Economic Stories of Relevance in Today's World -- August 12, 2012

Exclusive: U.S. banks told to make plans for preventing collapse - Reuters through the Chicago Tribune - Rick Rothacker - August 10, 2012 - U.S. regulators directed five of the country's biggest banks, including Bank of America Corp and Goldman Sachs Group Inc, to develop plans for staving off collapse if they faced serious problems, emphasizing that the banks could not count on government help.             The two-year-old program, which has been largely secret until now, is in addition to the "living wills" the banks crafted to help regulators dismantle them if they actually do fail. It shows how hard regulators are working to ensure that banks have plans for worst-case scenarios and can act rationally in times of distress.                 Officials like Lehman Brothers former Chief Executive Dick Fuld have been criticized for having been too hesitant to take bold steps to solve their banks' problems during the financial crisis.               According to documents obtained by Reuters, the Federal Reserve and the U.S. Office of the Comptroller of the Currency first directed five banks - which also include Citigroup Inc,, Morgan Stanley and JPMorgan Chase & Co - to come up with these "recovery plans" in May 2010.                 They told banks to consider drastic efforts to prevent failure in times of distress, including selling off businesses, finding other funding sources if regular borrowing markets shut them out, and reducing risk. The plans must be feasible to execute within three to six months, and banks were to "make no assumption of extraordinary support from the public sector," according to the documents.


It’s Just Business: How Corporate America Made Slaves of the Young - Truthdig.com - Christian Neumeister - August 9, 2012 - Companies across the nation are gleefully denying interns fair wages for their work, in flagrant violation of long-standing labor law, and have the nerve to tell the world they are doing these people a favor.                    Huge numbers of college students and recent graduates in a tight labor market are too scared to ask for compensation. Consequently, many interns must work for years in unpaid positions to build their résumés while depending on their parents for financial support. Not only do unpaid internships stop some from paying down a collectively exploding student debt, they compound the economical class differences between those who can afford to work for free and those who can’t.                    This exploitative practice has evolved over the generations since the passage of the Fair Labor Standards Act in 1938 and a 1947 Supreme Court ruling about railroad trainees that officially defined unpaid internships; that ruling was mostly ignored by businesses, and today’s systemic abuse of interns eventually developed.                   Now, a disturbing percentage of U.S. companies accepts as routine the illegal work of unpaid interns. One of the legal challenges to the abuse is a class-action lawsuit against the Hearst Corp. being pressed by the New York employment law firm Outten & Golden on behalf of interns who claim they were improperly denied wages and benefits at 19 of Hearst’s magazines. The law firm is pursuing two other corporations on similar grounds, Fox Searchlight and television’s “The Charlie Rose Show.”....


UN: Soaring Food Prices Might Spark Global Crisis - Newsmax - August 9, 2012 - The world could face a new food crisis of the kind seen in 2007-2008 if countries resort to export bans, the U.N.'s food agency warned on Thursday, after reporting a surge in global food prices due to a drought-fueled grain price rally.                A mix of high oil prices, growing use of biofuels, bad weather, restrictive export policies and soaring grain futures markets pushed up prices of food in 2007/08, sparking violent protests in countries including Egypt, Cameroon and Haiti.                      Concern about extreme hot and dry weather in the U.S. Midwest sent corn and soybean prices to record highs last month, driving overall food prices higher again and reversing the Food and Agriculture Organization’s expectations for steady declines this year.


Poll: More Than Half of Americans See Economy Getting Worse - Newsmax - Forrest Jones
- August 9, 2012 - Some 53 percent of Americans felt the economy was getting worse in July, up four percentage points from June, according to the Discover Financial Services’ U.S. Spending Monitor.               The poll also found 28 percent of respondents feel the U.S. economy is improving, down from 29 percent in June and 33 percent in May, while 53 percent of respondents rated the U.S. economy as poor, unchanged from June, The Wall Street Journal reported.              "The number of people who said their personal finances were improving was unchanged at 23 percent in July from June, but was down from 25 percent during May. Respondents who see their personal finances getting worse was up 2 percentage points to 49 percent," The Journal reported.                     "While 28 percent of respondents planned to spend more next month, the increase was driven mostly by an increase in anticipated spending on nondiscretionary items. About 38 percent of respondents expect to spend more on household expenses."


Gas prices climb 30 cents a gallon - CNN Money - Steve Hargreaves - August 7, 2012 - Gas prices continued their slow but steady march higher Tuesday, surpassing a nationwide average of $3.63 cents a gallon on the back of refinery problems in the United States and higher crude oil prices globally.                Nationwide average gasoline prices are now 30 cents higher than they were just five weeks ago. They are now at the midway mark between this year's high price of $3.94 a gallon -- hit April 5 -- and the recent low of $3.33 hit just over five weeks ago, according to AAA.

