CPI Shows an Increase – Is Inflation Set to Go Up?

CPI Shows an Increase – Is Inflation Set to Go Up?

Even as the government advertises the low inflation rate as a positive development in the slowly recovering U.S. economy, the consumer price index has recorded the largest increase from the end of 2009. The Labor department recently released the CPI statistics that show a 0.2% increase that comes close on the heels of the 0.1% increase recorded in December 2009.

The Federal Reserve is still continuing with its many programs designed to instill consumer confidence and boost economic stability, in spite of the fact that increased inflation is usually associated with a recovering economy. While economists have stated that the inflation levels are not likely to drop any further, they are also being cautious about taking any stance indicating an economic turnaround. It appears that they believe the price rise is too swift to be considered the beginning of a full fledged trend. Until more time has passed, it may not become clear exactly how prices will look in the coming months. However, many economists are terming the increase as the desired outcome of the many fiscal measures that the government put in place during the recession. From this perspective, the improvement in inflation may be perceived as a measure of the success of the policies.

The increase has exceeded the expectations of economists who had predicted a 0.1 % gain. The major contribution to the current increase comes from the fact that air fare and apparel have both become costlier now. Cost of shelter has continued its upward movement for the fourth month in a row.

However, Fed President (Chicago) Charles Evans believes that with the unemployment rate still hovering at high levels, the increase in inflation does not really mean much in terms of representing economic improvement. The labor market has definitely a long way to go as is clear from the rise in unemployment wage benefit applications in recent weeks.

Taking a completely opposing view, the Fed Chief in Dallas, Richard Fisher, believes that it is time for the government to ease off with stimulus programs to ensure that no further pressure is added to prices, pushing them up. He categorically stated that he could not see any reason for further government initiatives on the same lines.

Investors do not appear to be unduly worried about the possibility of increasing prices that the rising CPI indicates. Prices for Treasury instruments showed an improvement while stocks continued to be popular modes of investment for various investors.

Charges Announced In The Largest Healthcare Fraud In U.S

An estimated $60 billion a year is siphoned off from the Medicare program through fraudulent means. The investigation into healthcare fraud has uncovered this and many other shocking facts even as the country gears up to find out more about the various cases filed by the Obama administration in different cities.

Healthcare reforms are an important component of Obama’s political strategy. The Democrat President has been pushing for a complete overhaul of the various programs and schemes sponsored by the government under this heading.

Although the Republicans have been strongly opposed to the focus on healthcare, it is undeniable that this area is one where much of the government expenditure happens. Given the current situation where it is becoming evident that government spending cuts need to be brought in right away, there is clearly a need to stem leaks from heavily sponsored programs such as Medicare.

Nearly 45 million Americans are beneficiaries of the Medicare program. The treatment and health schemes offered under this program are sponsored by various companies that are, in turn, paid by the government from tax payer funds. Critics have been vociferous in their complaint that the entire system is susceptible to fraudulent practices and that the companies are overpaid substantially to implement the programs.
[Read more…]

Debt Ceiling Debate Is it Time for Obama to Take Fiscal Responsibility More Seriously

As the debate over raising the debt ceiling continues to rage, it is clear that the U.S. Government is now facing a stand off of sorts. Pushing up the debt ceiling would, no doubt, make a good ‘placebo’ for the immediate problem of unmanageable borrowings.

But, many critics fear that it will also serve to eliminate the sense of urgency that should hopefully push Obama’s boys into undertaking some effective spending cuts. Given these fears, there is no doubt that any move by the government to increase the debt ceiling will spark off heated discussions at every level within the country.

The debt ceiling represents the limit up to which the U.S. Treasury can borrow funds. If the borrowings grow beyond manageable levels, then Government may be forced to default on its repayments. If this does happen, the world financial markets will lose faith in the creditworthiness of the U.S. and this will have some far reaching consequences for the nation’s economy, none of them positive.

The U.S. government has carefully preserved its position as the ‘world’s safest borrower’ for over two centuries with timely repayments on all its debts. The current debt ceiling stands at $14.3 trillion, a massive figure indeed.
[Read more…]

The Euronext Deutsche Boerse Merger Will it Happen?

Earlier this month, the announcement by the London Stock Exchange of its proposed acquisition of the TMX group Canada caused a flurry of excitement. The new entity that arises from this deal would boast about $4.1 trillion of trading volume annually. But it now appears that there is much more in store in terms of dramatic changes where the world’s top stock exchanges are concerned.

