The study, “The ‘Jobless and Wageless Recovery’ From the Great Recession of 2007-2009,” said it was “unprecedented” for American workers to receive such a tiny share of national income growth during a recovery.

According to the study, between the second quarter of 2009, when the recovery began, and the fourth quarter of 2010, national income rose by $528 billion, with $464 billion of that growth going to pretax corporate profits, while just $7 billion went to aggregate wages and salaries, after accounting for inflation.

The share of income growth going to employee compensation was far lower than in the four other economic recoveries that have occurred over the last three decades, the study found.

“The lack of any net job growth in the current recovery combined with stagnant real hourly and weekly wages is responsible for this unique, devastating outcome,” wrote the report’s authors, Andrew Sum, Ishwar Khatiwada, Joseph McLaughlin and Sheila Palma.

According to the Bureau of Labor Statistics, average real hourly earnings for all employees actually declined by 1.1 percent from June 2009, when the recovery began, to May 2011, the month for which the most recent earnings numbers are available.

The authors said another factor explaining the weak performance for aggregate wages and salaries was the slow growth in weekly hours during the recovery. At the same time, worker productivity has grown just under 6 percent since the recovery began, helping to keep employment down while lifting corporate profits, the study said.

Professor Sum noted that the aggregate wage and salary figures exclude employer contributions to benefits and payroll taxes, while they include bonuses, overtime, commissions and tips.

He said that nonwage benefits rose in real terms by $27 billion during the first seven quarters of the recovery. “These small gains were exactly offset by a similar $27 billion loss in real wages and salaries over the same time period based on newly released data from the Bureau of Economic Analysis,” he said. “It was a wageless and jobless recovery.”

The study called that $27 billion loss in aggregate wages and salaries during the seven quarters after the recovery began “the first ever such decline in any post-World War II recovery.”

The study said that of the previous recoveries since the 1970s, the recovery following the 2000-1 recession was next worst in terms of the share of increased income going to wages and salaries. The study found that 15 percent of income growth went to aggregate wages and salaries in the six quarters after the recovery began following that recession, while 53 percent went to corporate profits. The growth in national income can also go to net interest, rental income or proprietors’ income.

The story was very different for the recovery that began in 1991. In that recovery, 50 percent of the growth in national income went to wages and salaries during the first six quarters after the recession ended, while corporate profits actually fell by 1 percent during that period.

With regard to corporate profits, the report noted that the preliminary estimate for the first quarter of 2011 was $1.668 trillion, an increase of $465 billion of just under 40 percent since the recovery began.

“Aggregate employment still has not increased above the trough quarter of 2009, and real hourly and weekly wages have been flat to modestly negative,” the report concludes. “The only major beneficiaries of the recovery have been corporate profits and the stock market and its shareholders.”

Article based on: NYTimes.com

The debt limit is the amount the government can borrow to help finance its operations. The United States reached its $14.3 trillion borrowing limit in May. It is at risk of defaulting on its debt if it does not raise that limit by Aug. 2. President Obama and Republican lawmakers have been at odds on a plan to raise it.

The I.M.F. also warned in its annual report on the American economy that rising budget deficits posed a risk to the economy. But it advocated a long-term strategy for reducing those deficits, not steep immediate cuts or tax increases. Cutting the deficit too quickly could slow the weak recovery, the fund said.

The American economy will grow this year and next but at a weak pace, the I.M.F. forecast. The fund projected that the economy would expand 2.5 percent this year and 2.7 percent in 2012. Consumers are still paying off debts, which will reduce their buying power, and budget cuts at the federal, state and local levels would also reduce demand.

The I.M.F.’s forecast is below recent projections by the Federal Reserve. The Fed expects the economy will grow by as much as 3.3 percent next year. Many private forecasters, however, are more pessimistic and closer to the I.M.F.’s view.