Fiscal cliff threatens small businesses - CNN Money - Jose Pagliery - August 9, 2012 - Potential massive cuts in federal spending are still months away, but some small businesses that rely on government contracts are already feeling the pinch.                   The looming cutbacks -- part of the "fiscal cliff" -- are causing firms to slow business or shrink production and could threaten jobs, according to company owners.                   The $110 billion in cuts for 2013 will kick in on Jan. 2 unless Congress agrees on an alternative. They will hit defense spending particularly hard but also affect other popular non-defense programs funded by Washington.                      Last year, small firms received $91 billion in federal contracts, slightly more than a fifth of all the money awarded by the federal government to private enterprise in 2011.                   It's not yet clear exactly which government agencies or programs would be affected, or how deeply the axe would slash at each.
But contractors say agencies have responded to the uncertainty by throttling back projects, delaying bids and terminating programs.



The Fed Should Stimulate Lending - Seeking Alpha - Evan Schnidman - August 10, 2012 - Many investors have been clamoring for QE3 due to a lack of readily available capital in the market as banks have become more cautious and more focused on deleveraging. A program to induce lending helps solve the problem of capital availability and increases the velocity of money without dramatically increasing inflationary pressure by adding more capital to the system. In essence, an inducement program works to use the money already in the system more efficiently by freeing up capital supply to meet demand.               Some commentators have recently argued that an inducement policy by the Fed would be both more aggressive and less effective than QE3. To the first point, it is very clear that it is not more aggressive in terms of adding inflationary pressure or growing the Fed balance sheet. Therefore, it will come under far less political fire. The efficacy issue is potentially more serious due to speculation that the lack of lending is not a matter of banks being unwilling to supply borrowers; it is a lack of borrowing demand.                    The demand question was largely answered in the Fed's July 2012 Senior Loan Officer Opinion Survey on Bank Lending Practices. This survey indicated that loan conditions to both businesses and households are tighter than the moving average since 2005, but demand is rising due to the inability of European banks to provide loans during their ongoing crisis.


Holland Wire Products closing West Michigan plant, but offers workers way to keep jobs - Michigan Live - August 02, 2012 - About 40 employees from Holland Wire Products Inc. have been given notice the plant will be closing in the next six months when production is moved to the parent company headquarters in Hickory Springs, N.C.                      Hickory Springs Manufacturing Co. spokesman Bobby Bush said the employees have been given an offer to move with the operation and retain their jobs and many have expressed interest.             The closure and relocation is being done to “bring production closer to the raw materials and customer base,” Bush said.             The company, with international sales, manufactures wire spring products for bedding products and seating for the furniture, automotive and health care fields.                        “Right now we’re producing the raw material for the springs here in North Carolina, shipping it to Michigan and then bringing the finished products back here for customers,” Bush said.                 “The Holland plant also wasn’t working at full capacity and in these tough economic times we got to make every efficiency we can,” Bush said.                  Employees at the Holland plant at 955 Brooks Ave. were notified on Wednesday about the closure. The plant has been in operation since 1988.


Corning Cable cuts 90 temporary jobs in Winston-Salem - Winston-Salem Journal - Richard Craver - August 12, 2012 - Lower customer demand for optical fiber-cable products has led Corning Cable Systems LLC to eliminate 90 temporary jobs at its Winston-Salem plant.             Corning Cable spokeswoman Beth Dann said today that the workforce reduction at 3180 Centre Park Blvd. was effective Monday. It represented the bulk of the operation's temporary staffing.                 "No full-time employees at this facility are impacted by this action," Dann said. She said the operation has more than 300 full-time workers.              "This is being done as part of an on-going practice of modulating work schedules and supplemental workforce levels to effectively address regular business cycling."                   Although Dann said the use of temporary workers "is a general part of Corning's workforce plans companywide," she confirmed the Winston-Salem operation is the only one of its eight in North Carolina that experienced a temporary-workforce reduction.



Real American Debt 70 Trillion Dollars and Growing by 10 Million Dollars a Minute - David Walker
David Walker : Total public debt not counting unfunded social security promises unfunded medicare promises unfunded pension and retiree for the civilians and the military personnel and excluding student loan, mortgage and credit card debt is exceeding 16 Trillion Dollars but in reality the federal financial; hole is about 70 trillion dollars and growing by 10 million dollars a minute says David Walker , the only country that is worse than us in Europe is Greece he added