Wednesday, February 29, 2012

Why College Aid Makes College More Expensive

SmartMoney by Jack Hough - View Original Article HERE

Hough: New research shows how federal spending on higher education can backfire.

Federal aid for students has increased 164% over the past decade, adjusted for inflation, according to the College Board. Yet three-quarters of Americans and even a majority of college presidents see college as unaffordable for most, and that sentiment has been steadily spreading, the Pew Research Center reports.

Two new studies offer clues on why. One measures the degree to which some colleges reduce their own aid in response to increased federal aid. The other suggests federal aid is helping to push college costs higher.

Recipients of federal Pell Grants have, by definition, limited means to pay for college, so they are likely to qualify for grants and price breaks given out by schools, too. But schools view a student's sources of federal aid before deciding how much to give on their own, rather than the other way around. The result is a crowding out effect, where some schools give less as the government gives more.

Lesley Turner, a PhD candidate at Columbia University, looked at data on aid from 1996 to 2008 and calculated that, on average, schools increased Pell Grant recipients' prices by $17 in response to every $100 of Pell Grant aid. More selective nonprofit schools' response was largest and these schools raised prices by $66 for every $100 of Pell Grant aid.

Aid from schools over the past decade has increased about half as fast as federal aid, according to the College Board.

Perhaps worse for students than a crowding out effect is the Bennett Effect, named for William Bennett, who 25 years ago as Secretary of Education wrote for the New York Times, "Increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions."

If subsidies puff up buying power and shift prices higher, as economics courses teach, could federal aid for college help create an affordability problem? After all, the federal government began spending more on college aid with the Higher Education Act of 1965 and the full funding of Pell Grants in 1975. Since 1979, tuition and fees have tripled after adjusting for inflation. That's much faster than the increase for real estate and teacher pay.

There have been mixed findings on the Bennett Effect in recent decades, with some studies finding a dollar-for-dollar relationship and others, none at all. Determining why college costs are rising is a difficult task, after all. Stephanie Riegg Cellini of George Washington University and Claudia Golden of Harvard take a new approach, focusing on for-profit schools. Some of these are eligible to participate in so-called Title IV aid programs (named for a portion of the aforementioned Act) and some not.

After adjusting for differences among schools, the authors find that Title IV-eligible schools charge tuition that is 75% higher than the others. That's roughly equal to the amount of the aid received by students at these schools.

Studies like these suggest that if one goal of government is to make college affordable, aid should become more thoughtful instead of merely more plentiful. And the total cost of federal spending on college isn't fully known. That's because spending on loans dwarfs that on grants. Student loans recently eclipsed credit card debt.

With credit cards, borrowers pay high interest rates to make up for their lack of collateral. Many many student loans have subsidized rates; others have low rates based on the assumption that a college education is a good financial risk for lenders.

If costs outpace the ability of graduates to find jobs with good pay, and repayment rates on these loans slide, taxpayers could end up feeling the crunch.

Debt doomsday may come sooner than expected


POLITICO - by Seung Mim Kin - View Original Article HERE

The federal government could hit the debt ceiling sooner than expected — and possibly around the November election — according to a report out Friday.

Lawmakers on Capitol Hill had hoped that last summer’s deal to end the nasty fight over lifting the debt ceiling would ensure the issue wouldn’t resurface until at least 2013

But the Bipartisan Policy Center said Friday that the debt-limit doomsday could come earlier than that.

Analysts from the Bipartisan Policy Center projected that the United States will hit its $16.4 trillion debt ceiling between late November 2012 and early January 2013 due to lower-than-expected corporate tax revenues and the recent extension of the payroll tax holiday.

A number of other factors, such as the ongoing financial crises in Europe, volatile gas prices and how quickly the U.S. economy continues to grow could push the debt-ceiling deadline forward or backwards, according to the center.

“When the Budget Control Act of 2011 increased the debt ceiling last August, Congress, the administration, and outside analysts believed that this increase would allow federal borrowing under the limit well into 2013,” the center’s analysts wrote. “Due to unexpected circumstances … that belief appears increasingly likely to have been misguided.”

The current debt level is $15.4 trillion, according to the Treasury Department.

The center’s report echoes a warning from Treasury Secretary Timothy Geithner last week, when he testified before the Senate Budget Committee that the country would reach the debt limit “significantly” after the fiscal year ends on Sept. 30, but “before the end of the calendar year.”

“Those estimates will change, it’s a long way away and you know those estimates change a lot,” Geithner told senators. “But what we do try and do is update those estimates regularly, transparently and we’ll keep doing that as we have in the past.”

President Barack Obama’s fiscal 2013 budget also foreshadows an earlier-than-expected deadline. As of Sept. 30, the debt level is expected to hit $16.3339 trillion, running close to the statutory $16.394 trillion limit, according to the budget.

A grueling, weeks-long battle in Congress last summer ended with an agreement to slash $2.1 trillion from the federal budget in exchange for raising the debt limit by the same amount. The standoff pushed the country to the edge of default and triggered the first-ever downgrade of the nation’s credit rating.

If the United States maxes out its credit limit before the end of this year, that could set up another messy and acrimonious battle during the lame-duck session. Lawmakers already face a dilemma over expiring Bush-era tax rates and a potential fight over preventing the $1.2 trillion in automatic budget cuts that were borne out of the supercommittee’s failure last November.

Congress has to sign off on any increases to the debt ceiling, but the Treasury Department can employ a variety of accounting maneuvers to stall the absolute deadline before the country defaults on its debt. It did so last year, when the debt limit was actually hit in May but Treasury was able to delay the deadline until early August.

The Bipartisan Policy Center said it believed that the Treasury Department could punt the debt-limit deadline until February 2013 if the so-called extraordinary measures were again used.

A recent analysis from JP Morgan also estimated that due to the payroll tax holiday deal – which also included an extension of jobless benefits and a delay in steep pay cuts to doctors who serve Medicare patients – the debt ceiling will be reached in mid-December. But the investment banking firm said that with the various accounting measures, Treasury could delay the absolute deadline until February 2013.




Tuesday, February 28, 2012

Gasoline Prices Are Not Rising, the Dollar Is Falling

FORBES by Louis Woodhill

View Original Article HERE


Panic is in the air as gasoline prices move above $4.00 per gallon. Politicians and pundits are rounding up the usual suspects, looking for someone or something to blame for this latest outrage to middle class family budgets. In a rare display of bipartisanship, President Obama and Speaker of the House John Boehner are both wringing their hands over the prospect of seeing their newly extended Social Security tax cut gobbled up by rising gasoline costs.

Unfortunately, the talking heads that are trying to explain the reasons for high oil prices are missing one tiny detail. Oil prices aren’t high right now. In fact, they are unusually low. Gasoline prices would have to rise by another $0.65 to $0.75 per gallon from where they are now just to be “normal”. And, because gasoline prices are low right now, it is very likely that they are going to go up more—perhaps a lot more.

What the politicians, analysts, and pundits are missing is that prices are ratios. Gasoline prices reflect crude oil prices, so let’s use West Texas Intermediate (WTI) crude oil to illustrate this crucial point.

As this is written, West Texas Intermediate crude oil (WTI) is trading at $105.88/bbl. All this means is that the market value of a barrel of WTI is 105.88 times the market value of “the dollar”. It is also true that WTI is trading at €79.95/bbl, ¥8,439.69/barrel, and £67.13/bbl. In all of these cases, the market value of WTI is the same. What is different in each case is the value of the monetary unit (euros, yen, and British pounds, respectively) being used to calculate the ratio that expresses the price.

