other activities where wages are already subpar and job security nonexistent. All with lax immigration enforcement, these exacerbate income inequality.

The situation remains particularly tough for recent college graduates and older Americans, and many working age adults have quit looking for work. Adding part-timers who want full-time employment and discouraged adults, the unemployment rate becomes 13.2 percent.

Stronger growth is indeed possible. Four years into the Reagan recovery, following a recession that pushed up unemployment to higher levels than President Barack Obama faced, the economy was growing at a 4.9 percent pace and creating jobs at a breakneck pace.

Still, in this environment, the Federal Reserve’s low interest-rate policies and quantitative easing (monthly purchases of $85 billion of Treasury and government-agency securities) have done about as much good as can be expected.

With a bit stronger growth beginning in 2014, look for the Fed to begin easing back on bond purchases.

The trade deficits on oil and manufacturing with China subtract substantially from demand for U.S. goods, services and workers.

Even with the recent surge in domestic production, petroleum imports exceed exports by more than 6 million barrels a day, and will require lifting bans on offshore drilling to eliminate.

Currency manipulation and other forms of protectionism remain problems with China, Japan and Germany — America’s main competitors.

Addressing those problems could add nearly more than 4 million jobs directly and 7 million jobs with the usual secondary effects, all but eliminating unemployment and substantially reducing inequality.

Editor’s Note: Seniors Scoop Up Unclaimed $20,500 Checks? (See If You Qualify) 

© 2013 Moneynews. All rights reserved.

Unemployment Falls to 7 Percent as 203,000 Jobs Added.

The U.S. job market is proving sturdier than many thought.

Solid job growth in November cut the U.S. unemployment rate in November to 7 percent, a five-year low. The surprisingly robust gain suggested that the economy may have begun to accelerate. As more employers gain the confidence to step up hiring, more people have money to spend to drive the economy.

Employers added 203,000 jobs last month after adding 200,000 in October, the Labor Department said Friday. November’s job gain helped lower the unemployment rate from 7.3 percent in October. The economy has now added a four-month average of 204,000 jobs from August through November, up from 159,000 a month from April through July.

Editor’s Note: Obama’s Budget Takes Aim at Retired Americans 

“It’s hinting very, very strongly that the economy is starting to ramp up, that growth is getting better, that businesses are hiring,” said Joel Naroff, president of Naroff Economic Advisors.

The job growth has also fueled speculation that the Federal Reserve will scale back its economic stimulus when it meets later this month.

It “gives the Fed all the evidence it needs to begin tapering its asset purchases at the next … meeting,” said Paul Ashworth, an economist at Capital Economics.

The unemployment rate has fallen nearly a full percentage point since the Fed began buying bonds in September 2012 and hit 7 percent earlier than most analysts expected.

In June, Chairman Ben Bernanke suggested that the Fed would end its purchases when the rate had reached 7 percent. Bernanke later backed away from that specific target in September. He cautioned that the Fed would weigh numerous economic factors in any decision it makes about its bond purchases.

Many economists still think the Fed won’t begin to cut back until its January meeting or later.

In addition to the solid job gain drop in unemployment, the November employment report contained other encouraging signs:

• Higher-paying industries are adding more jobs. Manufacturers added 27,000 jobs, the most since March 2012. Construction companies added 17,000. The two industries have created a combined 113,000 jobs in the past four months.

• Average hourly wages rose 4 cents to $24.15. They have risen just 2 percent in the past year. But that’s ahead of inflation: consumer prices have risen 0.9 percent over that time.

• Employers are giving their workers more hours: The average work week rose to 34.5 hours, up from 34.4. A rule of thumb among economists is that a one-tenth hourly increase in the work week is equivalent to adding 200,000 jobs.

Friday’s report follows other positive news. The economy expanded at an annual rate of 3.6 percent in the July-September quarter, the fastest growth since early 2012, though nearly half that gain came from businesses rebuilding stockpiles. Consumer spending grew at its slowest pace since late 2009.

But more people with jobs would lead to more spending. Job growth has a dominant influence over much of the economy. If hiring continues at its current pace, a virtuous cycle will start to build: More jobs typically lead to higher wages, more spending and faster growth.

But more higher-paying jobs are also needed to sustain the economy’s momentum. Roughly half the jobs that were added in the six months through October were in four low-wage industries: retail; hotels, restaurants and entertainment; temp jobs; and home health care workers.

The Fed has pegged its stimulus efforts to consistent improvement in the job market. Bernanke has said the Fed will ease its monthly purchases of $85 billion in bonds once hiring has improved consistently.

The recent economic upturn has been surprising. Many economists expected the government shutdown in October to hobble growth. Yet the economy motored along without much interruption, according to several government and industry reports.

Early reports on holiday shopping have been disappointing. The National Retail Federation said sales during the Thanksgiving weekend — probably the most important stretch for retailers — fell for the first time since the group began keeping track in 2006.

Consumers are willing to spend on big-ticket items. Autos sold in November at their best pace in seven years, according to Autodata Corp. New-home sales in October bounced back from a summer downturn.

Editor’s Note: Obama’s Budget Takes Aim at Retired Americans 

© Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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