“People may not appreciate that when a foreigner comes and visits Hawaii that actually counts as a U.S. export,” Bernanke said before Congress on July 17 in response to a question from Senator Daniel Akaka, Democrat from Hawaii. “Tourism has been something of a bright spot. Not just in Hawaii, but in a number of places around the country.”
Spending by tourists is providing 13 ½ million jobs for Americans at a time when the unemployment rate is stuck above 8 percent. Spending by overseas visitors climbed 8.1 percent to $13.9 billion. U.S. Commerce Department show this includes all expenses from airfares to hotels over twelve months ending May.
July 18th’s Fed’s Beige Book survey of regional economies noted tourism was strong in several districts and that hotel rates and revenue per room was “robust” in New York, Richmond, Atlanta, Chicago and San Francisco and the locations relying less on discount to bring in tourist were seeing more visitors such as southern California and Hawaii.
Leisure and hospitality employees 13.59 million which currently accounts for 10.2 percent of all payrolls in the U.S. up from 9.8 percent before the recession according to Labor Department data.
Marriott International is up about 23 percent this year, the Walt Disney Co. has advanced 28 percent and Gaylord Entertainment Co., which operates the Grand Ole Opry in Nashville, Tennessee, has jumped 49 percent out performing the broader stock market Standard & Poor’s 500 Index up only 7 percent.
Federal Reserve Bank of New York President William C. Dudley said the city’s economy is “doing quite well” and has become less dependent on Wall Street. Tourism to New York has helped and has been “really quite a success story,” Dudley said in public remarks on May 30.
“Tourism has been an over-performer,” said Chris Lafakis, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “This is an industry that’s fully recovered from recession.”
- — Photo Courtesy of Bloomberg.com —
It was an easy win for Chancellor Angela Merkel.
Germany’s Lower-house lawmakers on summer break were called back and returned to Berlin on a rainy one day session to vote on Spain’s Bailout which was approved 473 to 97. The special session was to vote on recapitalizing Spain’s banks with 100 billion euros ($123 Billion). Germany, Europe’s largest economy, will guarantee almost 30 percent of the new euro zone aid package.
Merkel received help from Finance Minister Wolfgang Schaeuble who appealed to the lawmakers to aid Madrid who said the slightest perceived risk of Spanish insolvency could trip up the entire 17-nation euro zone.
“Any problems in the Spanish banking sector are a problem for the financial stability of the euro zone,” he said. In order to be able to commit Germany to the Spanish bailout in a conference call of euro zone finance ministers, Schaeuble needed the parliamentary approval.
Merkel must work within the limits set by government’s parliament, the Constitutional Court as well as heed to German public opinion while under intense pressure from the European Union partners to act in a timely manner to diffuse the crisis.
“Spain is the fourth biggest economy in the euro zone and a couple of its banks need to be stabilised. If we don’t do it, the country that suffers most is Germany, so it is in Germany’s interests to help Spain,” Andrea Nahles, deputy party leader for the main opposition Social Democrats (SPD), told Reuters.
The rescue opposition, Social Democrats, are agreeing if the rescue and liability lies with Spain directly and not through just the Spanish Bank. They do not support the direct recapitalization of the Spanish banks which the new ESM could resolve if and when it meets constitutional requirements.
“If the majority of us still vote in favour, this is only because in our view too the damage would be catastrophic if Germany denied aid to Spain,” Frank-Walter Steinmeier, parliamentary floor leader of the SPD, said ahead of the vote.
The court has delayed the entry into force of the ESM, the permanent rescue fund, pending a detailed legal review of whether it violates the German constitution. The court is due to deliver its verdict only on September 12.
- — Photo Courtesy of http://www.yc.edu —
Outlook for residential real estate is on the uptrend and will push the economy in the right direction as data indicates that U.S. home starts in June was one of the fastest pace in almost 4 years according to economists.
Seventy-nine economist surveyed by Bloomberg News provided the data that indicates housing starts moved up 5.2 percent last month to 745,000 estimated annual which is the strongest since 2008 according to the median estimates, and building permits.
“The long-awaited housing market recovery is definitely under way as demand is improving,” said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. “Continued growth in the number of households, pent-up demand, very low prices and mortgage rates that have resulted in record- high affordability” are underpinning demand, he said.
Confidence among U.S. homebuilders climbed in July by the most since September 2002.
Index of sentiment increased by 6 points to 35 this month as sales and buyer traffic improved according to a report from the National Association of Home Builders/Wells Fargo.
“As we start to move prices up, it starts to draw people off the sidelines who are potential homebuyers, people that are at the age they should be buying a house, but they’ve been concerned about a further decline in prices,” Daniel Fulton, chairman and chief executive officer of forest-products company Weyerhaeuser Co. (WY), said at a June 13 conference. “So we’re starting to see some increase in activity.”
The housing supply is moving as record low mortgage rates and lower property values attract buyers reducing the inventory. This will cause the home builders to boost construction which will create jobs and stimulate the economy.
The Standard & Poor’s Supercomposite Homebuilding Index, which includes D.R. Horton Inc. and PulteGroup Inc., has climbed 52 percent this year, outpacing an 8.4 percent gain in the broader S&P 500 Index.