In terms of judging whether the price of WTI is high or low, here is the price that truly matters: 0.0602 ounces of gold per barrel (which can be written as Au0.0602/bbl). What this number means is that, right now, a barrel of WTI has the same market value as 0.0602 ounces of gold.

During the 493 months since January 1, 1971, the price of WTI has averaged Au0.0732/bbl. It has been higher than that during 225 of those months and lower than that during 268 of those months. Plotted as a graph, the line representing the price of a barrel of oil in terms of gold has crossed the horizontal line representing the long-term average price (Au0.0732/bbl) 29 times.

At Au0.0602/bbl, today’s WTI price is only 82% of its average over the past 41+ years. Assuming that gold prices remained at today’s $1,759.30/oz, WTI prices would have to rise by about 22%, to $128.86/bbl, in order to reach their long-term average in terms of gold. As mentioned earlier, such an increase would drive up retail gasoline prices by somewhere between $0.65 and $0.75 per gallon.

At this point, we can be certain that, unless gold prices come down, gasoline prices are going to go up—by a lot. And, because the dollar is currently a floating, undefined, fiat currency, there is no inherent limit to how far the price of gold in dollars can rise, and therefore no ultimate ceiling on gasoline prices.

Federal Reserve Chairman Ben Bernanke uses a “core CPI index” that excludes food and energy to guide monetary policy. From Big Ben’s point of view, rising gasoline prices are not a problem. For the rest of us, they are becoming a big problem.

Over the centuries, gold has been “the golden constant”. Eventually, all prices equilibrate with gold. This is why gold represents the best available standard in terms of which to define the value of a monetary unit. Forty-one years ago, when the value of the dollar was defined in terms of gold at $35/oz, WTI was selling for $3.56/bbl.

Right now, the threat posed by rising gasoline prices is not just to family budgets. An even greater danger is that the government will use escalating oil prices as an excuse to do something stupid.

After President Nixon abrogated the Bretton Woods monetary arrangement in stages starting in September 1971, both gold prices and oil prices started to rise. The government responded by imposing wage-price controls. This made a bad situation much worse.

This time around, the stupid policies being considered to “deal with” rising gasoline prices include additional cuts in payroll taxes and higher taxes on energy producers.

During the 1970s, the toxic combination of a weak dollar, high tax rates, and onerous regulations introduced a new word into America’s economic vocabulary: stagflation. Reaganomics banished this word to the history books. Now, President Obama and Fed Chairman Bernanke are teaming up to give stagflation another try. It is not likely that Americans will like it any more this time around than they did 40 years ago.

IRS still experiencing delays in sending tax refunds

SunSentinel.com by Donna Gehrke-White
View Original Article HERE

Tax preparers said Thursday that the Internal Revenue Service is continuing to have delays in sending federal tax refunds this year, with hundreds of South Floridians complaining they still haven't gotten their check.

"Our phone is ringing off the hook with people saying they should have their refund by now," said Mark Daly, franchise owner of several Jackson-Hewitt Tax Service outlets in South Florida.

"There's no rhyme or reason why some returns are being quickly processed and others not," Daly added. "We've had hundreds and hundreds of complaints."


"The IRS is experiencing delays this year in sending refunds," said H&R spokesman Gene King in a statement sent Thursday to the Sun Sentinel. "Based on current IRS guidance, most refunds are now issued from the IRS in 10 to 21 days."


Last month, the IRS said there would be a week delay for the earliest filers because of a computer snafu in getting up a system to find identity theft before refund checks were actually issued.

The federal agency said those people filing after Jan. 26 would not have delays.

But the agency continued to have a slower response partly because they had a backlog from the earliest cases being delayed, tax preparers said.

In a statement, the IRS said it successfully opened the filing season and "refunds have been issued to millions of taxpayers. When the IRS announced the opening of the 2012 filing season, it advised taxpayers who electronically file and select direct deposit that they could see their refunds in 10 to 21 days. Some taxpayers are getting refunds much faster, but at this time taxpayers should expect refunds to be issued as indicated in the original IRS guidelines."

The agency also said in its release that workers have resolved a recent online glitch: Some people who visited "Where's My Refund," on the IRS.gov website were told "we had no information regarding their return."

But the IRS statement said, "this was a temporary situation, and virtually all of these cases were resolved."

People can expect to get an expected refund date when they visit “Where's My Refund.”

"When a taxpayer receives an acknowledgment message that their e-filed tax return has been received, they can be assured that the IRS has received the tax return," according to the IRS.

Monday, February 27, 2012

World Bank proposes global coalition to save oceans

BREITBART - View Original Article HERE

The World Bank was on Friday to propose a coalition of governments, global organisations and other groups to protect the oceans, aiming to raise $1.5 billion in the next five years for the purpose.

World Bank president Robert Zoellick was to tell a global conference in Singapore that the new partnership would bring together various groups to confront problems of over-fishing, marine degradation and loss of habitat.

"The world's oceans are in danger, and the enormity of the challenge is bigger than one country or organisation," Zoellick, who is in Singapore for the World Oceans Summit, was expected to say, according to prepared remarks released by the World Bank ahead of his speech.

"We need coordinated global action to restore our oceans to health. Together we'll build on the excellent work already being done to address the threats to oceans, identify workable solutions, and scale them up."

"So today, I want to propose a new approach -- an unprecedented Global Partnership for Oceans," he added.

Zoellick said the coalition "will bring together countries, scientific centers, NGOs, international organisations, foundations and the private sector to pool knowledge, experience, expertise, and investment around a set of agreed upon goals."

As a starting point, the partnership is committing to raise at least $300 million in "catalytic finance", meaning funds that would be used for technical assistance for key governance reforms, he said.

Another $1.2 billion would be raised "to support healthy and sustainable oceans," he added.

"This would total $1.5 billion in new commitments over five years," he said, adding that the World Bank would convene the first meeting of the partnership in Washington in April.

Zoellick proposed several targets for the coalition to achieve in the next 10 years, including rebuilding at least half of the world's fish stocks.

About 85 percent of ocean fisheries are fully exploited, over-exploited or depleted, including most of the stocks of the top 10 species, he said.

The partnership should also aim to "increase the annual net benefits of fisheries to between $20 billion and $30 billion" from the current net economic loss of about $5 billion a year.

Marine protected areas should be more than doubled, he said, noting that less than two percent of the ocean's surface is protected compared to around 12 percent of land.

"Let's increase this to five percent," he said.

On the economic side alone, the implications are enormous if little is done, he said.

In developing countries, one billion people depend on fish and seafood for their primary source of protein and over half a billion rely on fishing as a means of livelihood, Zoellick said.

For developing countries, including many island and coastal nations, fish represent the single most traded food product, and for many Pacific Island states, fish make up 80 percent of total exports.

"The world?s oceans are in danger," Zoellick said. "Send out the S-O-S: We need to Save Our Seas."


Chart: 'America’s Per Capita Government Debt Worse Than Greece'

the weekly Standard by Daniel Halper

View Original Article HERE


The office of Senator Jeff Sessions, ranking member on the Senate Budget Committee, sends along this chart, showing that 'America’s Per Capita Government Debt Worse Than Greece,' as well as Ireland, Italy, France, Portugal, and Spain:

Sunday, February 26, 2012

Sorry, America: Your wireless airwaves are full

CNNMONEY by David Goldman View Original Article HERE

America is facing a spectrum crunch. That means cell phone bills will go up, service will get spotty -- and there's no quick or cheap fix.

This is part one of a week-long series on the cell phone capacity crunch.

