Economy News - part 6

August Gold Prices Surge, Bubble Likely

August Gold Prices Surge, Bubble Likely

ECONOMY

  • JP Morgan forecasts $2,500 per ounce gold by year end
  • Since 1999, gold is up from $255 to over $1,800
  • Gold exceeds relative strength index, “bubble” talk begins

August gold prices have remained upward-swinging and are on track to becoming the best monthly yield since 1999. With gold rallying above $1,900 an ounce, gold futures are up 16% and are expected to climb.

Investors are throwing more money into gold bars and bullion-based derivatives due to record prices and an uncertain global economy.

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ECB Purchases €14.3 Billion in Government Bonds

ECB Purchases €14.3 Billion in Government Bonds

ECONOMY

  • ECB buys government bonds to ease eurozone debt crisis
  • ECB total spending of government bonds now €110.5 billion
  • Obama and Merkel meet to discuss financial crisis

The European Central Bank has purchased €14.3 billion, or $20.5 billion, in government bonds last week in an attempt to soften the blow from the debt crisis that lingers over Italy and Spain. The ECB has yet to release information regarding which government bonds it had purchased.

A week earlier, the ECB bought €22 billion in bonds for Italy and Spain. The ECB has purchased roughly €110.5 billion in bonds since the launching of the Securities Markets Program in May 2010.

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ECB Seeks Inflation Protection in Bond Purchases

ECB Seeks Inflation Protection in Bond Purchases

ECONOMY

  • Forecasts predict inflation rate of 2.6% for 2011
  • ECB slowly purchases European bonds from secondary markets
  • ECB's Stark warns against common eurobond, low interest rates

The European Central Bank has announced that forecasters are now expecting higher rates of inflation at roughly 2.6% for the year and 2% for next year, up from the 2.5% for 2011 and 1.9% for 2012 predicted three months ago.

Economic growth figures have also been upgraded from 2.5% to 2.6% for the year. The ECB has also adjusted next year's growth figures, which have been downgraded from 1.7% to 1.6%.

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Jobs Opportunities Drop 11% for London's Financial Industry

Jobs Opportunities Drop 11% for London's Financial Industry

ECONOMY

  • 14,000 or 32% of London's financial industry looking for jobs
  • Banks cutting thousands of jobs, creating jobs abroad
  • LSBF offers new Trium program, guarantees full-time job in 6 months

Vacancies for financial jobs in London dropped 11% in July to 4,800 from 5,400 in June. The number of individuals within the industry seeking work reached over 14,000, or 32%.

Unemployment is being pushed up due to the growing number of firms cutting jobs. In fact, many european banks and security firms - including UBS, HSBC, Credit Suisse, Barclays and the Royal Bank of Scotland - are all eliminating thousands of jobs in an effort to cut back after reported declines in returns on investment banking.

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China Unable to Release Economy Buffer

China Unable to Release Economy Buffer

ECONOMY

  • China unable to create stimulus package to buffer local, global economies
  • China's annual inflation was 6.5% in July
  • Premier Wen seeks global cooperation, responsible policies

As the US credit rating downgrade peaked yesterday, concerns are high that the US and European debt crisis might lead to a global double-dip recession.

If so, this time around China may not be in a position to carry the global economy on its shoulders the way it did when it created a stimulus package to buffer the local and international economies. China's annual inflation rate increased to 6.5% in July, while the country's industrial output is growing more slowly than expected.

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Greece Debt Update

Greece Debt Update

ECONOMY

  • Voluntary bond exchange to be completed quickly
  • IIF estimates a 90% adoption rate for bond swap, while critics say investors unlikely to embrace it
  • Moody’s downgrades Greece to rating just above default

Last week, Euro zone leaders agreed on a wide-ranging new rescue package for Greece, designed to help the country slash its debt. The latest financial aid plan for Greece, which is set up to restructure the country’s bailout and debt, includes a swap of government bonds for longer maturity.

The bond exchange will give banks the option to swap Greek debt with new bonds that have maturities of up to 30 years. It was agreed at a Euro zone summit last week that Greece’s private-sector creditors will take a 21% loss on their bond holdings as part of a €37 billion contribution to the country’s latest bailout plan.

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No Solid Ground for FAA as Senate Goes on Summer Break

No Solid Ground for FAA as Senate Goes on Summer Break

ECONOMY

  • Nearly 4,000 Federal Aviation Administration workers remain on involuntary unpaid leave
  • Essential Air Service program costs government almost $200 million a year
  • Airline tax revenue lost during shut-down could add to $1.2 billion

The US Senate began its summer recess on Tuesday August 2 without breaking the Federal Aviation Administration's (FAA) funding deadlock. The current stalemate leaves 4,000 FAA workers spanning 35 states on prolonged furlough.

The ongoing budgetary dispute began with an effort to slash federal deficit that targeted rural air service subsidies. The Essential Air Service program represents government spending of about $200 million annually, says the New York Times, to subsidize commercial flights to 150 rural airports throughout the US.

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Mining Protests Across Three Continents Threaten Commodity Prices

Mining Protests Across Three Continents Threaten Commodity Prices

ECONOMY

  • Thousands of miners striking in South Africa, Chile and Australia for higher pay and better working conditions
  • Coal, oil, metal and diamond industries affected
  • Stoppages cause petrol shortage, coal stockpiles

Tens of thousands of angry workers in South Africa's coal, oil, metal and diamond industries are demanding higher pay as strikes surge in Australia and Chile. Roughly 30,000 coal workers for Xstrata, Optimum Coal Holdings, Anglo American Thermal Coal and Exxaro Resources stopped working two days ago after wage talks failed.

South Africa's National Union of Mineworkers (NUM), which is the country's largest labor union, has demanded a pay raise of 14% for their workers. Oil workers have been on strike since July 11 after an unsuccessful demand for an increase in pay of at least 10%. Talks with fuel employers have resumed after gas stations for Royal Dutch Shell ran dry.

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Greece Scrambles to Escape Deficit With Drastic Cutbacks

Greece Scrambles to Escape Deficit With Drastic Cutbacks

ECONOMY

  • Greece spiraled into debt over a ten-year period
  • Government spending skyrocketed 87% between 2004 and 2010
  • Greek implements austerity measures to meet EU-IMF demands

Since the late 1990s, Greece has ventured into the furthermost realms of debt and watched its economy plummet. In 2009, just eight years after joining the Euro zone, Greece's national debt climbed to nearly 12.7% of GDP, leaving it no other option but to take a combined bailout of €80 billion from the EU - and another €30 billion from the US last year.

Greece’s joining the Euro zone afforded the country the ability to borrow at low interest rates. This, combined with lax EU implementation of rules to cap debt, allowed Greece’s external debt to soar.

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Food Prices Rise in Venezuela

Food Prices Rise in Venezuela

ECONOMY

  • Poor in Venezuela spending nearly 45% of income on food
  • Food prices have risen 33% in Venezuela compared to 7% in other areas
  • Price rises linked to overspending and other governmental problems

Rising food prices are causing people in Venezuela to reduce spending on food or buy alternate, cheaper foods.

The country has an inflation rate of nearly 23%, and food prices are rising faster than salaries. Although some people in Venezuela are shopping at subsidized shopping markets that are run by the state, they have to deal frustrating long lines.

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