The I.M.F. has 187 member nations and lends money to countries with troubled finances. It also regularly reviews major national economies to look for signs of trouble that could affect the world economy.

Article based on: NYTimes.com

Christine Lagarde

After receiving support from the United States at the critical moment, Christine Lagarde was named Tuesday as the next managing director of the International Monetary Fund. In campaigning for the job, Ms. Lagarde, France’s finance minister, made various promises to emerging markets with regard to improving their relationships with the I.M.F. But such promises count for little.

The main impact of her appointment will be to encourage countries like South Korea, Brazil, India and Russia to back away from the I.M.F. and to further “self-insure” by accumulating larger stockpiles of foreign-exchange reserves –- the strategy that has been followed by China for most of the last decade.

From an individual country’s perspective, having large amounts of dollar reserves held by your central bank or in a sovereign wealth fund makes a great deal of sense – a rainy day fund in a global economy prone to serious financial floods.

From the perspective of the global economy, such actions represent a major risk going forward, because they will further push down interest rates in the United States, feed a renewed buildup in private-sector dollar-denominated debt and make it even harder to get policy makers focused on a genuine fix to our long-term budget problems.

Ms. Lagarde is sincere and will no doubt try to be friendly to her supporters, perhaps, for example, by creating a senior management-level job at the I.M.F. and making sure it goes to China or another emerging market. But what the emerging markets really want is more “quota” (the term used for share ownership and therefore votes at the I.M.F.), as well as more seats on the fund’s executive board.

These are not within Ms. Lagarde’s purview to grant. Rather the European Union, at the highest political level, would have to agree to give up some of its votes and reduce its voice. The E.U. is indeed overrepresented at the I.M.F., both in terms of shares and — most egregiously — with 8 or so seats on a board of 24 members (the exact number depends on how you count some seats shared by Europeans and non-Europeans).

And the E.U. has proved to itself and everyone else that it both cares a great deal about who controls the I.M.F. and that it can continue to assert this control.

To be fair, the control this time was partly about organizing early to provide unanimous support for Ms. Lagarde – amid an understandable desire to appoint a woman, given the recent resignation of her predecessor, Dominique Strauss-Kahn, amid pending charges of sexual assault.

But the E.U.’s dominance also reflects disorganization among the emerging markets. These countries, though often grouped in a category, do not really see themselves as having convergent interests on many issues, either now or in the near future.

If you look at the current circumstances from the perspective of countries like South Korea, India, South Africa, Brazil, or Russia, what conclusion would you draw?

Emerging markets cannot rely on the I.M.F. to provide help on generous terms during a crisis – such support looks as if it is available to European countries but no others. As a result, an appropriately cautious strategy is to hold a great deal of reserves; the only form of unconditional “foreign” support in a serious financial crisis comes from your own hard currency, perhaps in the form of United States Treasuries that can easily be sold in a liquid market.

What else constitutes appealing foreign exchange reserves in today’s world? The euro has some use, but is limited as long as a serious sovereign debt crisis looms –- very few euro-zone governments look to be risk-free. The Swiss franc continues to do well, but this is a relatively small volume of available assets. The British pound and the Japanese yen have lost a lot of their traditional allure as reserve currencies.

This leaves the dollar, which, despite all the obvious problems in the United States, is still the world’s No. 1 reserve currency. Emerging markets are likely to follow increasingly in the footsteps of China -– trying to run current-account surpluses, intervening to prevent their currencies from appreciating by selling local currency and buying dollars and investing the proceeds in dollar assets.

If our fiscal and financial house were in order, the resulting inflow of foreign capital would constitute a bonanza, allowing us to invest productively while paying low interest rates. But given the way our financial system operates and the dysfunctional nature of our budget politics, the availability of this capital will just encourage us further to overborrow, both in the private sector and in the public sector.

Article based on: NYTimes.com

“The work we’re doing to cut the deficits and create jobs is too important, the obstacles too steep and the time too short to waste even a moment,” Reid said. “There’s still so much to do to put American back to work and cut our deficits.”

