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The public is presumably aware that virtually all western economies are drowning in sovereign debt -- a problem that grows worse as the clock ticks.  Nothing going on in Europe or the US (count Japan in there too, though they are not thought of as 'western') changes the dynamic of spiraling out-of-control debt and sluggish, if not collapsing, economies. States within the US have their own problems.  There is no way for California or Illinois to avoid bankruptcy and several other states are right behind them. But, in all of this, we have forgotten about our cities.  Almost without exception, American cities are headed down the road to bankruptcy.  Their problems are similar to the problems of the states -- public pension and health care promises that have never been properly funded.  We are already seeing policemen and teachers being laid off so that comfortable public employees can retire at twice the national average income or more.  Expect more of that un...

Higher education claims a higher and higher percentage of the nation's resources.  No longer the land of the underpaid, it is routine for administrators to make high six figure incomes and many university presidents make well over seven figures.  Sounds like Wall Street, only better.  The work hours typically include six months vacation every year.  Not a bad deal. But not good enough, apparently, as colleges and universities demand more and more with higher tuitions and higher expenditures from government at all levels. One of the more insidious parts of this disgraceful situation is the expansion of student loans by the Obama Administration.  The main thrust of this is to increase the tuition levels at all schools to take advantage of this new source of funding.  Knowing that students can borrow, schools have created internal departments that are designed to educate and encourage students to take on debt so that the schools can further boost their own tui...

General election is around the corner. External environment was not so promising, following the no ending of European debt crisis, world economic slowdown, and recent tension between China and Japan. I believe all of these would be some key factors being taking into consideration to formulate the Malaysia Budget 2013. Goodies? Bonus? Cash handout? Themed as " Prospering The Nation, Enhancing Well-Being of the Rakyat: A Promise Fulfilled ". Our prime minister, who is also Finance Minister, tabled the 2013 Budget at Dewan Rakyat yesterday. Over here, Finance Malaysia blog would only touches on some key points: Economic growth projected to expand between 4.5% - 5.5% Federal Government's revenue in 2013 is estimated to increase to RM208.6 billion Continuation of BR1M of RM500 to households earning not more than RM3,000 a month and also extended the aid to cover a payment of RM250 for single unmarried individuals aged 21 and above, earnings not more than RM2,000 a month RM 1...

There is an old joke about the doctor, lawyer and the economist, all three, stranded on a desert island with nothing to eat.  They stumble upon a tin can of vegetables.  How do you open the tin can?  The doctor proposes to give it aspirin, the lawyer says 'file a brief.'  The economist?  The economist says: "assume that we have a can opener." Economists have a well deserved reputation for assuming away difficulties.  Simon Johnson's article in today's NY Times is a good example.  Johnson correctly points to the US National debt as very serious problem that needs a solution and needs it now.  His article suggests that there is an easy solution.  In Johnson's own words: "And American politicians could find other ways to restore federal government revenue to where it was in the late 1990s while also bringing health care spending under control." Sure, just bring me that can opener.  How does one "bring health care under control."  Johns...

  In past weeks, the replacement refs in the NFL have been a popular topic of jokes and Facebook memes. Some fans think these refs are so bad that they don’t even want to watch football anymore because they are destroying the integrity and spirit of a good, old-fashioned game of football. Monday night’s Packers vs. Seahawks game was the epitome of all that is wrong with the replacement refs. Missed penalties, conflicting calls, and terrible spots have been seen throughout the last three weeks and especially in this last game. The last hail-mary play in that game has sparked so much controversy throughout the sports world; this might give the NFL the push they need to re-negotiate the terms of their deal with referees. For those of you who don’t know what has been going on with the NFL referee situation, let me recap. About a month ago, the NFL wanted to change how NFL referees received retirement benefits. They wanted to switch from a defined pension plan, which is a fixed, stable ...

