US Federal expenditure

Approximate US Federal expenditure 2010 :

Entitlement	Social Security	$701b	20.28%
	Medicare & Medicaid	$793b	22.95%
	Other mandatory	$416b	12.04%
	(Sum of above)			55.27%
Discretionary	Defense	$689b	19.94%
	Non-Defense	$660b	19.10%
	(Sum of above)			39.03%
Interest	on National Debt	$197b	5.70%	5.70%
Total		$3,456b		100%

US could suffer credit downgrade despite deal

US credit rating downgrade likely even if debt ceiling deal is reached – HuffPost

US Debt saga brinksmanship

Boehner debt plan falters as Obama considers veto – BBC

Debt crisis options for Obama :

1. Make a deal
2. Buy time
3. Brinksmanship

US won’t default

The US will not default on Aug 2 – Zachary Karabell, Time

World financial fate in hands of Credit Rating Agencies

Credit Rating Agencies, not honest brokers, now hold world’s fate – Peter Goodman, HuffPost

If the agencies downgrade American debt to a notch below AAA, that could trigger panic in the global market. Some pension funds and other pools of money may be forced to sell their Treasury bonds, owing to obligations that they stick to investments that have the full seal of approval from the credit rating agencies. If the pension funds sell, that should push down the value of the dollar, which would force the Treasury to hand out higher rates of interest to find takers for its debt, which would eventually filter through the broader economy as higher interest rates, making it harder for people to finance homes and cars and stay current on their credit card balances.

And if United States debt no longer looks as solid, that is likely to cast a shadow on other debt in the global financial system, likely jacking up the rates that strapped governments in Ireland and Portugal and elsewhere must pay to find takers for their bonds, intensifying the pressure in Europe.

Gold's run is almost over - Mark Hulbert, MarketWatch

Bullion’s extraordinary run is fast running out of steam. Don’t be surprised if gold pulls back in coming sessions.

At a minimum, such a pullback would be a health-restoring event for the bull. However, such a pullback could also be the start of something more serious. We’ll know soon after it begins.

US Recovery in doubt

Nine signs the US recovery might be losing momentum – HuffPost

1. Consumers feeling strained
2. Unemployment numbers bad
3. Wage growth stagnates
4. Households say incomes will fall
5. Slow employment growth
6. Prices likely to flatten
7. Large gap between Actual and Natural rate of Unemployment
8. Rising length of unemployment
9. Steep decline in percentage of population employed

If the economy isn’t on the decline, there’s good reason to think it’s at least stalled.

Unsustainable debt will kill US economy

Bixby says unsustainable debt will ‘kill’ US economy – Bloomberg

July 18 (Bloomberg) -- Robert Bixby, executive director of the Concord Coalition, talks about congressional negotiations over raising the U.S. debt limit and reducing the federal deficit. Bixby, speaking with Mark Crumpton on Bloomberg Television's "Bottom Line," also discusses prospects for a balanced budget amendment to the U.S. constitution.

Future tax may be 70%

Get ready for a 70% marginal tax rate – Michael Boskin, WSJ

… teacher in California earning $60,000 : A current federal rate of 25%, a 9.5% California rate, and 15.3% payroll tax yield a combined income tax rate of 45%.
… Covering future Social Security and Medicare deficits brings the combined marginal tax rate on that middle-income taxpayer to an astounding 71%. That teacher working a summer job would keep just 29% of her wages.
At the margin, virtually everyone would be working primarily for the government, reduced to a minority partner in their own labor.

M.Boskin : Professor of Economics, Stanford University. Senior Fellow, Hoover Institution.
Chaired Council of Economic Advisers under President George W Bush.

US Default’s effects

US Default would likely cause Stocks, Bonds, Dollar to collapse – Matthew Craft, HuffPost

There is wide agreement among economists that a default would drive up borrowing costs for everybody. US Treasury yields act like a floor for other lending rates, so raising them makes it more expensive for Americans to take out mortgages, for corporations to finance new spending and for local governments to borrow.

