Budget Cut Conflicts between the US and Europe

28 06 2010

To most people, budgeting is not an exciting activity to engage in, and the same is true for politicians. Governments are spending more than they are generating, and are realizing that this leads to enormous amounts of risk when the economy is weak.

In Europe, politicians are seeking to cut governments spending, and the US is trying to convince them that that is not the solution. The US insists that cutting government spending will actually hurt the recovery of the economies that are swimming in debt.

President Obama explains that cutting budgets too soon could prolong recovery, and that continuing to spend money will foster economic growth. (The US Federal Deficit is 11.3% of the GDP, and is projected to reach $1.6 trillion by the end of this year.)

Yet, European countries are determined to reduce spending in the public budgets. They claim that the cuts are necessary, as opposed to raising taxes in order to fund further spending, and the governments taking more responsibility regarding spending will build confidence.

These differences of opinion were among the many items on the agenda discussed over the weekend at the G20 summit. Dominique Strauss-Kahn, head of the International Monetary Fund expressed that he felt more encouraged about the willingness of G20 members to coordinate their economic policies so that global recovery does not slow down or come to a halt. He expressed that if all countries tighten their budgets at the same time, it could destroy recovery, and that it would be okay if countries moved at different speeds.

What are your thoughts?


New Home Sales at Record Lows

23 06 2010

The homebuyer tax credit expired in April, prior to that, new home sales were on a two-month gaining trend. May was not so fortunate though. Sales of new homes plummeted to a record low of 300,000 (adjusted annual rate) new homes sold in a month. Prior to that, the record was an annual rate of 338,000 in September 1981.

Why such a huge decline? Obviously the rise over the last few months was not realistic; rather it was directly impacted by the fact that the tax credit was going to expire soon.  First time home buyers got up to $8,000 in a tax credit, and repeat buyers received a tax credit of up to $6,500. In my opinion, the decline is an exaggeration based on the rushed growth prior to the tax credit expiration. Simply put, with or without the tax credit, new home sales are a far cry away from the normal annual rate, between 800,000 and 900,000.

What Exactly is the Dow Jones Industrial Average and Why Should I Care

14 06 2010

The Dow Jones Industrial Average, often the most cited stock market index, has a very psychological impact on investors. In the last few years, the pulse of the Dow has been plastered across the headlines, “The Dow is over 10,000”, “The Dow dropped 300 points”, and on and on.

The Dow is comprised of what are considered to be the 30 top companies in America. It is an average of the weighted prices of the shares of these companies. What does it mean that the prices are weighted? It means that some companies shares’ count more than others. The purpose of the average is to give an overview of the health of the economy buy monitoring companies that are considered to be the most fundamental to the economy.

Since the Dow is the oldest of all averages available, it is often referred to the most often. Although it can be criticized as not being a very accurate representation of the overall economy, the fact is, it is an indicator of how the market is performing. It helps to gauge a measure of something that can be very difficult to define, which is consumer confidence. As the Dow fluctuates, investors can see whether consumers are uncertain or gaining more confidence.

Instead of getting caught up in the actual number of points attributed to the Dow, the more useful number can be the change. Understanding that over the past year, the Dow has increased by 16% is more significant that saying that the Dow is at 10,211.07 points.

Bring Down that Cell Phone Bill

7 06 2010

Just came across a great article with tons of advice on minimizing your cell phone bill. Of the ideas mentioned, here are my four favorites:

Find out if you qualify for a discount! Several companies offer discounts on personal cell phones of about 25%. That is a great savings, and will not impact the terms of your contract in any way. Brows through your company’s website or contact your HR department for more information. If your monthly bill is $100, that can mean a savings of up to $25! This is quick and easy way to save!

Information is power: It’s important to be an informed consumer. Knowing what the competition has to offer can help you save money. In the U.S. the four main cell phone companies are AT&T, Verizon, Sprint and T-Mobile. There are some very useful websites that can help you compare plans offered by these carriers and determine which is best for you. Check out BillShrink.com and Validas.com. If you find that there is a better plan offered on a carrier that you are not currently with, you can talk to your carrier and ask for a better deal. If they won’t oblige you, wait until your contract is over, and switch!

Try a Pre-Paid Phone: Pre-paid phones offer the works, with no contract or cancellation fees! You can call, text, and access the web starting at $40 a month. If you aren’t much of a talker, using less than 300 minutes a month, this is an excellent choice.

Free 411: 411 is a convenient number to call if you don’t know the number you need on quick notice, but it costs $1.49 each time you use it. Google offers a toll-free option by calling 1-800-GOOG-411.

If you are looking for ways to save, these are great options. Good luck!

The Economy of the Gulf of Mexico

2 06 2010

The fact that oil has been gushing into the Gulf of Mexico for over a month now is just devastating. I know that I am not the only one that feels this way, check out this twitter trend #BPoilSpill.

When news first spread about the oil spill (44 days ago!), I didn’t realize how dire the situation was. I was just concerned about the fact that several rig workers had died in an explosion, and thought to myself, what a scary job it must be to work on an oil rig, and no wonder it is such a high paying job, seeing as it is so life threatening.

Then, day after day, the oil pumping into the Gulf continued to flow, attempt after attempt has failed and the situation has only continued to get worse.

The monetary and economic damage is estimated to be anywhere from $14 billion to $100 billion! That huge difference of $86 billion is due to the fact that it is still not certain when the oil leak will be stopped, and how much damage the oil will cause to the shores (it is expected to reach Florida within days).

According to an article on CNN, if the Gulf of Mexico were a country, it would have the 29th largest economy in the world. So, the $234 billion it produces annually through tourism, fishing, shipping and oil is all at stake. For now there is a moratorium on further drilling in the Gulf, so that will certainly stifle that portion of economic activity. Also, many people are canceling their summer trips because they are concerned with the contamination. Although fishing and shipping only accounts for about 1% of the Gulf’s economy, they are feeling the impacts of the spill already, as fishing activities have been banned in over 35% of the Gulf.

These impacts are huge, long lasting, and getting worse as 789,000 gallons of oil flow into the ocean daily…  that is roughly 550 gallons a minute! The larger the spill, the larger the area of impact, in a few short days, we may not be concerned with only the Gulf anymore, who knows where the currents could move…