Riots are now turning violent in Greece and Spain.  Police surrounding the parliament building in Madrid last night were seen on videos beating demonstrators.  The Merkel-Sarcozy-Hollande-Geithner-Bernanke-Draghi policy is bearing fruit.  Civil society is breaking down in Greece and Spain.  The NY Times has a lengthy, front-page story yesterday about formerly middle class Spaniards foraging for food from garbage trucks.  That this is becoming a common scene in Spain was the thrust of the article. This will only get worse.  Unemployment and starvation is the ultimate outcome of the modern welfare state and it is now on display in the Eurozone with more yet to come.  Spain is still dithering about whether to alter 'early retirements' under their social security schemes.  This would be funny, if it weren't tragic.  Who is going to fund those who are already retired?  One might ask a similar question in Greece.  Are American and German ...

Japan’s claim of Senkaku Island property right has brought itself an enormous wave of anti-Japanese protests in China. The Senkaku dispute not only brings about political conflicts and military tension, but also, most importantly economic downtown, as China is Japan’s top two-way trade partner since its two-way tradegrows to $266.4 billion dollar in 2008. Japanese automobiles, electronic products, animated cartoons and video games are all popular Chinese imports. Japanese economy has always been relying on Chinese markets and the number one victim of the Senkaku dispute would be Japanese exporters. Major Japanese exporters such as Honda, Toyota, Sharp, Sony, and Panasonic are all facing dramatic sales and revenues decrease, and huge decline in stock price. Sony and Panasonic are even considering industrial transition and selling its LCD business to the Chinese and Korean producers. Losing its biggest importing country, Japanese export industry devastates in long-term even though Japane...

Angela Merkel says the right things and does the wrong things.  As a conservative leader, she and her conservative sidekick Nicolas Sarcozy, led the Eurozone down the bailout track while loudly proclaiming that responsibility for foolish behavior would not be rewarded.  But rewards were soon forthcoming from Merkel and Sarcozy.  Merkel still strikes the pose of frugal leader while steamrolling Germany toward the largest bailout in world history. Merkel talks about saving the Euro.  The issues in the Eurozone have little or nothing to do with saving the Euro.  The Euro is doing fine.  What is not doing fine is the fiscal situation of the Euro member states.  They are all going bankrupt, including Germany.  What currency is in place is of little importance if you cannot pay your debts and the Eurozone cannot pay their debts.  What they have is a temporary reprieve and a lot of conversation.  The endgame in this is all too obvious.  Bu...

Quantative Easing is always a hot topic in the news.  How much do you know about the recent QE3 announced by the Federal Reserve?  This blog aims at discussing the operations of quantitative easing and the impacts of QE3 on various aspects. The Fed launched a new bond-buying program on September 13.  The image below by Wall Street Journal gives a very clear illustration on how the Fed expects to boost the economy by buying more mortgage-backed securities and Treasurys. What's Distinguishes QE3 from the previous QE1 and QE2? The biggest differentiation would be the "open-endedness" that the Fed has promised.  Under the QE3 program, the Fed would buy $40 billion mortgage-backed securities each month in an open-ended effort until there is a sustained improvement in the job market.  Therefore, on top of the $45 billion a month the Fed is already spending on Operation Twist through the rest of this year, the Fed is spending $85 billion per month to boost the economy....

We've all heard about the joy of giving, but what if the money that we are giving away is someone else's money?  Wow! What a thrill.  That's the attitude of the Charlottesville City Council as they parcel out taxpayer money with little or no thought.  After all, they reason, these are only small amounts of money.  There is, of course, no concern by the City Council that the money that they are giving away so blithely is not their money, but taxpayer money.  Here is the URL for this amazing story: http://www2.dailyprogress.com/news/2012/sep/22/last-minute-funding-vexes-council-ar-2226729/ The attitude expressed by City Council members in Charlottesville is typical of liberal attitudes everywhere towards taxpayer money.  Dole it out to your friends with reckless abandon.  Just multiply all the numbers in the article by 10 million and you have the US government, the government of California, Illinois, Greece, Spain, Italy, etc.  It is easy to be char...

