A deal to raise the federal debt ceiling is in the works. If it goes through, many commentators will declare that disaster was avoided. But they will be wrong.
For the deal itself, given the available information, is a disaster, and not just for President Obama and his party. It will damage an already depressed economy; it will probably make America’s long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status.
Start with the economics. We currently have a deeply depressed economy. We will almost certainly continue to have a depressed economy all through next year. And we will probably have a depressed economy through 2013 as well, if not beyond.
The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further. Pay no attention to those who invoke the confidence fairy, claiming that tough action on the budget will reassure businesses and consumers, leading them to spend more. It doesn’t work that way, a fact confirmed by many studies of the historical record.
Indeed, slashing spending while the economy is depressed won’t even help the budget situation much, and might well make it worse. On one side, interest rates on federal borrowing are currently very low, so spending cuts now will do little to reduce future interest costs. On the other side, making the economy weaker now will also hurt its long-run prospects, which will in turn reduce future revenue. So those demanding spending cuts now are like medieval doctors who treated the sick by bleeding them, and thereby made them even sicker.
And then there are the reported terms of the deal, which amount to an abject surrender on the part of the president. First, there will be big spending cuts, with no increase in revenue. Then a panel will make recommendations for further deficit reduction — and if these recommendations aren’t accepted, there will be more spending cuts.
Republicans will supposedly have an incentive to make concessions the next time around, because defense spending will be among the areas cut. But the G.O.P. has just demonstrated its willingness to risk financial collapse unless it gets everything its most extreme members want. Why expect it to be more reasonable in the next round?
In fact, Republicans will surely be emboldened by the way Mr. Obama keeps folding in the face of their threats. He surrendered last December, extending all the Bush tax cuts; he surrendered in the spring when they threatened to shut down the government; and he has now surrendered on a grand scale to raw extortion over the debt ceiling. Maybe it’s just me, but I see a pattern here.
Did the president have any alternative this time around? Yes.
First of all, he could and should have demanded an increase in the debt ceiling back in December. When asked why he didn’t, he replied that he was sure that Republicans would act responsibly. Great call.
And even now, the Obama administration could have resorted to legal maneuvering to sidestep the debt ceiling, using any of several options. In ordinary circumstances, this might have been an extreme step. But faced with the reality of what is happening, namely raw extortion on the part of a party that, after all, only controls one house of Congress, it would have been totally justifiable.
At the very least, Mr. Obama could have used the possibility of a legal end run to strengthen his bargaining position. Instead, however, he ruled all such options out from the beginning.
But wouldn’t taking a tough stance have worried markets? Probably not. In fact, if I were an investor I would be reassured, not dismayed, by a demonstration that the president is willing and able to stand up to blackmail on the part of right-wing extremists. Instead, he has chosen to demonstrate the opposite.
Make no mistake about it, what we’re witnessing here is a catastrophe on multiple levels.
It is, of course, a political catastrophe for Democrats, who just a few weeks ago seemed to have Republicans on the run over their plan to dismantle Medicare; now Mr. Obama has thrown all that away. And the damage isn’t over: there will be more choke points where Republicans can threaten to create a crisis unless the president surrenders, and they can now act with the confident expectation that he will.
In the long run, however, Democrats won’t be the only losers. What Republicans have just gotten away with calls our whole system of government into question. After all, how can American democracy work if whichever party is most prepared to be ruthless, to threaten the nation’s economic security, gets to dictate policy? And the answer is, maybe it can’t.
Tuesday, August 9, 2011
Asian Shares Plummet as Fear Spreads
HONG KONG — The turmoil in the world’s financial markets showed no sign of abating on Tuesday, with relentless selling once again sending stock markets in Asia sharply lower as investors dumped equities in favor of traditional havens like gold and U.S. Treasury securities.
Some of the steepest decreases were seen in South Korea and Hong Kong, where the main market indexes slumped 5.2 percent and 6 percent, respectively, by midafternoon. The Nikkei 225 index in Japan sagged 2.7 percent, Australia and Taiwan retreated about 0.5 percent, and the main market gauge in Indonesia gave up 3.1 percent.
