Category: Economy (Page 10 of 12)

      CBO says stimulus package boosted the US economy

      November 24, 2010 /

      Democrats have taken a lot of heat for the stimulus package, and public perception of the package certainly hurt Democrats in the midterm elections.

      But we’re getting more evidence that the stimulus worked, as the CBO has come out with a new report about the impact of the package.

      The massive U.S. stimulus package, widely panned by voters, injected life into the otherwise-sluggish economy between July and September, the nonpartisan Congressional Budget Office said Wednesday.

      The American Recovery and Reinvestment Act put between 1.4 million and 3.6 million to work in the third quarter of this year, a time when more than 15 million Americans were unemployed, CBO said.

      It also boosted national output by between 1.4 percent and 4.1 percent during that time, the CBO said.

      During the third quarter, the economy grew by an annual rate of 2.5 percent. Economists say a rate faster than 3 percent is needed to make any noticeable dent in unemployment.

      Here’s even more impressive data.

      The unemployment rate, currently 9.6 percent, would have been between 10.4 percent and 11.6 percent without the Recovery Act, the CBO said.

      The stimulus created the equivalent of 2 million to 5.8 million jobs during the third quarter as part-time workers shifted to full-time work, or employers offered more overtime work.

      The Obama administration made the fateful error of predicting that the stimulus package would prevent unemployment from going over 8%, and that hurt the public perception of the package.

      It’s clear, however, that the stimulus package helped to save the US economy.

      Economy

      White House takes credit for GM resurgence

      November 21, 2010 /

      General Motors had a very successful IPO last week, and the Obama administration is taking justified credit for bailing out GM instead of letting it die in a forced liquidation in bankruptcy.

      It’s hard to argue here with success. The administration took a huge amount of grief for this decision, and it clearly hurt the President and the Democrats in the midterms, but this was the right decision. The auto industry is thriving, and we avoided a death spiral in the auto industry and the supplier base that would have occurred under a forced liquidation.

      Economy

      Luxury sales are rebounding

      October 18, 2010 /

      Here’s some interesting news regarding the retail sector and the luxury goods market. Luxury sales are rebounding, which probably means consumer sentiment is ticking back up.

      The luxury sector is rebounding better-than-expected this year thanks in large part to wealthy Americans replenishing their wardrobes after a year of self-denial and nouveau riche Chinese indulging in a worldwide spending spree, according to a new study released Monday.

      Sales of designer clothes, fine leather goods, jewelry, watches and other indulgences around the globe is forecast to surge 10 percent to euro168 billion ($236.7 billion) in 2010, recovering from a disastrous 2009 when sales declined 8 percent to euro153 billion, Bain & Co. said in its annual review of the sector commissioned by Italy’s Fondazione Altagamma association of high-end producers.

      Let’s see what happens this holiday season. If double-dip recession concerns are fading away, retailers might be in for a pleasant surprise.

      Economy, General Business, Retail

      Greenspan supports raising taxes

      September 16, 2010 /

      The tax debate is raging on Capital Hill, and now we have this surprise from Alan Greenspan.

      Former Federal Reserve chief Alan Greenspan, reversing a long-standing aversion to higher taxes, said Wednesday tax rates must rise and the fiscal stimulus wound down in order to reduce the U.S. budget deficit and allow private investment to expand.

      “I am in favor for the first time in my memory of raising taxes,” Greenspan told an audience at the Council on Foreign Relations in New York. He said the economy could not recover while the high deficit remains high.

      Greenspan warned that the deficit, swollen by massive stimulus spending, was crowding out capital investment. We “must find a way to simmer down fiscal activism and allow the economy to heal,” he said, adding that stimulus spending had been far less successful than anticipated.

      Conservatives won’t be happy to hear this, but the reality of the long-term deficit needs serious solutions. Greenspan is stating the obvious.

      Economy

      Junk bond sales are booming

      September 7, 2010 /

      Here’s an interesting twist in the new reality:

      With rising fears of a prolonged recession and stomach-churning moves in the stock market, corporate bond markets have performed so well this year they look like they’re part of a parallel universe.

      Banks are reluctant to lend, but large corporations with the weakest credit ratings have had little trouble finding investors happy to hand over their cash.

      Companies sold $24.6 billion in junk bonds in August, the eighth-best month ever for sales, according to Thomson Reuters data. Among those feeding in the market: Goodyear Tire & Rubber Co., Rite Aid Corp. and acquisitive power giant NRG Energy Inc.

      So how is it that companies with bad credit find it so easy to borrow in this economy?

      “A lot of that has to do with living in a world where investments pay less than 1 percent,” said Diane Vazza, head of fixed income research at rating agency Standard & Poor’s.

      More and more companies are refinancing their corporate debt, getting rid of high-interest bonds in favor of a lower interest rate. In many ways this trend is a positive as companies lower their debt costs, having the exact effect that the Fed intended.

      Economy, Finance, General Business

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