Already a large player China, the world'd largest auto market, GM made another leap to secure their leading market share. Along with its joint venture partners SAIC Motors, GM spent $252.5 million to build the largest proving ground in the country. Essentially a large test track for new cars, the proving ground will make introducing and improving vehicles made for the Chinese market that much easier. Without having to ship cars to South Korea, the United States, or any other tracks, GM will save both time and money when it comes to the creation, inspection, and final sale of the car. GM China President Kevin Wale stated, "When we look forward, our volumes are going to increase significantly and to win in the market place you have to introduce more products and introduce them quicker and better than the competition". This investment will allow them to continue building on the leading 14% market share they held last year. This move clearly shows that GM wants to contro...

You would think that the US economy was booming and all was right in the world if you are a regular listener to the major TV and radio outlets in America.  Recently, I was in Eastern Europe and was pleasantly surprised to read in foreign newspapers the issues that Americans face in the upcoming election -- the economy, foreign policy, the deficit, etc.  Back home, these issues don't seem to be of any interest to the media.  Such issues are of interest to voters, but they rarely see them discussed on NBC, ABC, public TV and the like. The big issues, according to US media, is whether or not a presidential candidate is willing to release their tax returns from decades ago or sidebar comments the candidates may have made before they were candidates that have absolutely nothing to do with any of the important issues.  The media is in the "gotcha" business.  It isn't just that they favor one party or another, it is more that the media doesn't really seem interested in...

Has any of your friends got a new iphone 5? Does s/he use maps on the cell phones a lot? If so, you must be hearing them complaining all days about their new babies, more specifically, about the map app. It seems that Apple's decision to replace Google Maps by its own product has now come to such an embarassment so quickly. The two Silicon Valley giants were once good alliances until Apple realized Google's android phone as a dangerous rival for iphone. From then, Apple started to cut down or even cut off their dependence on Google. Apple tried to find the alternatives for each popular Google apps in their iTunes store. They no longer see each other as a partner. But now the feedbacks from thousands of consumers proved Apple's failure. It's just too anxious to escape from Google's control. Almost all new iphone users find the new map system as a joke because mislabeled landmarks, missing roads and streets and misplacement of lots of famous constructions. In a word, ...

Jerry Brown's $ 28 billionbudget gap in California turns out to be a mirage.  Brown considered the $ 28 billion number a crisis for California, when he strode into the Governor's mansion.  A blue ribbon committee founded by Democrat and Obama advisor Paul Volcker has studied the budget gap in California and come up with a different number, or should I say, a range.  The outcome of that study is discussed in today's New York Times in an article by Mary Williams Walsh.  The actual California budget gap, according to the Volcker committee is somewhere between $ 167 billion and $ 335 billion.  Ooops! Even this is a dramatic understatement of California's plight since the combined unfunded liability of CALPERS, CALSTERS, and the nine largest county pension funds in California is well in excess of $ 1 Trillion, which is a multiple of the assumption being used by California's state government in assessing the budget gap.  So, the committee is trying to be Californ...

    The fires of a long-standing territorial dispute between Japan and China have been rekindling as multiple anti-Japanese protests have taken place recently in China.  The territory under question is a few small uninhabited islands in the East China Sea.  China claims long-standing historical ties to the territory.  However, Japan held jurisdiction over the islands starting in 1895 and lasted until 1945 when the United States took occupation of the islands.  The United States gave the islands back to Japan in 1972.  China has never been accepting of this Japanese control and still claims the islands.  Just this past month, the Japanese government decided to purchase the islands from the private Japanese citizens who owned them.  This purchase has been the direct cause of the recent anti-Japanese protests in China.      As of the writing of this article, the protests have begun to die down.  Protesters were seen...

Before jumping into the bandwagon of private retirement schemes (PRS), we should understand the PRS framework first. What is the structure behind the scene? Does our invested money in safe hands? Who are the regulators? These were the few typical questions we should find out. No worries, all of these will be answered here... (yeah, give us a "Like" ) Manufacturer? PRS are offered by approved PRS Providers . Each PRS will include a range of retirement funds from which individuals may choose to invest in, based on their own retirement needs, goals and risk appetite. Book-keeper? The PPA functions as a record keeping and resource centre for data on all transactions performed by contributors. It will facilitate transactions and promote efficient administration. The PPA will also act as a resource centre for data and research relating to the PRS industry in Malaysia. Safe-keeper? The assets of each PRS will be segregated from the PRS provider and held by an independent Scheme Tru...