A day after President Obama criticized lawmakers and urged them to cancel vacations, Reid announced the Senate will take Monday, July 4 off, but will return to work on July 5.

Lawmakers must raise the nation’s $14.3 trillion legal borrowing limit soon.

The Treasury Department says that on Aug. 2 it will run out of money to pay the nation’s bills in full and on time. That deadline is now just weeks away.

Republicans have demanded that any deal to raise the debt ceiling include deep spending cuts, but they have been reluctant to consider measures favored by Democrats that would increase revenue.

In making the announcement of no July 4th break, Reid added that failure to raise the debt ceiling, he predicted, would plunge the economy into a “full-fledged depression.”

The House is out of town, with lawmakers working in home districts this week and on recess July 4. They’ll be back in Washington July 6.

Is the debt ceiling constitutional?

However, Congress need not be in session to get a deal to raise the debt ceiling. A small group of Republican and Democratic leaders have been working with the White House behind closed doors. Senate aides quietly wondered how much actual work lawmakers would do next week, or whether the announcement is a publicity stunt.

But the pressure to look busy mounted, after President Obama’s criticism of lawmakers for failing to deliver a compromise to raise the debt ceiling and cut deficits.

On Wednesday, several Senate Republicans called on Reid to cancel the recess. “Our country is going bankrupt. We shouldn’t be going home on a holiday,” said Ron Johnson of Wisconsin.

Minority Leader Mitch McConnell made a public invitation to President Obama to “come on over,” to the Capitol Thursday to broker a deal, in a speech on the Senate floor.

“He says he wants us to start working and I can’t think of a better way than for him to come up today,” said McConnell, a Kentucky Republican.

Brendan Buck, spokesman for House Speaker John Boehner, said a Senate in session was better than one in recess.

“In terms of accomplishments, there hasn’t been much difference this year between the Senate in session and the Senate in recess,” Buck said. “Still, if we’re going to put together a serious package to cut spending, any sign of life over there is a good thing.”

Article based on: CNNMoney.com

Today At Newenergynews, 4-28:

* Today’s Study: Communication (The Huge Opportunity On The Wires)

* Quick News, 4-28: Pres Boosts New Energy; A Big Sun Buy-In Chance; Feds Fund Efficient Homes; Cleaner Cleaning

Yesterday
* Study: Being Ready (Measuring Higher Winds)
* Quick News, 4-27: More New Energy Innovation; New Energizing China’s Grid; A Garage For An Ev; Google Buys More Wind

Post Published: 28 April 2011
–>
Found in section: Greentech

Article extracted from ethicalmarkets.com

It’s not clear what he’ll say about taxes on Wednesday when he lays out his ideas for how to tackle the country’s long-term debt. If history holds, he’ll stick to his guns.

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Certainly, continuing to promise low taxes for 98% of the country will help his newly launched 2012 re-election campaign. But it wouldn’t be a great path to reining in debt. (Sorry GOP: Tax revenue has to go up)

Relying solely on tax increases for the rich to aid in deficit reduction — even when paired with significant spending cuts — doesn’t cut it for two reasons, said Tax Policy Center senior fellow Roberton Williams.

First, the income of the top 2% of taxpayers is typically more volatile than that of taxpayers lower down the income scale, so when the economy sours, so often do those high-end income streams. That means less revenue than expected will flow into federal coffers.

Second, even if that weren’t true, there just aren’t enough rich people to generate the kind of revenue needed to substantially reduce deficits.

To show the disparity, consider some recent calculations by the Congressional Budget Office. Raising all six income tax rates by 1 percentage point would yield an additional $480 billion over 10 years. By contrast, raising the top two rates by 1 percentage point would yield just $115 billion.

