Friday December 18, 2009
Overall, the Consumer Price Index (CPI) was up .4% since last month. The increase is due to a 6.5% increase in gas prices. Investors are expecting a global economic recovery and driving up oil prices as a result.
Compared to last year, there is a hint of , as prices are up 1.8%. This is a result of increased costs in health care, which is 3.5% higher than last year, and in used cars, up 5.8%. However, grocery bills were down 2.9% from last year, while restaurant prices went up 2.1%, according to the Bureau of Labor Statistics (BLS). September, October and November were the first times in 40 years that food prices benefited from deflation.
(Source: BLS Consumer Price Index: November 2009)
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Wednesday December 16, 2009
A new Federal Reserve report shows that lending is down 15% from the nation's four biggest banks: Bank of America, JPMorgan Chase, Citigroup and Wells Fargo. Between April and October of this year, these banks cut their commercial and industrial lending by $100 billion, according to the most recent Treasury Department data. Loans to small businesses are down 4%, or $7 billion, during the same time period.
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Tuesday December 15, 2009
A chart on Paul Krugman's blog says it all. It shows how banks are sitting on $1.1 trillion in excess reserves that was pumped into the economy by the government. Instead of lending it out, the banks use it to write off $1 -2 trillion in toxic assets. These defaulted mortgages caused the Great Recession, and are the debris clogging up the bank lending pipeline.
President Obama met with banks to cover four topics:
- Increase lending, especially to small businesses.
- Help homeowners refinance mortgages to prevent more foreclosures.
- Review increased banking regulations.
- Limit bankers' compensation.
Obama said that bankers were like ball players with a bad season...they should not get the huge bonuses when they didn't play well. White House economic adviser Larry Summers said that it was banks' "irresponsible risk-taking in many cases that brought the economy to collapse."
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Monday December 14, 2009
The Dow reached 10,501 when Dubai's bankruptcy was averted by a $10 billion bailout from the United Arab Emirates, which is governed by its strongest oil-rich city-state, Abu Dhabi. Investors were relieved that the government stood behind loans made to Dubai World, a government-owned company. On November 25, the Dubai government said it would not guarantee the debt, sending world markets into panic.
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