NEW YORK (CNNMoney) -- The U.S. mobile phone industry is running out of the airwaves necessary to provide voice, text and Internet services to its customers.

The problem, known as the "spectrum crunch," threatens to increase the number of dropped calls, slow down data speeds and raise customers' prices. It will also whittle down the nation's number of wireless carriers and create a deeper financial divide between those companies that have capacity and those that don't.

Wireless spectrum -- the invisible infrastructure over which all wireless transmissions travel -- is a finite resource. When, exactly, we'll hit the wall is the subject of intense debate, but almost everyone in the industry agrees that a crunch is coming.

The U.S. still has a slight spectrum surplus. But at the current growth rate, the surplus turns into a deficit as early as next year, according to the Federal Communications Commission's estimates.

"Network traffic is increasing," says an official at the FCC's wireless bureau. "[Carriers] can manage it for the next couple years, but demand is inevitably going to exceed the available spectrum."

How did we get here?

The number-one biggest driver is consumers' insatiable thirst for e-mail, apps and particularly video on their mobile devices -- anywhere, anytime. Global mobile data traffic is just about doubling every year, and will continue to do so through at least 2016, according to Cisco's (CSCO, Fortune 500) Mobile Visual Networking Index, the industry's most comprehensive annual study.

The iPhone, for instance, uses 24 times as much spectrum as an old-fashioned cell phone, and the iPad uses 122 times as much, according to the Federal FCC. AT&T says wireless data traffic on its network has grown 20,000% since the iPhone debuted in 2007.

Video and mobile are breaking the Internet

"We got into this principally because technology and demand exploded at a rate that nobody had anticipated," says Rory Altman, director of technology consultancy Altman Vilandrie & Co.

Another catalyst is the way the U.S. government allocated spectrum. The bands that wireless companies hold were broken up into small chunks across various markets, which was helpful in increasing competition in the 1990s.

But the patchwork nature has proven problematic for new technologies like high-speed 4G broadband. Bigger swaths of uninterrupted spectrum provide the larger amounts of bandwidth needed for delivering faster speeds.

One more contributing factor is that TV broadcasters and government agencies like NASA and the Department of Defense hold some of the best spectrum -- relatively low-frequency radio waves that can travel long distances and penetrate buildings.

There are also businesses such as Dish Network (DISH, Fortune 500) that have large spectrum allotments but aren't currently using them. (Dish is exploring its options for either using or selling its spectrum. A group of cable companies with unused spectrum recently struck a $3.6 billion pact to sell their holdings to Verizon in a deal that's facing heavy regulatory scrutiny.)

The spectrum crunch is not an inherently American problem, but its effects are magnified here, since the United States has an enormous population of connected users. This country serves more than twice as many customers per megahertz of spectrum as the next nearest spectrum-constrained nations, Japan and Mexico.

When spectrum runs short, service degrades sharply: calls get dropped and data speeds slow down.

That's a nightmare scenario for the wireless carriers. To stave it off, they're turning over rocks and searching the couch cushions for excess spectrum.

They have tried to limit customers' data usage by putting caps in place, throttling speeds and raising prices. Carriers such as Verizon (VZ, Fortune 500), AT&T (T, Fortune 500), Sprint (S, Fortune 500), T-Mobile, MetroPCS (PCS) and Leap (LEAP) have been spending billions to make more efficient use of the spectrum they do hold and billions more to get their hands on new spectrum. And they have tried to merge with one another to consolidate resources.

The FCC has also been working to free up more spectrum for wireless operators. Congress reached a tentative deal last week, approving voluntary auctions that would let TV broadcasters' spectrum licenses be repurposed for wireless broadband use.

But freeing up more spectrum won't be enough to solve the problem.

"There is no one solution that will address all the needs of the wireless industry," says Dan Hays, a partner at PricewaterhouseCoopers who specializes in telecom issues.

The good news is that there are ways to buy time. Several innovative approaches are in the works, and there's a decent amount of spectrum out there that could be turned over to the carriers' possession.

The bad news is that none of the fixes are quick, and all are expensive. For the situation to improve, carriers -- and, therefore, their customers -- will have to pay more.

"For a while we won't notice the quality of service changes, but over time as devices get better and use more data, we'll start to take notice," Altman says. "Consumers will notice it, and the burden will fall on the carriers to fix it."


Gallup Finds Unemployment Climbing to Nine Percent in February

CNSNews.com byMatt Cover - View Original Article HERE

Unemployment in the U.S. rose to nine percent in mid-February, up from 8.3 percent a month earlier, according to a new Gallup survey. The polling company said this suggests that it is “premature” to assume the economy will not feature prominently in the 2012 election season.

Gallup figures typically provide an indication of what the government will report at the end of the month.

“The U.S. unemployment rate, as measured by Gallup without seasonal adjustment, is 9.0% in mid-February,” Gallup said in its mid-month unemployment survey, released on February 17. “The mid-month reading normally reflects what the U.S. government reports for the entire month, and is up from 8.3% in mid-January.”

Gallup said the Bureau of Labor Statistics (BLS) would likely report a rise in the official unemployment rate in early March, when it publishes its February figures.

Gallup’s mid-month figures are not seasonally adjusted, and so may not predict the official unemployment rate precisely. However, because Gallup and BLS both conduct their unemployment surveys at the same time – in the middle of the month – Gallup’s early figures can provide a barometer of where the official rate is likely headed.

“Gallup’s mid-month unemployment reading, based on the 30 days ending Feb. 15, serves as a preliminary estimate of the U.S. government report, and suggests the Bureau of Labor Statistics will likely report on the first Friday of March that its seasonally adjusted unemployment rate increased in February,” Gallup said.

The survey also found that “underemployment” – those unemployed and those working part-time because full-time jobs are unavailable – rose to 19 percent, up from the 18.7 percent Gallup found in January.

Gallup

Gallup said its report reflected a continuing trend of weakness in U.S. labor markets, marking a “sharp deterioration” in job market conditions.

“Regardless of what the government reports, Gallup’s unemployment and underemployment measures show a sharp deterioration in job market conditions since mid-January.”

That decline was consistent with an economy struggling with weak growth and rising energy prices, Gallup said, making it “premature” to think that the economy would not be a major factor in November’s presidential elections.

“Further, it suggests that it is premature to assume the condition of the economy will not remain a major issue for Americans both financially and politically in 2012.”

Gallup’s survey is a random telephone tracking survey of 30,000 adults conducted through February 15, whereas BLS’s survey is done over one week in the middle of each month and surveys 60,000 households. BLS adjusts its results for seasonal changes in the job market – regular changes in the labor market that occur every year and aren’t reflective of the demand for labor or the supply of available jobs, such as temporary hiring around the holiday shopping season.

Since Gallup’s figures are not seasonally adjusted, the 0.7 percent rise in unemployment tracked in its survey almost certainly includes some of the seasonal factors that typically contribute to unemployment after the holiday shopping season.

Nonetheless, Gallup predicted that BLS would find an increase in unemployment in February.

“Although the government seasonally adjusts the U.S. unemployment rate, and the workforce participation rate could decline – both of which could drive down its unemployment rate – it still seems likely that the BLS will report an increase in the seasonally adjusted U.S. unemployment rate for February.”