Once again, investors shrugged off the fact that Asian economies — with the exception of Japan — remain in fundamentally good shape, with growth rates far above those in the West and debt levels well below those in many developed nations.
“When you get declines of this sort, it is technical factors and emotion that drive markets — the fundamentals are largely irrelevant,” said Stephen Davies, chief executive of Javelin Wealth Management in Singapore, referring to Wall Street’s plunge on Monday. The stock market there saw its worst day since December 2008, in the midst of the global financial crisis.
The Dow Jones industrial average fell 5.6 percent, and the Standard & Poor’s 500-stock index dropped 6.7 percent, accelerating a sell-off that began a couple of weeks ago.
Futures on the S.&P. 500 were down 1.7 percent during the Asian day on Tuesday, signaling that U.S. markets could sag again Tuesday.
Mr. Davies of Javelin Wealth Management characterized sentiment in Asia as “weary resignation” rather than outright panic, but he said that the markets in general had been caught in a “negative feedback loop” — where declining markets fuel worries about the economic fallout of the turmoil, which in turn undermines sentiment further.
The fear is that the upheaval could ultimately weaken the wider economy by constraining the ability and willingness of banks to extend credit to businesses and making it harder for companies to raise money from the capital markets.
On Tuesday in the United States, a few obscure but important parts of the credit market also showed signs of stress. For example, the market for commercial paper, short-term loans that companies use to finance themselves, became less favorable. This was not nearly as bad as during the financial crisis, but people will be keeping an eye on it to see if conditions deteriorate.
Friday’s decision by Standard & Poor’s to downgrade the United States’ credit rating — once deemed bulletproof — deepened the uncertainty but was not in itself the only cause of the current sell-off, many analysts and market strategists believe.
Rather, the downgrade, combined with the widening of the debt worries in Europe, highlighted the fact that governments in many parts of the developed world are having to rein in spending at a time when private-sector spending is still anemic.
“The fear is that when you remove that prop, the chances of recession go up,” Mr. Davies said. “Chances of a double-dip recession have increased markedly in the last few weeks.”
Analysts at Royal Bank of Scotland echoed that assessment, noting in a research report that although they did not believe that a renewed recession was the most likely outcome, the odds of a double dip in the United States had increased “given the risk of negative psychology feeding on itself, and with the economy already looking more fragile.”
These concerns have helped send equity markets around the world sharply lower in recent weeks, while pushing “safe haven” assets like gold, the yen and the Swiss franc to record levels.
The S.& P. 500 is now down 18 percent from its April 29 peak and is nearing official bear market territory, defined as a fall of 20 percent.
Gold, by contrast, has soared from $1,485 per ounce at the start of July, vaulting the $1,700 mark on Monday and rocketing to just under $1,770 at one point on Tuesday.
Officials in Asia tried to soothe markets on Tuesday by stressing that they were closely monitoring the situation.
“I will pay close attention to market movements with a sense of urgency today,” Japan’s finance minister, Yoshihiko Noda, was quoted by Reuters as saying.
Australia’s prime minister, Julia Gillard, told reporters, “We will continue to see economic growth,” according to Reuters.
“We should also get a degree of confidence from the strong fundamentals of our economy,” she said. Australia has been booming recently thanks to the strength of the Chinese economy, which imports massive amounts of iron ore, copper and other commodities to fuel its growth.
Graham Bowley contributed reporting from New York.
Some of the steepest decreases were seen in South Korea and Hong Kong, where the main market indexes slumped 5.2 percent and 6 percent, respectively, by midafternoon. The Nikkei 225 index in Japan sagged 2.7 percent, Australia and Taiwan retreated about 0.5 percent, and the main market gauge in Indonesia gave up 3.1 percent.
Once again, investors shrugged off the fact that Asian economies — with the exception of Japan — remain in fundamentally good shape, with growth rates far above those in the West and debt levels well below those in many developed nations.
“When you get declines of this sort, it is technical factors and emotion that drive markets — the fundamentals are largely irrelevant,” said Stephen Davies, chief executive of Javelin Wealth Management in Singapore, referring to Wall Street’s plunge on Monday. The stock market there saw its worst day since December 2008, in the midst of the global financial crisis.