Wherever you look, the American financial service sector is retreating.  The decline of US pre-eminence in world finance began with the regulatory overkill of Sarbanes-Oxley legislation in 2002, but the real death blow was the Dodd-Frank Act of 2009.  The future will be in Hong Kong, Shanghai, Singapore.  London may survive this, but that remains to be seen, but New York is definitely fading.  Basically, American financial strength is being legislated into weakness. You wonder why?  Have stocks done poorly.  On April 24th,1995, a scant 17 years ago, the Dow Jones Industrial Average closed at 4,303.  Yesterday, the DJIA closed at 13,577, about 3 1/2 times as high as the 1995 level.  (This result includes the 2008 financial crash).  Is that bad?  Has the average investor been screwed?  Is this why pension funds are in trouble?  The market hasn't delivered enough?  How much is enough? Why this rush to destroy American financi...

Like almost every public pension plan in America, the Chicago teachers' public pension plan is not going to survive.  Mary Williams Walsh's article in today's New York Times lays out the numbers.  With just over $ 10 billion in assets the fund is paying out more than $ 1 billion more than they take in every year.  The end is clear. Why is this the case?  Because it is very easy for politicians to make promises of things that they will do in the future, while providing benefits right now.  Social Security operates on this premise.  Give the benefits now, pay for them later.  But, of course, they never pay later.  That part is simply kicked down the road. We have already witnessed pension funds cutting the benefit payments for folks that have already retired.  We are about to see a wave of such actions.  The Chicago teachers fund is in much better shape than the Illinois state employee fund.  So, guess where that one is headed. The cr...

The New PS3 (Photo Credit: Sony) After six years on the market and one redesign, Sony has once again decided to release a new version of its Playstation 3 video game console, making the latest model half the size of the original behemoth. Sony has also decided to up the configurations to 250GB and 500GB models while also aggressively pricing the configurations at $269 and $299 in North America, respectively. This move comes in anticipation of Nintendo's Wii U console, which will have a price point of $300-$350. Will this redesign save Sony's lagging entertainment division? While sales of the PS3 remain steady, they are nowhere near the level of its predecessor, the Playstation 2. The slimming down of the PS3 will be a good thing for Sony and for consumers in general; however, it displays a glaring problem in Sony's corporate business model at large. For several years, the PS3 was sold at a loss with the hopes of eventually trimming it down to turn a profit. Only "event...

Liz Alderman's article in the New York Times today, "Euro or No, Economics of Everyday Greek Life is Eroding" provides a glimpse into the future of the western economies.  Economic and civil order has broken down in Greece.  The rising popularity of the neo-nazi party (now at 18 percent of the electorate) is gathering in the fruits of the collapse of the Greek welfare state.  In time, democratic government will collapse in Greece to be replaced by one of the extremes.  The so-called centrist governments cannot deliver and will not survive. Greeks expect the promises of past governments to be honored.  That is an expectation that has no hope of reality.  Their frustrations are spilling over into everyday economic and political life.  The beginnings of a similar breakdown are evident in Spain, Portugal and Italy.  No government can survive by imposing a program of austerity.  Their citizenry still believes the lies that they have been told for ...

Borrowing for investment may be a good idea.  Debt is not a bad thing.  It can be a good thing.  It depends upon what you are borrowing for. Borrowing to finance a new business or to expand an old one is a good idea.  Borrowing for investment purposes is generally a good idea. Borrowing is generally a bad idea if you simply borrow to finance consumption that you cannot otherwise afford.  Eventually 'consumption borrowing' will lead to disaster since nothing is taking place that can pay off the debt that is being created.  This is the type of borrowing that is taking place in western economies today. As much as politicians talk about 'investing in our future,' what they invariably mean in practice is financing consumption for a favored part of the electorate.  Rarely if ever is modern government spending intended to finance investment of any kind.  Paying more money to your favorite public employee, including teachers, is not a form of investment -...