Wednesday, February 22, 2012

Greek Rescue Leaves Risk of Default Alive in Europe as Austerity Deepens

Bloomberg by Simon Kennedy and James Neuger - View Article HERE


Europe is still struggling to avoid the threat of default as investors warn Greece will soon risk violating the terms of its second bailout in three years.
Seven months of negotiations ended in the pre-dawn hours in Brussels with Greece winning 130 billion euros ($172 billion) in aid it needs to avoid a March bankruptcy. Any respite may prove temporary after it signed up to a program of austerity and economic reform aimed at slashing debt to 120.5 percent of gross domestic product by 2020 from about 160 percent last year.
Even with investors and central bankers chipping in to relieve the debt burden, economists from Citigroup Inc. to Commerzbank AG concluded Greece may again fail to deliver amid a fifth year of recession, looming elections and social unrest. The upshot could be the removal of aid and renewed debate over the merits of fresh assistance before year-end as policy makers shift toward doing more to inoculate the rest of Europe.
“The bailout bandage is on, but it won’t take much to unravel,” said David Miller, partner at Cheviot Asset Management in London. “The euro zone has done its best to ensure that Greece will deliver on promises, but there is considerable scope for backtracking on deficit reduction.”
Financial markets signaled doubt the accord will fix Greece’s travails permanently or spell an end to the two-year debt crisis. The euro surrendered initial gains against the dollar and European stocks fell from a six-month high.
Bankruptcy Risks
By supporting Greece, Europe’s high command chose the financial and political cost of awarding fresh money over the risk of a bankruptcy that could splinter the 13-year-old euro area. At least 386 billion euros has now been committed to save Greece, Ireland and Portugal with investors predicting the government in Lisbon at least will need more support.
To tackle future fiscal emergencies and limit contagion, officials held out the prospect of boosting their firewall to 750 billion euros from a planned limit of 500 billion euros when a permanent aid fund is paired with the temporary facility starting in July. They also cajoled investors into providing more debt relief in an exchange meant to tide Greece past a March bond repayment.
In return for the new cash, Greece signed up to cuts in pensions, the minimum wage, health-care and defense spending, as well as layoffs of state employees and asset sales. It must implement that austerity with unemployment already topping 20 percent, meaning more retrenchment might end up only compounding the debt stress.
Dangers ‘Substantial’
“The danger of Greece saving itself into economic depression and having to default and exit the common currency zone remains substantial,” said Christian Schulz, an economist at Berenberg Bank in London. Jennifer McKeown of Capital Economics Ltd. repeated her forecast that Greece will quit the euro by the end of the year.
The odds that Greece will remain encumbered by debt were exposed by an analysis by European Union and International Monetary Fund experts that highlights what could go wrong with a country unable to grow out of its fiscal travails by devaluing its currency. In a worst-case scenario, the debt may rebound to 160 percent of GDP by 2020 rather than nearing the 120 percent the IMF deems “sustainable.”
“Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it,” said the report by the so-called troika, which also includes the European Central Bank.
‘Fully Fledged’ Default
The study exposes the difficulties Greece faces in delivering its promises amid a crisis-torn economy, said Guillaume Menuet, an economist at Citigroup in London. The country may miss its deficit goals as soon as June and have to prepare for a “fully fledged, coordinated default” by year- end, he said.
Joerg Kraemer, chief economist at Commerzbank in Frankfurt, calculates the debt ratio will rise to 127 percent if annual growth is 0.5 percentage points lower than assumed.
“Greece will find it difficult to shoulder even the reduced debt in the long run if it does not implement far- reaching reforms,” said Kraemer. “For the second half of the year, there is a significant probability that a frustrated EU stops payments to Greece.”
If 2010’s 110 billion-euro bailout is anything to go by, Greece will struggle to reach its targets. Privatizations supposed to reach 19 billion euros by 2015 have so far yielded about a tenth of that amount and Barclays Capital estimates that, even with promised fiscal cuts, just 16,000 state jobs were shed in the three years through the third quarter of 2011 compared with 466,000 in the private sector.
Outside Scrutiny
In a bid to prevent renewed failure even if it means eroding Greek sovereignty, European governments will tighten their scrutiny. A special account will be established that gives priority to keeping Greece solvent before releasing money for the country’s budget. A European Commission task force will also be embedded in Athens.
The biggest near-term risk may be elections which could be held as soon as April. In a poll released today, nearly every Greek questioned by GPO for Mega TV said the budget measures promised by the current government were too harsh.
“The new Greek government could refuse to follow through on its commitment,” said David Mackie, chief European economist at JPMorgan Chase & Co., who noted Europe’s leverage over Greece will recede once investors complete a debt exchange and the first aid payments are received.
Debt-Swap Relief
Other hurdles remain. Unless 90 percent of investors sign up to the bond swap, Greece may need to enforce it, creating legal difficulties. Finland and Germany are among the nations whose lawmakers must back the new loans as voters attack the bailouts. German Finance Minister Wolfgang Schaeuble said the IMF plans to add 13 billion euros to the bailout, less than the third it contributed to the first program.
The euro area has nevertheless “bought time” for countries such as Portugal to prove they are more creditworthy than Greece and to erect stronger defenses in the form of a larger bailout fund, said Carsten Brzeski, an economist at ING Groep in Brussels.
“The often-cited Greek can has again been kicked down the road,” he said. “The good thing is that the can is still on the road, but it requires a huge amount of stamina and patience to keep it there.”

Fitch Cuts Greece, Near-Term Default ‘Highly Likely’

CNBC.com View Article Here

Fitch ratings agency on Wednesday slashed its rating for Greek sovereign debt to “C” from “CCC,” indicating that default is “highly likely in the near term.”
Scott E. Barbour Getty Images
The downgrade comes just after the country secured a second bailout from its creditors and the subsequent announcement by the Greek government that private investors holding Greek debt would be forced to accept a debt swap, in which they exchange their bonds for lower-value debt.
“In Fitch's opinion, the exchange, if completed, would constitute a 'distressed debt exchange' (DDE) in line with its criteria and consequently yesterday's announcements set in motion the agency's process for reviewing Greece's issuer and debt securities ratings,” Fitch said in a statement.
Fitch said it would review its stance on Greece again once the debt swap had been completed.
"Shortly after completion of the exchange with the issue of new securities, Greece's sovereign rating will be moved ... and re-rated at a level consistent with the agency's assessment of its post-default structure and credit profile," the statement said.

Thursday, February 16, 2012

Biden Admits Government Subsidies Have Increased College Tuition

Real Clear Politics

Vice President Joe Biden admits that the government intervening with the free market and providing subsidies for students to attend college have contributed to the increase in college tuition.

"By the way, government subsidies have impacted upon rising tuition costs. It's a conundrum here," Biden said to a student who asked about the government's intervention in the free market system.

Biden was talking about the importance of tackling rising college costs at Florida State University in Tallahassee Monday morning.

more....

Monday, February 13, 2012

Economist John Hussman: Stocks to Plunge 25 Percent, US Recession Likely

MoneyNews by Forrest Jones
View Original Article HERE


U.S. stocks will fall 25 percent and the country stands a good chance of slipping into a recession in 2012, says economist and fund manager John Hussman.

While manufacturing numbers are improving in the U.S. and stock prices are on the rise, too many analysts are focusing on backwards-looking data, numbers that reflect what happened and often pop up on headlines with greater clarity than leading indicators, which aim to suggest how things may unfold.

Unemployment rates, for example, came in much better in January than expected, although the numbers don't suggest such momentum can sustain, especially since jobless figures can swing more than normal around January due to seasonal factors.


Read more: Economist John Hussman: Stocks to Plunge 25 Percent, US Recession Likely

When the mood from lagging indicators pops, the economy could fall and recession could follow.

"Though I don’t expect a 2008-type collapse here, I would view a 25 percent market decline as only run-of-the-mill," Hussman says in a note to investors.