“Evidence from the field suggests that the ‘for sale’ housing market has, in fact, bottomed and that we have commenced a slow and steady recovery process,” Stuart Miller, chief executive officer at Lennar Corp., the third-largest U.S. homebuilder by revenue, said in a June 27 statement.
Speaking to Congress before the Committee on Banking, Housing, and Urban Affairs, the Federal Reserve Chairman Ben Bernanke gave his Semi Annual Monetary Policy Report to Congress where he gave a picture of a weak U.S. economy which is moving very slow.
Bernanke was very adamant that Congress needed resolve the impasse or the economy picture will worsen; into a recession.
The economy is growing modestly but has weakened, Bernanke said. Manufacturing has slowed. Consumers are spending less. And job growth has slumped to an average of 75,000 a month in the April-June quarter from 226,000 a month from January through March. The unemployment rate is stuck at 8.2 percent.
Most importantly he stated a number of times that Congress needs to take action or the picture will become very dark.
Bernanke noted what the Congressional Budget Office has warned: A recession would occur, and 1.25 million fewer jobs would be created in 2013 without an agreement, tax increases and deep spending cuts would take effect at year’s end.
He said that if unemployment remains high at 8% the Fed is prepared to take further action to try to help the economy. He did not specify what action the Fed would take but its been reported that the Feds are already meeting and voting on action possibilities including the purchase of mortgage instruments.
Expressing very clearly that there is only so much the Feds can do and that his most urgent concern is what will happen if Congress does not take action and does not resolve its budget impasse before the years ends.
He minded congress that cuts in taxes on income, dividends and capital gains would expire. So would this year’sSocial Security tax cut and businesses tax reductions. Defense and domestic programs would be slashed. And emergency benefits for the long-term unemployed would run out.
All that “would greatly delay the recovery that we’re hoping to facilitate,” Bernanke said near the end of two hours of testimony.
Funding these project would help relieve, even though a small part, some of the of the economic pressure because of the great need for jobs and economic growth while at the same time supporting a sustainable conscious and responsible project.
This will be the first funding as early as the end of this year for supporting solar manufacturers since Solyndra LLC filed for bankcruptcy last year. Half of the solar manufacturers that received the loan guarantees filed bankruptcies which caused Republicans in Congress to use opportunity to hold inquiries into the programs turn it into a negative against President Obama’s sustainable efforts plus raised questions about the White House influence in funding.
President Obama is not powerful enough to control the global marketplace. The failures of the U.S. solar projects are in a large part due to the global market place and the normal odds of success that comes with research and development and any start-up. Standard for a new company is a 10% chance the project will make it to the end of the second year.
In addition, Asian countries and predominately China have demonstrated their competitiveness in manufacturing including solar products at prices the other countries including the U.S. and Germany have been unable to compete with.
“Those failures won’t prevent the government from honoring other guarantees”, said Damien LaVera, a spokesman for the Energy Department.“As long as they meet the terms and conditions of their agreement, including milestones, they can expect to receive funding as agreed,” LaVera said in an e-mail.
Designed to support innovation at companies developing new energy technologies the Energy Department program does not expect every applicant to succeed LaVera said. House Republicans proposed a bill yesterday that would bar the agency from issuing additional loan guarantees.
About 35 percent of the loans, loan guarantees and conditional commitments is for solar power generating project and lessthan 4% for solar manufacturing. The balance of the $35 billion for clean energy products are for supporting wind, geothermal, biofuel electric vehicles and other ventures.
- — Photo Courtesy of http://www.businessinsider.com —
Barclays, the United Kingdom’s no. 2 bank, admitted that at the request of traders at the bank and other banks, that its employees regularly manipulated Libor between 2007 and 2009 Barclays agreed to pay $453 million to U.S. and U.K. regulators.
Morgan Stanley’s calculation that at least ten additional banks could be fined between $420 and $651 million by regulators. Banks that have disclosed that they are being investigated include Deutsche Bank, Royal Bank of Scotland, Credit Suisse, Citigroup, UBS and JPMorgan Chase.
Ten trillion loans worldwide use Libor as a benchmark for determining rates for loans. credit cards and mortgages in the United States. In addition the same labor rate is used as a basis for trading $350 trillion in derivatives worldwide. The manipulations would have affected pension funds and local governments to name a few that would have purchased derivatives in an attempt to protect against interest rate changes.
It could be assumed that banks that are not quickly settling with the regulators will pay a premium in fines. Barclays may have received preferential treatment because they immediately responded and cooperated at the request by regulators and settled the fine expediently. Other banks may end up paying 30% more and higher fines after the UK Serious Fraud Office completes its investigation.
In May of 2008 , Treasury Secretary Tim Geithner, New York Fed at that time, raised the subject at a meeting of the President’s Working Group on Financial Markets. He also made suggestions to Mervyn King, the governor of the Bank of England which included to reduce the incentive of banks to misreport the interest rate.
The British Parliament has recently held hearings into the Barclays’ Libor scandal. The U.S. Justice Department already disclosed in February that it is conducting a criminal investigation into alleged manipulation of Libor. A class action suit is in the works for pensions in Ohio. U.S. Congressional Hearings have not been set.