Category: US Decline

Increasing US debt poses national security threat: Clinton

MSN | PTI | 08/09/2010

us-debt-sinking The increasing American debt poses a national security threat, US Secretary of State today warned, saying it could impact Washington’s ability to exercise "global leadership". "Today more than ever, our ability to exercise global leadership depends on building a strong foundation here at home," Clinton said. "That’s why rising debt and crumbling infrastructure pose very real long-term national security threats," she said in a major foreign policy speech at Council on Foreign Relations, a Washington-based think tank. She warned the increasing debt poses a national security threat, saying the Obama Administration is focusing on this crucial aspect of the country’s economic policy.

She said US President Barack Obama understands this. "You can see it in the new economic initiatives that he announced this week and in his relentless focus on turning the economy around," Clinton said. The rising debt levels pose a national security threat, and it poses a national security threat in two ways, she explained later in response to a question. "It undermines our capacity to act in our own interest, and it does constrain us where constraint may be undesirable. And it also sends a message of weakness internationally," the top diplomat said. She underlined that it is very troubling that the "we are losing the ability not only to chart our own destiny but to have the leverage that comes from this enormously effective economic engine that has powered American values and interests over so many years".

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Economy, New Rules Toughen U.S. Job-Hunt for Foreign Students

Bloomberg | Aug 27, 2010 | 5:57 PM GMT+0530

Goutham Dindukurthi, 24, was one of 18,000 students who traveled from India to study science or engineering in the U.S. in 2008. He won a coveted spot in the Entertainment Technology Masters program at Carnegie Mellon University in Pittsburgh. Like many of his compatriots, though, Dindukurthi discovered that the struggling U.S. economy and his immigration status stymied him as he looked for a job after graduation. “We heard of companies going on a hiring freeze,” he said. “Being Indian made it harder since some of the companies refused to sponsor a working visa.” Dindukurthi’s plight illustrates a widening problem that’s long been a sore point for chief executives of the U.S. technology industry. Bill Gates, founder of Microsoft, says U.S. visa curbs on immigrants with special skills in science, math or technology must be overhauled. “If we don’t, American companies simply will not have the talent to innovate and compete,” Gates said in testimony to the House Committee on Science and Technology on March 12, 2008.

Congressional Cap

International students are usually hired on H-1B visas, a program that allows companies to employ foreign workers with specialized training. Restrictions set on the program, fewer employment opportunities and a decrease in financial aid from colleges, have led to the slowest growth in international students studying sciences in the U.S. in years. The number of visas that can be issued annually through the H-1B program was capped by Congress at 65,000 in 2004 after the expiration of a temporary increase from 2001-2003 that set the limit at 195,000. Since 2004, technology companies including Microsoft Corp. have pushed Congress to again expand the cap. Gates, in urging lawmakers in 2008 to allow more foreign workers to be hired in the U.S., said the Redmond, Washington-based company had been unable to employ a third of its foreign candidates due to the visa cap.

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Japan stocks fall, dollar hits 8-month low vs yen

Japan stocks fall, dollar hits 8-month low vs yen | Reuters  04/08/2010 | 12:50 pm IST

Japanese stocks fell behind their Asian peers and slid 2 percent on Wednesday as the yen climbed towards 15-year highs against the U.S. dollar after weak U.S. data spurred talk of more Federal Reserve easing. Asia-Pacific stocks outside of Japan were slightly off their three-month peaks scaled on Tuesday and are seen prone to profit-taking as investors remain sensitive to any signs of fatigue in the global economy. The latest signs came in the form of disappointing U.S. consumer spending and housing market reports, which fanned speculation the Fed may further relax its loose policy at its Aug. 10 meeting and pushed the dollar to an eight-month low. European shares were set to open lower, with financial spreadbetters expecting Britain’s FTSE 100 to fall about 0.4 percent; Germany’s DAX to fall 0.2 percent and France’s CAC 40 to ease 0.1 percent. Tokyo stocks fell 2.1 percent, hit by fears that a strong yen will erode exporters’ profits and sap economic growth.

Such concerns combined with a run of disappointing U.S. data that cast a pall over recovery in the world’s largest economy, boosted Japanese government bonds, pushing the 10-year yield below 1 percent for the first time in seven years. Japan’s finance minister reiterated that he was closely watching currency moves as the dollar’s weakness tests the tolerance for a stronger yen as the economy struggles to pull out of a crippling spell of deflation. “Today’s stock fall is really all about the yen. At this kind of level, there’s inevitably worries about what sort of impact this will have on company earnings going forward,” said Toshiyuki Kanayama, a market analyst at Monex Inc. Continue reading

Recession in U.S. Was Even Worse Than Estimated, Revisions Show

Bloomberg | Jul 30, 2010 | 10:07 PM GMT+0530

The worst U.S. recession since the 1930s was even deeper than previously estimated, reflecting bigger slumps in consumer spending and housing, according to revised figures. The world’s largest economy shrank 4.1 percent from the fourth quarter of 2007 to the second quarter of 2009, compared with the 3.7 percent drop previously on the books, the Commerce Department said today in Washington. Household spending fell 1.2 percent in 2009, twice as much as previously projected and the biggest decline since 1942. “We do tend to get bigger revisions at turning points in the economy,” Steven Landefeld, director of the Commerce Department’s Bureau of Economic Analysis, said in a press conference this week. On the more positive side, “in the past, we’ve tended to undershoot the recovery” as well, he said.

