Economy News - part 5

Obama Announces $3 Trillion Debt Plan

Obama Announces $3 Trillion Debt Plan

ECONOMY

  • Debt plan to increase tax for wealthy, reduce health costs
  • Plan to cut corporate loopholes, end Bush tax cuts
  • CBS poll: 56% agree with Obama's debt proposal

Obama is promoting a new debt plan aimed at cutting the US deficit by more than $3 trillion over the next 10 years. The debt reduction package calls for nearly $1.5 trillion in new taxes that target the upper class.

The plan also promotes the cutting of Medicare and Medicaid benefits by over $580 billion and includes savings from the withdrawal of US troops from Iraq and Afghanistan equaling $1 trillion. Obama's proposal does not call for any changes in Social Security and the age of eligibility for Medicare.

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Bank of America to Cut 30,000 Jobs, Reduce Costs by 18%

Bank of America to Cut 30,000 Jobs, Reduce Costs by 18%

ECONOMY

  • CEO announces "Project New BAC" to cut costs by $5 billion, cut jobs by 10%
  • Goal is to restore investor confidence and raise company efficiency ratio to 55%
  • Investitgations cause 48% stock drop this year

Bank of America Corp. CEO Brian Moynihan says the bank plans to cut costs by $5 billion and slice over 30,000 jobs - or 10% of its workforce - in the largest single job cut this year.

BAC stock rose 1% on September 12 to $7.05 following the announcement.

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American Jobs Act Worth Nearly $450 Billion

American Jobs Act Worth Nearly $450 Billion

ECONOMY

  • American Jobs Act to create 1.9 million jobs, lower unemployment by 1%
  • Employed to receive additional take-home pay
  • Plan to cut social security taxes to 3.1%, senior citizens concerned

US President Obama is proposing a new $450 billion job creation package that includes tax cuts and project funding. The purpose of the American Jobs Act is to employ those who are jobless, while giving those who are working more money.

With lower taxes for employers and employees, Obama hopes people will spend more, thus boosting business for those seeking to employ new talent. US unemployment has remained at over 9% for more than two years. If enacted, the plan is expected to produce 1.9 million jobs and reduce unemployment by over 1%.

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US Falls to Fifth in Global Competitiveness Rankings

US Falls to Fifth in Global Competitiveness Rankings

ECONOMY

  • Mounting deficit, declining trust in politicians linked to pushing US down in rankings
  • Switzerland tops list with Western European countries dominating top ten
  • Advanced economies are stagnating while developing markets are rising

The United States has fallen to fifth place on the list of the most competitive economies in the world, according to a survey conducted by the World Economic Forum. Switzerland topped the list for the third year in a row, with Singapore jumping ahead of Sweden to take the second spot. Finland moved up to fourth ahead of the United States.

The World Economic Forum’s survey assesses global economies based on 12 “pillars of competitiveness” such as infrastructure, innovation and macroeconomic environment.

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UK Retail Sales Slide in August as Inflation Rises

UK Retail Sales Slide in August as Inflation Rises

ECONOMY

  • UK retail sales slump in August with consumer confidence low and inflation high
  • Report shows like-to-like sales down 0.6% compared to August 2010
  • Shop closures expected to continue in lead up to Christmas

Retail sales figures in the United Kingdom declined in the month of August with consumers keeping a keen eye on their finances and jobs, according to a report by the British Retail Consortium.

Consumer confidence dropped for the third straight month while inflation continued to rise, driving spending down at the quickest rate in about four decades, reported Bloomberg. Retail figures were 0.6% lower than August 2010 in a like-to-like comparison of sales, which discounts sales from newly opened stores.

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Economists Seek ECB Rate Reversal

Economists Seek ECB Rate Reversal

ECONOMY

  • Interest rates increased to 1.5% from 1%
  • ECB Council urges contractionary monetary policy
  • EU growth, manufacturing down in second quarter

Economists from the ECB Council are calling on the European Central Bank to reverse this year's interest rate, which has already been raised twice since January.

