Uprising in Egypt unsettles global markets

Source: Press TV
http://www.presstv.ir/detail/163026.html

Debt agency Moody's has cut its credit rating for Egypt, making it more costly for the Egyptian government to borrow.

Concerns about the possible closure of the Suez Canal, seen by economists as a chokepoint for global trade, is also pushing up commodity prices amid fears that supplies will be disrupted. Amid all this, the US Secretary of State had this to say:

The hesitance is no surprise -- considering the massive American business interests at stake in Mubarak's Egypt. The US sends nearly one and a half billion dollars in military aid to Egypt each year -- much of which comes back to American corporations -- which sell weapons and maintenance services to the Egyptian military.

Western oil companies have been a major presence in Egypt for decades -- drilling for oil and gas and making billions over the decades of Mubarek's rule.

Going strictly by the corporate bottom line - the Mubarek Presidency has been a profitable one for American and Western multinational corporations. Experts that Press TV has spoken to - however - are not bullish about the prospects of those corporations when the subject turns to Mubarak's replacement.

Sara Flounders - Co-Director of the International Action Center - says that there will likely be a harsh new reality for all Western companies doing business in Egypt - no matter who the new president turns out to be.

Many experts speculate that Mubarak's reign will end soon. When and if Mubarek heads out the door - he will take with him the cozy relationships he had with Western multinationals - and the massive profit margins many of them have enjoyed. According to Flounders - whoever steps into the power vacuum won't have much tolerance for Western interests.

The Dow Jones Industrial Average was up slightly on Monday - but not enough to recover from its plummet last Friday as investors ran to safer stocks. What will happen to investments - however - will continue to be closely tied with what happens on the ground in Cairo.

China warns of inflation rise

China's high infllation rate prompts Beijing to tighten monetary policies

Source: Press TV
http://www.presstv.ir/detail/162845.html

China's Central Bank has warned that inflation still runs high in China, while it has launched measures to tighten monetary policies to rein in price bubbles.

“Inflation pressure is quite big,” the central bank said in its fourth-quarter monetary policy report on its website, citing rising capital inflows, labor costs and resource prices as reasons.

China will face a “relatively stable” external environment this year, and the domestic economy is likely to maintain fast growth due to investment momentum and consumer spending, the report also said.

Economists say high inflation could slow down the growth of the Chinese economy as China's consumer price index, or CPI increased by 4.6 percent in December, compared with November's 5.1 percent annual pace, which was the fastest in more than two years.

Beijing has launched a series of monetary tightening measures, including two interest rate hikes and a number of bank reserve requirement ratio increases over the last year in attempts to dampen rising consumer prices.

Central bank governor Zhou Xiaochuan said on Sunday in Japan that China's inflation is "higher than expected" and warned that banks' reserve requirement ratios (RRR) could be tightened further to mop up excessive liquidity in the country.

The central bank will also step up monitoring of the “overall financing size of the society,” which includes bonds and stocks apart from loans for policies.

China's economy is the second largest in the world.

High unemployment in US sets foreclosures record

Source: Press TV
http://www.presstv.ir/detail/162341.html

As unemployment lines grew to staggering lengths in the US, so grew the number of foreclosure signs peppering the lawns of American homes throughout the country.

Foreclosures reached record high numbers in 2010. Realty Trac, says high unemployment drove up foreclosures 72 %in more than 200 major metropolitan areas.

The US housing crisis is far from over. Many of the leading metropolitan areas not hit as hard by the initial waves of foreclosure are being pounded now.

Las Vegas posted the nation's highest metropolitan foreclosure rate.

One out of every nine homes is in foreclosure.

Nationwide, it is 1 in 45 homes. In all, nearly 3 million U.S. homes are being taken back by mortgage lenders.

Americans living in Idaho, Colorado and Atlanta are now experiencing a surge in foreclosures. The Atlanta region posted a 21 % jump in filings last year. Dave Kuhn has been selling real estate near Atlanta for 24 years.

Despite some dips in hard-hit areas, foreclosure levels remain five to 10 times higher than in normal times. And U.S. foreclosures have not yet peaked. Last fall, major mortgage servicers, including Bank of America, delayed foreclosure activity following revelations that foreclosure documents may have been improperly prepared.