The Dow Jones industrial average fell 5.6 percent, and the Standard & Poor’s 500-stock index dropped 6.7 percent, accelerating a sell-off that began a couple of weeks ago.
Futures on the S.&P. 500 were down 1.7 percent during the Asian day on Tuesday, signaling that U.S. markets could sag again Tuesday.
Mr. Davies of Javelin Wealth Management characterized sentiment in Asia as “weary resignation” rather than outright panic, but he said that the markets in general had been caught in a “negative feedback loop” — where declining markets fuel worries about the economic fallout of the turmoil, which in turn undermines sentiment further.
The fear is that the upheaval could ultimately weaken the wider economy by constraining the ability and willingness of banks to extend credit to businesses and making it harder for companies to raise money from the capital markets.
On Tuesday in the United States, a few obscure but important parts of the credit market also showed signs of stress. For example, the market for commercial paper, short-term loans that companies use to finance themselves, became less favorable. This was not nearly as bad as during the financial crisis, but people will be keeping an eye on it to see if conditions deteriorate.
Friday’s decision by Standard & Poor’s to downgrade the United States’ credit rating — once deemed bulletproof — deepened the uncertainty but was not in itself the only cause of the current sell-off, many analysts and market strategists believe.
Rather, the downgrade, combined with the widening of the debt worries in Europe, highlighted the fact that governments in many parts of the developed world are having to rein in spending at a time when private-sector spending is still anemic.
“The fear is that when you remove that prop, the chances of recession go up,” Mr. Davies said. “Chances of a double-dip recession have increased markedly in the last few weeks.”
Analysts at Royal Bank of Scotland echoed that assessment, noting in a research report that although they did not believe that a renewed recession was the most likely outcome, the odds of a double dip in the United States had increased “given the risk of negative psychology feeding on itself, and with the economy already looking more fragile.”
These concerns have helped send equity markets around the world sharply lower in recent weeks, while pushing “safe haven” assets like gold, the yen and the Swiss franc to record levels.
The S.& P. 500 is now down 18 percent from its April 29 peak and is nearing official bear market territory, defined as a fall of 20 percent.
Gold, by contrast, has soared from $1,485 per ounce at the start of July, vaulting the $1,700 mark on Monday and rocketing to just under $1,770 at one point on Tuesday.
Officials in Asia tried to soothe markets on Tuesday by stressing that they were closely monitoring the situation.
“I will pay close attention to market movements with a sense of urgency today,” Japan’s finance minister, Yoshihiko Noda, was quoted by Reuters as saying.
Australia’s prime minister, Julia Gillard, told reporters, “We will continue to see economic growth,” according to Reuters.
“We should also get a degree of confidence from the strong fundamentals of our economy,” she said. Australia has been booming recently thanks to the strength of the Chinese economy, which imports massive amounts of iron ore, copper and other commodities to fuel its growth.
Graham Bowley contributed reporting from New York.
Monday, August 1, 2011
China: How to Steal $3 Billion
In no way, shape or form am I advocating stealing $3 billion from anyone. But if you were so inclined, apparently all you have to do work on the railroad.
According to CCTV, the state-owned television broadcaster in China, Zhang Shuguang, the former deputy chief engineer at the Ministry of Railways, is accused of having deposits abroad of $2.8 billion, reports Tom Lasseter from McClatchy Newspapers. Zhang’s former boss, Liu Zhijun, the Railways minister, is accused of walking off with $155 million.
Both officials were suspended in February on graft charges. The figures had been circulating previously on China’s rumor mill, but the report by CCTV appeared to be an official confirmation, writes Malcolm Moore of The Telegraph. At least five former senior officials at the Railways ministry are now under investigation for corruption.
According to CCTV, the state-owned television broadcaster in China, Zhang Shuguang, the former deputy chief engineer at the Ministry of Railways, is accused of having deposits abroad of $2.8 billion, reports Tom Lasseter from McClatchy Newspapers. Zhang’s former boss, Liu Zhijun, the Railways minister, is accused of walking off with $155 million.
Both officials were suspended in February on graft charges. The figures had been circulating previously on China’s rumor mill, but the report by CCTV appeared to be an official confirmation, writes Malcolm Moore of The Telegraph. At least five former senior officials at the Railways ministry are now under investigation for corruption.