What Obama has said: In his most recent budget request, the president proposed letting the top two income tax rates revert to 39.6% and 36%, up from 35% and 33% today. He also called for an increase in the capital gains and dividend rates to 20% that high-income households pay, up from 15% today. And he would reduce the value of their itemized deductions and personal exemptions.

All told, those proposals — which would affect individuals making at least $200,000 and couples making $250,000 and up — would reduce deficits by just under $1 trillion over 10 years.

That’s only about a third of the deficit reduction that would occur if lawmakers just let all of the Bush-era tax cuts expire.

Think you’re smart about deficits? Take the quiz

And it’s just a tenth of the $1.1 trillion a year that could be saved if the tax code were stripped of the byzantine mess of tax breaks, many of which disproportionately benefit the rich but also benefit those lower down the income scale.

Of course, if one wants more revenue from the $250,000-plus set, why not just raise rates and constrain tax breaks even more than the president has proposed so far?

0:00
/04:17Stiglitz: Tax the rich

“You’d have to raise rates an awful lot on the wealthy,” Williams said. And by that he meant to heights that would be neither politically nor possibly even economically feasible.

The higher tax rates are, the more likely they are to affect economic behavior by increasing tax avoidance and discouraging otherwise growth-spurring investments. And that, in turn, can reduce the revenue raised.

Tax reform in order: That’s why Williams and other tax experts hope that the president will take a cue from his own bipartisan debt commission, which recommended comprehensive tax reform.

The commission report laid a few paths to tax reform. One — called the “Zero Plan” — would eliminate all tax breaks. Doing so would raise more than $1 trillion a year, the bulk of which would be used to pay for a steep reduction in individual and corporate rates.

Under that scenario, the commission would reduce the number of tax brackets for individuals from six to three and set income tax rates at 8%, 14% and at 23% — a 12 percentage point drop from today’s top rate.

The commission then offered two other, less extreme versions of the Zero Plan — each of which adds back some tax breaks. In one case, they restore the earned income tax credit and the child tax credit, both of which benefit lower income households. Under that scenario, income tax rates would be 9%, 15% and 24%.

When they add back still more — this time including limited versions of popular tax breaks on mortgage interest, health insurance, retirement savings and charitable giving — the rates would still be lower than they are today, but notably higher (12%, 22% and 28%) than under the most extreme Zero Plan.

In all cases, Williams said, the commission offered up the kind of fundamental tax reform that “can generate a simpler, fairer and more efficient tax code and still bring in more money.” 

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Now for the real budget war

Sorry, GOP: Tax revenue needs to go up

Time to get real on the debt ceilingFirst Published: April 12, 2011: 2:35 PM ET
Article extracted from cnn.com

“At these prices Japanese stocks are a steal,” said Herro, 50, manager of the $6.9 Oakmark International Fund, which is almost a quarter invested in Japan.

Already comparatively cheap, Japanese stocks should become even more attractive as exporters increase trade with China and companies start returning cash to shareholders, said Herro, Morningstar’s international manager of the decade.

Herro and others bullish on Japan, including strategists at Goldman Sachs Group Inc. and Deutsche Bank AG, are bucking a wave of skepticism spawned by a generation of dismal stock market and economic results. In a January Bloomberg global investor poll, 23 percent of respondents named Japan as the market that would perform the worst in 2011. Only the European Union was less popular.

“They have too much debt and they’ve suffered from bouts of deflation,” Michael Mullaney said in a telephone interview, explaining why he holds fewer Japanese stocks than the MSCI EAFE Index, a common international benchmark. Mullaney helps oversee $9.5 billion as a portfolio manager at Boston-based Fiduciary Trust Co.

Political Gridlock

Japan’s credit rating was cut for the first time since 2002 last week by Standard & Poor’s as persistent deflation and political gridlock undermine efforts to reduce an $11 trillion debt. The government’s ratio of debt to gross domestic product will peak in the mid-2020s, the S&P report said.