Are you ready for your retirement life? If not, what and how are you going to do before it is too late? These are a few critical questions Malaysians should ask ourselves without further procrastination.  With increasing life expectancy and rising living standards, many Malaysians find that their savings are inadequate to meet their retirement needs. Private Retirement Schemes (PRS) form an integral feature of the private pension industry with he objective of improving living standards for Malaysians at retirement through additional savings of funds.  As long-term investment vehicles, PRS are designed to help enhance adequacy and expand coverage of retirement benefits to all segments of the population. It complements Malaysia's mandatory retirement savings scheme - EPF. Voluntary? Yes. It's totally up to YOU to contribute voluntary anytime. Who can participate? Anyone, be it individuals (retail investors, self-employed and employees) or employers. Offering private pensio...

With the new Premier League, La Liga, Bundesliga and Serie A campaigns several weeks into their respective seasons, new trends for predicting the eventual winners of the world's biggest leagues are  becoming as popular as fantasy football tables. And all these trends point to one thing: spending brings silverware home. It took close to a $1 billion investment over the last couple years by Sheikh Mansour to bring home the Premier League trophy to Manchester City last season, and since then, clubs are retaliating. Chelsea has spent over $100 million on just two  players this pre-season, and that seems like a bargain in comparison to the skill Eden Hazard brings to the pitch. All over the world, the clubs with the richest owners are spending, and spending big. Which is why Financial Fair Play cannot come soon enough.  Already, we are seeing some effects of the rules that require teams to at least break even on spending, with the Europa League champions Atletico Madrid and ov...

A consortium of private equity firms including Bain Capital is said to be in preliminary talks to take-private struggling office supplies retailer, Staples. Though an official announcement has not been made, an offer could be announced by the end of this year. What does this mean for Mitt Romney? As the Obama campaign continues to portray Mitt Romney's role at Bain Capital in a negative light, Mitt Romney has always retaliated with a list of companies he helped become successful. In almost all of his speeches regarding the recovery of the economy, he mentions how Bain Capital invested in Staples, created jobs, and caused it to become what it is today. Based on recent news which has come out about Staples, it doesn't make sense for Mitt Romney to keep touting Staples as one of his major successes as it continues on a downward spiral. Just last month, Staples cut its profit and sales expectations citing a weak retail market. Staples shares have fallen 25% in the last six months, ...

Ben Bernanke is printing money once more.  Not content with the current historic expansion in the money supply, Bernanke is headed off to new records.  Somehow pumping more liquidity in the system is going to offset the negatives that face employers.  How? If paying an employee $ 35,000 per year means a cost of $ 70,000 per year because of health care mandates, employee payroll costs and litigation risks, how does additional liquidity matter?  With Dodd-Frank and the regulators forcing the banks out of the lending business for middle Americans, what difference does additional liquidity and lower mortgage rates make?  What is Bernanke thinking? Bernanke's policies are not without cost, though they seem clearly without benefit.  The cost will come when inflation rears its ugly head.  Bernanke assumes that can't happen unless the economy is near full employment.  He's wrong.  We can have inflation and unemployment and they can both grow at the s...

         According to the Office for National Statistics, the number of unemployment fell by 7,000 to 2.59 million in July and London contributes most to the number. We think of the Olympics as an opportunity for host country to build the country image, attract foreign visitors and boost the local economy. However, in a long-term perspective, the Olympic game brings limited economic benefits to the host country and the degree of its impact varies widely between countries.      Countries hosting the Olympics spend millions of dollars building new sports facilities and infrastructures, which, in short-term, indeed brings increasing number of tourists. They visit the newly built stadium, pools and sports facilities. However, as the game ends, people move on to the next Olympic game. Unlike other infrastructures, these sports facilities and constructions will not be rebuilt into some productive and economic effective buildings that can be u...