Currently at 1.5%, the high interest rate may further dampen the European economy according to members of the ECB Council, who believe that a contraction in consumer confidence, manufacturing and business may continue into the third quarter. Elga Bartsch, Chief European Economist for Morgan Stanley and member of the ECB Council, has reduced her Euro zone growth expectation for next year to only 0.5% due to the deceleration in manufacturing.

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US Government Faces Off Banks in Mortgage Lawsuit

US Government Faces Off Banks in Mortgage Lawsuit

ECONOMY

  • FHFA sues 17 financial firms for $195 billion mortgage securities loss
  • Bank of America sued for almost $58 billion
  • Taxpayers picked up $135 billion housing tab over three years

The US Federal Housing Finance Agency (FHFA) is suing 17 financial companies – including Goldman Sachs, the Bank of America, JP Morgan Chase & Co, and Citigroup along with EU banks such as Barclays, Credit Suisse and the Royal Bank of Scotland – on the basis they exaggerated the value of mortgage packages sold totaling over $195 billion.

The FHFA, which keeps tabs on the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), launched legal action on behalf of the two agencies, claiming that banks breached securities law and neglected to properly verify mortgagers’ reported earnings in sales of amalgamated mortgages as securities to investors.

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US Consumer Confidence Falls to 2-Year Low

US Consumer Confidence Falls to 2-Year Low

ECONOMY

  • Consumer confidence index plummets to 44.5 from over 59 in July, biggest drop in 3 years
  • Unemployment hits 9%, highest in 9 months
  • 4.5% year-on-year drop in house prices across 20 US cities
  • Motor vehicle manufacturing up 10% for highest gain in 8 years

US consumer confidence is reaching ever-increasing depths, this month hitting a record-low since 2009. The new consumer attitude ratings - down to 44.5 from over 59 in July - mark the most significant fall in almost three years, according to private-sector research consultancy Conference Board.

Waning consumer confidence could have an effect on retail sales though as of yet it is too early to tell if this will be the case. Industrial production may slow but avoid a steep decline.

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China Makes Major Metro Investment

China Makes Major Metro Investment

ECONOMY

  • China invests ¥1.27 trillion in new railways, subways to ease traffic congestion and attract urban development
  • Chinese government orders safety checks, new regulations for high-speed rail
  • China CNR recalls 54 bullet trains

China has released plans to invest ¥1.27 trillion, or $199 billion, in new railways and subways. According to the China Securities Journal, this new five-year plan is aimed at easing traffic congestion and attracting urban development.

Local Chinese governments will finance 35% of the bill. The remaining funds for the project will be loaned by commercial banks. The National Development and Reform Commission will also provide low interest loans through China Development Bank, one of only three policy lenders in China. These low interest loans include an invested ¥170 billion in Beijing until 2015.

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Japan’s Renewable Energy Plan in Motion

Japan’s Renewable Energy Plan in Motion

ECONOMY

  • Japan’s lower house of parliament approved new renewable energy bill
  • Bill requires utilities to purchase electricity generated by renewable energy sources
  • Majority of Japanese polled favor a gradual change in energy sources

Japan’s lower house of parliament has approved a bill promoting investment in solar and other forms of renewable energy. This ruling was the first step toward current Japanese Prime Minister Naoto Kan’s vision of a nuclear-free Japan. It is expected that the upper house will grant final legislative approval in the next few days, with related laws enforced by July 2012.

Under this bill, utilities will be mandated to purchase any amount of electricity generated from small hydro power plants, solar, biomass, wind and geothermal energy sources at pre-set rates for a maximum of 20 years. As reported by Business Green, this new legislation should push renewable energy from 9% of generated energy to 20%, with over 30 gigawatts (GW) of renewable energy capacity developed in the next ten years.

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