Twenty-four percent of Herro’s equity holdings are Japanese companies, compared with the 16 percent average for international funds, according to Chicago-based Morningstar. His Oakmark colleague, Clyde McGregor, whose $2.4 billion Oakmark Global Fund beat 99 percent of rivals over the past decade, has 21 percent of his equity assets in Japan. The $12.2 billion First Eagle Overseas Fund, which beat 89 percent of peers over the same stretch, has a 42 percent allocation, Morningstar data show.

“People hate Japan,” Herro said in a telephone interview from Chicago. That attitude has caused investors to overlook the market’s strengths, including low prices, said Herro, who outperformed 97 percent of peers over the last decade.

Piles of Cash

The Topix, also known as the Tokyo Stock Price Index, trades at a price-to-book value of 1.1, about half the level it reached in 2006, according to data compiled by Bloomberg. The comparable ratio for the Standard & Poor’s 500 Index is 2.3. Price-to-book value is a measure of a company’s price compared with the worth of its assets.

Companies in Japan look even cheaper when cash on balance sheets is considered, Herro said. One of Herro’s holdings, Rohm Co., a Kyoto-based chipmaker, has cash and long-term investments equal to more than 50 percent of the stock’s market value, Robert Taylor, co-manager on two of Oakmark’s international funds, said in a telephone interview.

Corporate profits in Japan this year will approach 2007 highs, adding to record levels of cash, New York-based Goldman Sachs said in a Dec. 1 report. The firm predicted the Nikkei 225 Index could reach 12,000 this year, up from 10,431 today. In a January report, Frankfurt-based Deutsche Bank said Japanese stocks could produce returns of more than 20 percent in the first half of 2011.

China Exports

In a December letter to shareholders, Matthew McLennan and Abhay Deshpande, portfolio managers of New York-based First Eagle, wrote that many of their Japanese holdings were doing well, including Fanuc Ltd., the world’s largest producer of controls that run machine tools. The Yamanashi-based firm is positioned to take advantage of expanding globalization, they said.

“We think for China and India to go through high-end industrialization they will need the equipment Fanuc makes,” McLennan said in a September interview with Bloomberg television.

McLennan declined to comment on Japan, according to an e- mail from Tom Pinto, a First Eagle spokesman.

Fanuc’s founder, Seiuemon Inaba, said in a January interview with Bloomberg that the firm wanted to capitalize on China’s automation boom. “Everything comes down to China,” he said. “That’s where the growth is.”

China passed the U.S. as Japan’s largest export market for the first time in 2009, according to the Japanese Ministry of Finance.

Stock Buybacks

Charles de Vaulx, who joined New York-based International Value Advisers LLC in 2008 after 20 years at First Eagle, said Japanese firms historically have kept too much cash, refusing to give it back to investors in the form of dividends or buybacks.

“Over time, investors have grown sick and tired of the fact that companies in Japan aren’t managed for shareholders,” said de Vaulx, who co-manages the $1.8 billion IVA International Fund, which has 40 percent of its equity assets in Japan, Morningstar data show.

That is starting to change, de Vaulx said.

One of the stocks he owns, KDDI Corp., Japan’s second- largest mobile-phone operator, rose the most in almost two years in Tokyo trading after the company said in October it will spend as much as $1.2 billion buying back shares.

Canon Inc., the world’s largest camera maker, rose 5.6 percent Sept. 10 when the firm said it would buy back as much as 1.2 percent of its shares. Herro owns shares in the Tokyo-based company.

Debt Burden

The change isn’t happening quickly enough for some investors. In June 2009, Rohm shareholders defeated a proposal by Brandes Investment Partners LP to buy back more stock after the San Diego-based firm argued that Rohm’s cash position was excessive.

Rohm management is still committed to buybacks and dividends, Oakmark’s Taylor said in an e-mail.

