The current jobs proposal put forth by President Obama mirrors the financial struggles faced by the U.S. Treasury: it lacks substance and is financially unfeasible. While we didn’t anticipate much, the weight of disappointment from its vague promises is still palpable.
What stands out most about the President’s new plan isn’t necessarily its contents, but rather the underlying belief that government can effectively stimulate the economy using borrowed funds. This notion is striking in its optimism.
If this theory held true, the trillions of dollars already allocated would have sparked a strong economic revival and significant job growth. By now, we should have seen lower unemployment rates and numerous new opportunities. Regrettably, that has not been the case. Recently, a Bloomberg National Poll indicated that only 9 percent of the population feels confident that the economy won’t enter another recession.
The government has shown a remarkable ability to spend substantial borrowed amounts; however, there is no solid evidence that this approach effectively spurs economic growth. In fact, logic suggests that such borrowing may actually hinder economic expansion. Continue reading
Recently, the cost of credit default swaps insuring Greek debt surged, indicating a 98 percent likelihood of a Greek default within the next five years. The situation, however, may escalate sooner, as Greece seems to be undermining its austerity commitments, leading Germany to express frustration.
“Greece is ‘on a knife’s edge,’ German Finance Minister Wolfgang Schaeuble conveyed to lawmakers in a closed meeting in Berlin on September 7,” Bloomberg reported. “If Greece cannot adhere to the aid conditions, ‘it’s up to Greece to find financing without the euro zone’s support,’ he asserted during a parliamentary address.”
Without further financial backing from Germany, a Greek default appears imminent. Such an event could generate chaos for major European banks that have extended credit to the Greek government.
One clear sign that Germany may not bail out Greece again is the fact that they are reportedly making contingency plans to protect their banks from a potential Greek shortfall. Additionally, there are concerns that Moody’s Investors Service may downgrade the credit ratings of France’s largest banks, including BNP Paribas and Societe Generale, due to their exposure to Greek debt. Continue reading
The changing dynamics of our world can often be surprising. Markets can shift in ways that catch us off guard, leading to unfortunate financial outcomes.
Not long ago, the notion that ‘house prices always increase’ was widely accepted. This belief spread like wildfire across the nation. However, it was true only until it suddenly wasn’t. That’s when the unthinkable occurred—house prices dropped.
Previously, many believed that simply ‘buying and holding’ an S&P 500 index fund was a surefire way to ensure a comfortable retirement. This strategy seemed straightforward, allowing even the most inexperienced investors to participate. Yet that confidence dwindled as the stock market fluctuated dramatically, frustrating long-term investors for over a decade.
Nowadays, the prevailing wisdom is that ‘U.S. Treasuries are the most secure investment worldwide.’ In an astonishing turn of events, Ten-Year Treasury yields recently fell to 1.91 percent, signaling an extraordinary level of confidence in the U.S. government, as investors are willing to lend their hard-earned money for a decade at almost no interest.
At the Economic Prism, we watched with shock and disbelief as these trends unfolded. Continue reading
As Labor Day weekend kicked off last Friday, the Labor Department reported that, overall, the U.S. economy failed to create any jobs in August. On a positive note, this also means there were no job losses during that month. However, a zero net growth signals a detrimental reality, as around 125,000 jobs monthly are needed merely to keep pace with population growth.
The unemployment rate held steady at 9.1 percent, but the actual figure is likely much higher. Officially, 14 million people are unemployed; yet an additional 11.4 million are classified as unofficially unemployed.
This unofficial group includes part-time workers seeking full-time positions and individuals who are unemployed but have not actively searched for a job in the past month, and are therefore excluded from the Labor Department’s statistics. When accounting for them, the unemployment rate skyrockets to over 16 percent.
During the holiday, President Obama took a moment to tell the residents of Detroit, “We have much more work to do to completely recover from this recession.”
It’s evident to everyone that the economy requires more jobs to rebound effectively. But the pressing question remains: where will those jobs originate? Continue reading