But analysts say predicting exactly how a default would play out in stocks, bonds and currency in the hours and days following the Aug 2 debt ceiling deadline is practically impossible.

Traders are still banking on a deal to increase the borrowing limit before the Aug 2 deadline. That’s one reason stocks and bonds have remained relatively stable thus far, even after Moody’s and Standard & Poor’s warned they may soon take away the country’s top credit rating.

Italy and the Euro

On the edge – Economist 14 Jul

By engulfing Italy, the euro crisis has entered a perilous new phase – with the single currency itself now at risk

Europe’s economies : Strong core, pain on the periphery – Economist 17 May

Moody’s warns of possible US rating downgrade

Moody’s puts US ratings on review for possible downgrade – Reuters
Moody’s statement : 
Moody's Investors Service has placed the Aaa bond rating of the government of the United States on review for possible downgrade given the rising possibility that the statutory debt limit will not be raised on a timely basis, leading to a default on US Treasury debt obligations. On June 2, Moody's had announced that a rating review would be likely in mid July unless there was meaningful progress in negotiations to raise the debt limit.

In conjunction with this action, Moody's has placed on review for possible downgrade the Aaa ratings of financial institutions directly linked to the US government: Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the Federal Farm Credit Banks. We have also placed on review for possible downgrade securities either guaranteed by, backed by collateral securities issued by, or otherwise directly linked to the US government or the affected financial institutions.

Fed mulls further easing

Fed weighing further easing, Bernanke says – MarketWatch

Bernanke discussed three approaches to further easing :

1. Fed to provide more “explicit guidance” to pledge that rates will stay low for “an extended period”.
2. Another round of asset purchases (or Quantitative Easing), or for Fed to “increase the average maturity of our holdings”.
3. Fed could reduce the 0.25% interest rate it pays to banks on their reserves – “thereby putting downward pressure on short-term rates more generally”.

Bernanke pushed Congress to increase the debt ceiling, saying failure to act would spark a “major crisis” and roil the global economy. He said that the US economy would certainly shed more jobs if the debt ceiling is not increased.

Treasury will not default

The US Treasury will not default – Kurt Brower, MarketWatch

Best cities to invest in rental homes

Best cities to invest in rental homes – Amy Hooks, MarketWatch

In Las Vegas, investors willing to to take a gamble could win big

Top 10 markets :

1. Las Vegas
2. Detroit
3. Warren, MI
4. Orlando, FL
5. Bakersfield, CA
6. Tampa-St.Petersburg, FL
7. Phoenix
8. Ft.Lauderdale, FL
9. Rochester, NY
10. Stockton, CA

US Debt Ceiling saga

IMF chief asks US to raise Borrowing Limit – HuffPost
The IMF’s new chief foresees “real nasty consequences” for the US and global economies if the US fails to raise its borrowing limit.
Christine Lagarde said in an interview broadcast Sunday that it would cause interest rates to rise and stock markets to fall. That would threaten an important IMF goal, which is preserving stability in the world economy.

US Default would be catastrophic but it won’t happen, Geithner says – FoxNews
Treasury Secretary Timothy Geithner said Sunday that a failure to raise the debt ceiling by Aug 2 would be “catastrophic” to the economy, though he and other top officials expressed confidence that lawmakers would ultimately vote to lift the $14.3 trillion cap in time.
He said interest rates could rise the closer the country gets to Aug 2 without a deal and that if the debt ceiling is not raised by then, credit rating agencies could follow through on threats to downgrade the US’ sterling credit rating.
“If that happens, you’re going to see catastrophic damage across the American economy and across the global economy,” Geithner said.
He said Congress has no choice but to act.

What if US defaults

US default would be ‘disastrous’ to struggling economy, analysts say – Boston Globe

“It’s the type of thing that could trigger another recession” – Nariman Behravesh, chief economist HIS Inc.
“There would be an almost crisis of confidence, throwing the financial markets into turmoil.”