"I don’t view the probability of recession as 100 percent, but the leading evidence continues to indicate recession as the most likely probability."

Other economists agree that a recession is more likely in the U.S. than most would think.

Fiscal spending will wind down this year as the government moves away from stimulus measures and focuses on narrowing deficits.

Decreased presence from the government will take a good chunk out of economic activity, which ups the chances for a downturn, says Jim Walker, founder and managing director of Asianomics, an independent research firm.

"There's going to be a significant slowdown in fiscal expenditure in the U.S., they're going to have to control the fiscal side much more as the year goes on," Walker tells CNBC, adding in a separate report there's a 55 percent chance for recession this year.

"Home prices are still falling (on a mild deflation path), equity prices are still off their highs of the year, household credit outstanding is still contracting, real hourly compensation growth is still negative, employment growth is still subpar — and up until November — consumer confidence was fast approaching the recession lows of 2008," Walker writes in a report, also reported by CNBC.

Oil-Price Expert Kloza: Get Ready for Wild Gasoline-Price Spikes

MoneyNews by Forrest Jones
View Original Article HERE


Gasoline will hit $4 a gallon in the coming months due to seasonal factors, but some portions of the country could see chaotic spikes much higher, says Tom Kloza, chief analyst for the Oil Price Information Service.

Regular unleaded gasoline now averages $3.48 a gallon, up from $3.12 a year ago and $2.67 in February 2010, USA Today reports.

Prices will climb by 60 cents in May due to seasonal factors.

"I think it's going to be a chaotic spring, with huge price increases in some places," Kloza says, USA Today adds.

Expect a nationwide peak of $4.05 this spring, when increased driving and refinery trends result in higher prices.

Escalating tensions between the West and Iran are pushing up global crude prices, while refinery snags in the U.S. and closures elsewhere will also pressure prices upward.

"Higher demand, Iran, lost refining capacity are all potential problems," says Brian Milne of energy tracker Televent DTN, USA Today adds.

"We'll get over $4 a gallon, but it's going to be tough to sustain that level. People will drive less."

While tensions between the West and Iran are pushing prices up, concerns of an implosion in Europe are countering those sentiments.

A return to recession in Europe is a foregone conclusion for many, yet a messy string of defaults could exacerbate the situation and really pummel the economy, which would cut into oil demand.

"The global economy and energy markets are likely to see continued high volatility," says Shell CEO Peter Voser, according to The Telegraph.

"Both volatile macro and volatile earnings are now a fact of life for our industry," Voser says.

"We deal with this by staying focused on longer-term trends."

Friday, February 10, 2012

Biden Admits Government Subsidies Have Increased College Tuition

Real Clear Politics
View Original Article HERE

Vice President Joe Biden admits that the government intervening with the free market and providing subsidies for students to attend college have contributed to the increase in college tuition. "By the way, government subsidies have impacted upon rising tuition costs. It's a conundrum here," Biden said to a student who asked about the government's intervention in the free market system. Biden was talking about the importance of tackling rising college costs at Florida State University in Tallahassee Monday morning.
MORE.......

Pimco's Gross: We're Witnessing 'Death of Abundance,' Birth of Austerity

MONEYNEWS by Julie Crawshaw
View Original Article HERE


Pacific Investment Management Co.’s Bill Gross says the age of abundance is over.He thinks the zero-bound interest rate policies embraced by central banks including the Federal Reserve may end up killing — as opposed to creating — credit and developed economies may suffer accordingly, Bloomberg reported. "We are witnessing the death of abundance and the borning of austerity, for what may be a long, long time," Gross writes in a note to investors. While recent actions by policy makers provide assurances that short and intermediate U.S. bond yields may not change for years, any potential for price appreciation is limited, Gross says.“Monetary and fiscal excesses carry with them explicit costs,” Gross wrote. “My intent really is to alert you, the reader, to the significant costs that may be ahead for a global economy and financial marketplace still functioning under the assumption that cheap and abundant central bank credit is always a positive dynamic.”When credit dies, Gross says, “it delevers, it slows and inhibits economic growth, and it turns economic theory upside down, ultimately challenging the wisdom of policymakers.”“The transition from a levering, asset-inflating secular economy to a post bubble delevering era may be as difficult for one to imagine as our departure into the hereafter,” he says. “We'll all be making this up as we go along for what may seem like an eternity."Most short to intermediate Treasury yields are dangerously close to the zero-bound which imply limited potential room, if any, for price appreciation, observes Gross. Gross says that when all yields approach the zero-bound, as in Japan for the past 10 years, and now in the U.S. and selected “clean dirty shirt” sovereigns, then the dynamics may change. “Money can become less liquid and frozen by ‘price’ in addition to the classic liquidity trap explained by ‘risk,’” he says.“We can’t put $100 trillion of credit in a system-wide mattress, but we can move in that direction by delevering and refusing to extend maturities and duration.” Gross boosted the proportion of U.S. government and Treasury debt in the $244 billion Total Return Fund to 30 percent of assets in December, the highest since November 2010, Bloomberg reported, citing a report placed on the company’s website last month. His fund has returned 6.57 percent in the past year, beating 53 percent of its peers, according to data compiled by Bloomberg. It gained 2.58 percent over the past month, beating 99 percent of peers.Pimco, a unit of the Munich-based insurer Allianz SE, managed $1.35 trillion of assets as of September.Meanwhile, a top Federal Reserve official sharply criticized the U.S. central bank's decision last week to telegraph ultra low interest rates for nearly three more years, saying on Wednesday the move undermined confidence and caused confusion, Reuters reported.The Fed's policy-setting committee, citing a bleak outlook for the fragile economic recovery, said last week it expected to keep rates "exceptionally low" at least through late 2014. The forecast, which was contingent on economic conditions, pushed the target date some 18 months later than a previous forecast and it sparked a rally in stocks and bonds."Such statements are, in my mind, particularly problematic from a communications perspective," Philadelphia Federal Reserve President Charles Plosser told a business audience. "Monetary policy should be contingent on the economic environment and not on the calendar."

Wednesday, February 8, 2012

Bogle, Volcker: Financial System Remains Broken

MoneyNews

View Original Article Here


John Bogle, the founder of mutual fund company Vanguard Group Inc. who popularized index investing, and Paul Volcker, the former Federal Reserve chairman, said confidence in the U.S. financial system is broken as regulators struggle to rein in speculation.

Bogle, who has spent 60 years advocating a low-cost approach to personal investing and railing against conflicts of interest in his industry, said he would grade the U.S. financial system a ‘D.’

Volcker, 84, who has urged Congress to ban proprietary trading by commercial banks, said banks are lobbying to undermine financial regulation aimed at making the industry more stable.

“There’s no question that confidence in government is shaky,” Volcker said in New York Tuesday at The John C. Bogle Legacy Forum hosted by Bloomberg Link. Washington is “filled up with law firms that cover whole city blocks. Lobbying firms. And it’s all living off the influence of the government.”

More.....


Latest Congressional Budget Outlook For 2012-2022 Released, Says Real Unemployment Rate Is 10%

Zero Hedge by Tyler Durden

View Original Article HERE


What do the NAR, Consumer Confidence and CBO forecasts have in common? If you said, "they are all completely worthless" you are absolutely correct. Alas, the market needs to "trade" off numbers, which is why the just released CBO numbers apparently are important... And the fact that the CBO predicted negative $2.5 trillion in net debt by 2011 back in 2011 is largely ignored. Anyway, here are some of the highlights.