Zhang is regarded as the “father of China’s high-speed railways,” according to Asia Times. He supported Liu’s plans for “leapfrog development” by building a $300 billion high-speed rail network covering nearly 10,000 miles by 2015.
Zhang reportedly has his $2.8 billion stashed away in Swiss and US bank accounts, and owns three luxury homes in Los Angeles, despite his status as a prefecture-level official, with a monthly salary of just $1,240 (8,000 yuan). His wife and daughter live in the U.S.
Last weekend, two high speed trains collided off a bridge in Zhejiang province, killing 40 and injuring nearly 200.
Chinese Premier Wen Jiabao vowed to punish any corrupt person found responsible for the crash, wrote Gillian Wong from AP. “If corruption was found behind this, we must handle it according to law and will not be soft. Only in this way can we be fair to those who have died,” Wen said.
China’s Dollar Problem
China is the biggest holder of US debt outside of US fixed income investors. It’s been diversifying away from buying US Treasurys all year, and instead has been buying gold and other developing market investment grade bonds. In fact, China demand for euro debt is one of the reasons why the euro — despite the budget problems in Greece and Portugal — has managed to hold steady against the dollar.
In this regard, China’s dollar problem has been good for the euro. Yu Yongding, a former adviser to the People’s Bank of China, has called on the government to reduce its demand of US debt and to buy bonds from other countries instead. China cannot really short US bonds on any meaningful level, because if it induced a sell-off of US bonds, it would be shorting its own portfolio.
“China will probably seek to calm markets rather than risk startling them with a policy change,” said Mark Williams, an economist at Capital Economics in a research note.
Chinese officials said buying euro zone debt was its best alternative, but there is no doubt that wherever the dollar goes from here, China will continue to buy a lot of Treasuries.
President Barack Obama announced Sunday that Congress finally agreed to raise the $14.26 trillion debt ceiling by $2.4 trillion in a best case scenario, and to cut an initial $12.4 trillion from federal government over the next 10 years. But the agreement is still subject to more voting. There are still some unknowns about the debt ceiling. At least $500 million is subject to more voting.
Once the market fully digests the debt deal (if Congress ever puts it to bed), then the dollar will make its move. If the market views the deal as long term positive, the dollar will stabilize or gain against the euro. If the market views the deal as long-term weak, then the dollar will continue its downward trend against all currencies and commodities, which is problematic for China.
The weak dollar means higher commodity prices, and China is the leading importer of raw materials. China’s appetite for iron ore, soybeans and crude oil lends support to those higher prices, as well. As a result of this combination — weak dollar/China demand — China ends up importing its own inflation problems.
China’s consumer price index hit a three-year high of 6.4% in June. Expectations are that July could be even higher. Zhu Baoliang, chief economist at the State Information Center, a top government think tank, told China Daily on Monday that the country’s core inflation for July would be similar to June.
“Once the alarm of debt default is removed, China will not suffer an immediate effect. Instead, the effect…will eventually be seen in the long term,” Zhu said, adding that cuts over the next 10 years wouldn’t be enough to lower US debt to GDP going forward.
Under Standard & Poor’s baseline macroeconomic scenario, net general government debt will reach 84% of GDP in two years, based on 3% GDP growth over the same period and the end of the Bush tax cuts in 2012. The high debt-to-GDP percentage indicates what Standard & Poor’s credit analysts called “a relatively weak government debt trajectory compared with those of the US’s closest ‘AAA’ rated peers – France, Germany, the U.K., and Canada.”
Lu Zhengwei, chief economist with Industrial Bank Co Ltd, told China Daily that a third round of quantitative easing could be in the works if the economy slows further in the second half. The second quarter growth was barely over 1%. Another round of quantitative easing, whatever it may be called, would cause the dollar to weaken as investors turn to hard assets like commodities to hedge.
“If the unemployment rate continues to rise, it will further damage investor confidence and force them to move away from US Treasury securities, leaving the US government no choice but to print money and depreciate its currency,” Lu told China Daily.