Meanwhile, the number of people applying for unemployment benefits rose sharply last week. Applications surged to 454,000, the highest level since late October, according to the Labor Department.

9.4 million people are receiving unemployment benefits. On YouTube, President Obama answered questions about the economy. The Great Recession has been brutal. And at least for now and for millions, the American Dream to have a steady job and own a home has been put on hold.

US budget deficit to hit historic high

A financial professional looks up at a screen on floor of the New York Stock Exchange

Source: Press TV
http://www.presstv.ir/detail/162163.html

The US budget deficit will hit a record-breaking 1.5 trillion this year due in part to a recent tax cut deal, the Congressional Budget Office says.

The daunting numbers released on Wednesday mean that the US government will have to borrow 40 cents for every dollar it spends, according to the AFP.

The analysis predicted that joblessness in the country will remain above nine percent this year. The nonpartisan agency also estimated a nationwide unemployment rate of 8.2 percent on Election Day in 2012.

The deficit is on track to beat the record of $1.4 trillion set in 2009.

"The fiscal challenge confronting us is enormous. We can't continue to put this off. We need to reach an agreement this year," said Budget Committee Chairman Kent Conrad.

"We need to have both sides, Democrats and Republicans, willing to move off their fixed positions and find common ground," he stressed.

The chilling figures come the morning after US President Barack Obama called for a five-year freeze on domestic agency budgets passed by Congress each year.

Those nondefense programs make up just 18 percent of the budget, which means any upcoming deficit reduction package will require politically dangerous curbs to popular benefit programs, including social security, the Medicare social insurance program for senior citizens, the Medicaid health care program for the poor and disabled, and food stamps.

Neither Obama nor his Republican rivals in Congress have yet come forward with any specific proposals for cutting benefit programs.

US home prices dip for 4th month in row

As foreclosed homes flood the markets, prices could tank even further.

Source: Press TV
http://www.presstv.ir/detail/162028.html

A double-dip in the US home prices appears to be underway in America's biggest cities, endangering an already fragile economic recovery in the country.

Home sale prices fell 1.6 percent for the fourth consecutive month in November 2010, the Standard & Poor's/Case-Shiller Index, which tracks the real estate market in 20 major US cities, showed.

The housing market got a boost early last year with the help of tax incentives. But after the US government's initiatives ended, sales dropped sharply.

Falling home values result in what economists call a negative wealth effect. In this scenario, people's financial confidence is shattered as a result of lost equity in their homes.

Currently, there are more than ten million households in the United States who owe more on their homes than they have equity.

Some economists predict the US housing price, which is a key indicator of the country's economic vitality, will drop by as much as 20 percent this year.

According to their reports, the decline in home value is greater than it was in 1928 to 1933 during the Great Depression -- a severe worldwide economic depression in the decade preceding World War II.

In addition, unemployment has remained stubbornly high and millions of Americans are still at risk of foreclosure.

US economy losing to rising powers

US President Barack addresses a Joint Session of Congress while delivering his State of the Union speech

Source: Press TV
http://www.presstv.ir/detail/162006.html

Painting a grim picture of the financial trials in the US, President Barack Obama has called on authorities to gear up in order to meet challenges from rising economies.

In his State of the Union address before Congress on Tuesday, Obama said America is at the risk of losing out to rapidly developing economies, such as China and India, in the global market.

Listing areas where the United States had fallen behind the rest of the world, the US president said Americans had lost to South Korea in internet penetration, to Europe in infrastructure and to China in trains and airports.

He then called for a return to the American traditions of innovation and risk-taking to keep up with the rising powers from the East.

We need to “out-innovate, out-educate and out-build the rest of the world,” the US president pointed out.

Obama also spoke of investments in education and research as the way to provide a more sound economic base and accelerate employment and development in the country.

“Over the next 10 years, nearly half of all new jobs will require education that goes beyond a high school degree. And yet, as many as a quarter of our students aren't even finishing high school,” the US president warned.

But finding the money for programs to create a competitive economy is the problem.

That is why during his nationally televised speech, Obama urged rival politicians in the Republican and the Democratic camps to ditch partisanship for a unified push for a better future.

"We will move forward together," he said, "or not at all."