  • 2012 Deficit: $1.1 trillion; 2013 Deficit: $0.6 - yes, we are cackling like mad too...
  • Unemployment to remain above 8% in 2012 and 2013; will be around 7% by end of 2015; to drop to 5.25% by end of 2022.
    • This forecast is utterly idiotic and is completely unattainable unless the US workforce drops to all time lows and the US economy generates 300,000 jobs a month for 10 years
  • Needless to say, CBO assumes the best of all worlds in this meaningless forecast
  • But here is the kicker: "Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 1¼ percentage points higher than the actual rate of 8.7 percent" translation: CBO just admitted that the BLS numbers are bogus and real unemployment is 10%. Thank you

MORE......

Tuesday, February 7, 2012

Soaring Beef Prices Force Shoppers To Find Other Foods


CBS Philly by Oren Liebermann
View Original Article HERE



PHILADELPHIA (CBS) -- At Cappuccio’s Meats in the Italian Market, the cuts of beef are cutting into the profits.

“Every week when I talk to my suppliers, I’m amazed by how much it’s going up,” said owner Domenick Crimi.

Beef prices soared more than 10 percent last year according to the Department of Agriculture, and they will likely go up at least another 5 percent this year.

“It bumps up a bit, comes down a tiny bit, then it bounces again, and when it bounces, it goes up another dime, 15, 20 cents,” said Crimi, “and sometimes that’s in a week.”

A drought across Texas and Oklahoma has made food and water scarce for cattle, which has kept herds small. The Department of Agriculture says there are 91 million cattle nationally, the smallest herd since 1952. Add to that the rising cost of feed and rising beef exports, and the price of beef in the states is surging.

“Your customers get tired of hearing every week that it’s going up,” said Andrew Hurford, manager of Kissin Fresh Meats. “Sooner or later, they’re going to reach a tolerance ceiling and they’re going to say maybe it’s not worth it anymore.”

The meat locker at Kissin used to be filled with fresh beef hanging from rails. But now it is only half full, since they have replaced beef with pre-packaged goods like eggs and cole slaw, leaving them something else to sell when customers stop purchasing as much beef.

“We do a lot of fish now and chicken,” said Johanna Butler, visiting the Italian Market from Swedesboro, NJ. “I mean, beef indeed is very expensive, so I’ve made some changes.”

For many shoppers tired of high beef prices, the question is no longer where’s the beef, but how much is it going to cost?

Monday, February 6, 2012

The Coming Tech-led Boom

The Wall Street Journal by Mark P Mills and Julio M. Ottino

View Original Article Here

A wonderfully hopeful article. Read it and take heart!

In January 1912, the United States emerged from a two-year recession. Nineteen more followed—along with a century of phenomenal economic growth. Americans in real terms are 700% wealthier today.

In hindsight it seems obvious that emerging technologies circa 1912—electrification, telephony, the dawn of the automobile age, the invention of stainless steel and the radio amplifier—would foster such growth. Yet even knowledgeable contemporary observers failed to grasp their transformational power.

In January 2012, we sit again on the cusp of three grand technological transformations with the potential to rival that of the past century. All find their epicenters in America: big data, smart manufacturing and the wireless revolution.

Information technology has entered a big-data era. Processing power and data storage are virtually free. A hand-held device, the iPhone, has computing power that shames the 1970s-era IBM mainframe. The Internet is evolving into the "cloud"—a network of thousands of data centers any one of which makes a 1990 supercomputer look antediluvian. From social media to medical revolutions anchored in metadata analyses, wherein astronomical feats of data crunching enable heretofore unimaginable services and businesses, we are on the cusp of unimaginable new markets.

The second transformation? Smart manufacturing. This is the first structural shift since Henry Ford launched the economic power of "mass production." While we see evidence already in automation and information systems applied to supply-chain management, we are just entering an era where the very fabrication of physical things is revolutionized by emerging materials science. Engineers will soon design and build from the molecular level, optimizing features and even creating new materials, radically improving quality and reducing waste.

Devices and products are already appearing based on computationally engineered materials that literally did not exist a few years ago: novel metal alloys, graphene instead of silicon transistors (graphene and carbon enable a radically new class of electronic and structural materials), and meta-materials that possess properties not possible in nature; e.g., rendering an object invisible—speculation about which received understandable recent publicity.

This era of new materials will be economically explosive when combined with 3-D printing, also known as direct-digital manufacturing—literally "printing" parts and devices using computational power, lasers and basic powdered metals and plastics. Already emerging are printed parts for high-value applications like patient-specific implants for hip joints or teeth, or lighter and stronger aircraft parts. Then one day, the Holy Grail: "desktop" printing of entire final products from wheels to even washing machines.

The era of near-perfect computational design and production will unleash as big a change in how we make things as the agricultural revolution did in how we grew things. And it will be defined by high talent not cheap labor.

Finally, there is the unfolding communications revolution where soon most humans on the planet will be connected wirelessly. Never before have a billion people—soon billions more—been able to communicate, socialize and trade in real time.

The implications of the radical collapse in the cost of wireless connectivity are as big as those following the dawn of telegraphy/telephony. Coupled with the cloud, the wireless world provides cheap connectivity, information and processing power to nearly everyone, everywhere. This introduces both rapid change—e.g., the Arab Spring—and great opportunity. Again, both the launch and epicenter of this technology reside in America.

Few deny that technology fuels economic growth as well as both social and lifestyle progress, the latter largely seen in health and environmental metrics. But consider three features that most define America, and that are essential for unleashing the promises of technological change: our youthful demographics, dynamic culture and diverse educational system.

First, demographics. By 2020, America will be younger than both China and the euro zone, if the latter still exists. Youth brings more than a base of workers and taxpayers; it brings the ineluctable energy that propels everything. Amplified and leavened by the experience of their elders, youth and economic scale (the U.S. is still the world's largest economy) are not to be underestimated, especially in the context of the other two great forces: our culture and educational system.

The American culture is particularly suited to times of tumult and challenge. Culture cannot be changed or copied overnight; it is a feature of a people that has, to use a physics term, high inertia. Ours is distinguished by incontrovertibly powerful features, namely open-mindedness, risk-taking, hard work, playfulness, and, critical for nascent new ideas, a healthy dose of anti-establishment thinking. Where else could an Apple or a Steve Jobs have emerged?

Then there's our educational system, often criticized as inadequate to global challenges. But American higher education eludes simple statistical measures since its most salient features are flexibility and diversity of educational philosophies, curricula and the professoriate. There is a dizzying range of approaches in American universities and colleges. Good. One size definitely does not fit all for students or the future.

We should also remember that more than half of the world's top 100 universities remain in America, a fact underscored by soaring foreign enrollments. Yes, other nations have fine universities, and many more will emerge over time. But again the epicenter remains here.

What should our politicians do to help usher in this new era of entrepreneurial growth? Liquid financial markets, sensible tax and immigration policy, and balanced regulations will allow the next boom to flourish. But the essential fuel is innovation. The promise resides in the tectonic technological shifts under way.

America's success isn't preordained. But the technological innovations circa 2012 are profound. They will engender sweeping changes to our society and our economy. All the forces are in place. It's just a matter of when.

Europe's lost generation: how it feels to be young and struggling in the EU

the guardian/ The Observer by Diego Salazar

View Original Article Here


Viola Caon left her Italian home to find work. Now she returns to see how her former classmates are faring… and in the week that shocking figures showed how badly Europe's youth is being hit by the unemployment crisis, we also talk to hard-hit twentysomethings in Athens and Madrid

The classmates of Civita Castellani
Left to right, the classmates of Civita Castellani: Martina Rossitto, Viola Caon, Maria Francesca Zozzi, Elisa Di Pietro Paolo, Michele Stentella, Michela Moretti and Elena Cirioni. Photograph: Christian Sinibaldi/For The Observer


Maybe being young is never easy. But being a twentysomething young European has rarely been more stressful.