China maybe be down on US debt, but its purchases of US Treasurys have risen steadily for the last five years, going from $527 billion in 2005 to $1.6 trillion in 2010. This year, China has made $1.2 trillion in US government bond purchases as of May 31, according to the Federal Reserve Board. That’s around $250 billion worth of US Treasurys purchased by China each month. At that pace, China will likely purchase more government debt in 2011 than it did in 2010.
China investment bank, China International Capital Corp, said in a report on Monday that the US economy remains a cause for concern even with the debt debate finally “over”.
China Daily got its hands on the report and quoted an analyst who wrote that “The debt crisis may have a negative impact on the fiscal spending of the US government, which may drag down the US economy for the rest of the year,” writes Hou Zhenhai of China International Capital. In that case, QE3 is a possibility. In the US, the market is not expecting another round of easing. But moods on Wall Street can change fast.
Come and get it...
“The dollar and the euro are fighting in an ugly contest,” said Martin Schulz, managing director of international equity at PNC Capital in Cleveland. “The Chinese government, in fact, is being forced to go through a process of ‘worsification’. There’s not a lot of quality out there in the developed world,” he said.In this regard, China’s dollar problem has been good for the euro. Yu Yongding, a former adviser to the People’s Bank of China, has called on the government to reduce its demand of US debt and to buy bonds from other countries instead. China cannot really short US bonds on any meaningful level, because if it induced a sell-off of US bonds, it would be shorting its own portfolio.
“China will probably seek to calm markets rather than risk startling them with a policy change,” said Mark Williams, an economist at Capital Economics in a research note.
Chinese officials said buying euro zone debt was its best alternative, but there is no doubt that wherever the dollar goes from here, China will continue to buy a lot of Treasuries.
President Barack Obama announced Sunday that Congress finally agreed to raise the $14.26 trillion debt ceiling by $2.4 trillion in a best case scenario, and to cut an initial $12.4 trillion from federal government over the next 10 years. But the agreement is still subject to more voting. There are still some unknowns about the debt ceiling. At least $500 million is subject to more voting.
Once the market fully digests the debt deal (if Congress ever puts it to bed), then the dollar will make its move. If the market views the deal as long term positive, the dollar will stabilize or gain against the euro. If the market views the deal as long-term weak, then the dollar will continue its downward trend against all currencies and commodities, which is problematic for China.
The weak dollar means higher commodity prices, and China is the leading importer of raw materials. China’s appetite for iron ore, soybeans and crude oil lends support to those higher prices, as well. As a result of this combination — weak dollar/China demand — China ends up importing its own inflation problems.
China’s consumer price index hit a three-year high of 6.4% in June. Expectations are that July could be even higher. Zhu Baoliang, chief economist at the State Information Center, a top government think tank, told China Daily on Monday that the country’s core inflation for July would be similar to June.
“Once the alarm of debt default is removed, China will not suffer an immediate effect. Instead, the effect…will eventually be seen in the long term,” Zhu said, adding that cuts over the next 10 years wouldn’t be enough to lower US debt to GDP going forward.
Under Standard & Poor’s baseline macroeconomic scenario, net general government debt will reach 84% of GDP in two years, based on 3% GDP growth over the same period and the end of the Bush tax cuts in 2012. The high debt-to-GDP percentage indicates what Standard & Poor’s credit analysts called “a relatively weak government debt trajectory compared with those of the US’s closest ‘AAA’ rated peers – France, Germany, the U.K., and Canada.”
Lu Zhengwei, chief economist with Industrial Bank Co Ltd, told China Daily that a third round of quantitative easing could be in the works if the economy slows further in the second half. The second quarter growth was barely over 1%. Another round of quantitative easing, whatever it may be called, would cause the dollar to weaken as investors turn to hard assets like commodities to hedge.
“If the unemployment rate continues to rise, it will further damage investor confidence and force them to move away from US Treasury securities, leaving the US government no choice but to print money and depreciate its currency,” Lu told China Daily.
China maybe be down on US debt, but its purchases of US Treasurys have risen steadily for the last five years, going from $527 billion in 2005 to $1.6 trillion in 2010. This year, China has made $1.2 trillion in US government bond purchases as of May 31, according to the Federal Reserve Board. That’s around $250 billion worth of US Treasurys purchased by China each month. At that pace, China will likely purchase more government debt in 2011 than it did in 2010.