Merger talks are underway between New York’s own Euronext and the German Deutsche Boerse AG. If the deal pans out, this new mammoth will overshadow the LSE –TMX trading volume with an astounding above $20 trillion worth of trades in a year. The Germans will hold the lion’s share of the proposed merged entity and its headquarters will be based in both NY and Frankfurt.

However, the road ahead may have its bumps and blocks for the Germans and Euronext as the deal faces an unprecedented degree of scrutiny by U.S. regulators. No comments have been released on the issue from any official sources, leaving one to wonder what exactly the government feels about letting the Big Board go out of American hands.

One issue that may be a major concern is that the merger will give an uncomfortably large degree of influence over the derivatives market in Europe to the new entity. This market is indisputably one of the most lucrative world markets. The sagacity of knowingly giving one single entity a large enough clout to call the shots here is definitely one that is, hopefully, being questioned.
[Read more…]

Obama’s Budget to Focus on Reducing Deficit

The focus of the 2012 budget will be on cutting down the deficit, according to budget director Jacob Lew. The statement was made by the director in a talk aired on CNN. If the budget achieves its targets, U.S.’s deficit will be reduced to the tune of $1.1 trillion over the next 10 years.

Lew also hinted at the strategy that will be followed by President Obama to achieve this ambitious target. He said that strategic spending that will make the U.S. more competitive in the global markets combined with expenditure cut backs in some hand picked areas will provide the solutions.

The statement does not give any specifics about how exactly the $1.1 trillion deficit will be wiped out from the books. Neither does it clarify how the to-be-announced budget will deal with or impact long term deficit.

However, one aspect that is quite clear is that the President is proposing to put a clamp on discretionary spending on non-security related issues. The clamp will last for five years if Obama’s call is indeed heeded. This alone will save $400 billion, a massive chunk of money by all standards. However, this expense head still accounts for only about 10% of the total spending by the Fed.

Critics have been quick to point out that rather than focusing on this relatively small expense area, the government would do better to address items like entitlement programs, where enormous expense is borne year after year.
[Read more…]

New Hampshire Wealthiest State Census Bureau Report

The U.S. Census Bureau has released its latest report showing the median income of various states across the country. With a $65,028 median income, New Hampshire heads the list followed closely by New Jersey. Washington trails in at 10th place with a median income of $58,404, ranking last among the 10 wealthiest states in the U.S. The report takes the income over the past two years into consideration.

The Census Bureau report has revealed one interesting fact. Four of the states that make it to the top 10 most wealthy states list are located in the Northeastern part of the country. The money seems to be all concentrated here if one is to look at the statistics.

In striking contrast, the South has most of the 10 lowest income states. North Dakota residents have cause for celebration because this is the state with the best percentage improvement in median income. On the downside, Hawaii posted one of the biggest income declines.

When compared with the previous report, it is clear that not many states show much headway in terms of increasing their median income levels. Only a dozen have shown some improvement in the income, when the current report is compared with the earlier one showing the median income for the two year period ranging over 2006 and 2007.
[Read more…]

Will the Dollar Step Aside for SDRs?

The dollar may soon be ousted from its position as the reserve currency of the world if and when a new IMF proposal comes into force. A recent report from the International Monetary Fund discusses the use of Special Drawing Rights as substitutes for the ubiquitous dollar. The reasons for this proposal to replace the USD are many.

Even as the economies across the world begin to gear up once more post recession, the dollar continues to lose ground. This disappointing trend appears to be a huge factor in the IMF’s proposal to replace this currency with a more stable offering.

Although the beginning weeks of this year promised a good start for the dollar, the currency appears to have lost momentum in early February. When compared with the USD, other international currencies have been steadily moving up in value.

There is still considerable volatility in currency values and this has made it difficult to say with certainty what the final fate of the dollar will be. In this week’s statement, Fed Chairman Ben Bernanke stated that the upturn in the economy has not yet eliminated the poor employment rate in the U.S.

On a more positive note, inflation is still under control. The Federal Reserve is clearly going to be hard pressed to maintain low inflation levels while taking all necessary steps to boost employment. Given this, the future path that the dollar may take is still quite unpredictable, and this fact has lead some economists into stating that replacing this currency with SDRs is the best course of action.
[Read more…]

Bank Of Americas Campaign To Rid Bad Mortgages

Bank of America Gets Serious About Bad Mortgage Clean Up

The announcement of a veteran mortgage expert to head the Legacy Asset Servicing unit to take care of bad mortgages and foreclosures has lent strength to Bank of America’s ongoing battle in this area. Terry Laughlin, who amply demonstrated his expertise in his earlier stint with OneWest Bank, will head this new division and hopefully find more success in keeping the bank’s subprime mortgages within control.

