Banking, Credit Markets, Immigration, The World Comments (0)
November 13, 2008
For the past decade Ireland has experienced huge economic growth, 7.5% per year, as evidenced by huge jumps in immigration and building. Major American companies, such as Dell, have flocked to the Emerald Isle to take advantage of Ireland’s new found prosperity. Many credited inclusion in the European Union and adoption of the euro for the growth. Unfortunately, that which giveth may very well taketh away. Ireland is in trouble and the EU may be adding to the problems.
Unfortunately, Ireland is being hit particularly hard in the 2008 global economic meltdown. The Irish are facing their worst economic recession in the last 25 years. The global credit meltdown has put a halt to massive Dublin construction projects and EU rules may force the country to take steps which will dig them further into the hole.
Upon joining the European Union, Ireland agreed to abide by the monetary policy of the European Central Bank and also agreed to meet certain budget targets, limiting its ability to carry deficits. Because of these strict rules, It is predicted that EU states, especially Ireland, will suffer even greater economic woes than the United States. While non-EU countries have the freedom to respond to the growing financial disaster using all tools at their disposal, Ireland has found itself in the unfortunate position of actually having to make the situation worse. While Ireland now needs low interest rates to stimulate the economy, the European Central Bak has raised them to protect other EU countries, such as France. EU leaders are demanding that Ireland cut public spending to meet the budget goals. In order to comply, Ireland may be forced to actually increase taxes on its citizens.
Raising taxes is not the only unpopular plan the Irish have. Huge cuts in education and the public sector are on the horizon, as is scrapping the plan to offer the HPV vaccine to young girls. A plan to force seniors to pay for the healthcare has already been defeated.
When Ireland does attempt to staunch the flow of red, EU has responded unfavorably. In October, Ireland moved to guarantee all bank deposits; the EU scolded Ireland for acting alone.
The rising conflict between Ireland’s needs and the needs of other EU members may be coming to a head. The Irish have already rejected the Lisbon Treaty, which would have given EU leaders in Brussels more power.
700 Billion bailout, Banking, Credit Card Debt, Credit Markets, Domestic Economy, Legislation, consumer spending Comments (0)
November 12, 2008
American Express wants $3.5 billion in taxpayer bailout money, which explains why earlier this week Amex was deemed by the Federal Reserve to be a “bank holding compnay”, giving it access to Fed financing.
American Express has hit troubled times recently because its business model relied heavily on selling packages of credit card debt to investors; nobody wants to buy these packages now. Further, consumers are spending less and missing their monthly payments; losses are a full 50% higher than last year.
The government financing would be in the form of preferred stock, which is not quite the “equity stake” touted by those who pushed the $700 billion bailout on the American taxpayer. Preferred stock usually does not come with voting rights - usually it is simply a debt instrument. Thus, $3.5 billion would get us virtually no say in what Amex does with the money.
Fannie Mae, Freddie Mac, Housing, Mortgage Lenders Comments (0)
November 11, 2008
In an effort to prevent more foreclosures, Fannie and Freddie are stepping up plans to modify hundreds of thousands of at-risk mortgages. Interim Assistant Treasury Secretary for Financial Stability, Neel Kashkari, hopes the move will help stabilize the flagging housing market.
The plan is to target loans made prior to Jan 1, 2008 that are 90 days or more past due and bring the ration of payment to income to 38% by reducing the interest rate or even forgiving part of the mortgage. The homeowner will have to attest that they have suffered some hardship that has made them unable to pay the mortgage on their primary residence.
Mortgage service companies will make out like bandits, of course, being paid $800 for each modification.
There is already a program in place to help those who have suffered a hardship. It’s called bankruptcy. Why should homeowners get special treatment? Whatever…
Domestic Economy, Job Loss Comments (0)
November 11, 2008
Like many companies in the publishing industry, Time, Inc. has announced plans to layoff workers, citing a reduction in ad revenue. Magazines owned by Time, Inc. are looking for 83 volunteers to be laid off. Sports Illustrated, People, Time and, ironically, Fortune and Money, are all looking to trim jobs.
Print is dead, people. Stop killing trees…read only material that is exclusively online.
Arnold Schwarzenegger, State Budget Deficits Comments (0)
November 11, 2008
Unless drastic action is taken, California will be close to 30 billion in the whole by June 2010. California’s deficit has been a tremendous problem for years now, but it has become dire in the face of the current national economic meltdown. To make matters worse, it is now predicted that California’s tax revenue will be lower than what the administration had been banking on.
Unpopular measures to fix the situation are likely on the table such as an increase in sales tax, income tax, and auto registration fees.