The Nikkei 225 Index has fallen 73 percent since it peaked at almost 39,000 in December 1989. In the 25 years ended Dec. 31, the index lost 1 percent a year, according to data compiled by Bloomberg.

The Japanese economy grew an average of 1 percent a year in the 20 years through 2009, according to IHS Global Insight, a Lexington, Massachusetts-based consulting firm. The U.S. averaged 2.5 percent a year growth in the same period.

Weakening Yen

“Japan has frustrated investors for years,” said Jack Ablin, chief investment officer at Chicago-based Harris Private Bank, where he helps oversee $55 billion.

When Japanese stocks do rise, Ablin said, the gains for outside investors are often wiped out by declines in the yen. Forecasters surveyed by Bloomberg expect the yen to weaken against the dollar in 2011.

Even fans of Japanese stocks like Herro have suffered as some bets failed to pay off. Shares of Daiwa Securities Group Inc., a Tokyo-based investment bank and Herro’s largest holding, fell 19 percent annually in the five years ended Dec. 31, according to data compiled by Bloomberg.

Herro, who has owned Daiwa since 2001, said investors don’t fully appreciate the firm’s strengths, including its asset- management business. “I will continue to wait it out,” he said.

‘Lack of Exuberance’

Investors in Japan need to look past the gloomy macroeconomic picture, Taylor said. “We are not saying we love falling birth rates, deflation or the fact that they have had so many different prime ministers in the past few years,” he said, referring to the June election of Naota Kan, the fifth Japanese leader in four years.

Japan’s stock market has rallied repeatedly over the past 25 years, de Vaulx said, even as the economy has plodded along. Many individual stocks have thrived, especially in periods when the yen weakened against the dollar, a plus for Japanese exporters.

“Japan is a market that suffers from an irrational lack of exuberance,” de Vaulx said.

–Editors: Steven Crabill, Josh Friedman

To contact the reporter on this story: Charles Stein in Boston at cstein4@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at

Article extracted from businessweek.com

The announcement came as Spain’s second-largest bank by assets reported a jump in fourth-quarter profit backed by robust growth in Latin America, which offset weakness in Spain.

BBVA said net profit was €939 million ($1.3 billion) in the quarter, up from €31 million in the fourth quarter a year earlier. At the end of 2009, BBVA cleaned up its books by front-loading charges on loans it deemed problematic, even if the …

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Article extracted from wsj.com

That opinion seems justified, and here’s why:

• The homeowner’s lender must voluntarily write off at least 10 percent of the unpaid balance of the loan. In lender-speak, “voluntary” usually means “no.”

• The actual writeoff required in many cases may be much more than 10 percent because the loan-to-value, or LTV, ratio on the new FHA-backed loan can be no more than 97.75 percent, and the total combined LTV on all of the homeowner’s financing must be no more than 115 percent.

For example, if a homeowner owed $185,000 on a house worth $150,000, the writeoff wouldn’t be $18,500, or 10 percent of the debt. Instead, the writeoff would be $38,375, or almost 21 percent of the debt, to reduce the loan to $146,625, or 97.75 percent of the value. That’s unlikely to be an attractive proposition, though presumably the homeowner could cash in the difference.

• The government will offer incentives to gain the cooperation of second-lien lenders. But so far, such incentives haven’t bought much cooperation.

• The homeowner must be current on the loan payments, occupy the home as a primary residence, meet the FHA’s qualifying requirements, not already have an FHA-backed loan and pay for FHA mortgage insurance on the new refinance loan. No economic hardship is required other than the decline in the home’s value.

• Homeowners who qualify should expect the usual maze of paperwork, hard hit to their credit record and possibility of income tax on forgiveness of mortgage debt.

And finally,

• Homeowners will be selected for the program by investors who own mortgage-backed securities on the theory that they may prefer a writeoff to a walkaway.

Does anyone think that’s likely to work?

Article extracted from bankrate.com

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Article extracted from hotnewreleaseproduct.com