China investment bank, China International Capital Corp, said in a report on Monday that the US economy remains a cause for concern even with the debt debate finally “over”.
China Daily got its hands on the report and quoted an analyst who wrote that “The debt crisis may have a negative impact on the fiscal spending of the US government, which may drag down the US economy for the rest of the year,” writes Hou Zhenhai of China International Capital. In that case, QE3 is a possibility. In the US, the market is not expecting another round of easing. But moods on Wall Street can change fast.
Does this weekend’s agreement provide any relief to China’s dollar problem? Not really. Under the plan, a bipartisan congressional panel would seek $2.4 trillion in spending cuts or tax increases over the next 10 years. The only immediate cut is around $917 billion. If the remainder of the package fails because Congress or the president rejects its spending cut recommendations, then the rest of the spending cuts would be implemented automatically, the USA Today explained: “It’s called a ‘trigger’ and it has been used in the past, but with mixed results at best. In the 1980s and ’90s, triggers passed by Congress under Presidents Reagan, George H.W. Bush and Clinton eventually were evaded. Veterans of past budget deals say the same thing could happen this time.”
Hong Kong fund manager Agnes Deng told Forbes last week that should the debt problem lead to a credit rating downgrade by Standard & Poor’s – which called for $4 trillion in cuts on July 18– Chinese equity markets will suffer.
“A downgrade will hit this market hard,” she said in a phone interview from her office in Hong Kong. “China’s market is perceived as a higher beta market and when investors become risk averse, they don’t want to hold high beta assets so there will be a lot of selling in Hong Kong and Shanghai,” she said.
The World’s Highest-Paid Soccer Players
David Beckham arrived to play for the Los Angeles Galaxy four years ago amid much hoopla of turning the U.S. into a soccer-loving country. His American summer debut was a media circus with stars like Tom Cruise, Eva Longoria, Mary-Kate Olsen and Arnold Schwarzenegger turning out to catch a glimpse of Becks on the field.
Alas the soccer explosion in the U.S. didn’t happen. Major League Soccer has had success, but it continues to appeal to a niche audience with games averaging 249,000 viewers on ESPN2 last season. The Galaxy failed to make the playoffs during Beckham’s first two seasons and he scored only nine goals in his first four years with the Galaxy as injuries slowed his game.
Yet the move to the U.S. was a huge success financially for Beckham. Despite being in the twilight of his career (he turns 36 next month), Beckham continues to be the highest-paid soccer player in the world with total earnings of $40 million last year (click below for the full list).
Beckham added Electronic Arts and Diet Pepsi to his endorsement stable over the past year (he also inked a short-term agreement with Yahoo). His Adidas contract is the biggest in the sport thanks to royalties from soccer apparel and cleats as well as lifestyle lines like ObyO. He also has a cologne deal with Coty and pitches Go3’s Omega-3 line of products.
The Beckham marketing juggernaut shows no sign of slowing down. Later this year Beckham plans to launch his own underwear label and line of grooming products. He will also be a sought after partner for companies looking to advertise in the run-up to the 2012 London Olympic Games, where he’ll serve as an unofficial “host” for his hometown Games (Beckham was a bid ambassador when London won the rights to the Games).
Alas the soccer explosion in the U.S. didn’t happen. Major League Soccer has had success, but it continues to appeal to a niche audience with games averaging 249,000 viewers on ESPN2 last season. The Galaxy failed to make the playoffs during Beckham’s first two seasons and he scored only nine goals in his first four years with the Galaxy as injuries slowed his game.
Yet the move to the U.S. was a huge success financially for Beckham. Despite being in the twilight of his career (he turns 36 next month), Beckham continues to be the highest-paid soccer player in the world with total earnings of $40 million last year (click below for the full list).