Ever since it acquired Countrywide Financial Corp. in 2008, Bank of America has been hard pressed to contain the damages the new company brought into the fold in the form of bad mortgages. Already, BofA has invested billions in settling claims in this respect. Recent months witnessed a 50 million dollar spending towards the legal costs for Angelo R Mozilo, erstwhile Chairman and CEO of Countrywide.

Needless to say, investors have been apprehensive about how these costs will impact the bottom line of BofA. Many fear that as more bills continue to pile up in the coming months the bank may start to show some cracks.

Statistics show that there is good reason for such fears. In September 2010, Wells Fargo reports showed that upwards of 13% of the mortgages attributable to Countrywide payments were either late or foreclosure proceedings had already been initiated on them. BofA has also failed to make the best use of loan modifications under the Making Homes Affordable program introduced by Obama to shore up housing.
[Read more…]

Investors Take A Closer Look At The Undervalued Yuan

Yuan ‘Substantially Undervalued’- Latest U.S Treasury Report

The latest report from the U.S Treasury states that the Yuan is ‘substantially undervalued’. The artificially suppressed valuation of the Chinese currency has been a bone of contention for a while now for manufacturers in the U.S. Their grievance is more than justified as they continue to steadily lose potential customers to the Chinese manufacturers who make cheap substitutes for U.S. produced wares available in the market.

The line taken by the Treasury with this report is a markedly stronger one than the ‘undervalued’ prognosis it gave to the Yuan in the earlier July 2010 report. Back then, this ‘mild’ reprimand was considered as a political placebo offered by the government to keep U.S manufacturers happy without ruffling any Chinese feathers. Even this time, the report was kept ‘on ice’ so to speak until after the Washington visit by the Chinese President.

During his visit, President Hu Jintao made all the right noises about being keen on currency reform. The Yuan has, in fact, been appreciating ever since the Chinese verbally committed to kick start a currency revaluation program back in June. However, the stronger tack taken in the latest report still falls far short of expectations that the major power houses in manufacturing had from the U.S government.
[Read more…]

Wall Street Tycoons Could See More Bonus Cuts

Wall Street Bonus Cuts Will Reduce Risk U.S. Regulators

U.S regulators are all set to address the growing concerns about top financial institutions paying huge bonuses without considering long term financial stability of the organization. A new proposal is being mooted, that will require that top ranking executives put off receiving half their bonus for a minimum period of 3 years.

This news comes from sources who are in the know about the proposal that is being unveiled at the FDIC board meeting. Among those institutions that will be affected by this new proposal are Bank of America Corp, Morgan Stanley and Goldman Sachs.

The proposal is based on the Dodd-Frank law that aims at reducing the risk that investors and stakeholders face if the company pays out a significant proportion of its short term profits to top level employees. The reform law came into being to ensure that no adverse long term implications arise out of such short sighted bonus policies. By deferring bonuses of some high ranking employees, the profits of the company can be deployed towards cementing its financial stability.

According to the proposal mooted by the U.S. regulators, the deferred bonus that the employee could draw at a later date, post the three year period, depends on his contribution to the company’s overall profitability. The eligible bonus may be paid in installments not exceeding one-third of the total amount in each year post deferral period.
[Read more…]

The Unemployment Rate Continues To Fall

Unemployment Rate Falls in January

As the unemployment rate takes a marked dip for the second month in running as per January’s figures, there is cause for rejoicing across the U.S. However, the news could be better, according to economists, who fear that the dip may just be the precursor to a slow increase in the number of unemployed in the coming months.

The latest report from the Government shows that from the 9.8% unemployment rate in November 2010, the figure dropped to 9.4% in December and further dipped to 9% in January. The declining rate has encouraged optimism about employment prospects across the country. But there is another side to the story that is not quite as heartening.

Yet another survey has revealed that only about 35,000 new jobs were added last month. Given that the falling unemployment rate represents nearly 600,000 newly employed people, the two findings are not consistent. Economists are still trying to correlate these two contrasting pieces of information to understand what it all means for the job market.

While a cautious approach from independent analysts is not surprising, it is definitely food for thought that even White House officials are toeing a ‘wait and watch’ approach instead of advertising the declining unemployment rate. In fact, economists at the White House have categorically stated that the figures need to be studied with care before any conclusions are made.
[Read more…]