If the worst-case scenario does unfold, and lawmakers fail to reach a debt agreement, the Treasury would have a number of options to keep paying bills, none of them attractive.
The Treasury has signaled it will do everything possible to maintain payments to investors holding trillions of dollars in US bonds, technically averting a default by using revenue from regular tax collections to pay off debt holders.
But since it legally couldn’t borrow money to pay other government bills, Treasury might have to reduce or temporarily halt expenditures on Social Security, Medisave, and other popular federal programs.

“Bond investors … would start asking ‘How long will it be before Treasury feels pressure to pay off Social Security and other programs and cut our bond payments?’”

“We’re moving into a new phase of American economic history when international markets will be increasingly scrutinizing our finances”

States face budget woes

Weak economy poses more budget problems for cash-hungry states ... – FoxNews

The 5 states facing the darkest economic outlook are :
(50)  New York     (49)  Vermont     (48)  Maine     (47)  California     (46)  Hawaii

The 5 states with the brightest outlook : Utah, South Dakota, Virginia, Wyoming, Idaho.

[4th edition] Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index based its economic outlook ranking on 15 policy variables : including tax burdens, legislated tax changes, regulatory burdens and labor policy.

The 5 best-performing states : Wyoming, Texas, Montana, North Dakota & New Mexico.
– what these have in common are low or no income taxes & strong population growth.

Cities with expected home price rises

5 cities where home prices will rise this year – Amy Hoak, MarketWatch
Despite recent price improvements nationally, only five markets in the country are expected to see home-price gains for the remainder of 2011:

Washington, New York, Orlando, Dallas & San Francisco.

What if debt limit isn’t raised

If the debt limit isn’t raised … what’s next? – Robert Schroeder, MarketWatch

What major players are saying about possible scenarios :

• The sky will fall
• Picking and choosing
• A constitutional question

Doomed to repeat 2008 ?

The next, worse financial crisis – Brett Arends, MarketWatch

10 reasons why we are doomed to repeat 2008

1. We are learning the wrong lessons from the last one
2. No one has been punished
3. The incentives remain crooked
4. The referees are corrupt
5. Stocks are skyrocketing again
6. The derivatives time bomb is bigger than ever – and ticking away
7. The ancient regime is in the saddle
8. Ben Bernanke doesn’t understand his job
9. We are levering up like crazy
10. The real economy remains in the tank

College not worth the cost

The College Scam – John Stossel, FoxNews

What do Michael Dell, Mark Zuckerberg, Bill Gates and Mark Cuban have in common?

They’re all college dropouts.

Richard Branson, Simon Cowell and Peter Jennings have in common?

They never went to college at all.

But today all kids are told: To succeed, you must go to college.

Risks to economy

The scariest risks to the economy – CNN Money

“A Europe debt default could cause financial crises as large as the 2008 one due to financial system interconnections,” – Bill Watkins, executive director of Center for Economic Research & Forecasting.

“Oil prices sustained above $125 a barrel for six months or longer would guarantee another recession in 2012” – James Smith, chief economist Parsec Financial Management.

Though economists do see major risk from a possible US default in the event that Congress does not raise the debt ceiling, they did not view that as being very likely.

Survey: Where the economy is headed

Economy torn two ways

For the economy, it’s a tug of war – Irwin Kellner, MarketWatch
Political paralysis means only rich can save economy

The business and financial outlook for the second half of 2011 and beyond will be determined by which of two important economic concepts prevails: the wealth effect or the income effect.

China banks to need bailout ?

China debt woes point to bank bailout - MarketWatch

Entrepreneurship makes America Great

Let’s remember that Entrepreneurship helps makes America Great – John Stossel, FoxNews

Tax-friendly states for Retirees

5 Tax-friendly states for Retirees 2011 – Mary Beth Franklin
          I = State Income Tax,      S = Sales Tax,      E = Estate Tax,      I = Inheritance Tax

1. Wyoming :        I 0%,      S 0%,      E No,      I No
2. Mississippi :    I 3-5%,   S 7%,      E No,      I No
3. Pennsylvania : I 3.07%, S 6%,      E Yes,      I Yes
4. Kentucky :         I 2-6%,   S 6%,      E No,      I Yes
5. Alabama :         I 2-5%,   S 4%,      E No,     I No