In other comments, Obama also urged US colleges to allow military recruiters and officer training programs back on campuses.

The president also proposed a three-year partial freeze on civilian programs and a $78 billion cut in military spending.

On the war in Afghanistan, he said that a tough fight is ahead, but repeated his plans to bring some US troops back home in July.

However, he pledged to continue attacks on what he called 'al-Qaeda' in Pakistan.

California bankruptcy chatter alarms investors

Source: Press TV
http://www.presstv.ir/detail/161839.html

Some analysts are saying that bankruptcy could be California's best bet for getting out from under a crushing budget deficit of 25 billion dollars.

But current U.S. law prohibits states from declaring bankruptcy, which is why some are pushing for a change.

This call for a change in the bankruptcy law comes as California's financial future looks even more bleak than it did the previous year.

The state's budget deficit continues to increase while the unemployment rate shows no sign of dropping.

Declaring bankruptcy could be the best path for the state to get out from under it's crushing debt and move toward recovery.

Economists say other California municipalities are already taking advantage of bankruptcy protection.

The city of Vallejo and Orange County both filed for bankruptcy and are emerging with an improved financial situation.

But economists say there's a big difference between a city and a state.

That's why California Treasurer Bill Lockyer is already dismissing the idea of filing for bankruptcy, saying it would limit the state's ability to create jobs and to secure future investments.

And economists say California already has the lowest credit rating in the U.S.

However, proponents of the bankruptcy option say it will give California leverage when dealing with the public employee unions.

The state has a massive unfunded pension liability and the threat of bankruptcy might encourage unions to agree to reduced packages.

But economists say bankruptcy would not address the main reason California is in fiscal turmoil.

Republicans are expected to introduce the bankruptcy legislation within the next 30 days.

Experts say even if the bill was passed, it would take at least two years before states would be able to file.

China taking over US banks

ICBC is doubling its presence in Europe through branch openings in major cities

Source: Press TV
http://www.presstv.ir/detail/161737.html


The Industrial and Commercial Bank of China (ICBC) has agreed on a deal to take over a US retail bank, at a time when American financial institutions are falling one after another.

The ICBC will buy 80 percent of the US unit of Bank of East Asia Ltd. for USD 140 million, the two companies announced in an e-mailed statement on Sunday.

The move, which is yet to be approved by US regulators, could be a positive step for the arrival of Chinese banks to the US retail market.

The deal was signed during President Hu Jintao's state visit to the US.

The acquisition “will enable us to establish a solid presence in the US,” ICBC Chairman Jiang Jianqing said in the statement.

“With this commercial bank license in the US, ICBC can further expand its retail banking business and operating network across the nation.”

In January, ICBC opened its first branch in Paris, and is doubling its presence in Europe through branch openings in major cities.

Over 10 percent of the 7,760 banks in the US are in financial trouble and despite receiving a total of USD 4.2 billion in bailout cash, 98 US banks are still at risk of failing.

In 2010, 157 US banks failed and so far this year seven banks have failed.

US states seek way to file for bankruptcy

Source: Press TV
http://www.presstv.ir/detail/161305.html


American policy makers are trying to determine whether they could let states declare bankruptcy as they confront crushing debts and dwindling revenues.

House Republicans and Senators from the two major political parties have shown an interest in the matter. They have called on bankruptcy lawyers and a former House speaker, Newt Gingrich, to come up with a solution which paves the way to such a measure, The New York Times reported on Thursday.

The report comes as states face a combined pension fund shortfall of USD 3 trillion, according to finance professors' estimate.

Proponents say bankruptcy could permit a state to alter its contractual promises and get out from under massive debts.

Nevertheless, states cannot seek protection in the US Bankruptcy Court as they are considered sovereign.

Financial experts say any effort to simulate Washington's response to a state's request for a bailout would be difficult as major constitutional burdens have to be removed.

Some American cities reportedly run high risk of bankruptcy. The City of Harrisburg, Pennsylvania, is said to have received legal advice to petition for bankruptcy as it is teetering on the edge.

Hamtramck city in Wayne County of Michigan has also sought bankruptcy protection to cover deficits. The request has, however, been turned down by the state of Michigan.

It appears that years of generous spending and lofty pension promises to employees are coming to end across the United States as states are suffering severe financial hardship.