The data better explain why the jobless rate doubled, reaching a 26-year high of 10.1 percent in October, and has been slow to subside. The government also boosted personal income levels for each of the past three years, propelling the savings rate higher and signaling households are further along the process of repairing finances. The rebound from the recession has been more subdued in the last six months of 2009, as the economy grew at an average 3.3 annual pace from July 2009 through December, instead of the 3.9 percent previously projected. By comparison, growth averaged 7.2 percent in the two quarters following the 1981-82 recession, during which the economy contracted just 2.9 percent.

Lehman Collapse

The worst quarter of the current economic slump is now the final three months of 2008, in the immediate aftermath of the collapse of Lehman Brothers Holdings Inc., rather than the first quarter of 2009. GDP shrank at a 6.8 percent pace from October to December 2008, exceeding the prior estimate of 5.4 percent, making it the deepest quarterly drop since 1980. The new data showed the peak of the last expansion occurred in the fourth quarter of 2007 rather than the second quarter of 2008. The figures are more in sync with the recession chronology prescribed by the National Bureau of Economic Research, the accepted arbiter of U.S. business cycles. The Cambridge, Massachusetts-based private group determined the slump began in December 2007, and has yet to announce when it ended. Consumer purchases, which account for 70 percent of the economy, were cut for each of the past three years, with the biggest reduction taking place last year. Less spending on services than previously estimated, including financial services and auto repair, was responsible for the change.  

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Dollar Weakens Most in 14 Months versus Euro on Signs of Economic Slowdown

Bloomberg News | Jul 17, 2010

The dollar fell the most against the euro in 14 months and dropped to the lowest level this year versus the yen as economic reports added to evidence that the U.S. recovery is losing momentum. The greenback touched a level weaker than $1.30 versus the shared currency as minutes of the Federal Reserve meeting last month indicated policy makers trimmed their forecasts for growth. The euro rallied for a third straight week against the dollar before partial results of stress tests on the region’s banking system due on July 23. “It’s really dollar weakness based on some evidence the economy is slowing,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “The economic indicators are pointing strongly toward slower growth in the second half of the year.”

The dollar declined 2.24 percent, the most since May 2009, to $1.2930 per euro yesterday, from $1.2641 on July 9. It touched $1.3008 yesterday, the weakest level since May 10. The U.S. currency dropped 2.3 percent to 86.57 yen, from 88.62 yen, after reaching 86.27 yesterday, the lowest level since Dec. 1. The euro was little changed at 111.96 yen, compared with 112.01. The euro has rallied 8.9 percent versus the dollar since reaching a four-year low of $1.1877 on June 7 as concern eased that Europe’s sovereign-debt crisis would undermine the region’s economic recovery. Spain, which has the third-largest deficit in the euro region, drew higher demand in its sale of 3 billion euros ($3.8 billion) of 15-year bonds on July 15. It attracted bids worth 2.57 times the securities offered, compared with 1.79 in an April auction.

Stress Tests

Stress tests of European banks aren’t likely to force major publicly listed lenders to bolster their capital by selling new shares, according to Goldman Sachs Group Inc. “We do not expect large listed European banks to raise equity as a result of the stress tests,” London-based Goldman Sachs analysts, including Jernej Omahen and Frederik 

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Obama aide: U.S. economy still needs further boost

Reuters | Sun May 16, 2010 | 10:16pm IST

The U.S. economy has begun to climb out of the worst downturn since the 1930 Great Depression but still needs further steps by the federal government to stem a crisis in the job market, a senior economic adviser to President Barack Obama said on Sunday. "What we need now is not the withdrawal of support, but further targeted actions that will help the private sector come back more strongly," Christina Romer, chairwoman of the White House Council of Economic Advisers said in prepared remarks for a commencement ceremony at the College of William and Mary in Williamsburg, Virginia. Text of Romer’s remarks was made available in Washington.

Yuan rises as speculation of policy shift grows

Reuters | Thu Apr 8, 2010 | 6:29pm IST

The yuan and other Asian currencies rose sharply on Thursday as speculation intensified that China might soon unveil a long-awaited shift in its exchange-rate regime by revaluing its currency. The New York Times reported that Beijing was very close to announcing a "small but immediate" revaluation of the yuan and would then let the currency fluctuate more widely. The despatch from Hong Kong, which quoted people with knowledge of the policy consensus emerging in Beijing, coincided with the arrival in the Chinese capital of U.S. Treasury Secretary Timothy Geithner for hastily arranged talks with Vice Premier Wang Qishan. A late advance in the yuan in Shanghai to 6.8235 per dollar, its highest rate since October 2009, fanned the talk that change was afoot.

The rise on the day was tiny but nonetheless significant because the People’s Bank of China tightly controls the currency’s movements through its interventions in the market. In offshore markets, three-month yuan/dollar non-deliverable forwards fell to the lowest level since July 2008, implying a 1 percent rise in the Chinese currency over that period. Other Asian currencies rose in sympathy. "The U.S. dollar got smashed down against the South Korean won, Indonesian rupiah and Taiwan dollar, not to mention the yuan," said a Singapore-based trader. U.S. officials declined to comment on Geithner’s talks, but he has repeatedly made the case that it is in China’s, as well as the world’s interest, to permit a renewed rise in the currency.   

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