Greek Default not Priced into Euro

As we approach increasing probability of a Greek default with one year Greek bonds at over 100% and two year at over 70%, people are starting to wonder if the current price of the Euro is already accounting for a default. Karpowitz of Commerzbank, a currency analyst tends to think not. And one of the reasons is there aren't a lot of places to go for safe havens. Switzerland has put a ceiling on their currency to the Euro, and the Bank of Japan seems ready to make another move. He thinks a contagion that just involved Greece, Portugal and Ireland would be managable, but if you start involving Italy and Spain, the possibility of a complete collapse of the Euro may loom.   ...

The Purpose of a Bank

It CAN be VERY simple...A bank receives deposits for people who want to earn interest on their money. For those that want to borrow money, the bank loans money and charges interest on the loans. The money earned from interest is used to pay interest to depositors, and also to pay for costs like the employees who work at the bank, the bank building, etc. This is EXACTLY how banks worked a few decades ago, and exactly how most credit unions operate today. ...

GOP Wants to Repeal the 20th Century?

So as we look at what many of the GOP candidates are espousing, there is a massive laundy list of things they want to repeal: Social Security Medicare the Federal Reserve Clean Air Act Clean Water Act the EPA the FDA 16th Amendment 17th Amendment Darwin?   Then we here that it is the private sector that creates jobs, not government. Why is it then that Romney and Perry were debating about which of them created the most jobs as governor?It's mind boggling! ...

John Williams on the Economic Outlook

San Francisco Fed President John Williams issued his report today about the economy, and here a few key nuggets from the report: Efforts at debt reduction may reduce demand and already slow a precarious reconvery A huge supply of homes is available for sale, which keeps prices down. Add to that what might be called a shadow inventory of some 4 million homes whose owners are seriously delinquent on their mortgages or in foreclosure.  Sixty-two percent of households expect their income to stay the same or decline over the next year, the worst reading in the over 30 years that this question has been asked.  A full-blown financial meltdown in Europe would hit U.S. exports, which have been one of the economy’s few bright spots. Perhaps more importantly, it could...

Corporate Profits and Unemployment

So often we hear a message that we would be able to create more jobs if only we taxed corporations less. We hear there are too many regulations that are stopping businesses from expanding, and that government needs to "get out of the way" so businesses can grow. Then these businesses will provide these missing jobs that we have been waiting for. So let's take a look at corporate profits compared with the unemployment rate... As you can see, corporate profits are better than before the recession started. They are doing fantastic after all taxes have been paid. They have more money now to do things like HIRE PEOPLE than they did before the recession started. Even with all the regulations and taxes they are more...

Bernie Sanders Speaking to Steel Workers

When you look at social security, medicare, medicaid, minimum wage, the 8 hour working day, right to vote, and so much more, unions played an integral role in their development. There was a time last century when children were working long hours in fields, seniors having worked all their lives were living in poverty, and conditions in factories were like a "sweat shop". But workers fought their right to assemble and demand better. I think it is easy in political sound bites to make it sound like unions are all bad. But when you have 400 people in this country making the same amount as the bottom 150,000,000 (about half), it seems clear there are some imbalances going on. The middle class has seen their opportunities...

Sunday Night Markets and Futures

If you are finishing up your weekend and ready to start a new week, sometimes it can be interesting to see if you can predict how the week will start. I wanted to give you a few resources that might help you. Monday's can sometimes be busy for people at work, and opportunities might be missed. If you take a quick survey on Sunday, you'll be at least mentally prepared for what might take place on Monday. If you want to get a feel for how market futures are doing before you go to bed on Sunday, Forex Pros has a Real Time Stock Indices Futures page. It isn't perfect, but is kept updated pretty well. By the way, I would recommend you DO NOT invest...

Roubini and Wolfensohn

Here are two great economists of our time having a talk about economics of our World, and the important debates that we must have to move forward by becoming more competitive without having a trade war. They discuss the Chinese and Japanese economies. Wolfensohn suggests that the number of people in the middle class in Asia will exceed that of the Western World in just a few years. Roubini suggests that as China's wages rise, their ability to "take over" manufacturing as they are now will be diminished.   ...

Race to the Bottom, Currencies and Wages

As you may be well aware, China has consistently devalued their currency for many years. This made the cost of the products from Chinese factories ultra cheap, ushering in the era of $30 DVD players and $300 big screen TVs. Because the currency is so low, the prices people pay for goods from China is also very low, and with those low prices are extremely low wages compared with the wages we have here in America.  If you look at the chart below, you can see that US wages have declined, while Chinese wages have increased... In the United States it has become a "buyer's market" for employers. With so many jobs going overseas (not just to China), there are fewer jobs available in the United States,...

Bernie Sanders on Social Security

Social security has paid out what is due for over 75 years and has a $2.1 Trillion surplus, and would not run out for 25 years at the current rate. Sanders is first standing up against those who would seek to make cuts or increase the retirement age, and is instead proposing that we should drop the cap on the tax. Currently, only the first $106,500 of income is taxes, meaning the the super rich pay a very small percentage of their income to social security compared with the middle class. Sanders is proposing a bill that would tax all income the same, a flat tax if you will. For those proponents of a flat tax, why not start with social security?   ...