LyrArc Article Gist
The Fed's efforts to stimulate the economy with low interest rates are having an unintended effect. Even as it is hurting savers and the retired who earn little interest and are pushed into riskier investments, corporations are able to borrow cheaply at near 1% interest rates. Corporations now have about $1.6 trillion in cash savings set aside, and the ratio went up to 6.2% of assets. With the current economic environment and uncertainty this cash is not being used for additional investments and hiring.

LyrArc Article Gist
Analysis by the Wall Street Journal shows companies in the S&P 500 stock index earned second quarter profits of $189 billion. This was up 38% from 2009, without the inflation adjustment. For all American companies, Commerce Department estimates second quarter after tax profits rose to an annual rate of $1.208 trillion, up 3.9% from the first quarter, and up 26.5% from year earlier. Companies are doing this with layoffs of workers, closing less profitable units, and shifting work to cheaper locations, and introducing more efficient processes. Texas Instruments shut down a unit making cellphones, Electronic Arts pruned its videogames by about 50%. These profit increases were achieved by reducing costs on flat or declining sales compared to 2008, just prior to the financial crisis. Companies are not expected to increase spending through new hiring or adding equipment in the current economic environment. From the Journal's analysis of the 500 S&P companies, it shows sales were 6% less than 2008, with second quarter profits 10% higher....

LyrArc Article Gist
Nouriel Roubini has proven correct on global financial issues. He said in an interview on the sidelines of a symposium in Malaysia, that China needs to revalue its currency for its own sake. China will see a growth collapse in the next 2-3 years if it fails to do so. His point is that China can still maintain growth by shifting to domestic consumption and less infrastructure spending and exports. In his view growth should not be affected if China exports less and consumes more. He points to the decrease in consumption as a share of GDP from 45% to 36% in the last ten years- this ratio is 70% in the USA. A cheap yuan keeps foreign goods unaffordable and protects state owned companies which also get cheap credit, as keeping the yuan low requires China to keep interest rates artificially low. What this does is make a massive transfer of income from the household sector to the state owned companies, just at the time when China needs to do the very opposite of this. And compounding the problem is that the 25% of China's GDP that is made up of retained earnings of mostly state owned companies, goes into real estate and production facilities. See the link to David Barboza in the New York Times who points to the wasteful spending and real estate speculation by state owned companies. Roubini cites the automobile sector where capacity has doubled in the last year to 20 million, when the domestic market increased by 50% to 10 million vehicles. The stimulus only increased the effect of surplus capacity and misallocation of investment, with highways to nowhere and brand new airports that are three quarters empty. The Chinese leadership is beginning to grasp this, but the state owned companies and other interests who benefit fromm the old model, may make it difficult to reverse the trends. A lot is at stake in this, as it affects the U.S., as well as countries dependent on China's imports such as Australia, Canada, Brazil and Germany. ...

LyrArc Article Gist
A Wall Street Journal/NBC poll conducted in September 2010 shows a big change in public opinion in the US towards outsourcing of production and on free trade agreements. Poll respondents were asked "Do you think free-trade agreements have helped or hurt the US?" The response in 1999 was close to 30% for those who said hurt and those saying helped. By 2005 the curves diverged seriously with more people saying that it hurt and fewer saying it helped. In 2010 this swing is sharp with about 50% saying it hurts the US and only about 10% saying it helps. When asked "Do you agree or disagree that outsourcing of production and manufacturing work to foreign countries is a reason the U.S. economy is struggling and more people are not being hired?" the response is overwhelmingly agreeing that this is bad for the U.S. job situation. The answers are the same across party affiliation, in fact higher for Republicans than Democrats 90% to 84%, higher by income level with 93% for those making over $75,000 agreeing and 86% for those making less than 75,000 agreeing, 93% of professionals and managers agree compared to 89% white collar and 83% blue collar agreeing. This shows all segments of society agree that that the manner in which free trade and outsourcing of production is taking place is not helping the U.S., and this time the highly educated segments are leading the way. Bill McInturff, the Republican pollster who helped do the survey points to the big change in the way well educated and upper income people perceive free trade agreements. In 1999 only 24% of this group making over $75,000 said free trade hurt the U.S., now 50% of this group says it hurts the US. This is sure to lead to big changes in U.S. trade and currency issues with China and other countries. ...

LyrArc Article Gist
Ed Miliband's victory over his brother David for the Labor party leadership. The unions support Ed Miliband. He tries to move labor to the centre by saying he supports cuts and Labor woulld have made cuts also, only differing on the manner and the size of the cuts.