In Pictures: Soccer’s Highest-Paid Players
“Beckham is more analogous to a Hollywood star than a footballer,” says Michael Stirling, CEO of Global Sponsors, which manages sponsorship properties worldwide. His appeal as a player has diminished as he enters the final season of his Galaxy contract (he intends to keep playing after this year), but he is a global celebrity that everyone knows.Beckham added Electronic Arts and Diet Pepsi to his endorsement stable over the past year (he also inked a short-term agreement with Yahoo). His Adidas contract is the biggest in the sport thanks to royalties from soccer apparel and cleats as well as lifestyle lines like ObyO. He also has a cologne deal with Coty and pitches Go3’s Omega-3 line of products.
The Beckham marketing juggernaut shows no sign of slowing down. Later this year Beckham plans to launch his own underwear label and line of grooming products. He will also be a sought after partner for companies looking to advertise in the run-up to the 2012 London Olympic Games, where he’ll serve as an unofficial “host” for his hometown Games (Beckham was a bid ambassador when London won the rights to the Games).
The economic downturn had companies around the world scrutinizing expenses the past few years and athlete endorsements were no different. Gillette let deals with Thierry Henry, Ricardo Kaka and Lionel Messi expire. Coca-Cola did not re-sign Manchester United striker Wayne Rooney when their agreement ran out at the end of 2010.
While a few deals have expired, the sponsorship market is still strong for the top players according to Stirling. Sponsors are seeking bigger time commitments from athletes in some cases or flexibility in the deal terms, but deals are still getting done.Ranking No. 2 on our list of the highest-paid soccer players is Cristiano Ronaldo who made $38 million in 2010 (our earnings figures include salaries, bonuses and endorsement income). Ronaldo’s earnings are split evenly between his Real Madrid salary and endorsement income from Nike, Armani, Castrol and others.
Ronaldo is able to reach a massive audience through social media. His 24 million Facebook fans are twice as many as any other athlete (Michael Jordan is second with 10 million fans). His Facebook audience is split evenly between men and women, which makes Ronaldo attractive to a wide range of companies as a pitchman. His 2.4 million Twitter followers are topped only by Shaquille O’Neal, Kaka and Lance Armstrong amongst athletes.
Another athlete looking to social media is Messi who ranks No. 3 on our list with earnings of $32 million in 2010. Messi launched a Facebook account this month and quickly signed up more than seven million fans. The two-time Player of the Year has beefed up his endorsement portfolio in recent years. Current sponsors like Adidas, Lay’s, Konami, Audemars Piguet, Chery and Air Europa net Messi $16 million annually on top of the $16 million he earned last year from Barcelona in salary and bonuses.
The World’s 50 Most Valuable Sports Teams
The NFL has grown explosively over the past 25 years as TV revenue jumped 700%. The league’s 32 teams now divide $3.8 billion annually under the current round of broadcast deals, which expire after the 2013 season. With ratings at record levels, the next TV contracts are bound to be even more lucrative. Teams that were selling for $70 million in the mid-1980s are now worth $1 billion on average.
NFL owners claim they are not getting a big enough share of the league’s $9 billion in revenue, but a look at the world’s 50 most valuable sports teams shows how valuable NFL teams already are. The list is littered with NFL franchises–all 32 teams make the cut, led by the Dallas Cowboys, worth $1.81 billion. Yet the top franchise plays a different kind of football. English Premier League power Manchester United is the world’s most valuable sports team, worth $1.86 billion.
The Glazer family, which also owns the NFL’s Tampa Bay Buccaneers (No. 18 at $1.03 billion), bought United in 2005 for $1.5 billion, but quickly drew the wrath of fans after the purchase saddled the team with a massive debt load. Fans feared the team would not have the resources to pay top players. In November the Glazers paid off $330 million of the debt which now stands at $756 million, or 41% of the team’s value (the average debt-to-value ratio of the top 50 franchises is 26%). Even better for fans of the Red Devils, the team captured its record 19th English Premier League title this year and made the finals of the UEFA Champions League before falling to Barcelona (No. 26 on our list, worth $975 million).
The finances of Manchester United continue to look up. This season marked the first year of its new shirt sponsorship with Aon, worth $32 million annually over four years. It represents a 50% bump from its prior deal with AIG. The team is reportedly in line to get a similar increase for its merchandise deal with Nike, which already pays United nearly $40 million per year. The current 13-year contract is set to expire in 2015, but a new deal is expected to be done by next year that could be worth as much as $70 million a year. Reports surfaced last month that United is considering selling shares on the Hong Kong Stock Exchange at a price that would value the club at $2.7 billion.
