KeNo's Housing and Economic Portal: Saturday January 22 Housing and Economic stories

Friday, January 21, 2011

Saturday January 22 Housing and Economic stories

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Downturn's Ugly Trademark: Steep, Lasting Drop in Wages - (www.online.wsj.com) In California, former auto worker Maria Gregg was out of work five months last year before landing a new job—at a nearly 20% pay cut. In Massachusetts, Kevin Cronan, who lost his $150,000-a-year job as a money manager in early 2009, is now frothing cappuccinos at a Starbucks for $8.85 an hour. In Wisconsin, Dale Szabo, a former manufacturing manager with two master's degrees, has been searching years for a job comparable to the one he lost in 2003. He's now a school janitor. They are among the lucky. There are 14.5 million people on the unemployment rolls, including 6.4 million who have been jobless for more than six months. But the decline in their fortunes points to a signature outcome of the long downturn in the labor market. Even at times of high unemployment in the past, wages have been very slow to fall; economists describe them as "sticky." To an extent rarely seen in recessions since the Great Depression, wages for a swath of the labor force this time have taken a sharp and swift fall.

Foreigners Shun Europe’s Bonds, and Debt Piles Up - (www.nytimes.com) Greece. Ireland. And now, it seems, Portugal. While the circumstances that have driven these debt-ridden members ofthe euro zone to the brink differ, they share one common characteristic: all three countries aggressively tapped their domestic banking systems for more debt long after they had been shut out of international bond markets. With its 10-year debt trading near the record high of 7 percent reached last week, Portugal will try on Wednesday to sustain what many have come to see as nothing more than a form of bond market charades. It will try to raise up to 1.25 billion euros ($1.62 billion) in long-term financing — debt that is expected to come largely from the country’s already depleted banking system.

Brown Makes Universities, Poor Californians Bear Biggest Cuts - (www.bloomberg.com) The world’s biggest banks are seeking to revive global efforts to create a resolution mechanism to deal with failing financial giants in a bid to stave off higher capital charges and other options that they say could damage their bottom lines. The Institute of International Finance, a leading industry group, is lobbying to put the issue on the agenda when leaders of the G20 leading economies next gather. On Wednesday, IIF representatives are meeting French officials, who will host this year’s gathering in November, to press their case. The big banks are acting at a time when the US and European Union are independently developing conflicting plans to deal with large bank failures, and as the Financial Stability Board, a global group of central bankers and regulators, develops its own recommendations for making supersized banks safer. The banks want a higher level group that would have the power to address both legal and regulatory issues on a global scale.

Risk of bust after boom haunts Latin America - (www.ft.com) Nobody has described the mixed blessings of commodity wealth more pithily than Juan Pablo Pérez Alfonzo, Venezuela’s oil minister in the 1960s and one of the founders of Opec. “Oil will bring us ruin,” he said. “Oil is the devil’s excrement.” Half a century later, Latin America is finding new truth in his words. Oil can become a commodity curse. But so too the other raw materials so abundant in the region, from sugar and copper to iron ore and soyabeans. Ostensibly, the continent is thriving. Some even talk of the coming “Latin American decade”, fuelled by an Asian-driven commodity boom that has produced a thirteenfold increase in trade with China since 2000. But there is a Janus face to this abundance: alongside soaring commodities prices have come extreme economic dislocations, especially in currencies.

Portuguese Bond Sale May Make Bailout ‘Inevitable’: Euro Credit - (www.bloomberg.com) Portuguese yields may be rising to levels that force the nation to follow Greece and Ireland in requesting a bailout from the European Union and the International Monetary Fund to avert default. The nation plans a 10-year sale tomorrow, the first bond auction by any of the euro region’s most indebted countries this year. Its existing 10-year debt has yielded more than 7 percent in 10 of the past 62 days, according to Bloomberg data. Greece needed a rescue within 17 days of its 10-year yield breaching 7 percent on April 6, while Ireland lasted less than a month after it cracked that level in October. “Even if we see a successful auction, it doesn’t mean anything, because at rates above 7 percent it’s not sustainable,” said Ioannis Sokos, a strategist at BNP Paribas SA in London. “It is inevitable that Portugal has to turn to the EU and IMF if they keep borrowing at these levels.”