More than a quarter (28%) of Italians between 16 and 24 are unemployed. Others are struggling to get by on unpaid internships or poorly paid jobs with little security.

Italy's new prime minister, Mario Monti, has vowed to help the younger generation, promising among other things to help them start businesses, but as austerity bites deep the future is uncertain, even terrifying, for many.

It's not just Italy, of course. Eurozone unemployment is at a record. According to Eurostat, the EU's statistical office, 16.3 million people are out of work in the 17 countries that joined the euro. The story of a lost generation is becoming the scandal of a continent. In Spain, 51.4% of those aged 16-24 are jobless. In Greece, the figure is 43%.

As the eurozone crisis worsened, I went back to my hometown of Civita Castellana, 65 kilometres north of Rome, to meet my classmates from the Giuseppe Colasanti high school. Michela, Maria, Elena, Elisa, Michele, Martina and I were in the class of 2005.

When Monti announced his €30bn austerity package, he said: "Sacrifice will be required." In Civita, those sacrifices are being made. It is one of the largest industrial centres in the region. Since the end of the second world war, about 90% of people been employed making bathroom fittings and crockery, for which Civita is renowned. What everyone now calls "the crisis" arrived here earlier than elsewhere, as the town suffered the consequences of globalisation and competition with China, where similar products were being made more cheaply. Many factories have closed; thousands are out of work.

The debt crisis that began in 2008 means redundancy hangs over many of those who have kept jobs. Then there are the young. Getting a foot on the ladder has never been simple in Italy, where who you know is often key. But with the country facing austerity for the foreseeable future, and eurozone GDP as a whole predicted to shrink by 0.5% in 2012, the outlook is bleak.

So meeting my schoolmates again was quite an experience. My decision six months ago to live and work in London was partly to do with the economy. But how had my schoolmates been getting on?

Martina Rossitto, 26, MA student, human biology

"I am doing a traineeship at the laboratory for cystic fibrosis of Bambino Gesù hospital in Rome. I was lucky, as they do serious research there. I got the place because I know one of the doctors in the lab. I am not getting paid, not even expenses. However, I consider myself to be privileged, as most of my university mates are working 12 hours a day and don't even have access to basic research tools. In Italy, choosing to work as a researcher is suicide. The government keeps cutting the funds."

Maria Francesca Zozi, 26, MA student, arts

"I am usually told I will be a useless graduate. I find it unbelievable: governments keep investing in other sectors and they cut on arts and education. It is simply ridiculous. The problem is that the public sector – which includes most of our arts heritage – is corrupt and inefficient. I have a lot of projects in mind, I would like to attend a course at Brera Academy of Arts in Milan, but I really cannot afford it. I would leave the country if it weren't for my boyfriend, who says we have to stay and fight for a better future."

Elisa Di Pietro Paolo, 25, unemployed shop assistant

"I looked for a job as soon as I left high school six years ago. I found one as a shop assistant in Rome, on a short-term contract. My employers used to renew every year, until one day they didn't. They fired a girl who had worked for them for five years because she took sick leave for pneumonia. Since last January I have been unemployed and doing occasional jobs: for a holiday camp, leafleting, and now for a non-profit thing. The problem is that, having worked as a trainee, employers must hire me on a proper contract, and it's not convenient to them."

Michele Stentella, 26, DJ and student in political science

"I have been DJing for years. Besides doing some nights in a major club in Rome, I have also started to work as a producer. If things go well, I might also sign with an important label. But the crisis has struck in my area, too. More and more clubs are closing. People cannot afford to spend much money and we all feel the pinch at the end of the month. I have a registered logo, and four guys who work with me. I really hope I can keep doing this job. Meanwhile, I study and maybe a BA degree will turn out to be useful some day."

Michela Moretti, 25, trainee lawyer

"I have just graduated in law and I started a traineeship in a law firm near my hometown, Viterbo. Of course, they are not even paying me expenses. The only people I know who are getting paid during their traineeship are lawyers' children. They go to their parents' law firm and they get paid. With Monti's talk about liberalising the professions, everything is still more unclear for us. They're even talking about getting rid of the traineeship. It's going to be very confusing."

Elena Cirioni, 25, trainee radio journalist

"I did a two-year internship for a local FM radio which never even paid me the expenses. Fortunately, I got another opportunity with a private web radio station which is paying me the expenses and is helping me obtain a journalist's licence. I work 15 to 20 hours a week and I get paid €200 a month. My dream was to become a theatre actress and I am still hoping to fulfill this Athensambition at some point. The problem is that the culture industry is eternally in crisis in Italy, and there isn't the money for new actors."

GREECE

Christos Xeraxoudis, Evangelia Hadzichristofi and Giorgos Dimas Left to right, Christos Xeraxoudis, Evangelia Hadzichristofi and Giorgos Dimas Photograph: Milos Bicanski For The Observer


The greatest victims of Greece's economic crisis have been its youth, men and women who never knew the boom times but must now bear the brunt of one of Europe's harshest austerity programmes.

With unemployment at a record as the debt-choked country endures a fifth consecutive year of recession, nearly 44% of the 907,953 out of work are between 15 and 24. For the first time since the 1960s, the jobless rate has nudged 18.5%, according to data released by the national statistics office in November. Four out of 10 without work are young people, although three months later, with ever more businesses closing, the figures are undoubtedly worse.

Lack of job prospects and the absence of vocational training to redirect the newly unemployed, fears of impending economic collapse and warnings that it may take 10 years before the service-oriented economy even begins to recover have spurred many of the brightest and best to look abroad. The exodus has sparked a brain drain that could have a devastating effect on the country's future growth. Tens of thousands of young Greeks are believed to have moved overseas in the last two years. Almost always from part of the educated elite, they have gone to other European countries and as far as Australia.

An 800-seat Australian "skills expo" in Athens in October attracted 13,000 applicants. Community leaders in Melbourne, focus of a similar Greek migration in the 1950s and 1960s, have been flooded by requests from Greek graduates.

Christos Xeraxoudis, 24, unemployed chef

"I'm a trained chef and have been looking for work for months. I've sent my CV to hotels and restaurants all over Greece, but out of the 50 or applications that I've made I only got an answer once. Lately I've looked for jobs in the UK, Germany and Switzerland, where I happen to have relatives, but I've had no response. But I am optimistic. Greece needed to change. It needs to be rebuilt from the beginning. It has so much going for it but somehow had lost its way. After all, we had got to the point where we were importing lemons from Argentina."

Evangelia Hadzichristofi, 26, unemployed interior designer

"I've been out of work for the last year. It's hard. I'm an interior designer and our industry has been very badly hit. I had an internship at the Benaki Museum [in Athens], but then they let me go and it's been impossible to find a job since. I've looked for work as a secretary, receptionist, shop assistant and the answer has always been 'no'. It's got to the point where I am counting every cent and have to rely on my father, who is in difficulty himself with his own business. I've just applied for jobs in England and Amsterdam because at least there is always overseas."

Giorgos Dimas, 25, working as a chef

"I was unemployed for three years until last week when I finally found a job as a chef. I went back to school to train as a cook, and I've been learning English but it's been really difficult. At the back of my mind there is always the thought that the restaurant I'm about to work in might go bust, given that no one has any money any more. But although it might take a few years for my generation to find work I actually think the crisis has been a good thing. Greece was all about jobs for civil servants and nothing else. It had to change."

Report by Helena Smith Athens

SPAIN

Eduardo Caña, Marita Blázquez, Adriano Justicia, María Lázaro Left to right, Eduardo Caña, Marita Blázquez, Adriano Justicia and María Lázaro. Photograph: Erik Molgora For The Observer


Now is not the time to be a twentysomething in Spain. According to figures last week, 51.4% of 16-24 year-olds are now without work, as the total unemployment count passed the 5 million barrier.

This has often been called the best-educated generation in Spain. It is also the one which has the direst prospects. Even if they are lucky enough to get a job, most of them – around 60% – have to live on low salaries with little job security. The usual best options are internships or temporary contracts that allow the employer to fire them without difficulty. The situation is now critical, as indicated by prime minister Mariano Rajoy's plea last week to Brussels. He demanded greater "realism" from Brussels over Spain's attempts to cut its deficit. Austerity is sending Spain back into recession and the danger is that a generation is to be sacrificed as a result.

About a decade ago, a new term was coined to describe young people who earned €1,000 a month – the mileuristas. Now things are so bad that this disparaging term describes an unattainable aspiration for most.

Eduardo Caña, 23, student

"I am studying journalism and economics and I've done all sort of low-paid jobs: serving beers in Valencia beach bars, working in construction in Galicia, unloading fruit trucks and filling customers' bags in Ikea. I've never been paid more than €7 an hour. I also worked as an intern for a newspaper, almost for free. This friend of mine was working on a paper for less than €400 a month. Her temporary contract expired and they called to offer me the same job but as an unpaid intern. I found that so offensive. I am finishing school next June and if nothing comes up I am thinking about moving abroad."

Marita Blázquez, 25, student

"I've found it impossible to get a job in my own field. In my hometown of Granada, I worked as a monitor in a shopping mall kids' play area and that's the closest I've got to working with kids, which has been my goal since I started studying. I came to Madrid but all I could get were two part-time jobs, first at a department store and then in a clothes shop, where they hired me as a clerk with an illegal contract making €3 an hour. When I asked for better conditions my boss fired me. I started studying again to become a teacher. But only a few posts are open every year so I have no idea what I am doing next."

Adriano Justicia, 27, unemployed photographer

"I am a photographer and also hold a film studies degree, but never could find a job in any of those areas. I've worked as a telemarketer, in credit card sales and also a Red Cross charity recruiter for not much money at all. I just went back to study for a degree in TV production, which includes unpaid training. If I don't get a job after that, I think I will be forced to move back to Berlin, where I spent a couple of months as an intern for a photographic studio. Given the circumstances, that looks like the best option, although it is always difficult to leave your country."

María Lázaro, 25, jobless tour and advertisement agent

"I came to Madrid to work as a manager for Real Madrid's museum. I worked at Santiago Bernabéu stadium museum for two years until I was fired six months ago. Since then I've been working in temporary jobs, three or five days as a hostess in business conventions and fairs, most of them without any kind of contract. My partner works as a graphic designer and he has just been offered a job in Zaragoza, so we are probably moving there. I just got admitted back into school, where I am hoping to do a masters degree, to see if that helps me finally to get a job."

Thursday, February 2, 2012

Locals weigh in on what a minimum-wage hike would mean in this economy


Delaware Online by Beth Miller

View Original Article HERE

It's only one American dollar, just $1, but those dollars can add up fast, as everyone who pays the bills -- or can't pay the bills -- knows well enough.

And that's the argument from all sides of the "should-we-raise-the-minimum-wage?" debate now unfolding in Dover, where Delaware lawmakers are considering whether to increase the minimum wage from $7.25 an hour to $8.25 an hour.
Senate Bill 163, sponsored by Sen. Robert Marshall, D-Wilmington West, would raise the rate by 50 cents a year for the next two years -- the first raise since 2009. That raise -- from $7.15 to $7.25 -- was done because the federal rate rose to $7.25 and the state had to match it.
Business owners warned that the proposal would have a chilling effect on hiring and could force some businesses to close, but S.B. 163 cleared the Senate Thursday by a grudging 12-9 vote and now moves to the House for consideration.
It's a tough call, said Michael McGuigan, who just graduated from Wesley College with a degree in elementary education and now works part time in member services at The Village Gym, a Middletown fitness center.
McGuigan said the job helps him pay the rent, buy gas and cover cellphone costs. Many high school athletes get jobs at the gym, too, he said, jobs that help them save for college. The extra dollar would help them.
But, he said, the gym expanded to a 24-hour, seven-day-a-week schedule in November to accommodate members who work all sorts of shifts, including those in law enforcement. That expansion requires a significant investment, he said, and a wage increase could have ripple effects.
"I wouldn't be surprised if everything went up," he said.
With almost 32,000 people out of work in Delaware -- about 7.4 percent of the state's workforce -- elected officials are looking for ways to boost Delaware's job market. They don't want to make things worse for business owners -- the ones who do the hiring.
But with the cost of gasoline stuck near $3.50 a gallon and higher costs for almost everything, those making low wages in Delaware often are shut out. Literally.
(Page 2 of 2)
A person working full time at Delaware's minimum wage -- $7.25 -- cannot pay for even basic housing, according to a 2011 report by the Delaware Housing Coalition.
To afford an efficiency apartment -- with no separate bedrooms -- would require an average of at least $14.23 an hour, a bit less in Sussex ($11.90) and Kent ($12.96), a bit more in New Castle County ($15.17).
At minimum wage, paying the rent for a "modest, two-bedroom" apartment would require working more than 104 hours per week -- 2.6 full-time jobs -- the report said.
Thousands in Delaware cannot reach that high.
"Times are hard, and $7.25 is not a lot," said Robert Jacobs, a stay-at-home dad working on a master's degree in information systems. "I don't know many who could survive on that. I know we couldn't."
"I see both ends of it," said Tonette Mollohan, a Middletown-based regional sales leader for Justice girls clothing. "For workers, it's a good thing. For businesses, it's a little tougher. You want to pay the workers. But overall, I think it's probably a good thing. At the end of the day, workers stay longer, and they're happier. Young kids will move [to another job] for 25 cents more an hour."
After the nation's economic crisis, Marlene Litton said her 70-year-old husband had to go back to work. He had a great career before his retirement, she said, and now he works for minimum wage to help pay the bills. She favors the wage increase -- not just for him, but for students just entering the job force, others who struggle to pay for basics and for the little 4-year-old girl at her side.
"She's the one I worry about with the future," said Litton, nodding toward her granddaughter, Giovanna. They had just attended a reading event together at the Appoquinimink Free Library in Middletown.
"Gasoline is as high as it has ever been -- and this is sustained," she said. "It would be good for everybody. Businesses are making enough."
A part-time job at McDonald's helps 19-year-old Connor McCarthy pay for school at Delaware Technical Community College, which he hopes will lead to work as a mechanical engineer.
"I would love an extra dollar to go toward books and the gas to get to college," he said.
But there are even better reasons to boost that pay, he said.
"If you increase workers' pay, they have more incentive to work, and it will give the economy a boost," he said. "I'm all about small business and expansion of small business. If you have an idea and someone is willing to pursue that idea with you -- I'd pay them extra."
Those concerns are shared by many, even those who would love to see bigger paychecks.
Ryan Ashkenase, 19, fits in that category right now. He makes minimum wage in his job at a Middletown insurance company, but -- as a Delaware Tech student studying ad design -- he is considering the bigger picture, too.
"An extra $1 would be awesome," he said, "but I don't want to screw up the whole economy."