The Cowboys are the sports world’s second most valuable team with a worth of $1.81 billion. Jerry Jones‘ $1.25 billion stadium, which opened in 2010, features more than just a 152-foot-wide HD TV screen. Cowboys Stadium has 320 luxury suites and 15,000 club seats that generate more than $100 million annually in premium seat revenue for Jones. America’s Team has also signed a host of lucrative sponsorship deals with the likes of AT&T, Bank of America, Ford Motor and PepsiCo.
NFL owners claim they are not getting a big enough share of the league’s $9 billion in revenue, but a look at the world’s 50 most valuable sports teams shows how valuable NFL teams already are. The list is littered with NFL franchises–all 32 teams make the cut, led by the Dallas Cowboys, worth $1.81 billion. Yet the top franchise plays a different kind of football. English Premier League power Manchester United is the world’s most valuable sports team, worth $1.86 billion.
The Glazer family, which also owns the NFL’s Tampa Bay Buccaneers (No. 18 at $1.03 billion), bought United in 2005 for $1.5 billion, but quickly drew the wrath of fans after the purchase saddled the team with a massive debt load. Fans feared the team would not have the resources to pay top players. In November the Glazers paid off $330 million of the debt which now stands at $756 million, or 41% of the team’s value (the average debt-to-value ratio of the top 50 franchises is 26%). Even better for fans of the Red Devils, the team captured its record 19th English Premier League title this year and made the finals of the UEFA Champions League before falling to Barcelona (No. 26 on our list, worth $975 million).
The finances of Manchester United continue to look up. This season marked the first year of its new shirt sponsorship with Aon, worth $32 million annually over four years. It represents a 50% bump from its prior deal with AIG. The team is reportedly in line to get a similar increase for its merchandise deal with Nike, which already pays United nearly $40 million per year. The current 13-year contract is set to expire in 2015, but a new deal is expected to be done by next year that could be worth as much as $70 million a year. Reports surfaced last month that United is considering selling shares on the Hong Kong Stock Exchange at a price that would value the club at $2.7 billion.
The Cowboys are the sports world’s second most valuable team with a worth of $1.81 billion. Jerry Jones‘ $1.25 billion stadium, which opened in 2010, features more than just a 152-foot-wide HD TV screen. Cowboys Stadium has 320 luxury suites and 15,000 club seats that generate more than $100 million annually in premium seat revenue for Jones. America’s Team has also signed a host of lucrative sponsorship deals with the likes of AT&T, Bank of America, Ford Motor and PepsiCo.
The NFL’s Highest-Paid Players
SI’s Peter King reported at halftime of the Vikings-Saints game that Tom Brady and the New England Patriots had reached terms on a new four-year contract that will make Brady the highest-paid player in the game in terms of average salary. The deal is expected to be worth around $18 million annually. The previous highest average annual salary was Eli Manning at $16.3 million per year.
Brady’s title as the NFL’s top-paid player will likely be short-lived as Colts’ owner Jim Irsay has vowed that Peyton Manning’s next contract will make him the league’s financial alpha dog (Manning’s current average salary of $14 million doesn’t rank among the five highest-paid QBs). Manning is already the league’s top earner off-the-field with annual endorsement income of $10 million annually thanks to deals with Reebok, MasterCard, Gatorade, DirecTV, Sony and others.
#1 Eli Manning $39.9 million
#2 Terrell Suggs $38.3 million
#3 Julius Peppers $36 million
#4 Philip Rivers $32.1 million
#5 Albert Haynesworth $27.3 million
#6 Demarcus Ware $26.7 million
#7 Peyton Manning $24.8 million
#8 Jake Delhomme $22.4 million
#9 Matthew Stafford $21.4 million
#10 DeAngelo Hall $20.8 million
#11 Vince Wilfork $$20.6 million
#12 Nnamdi Asomugha $20.5 million
#13 Kurt Warner $20.3 million
#14 Jason Smith $19.4 million
#15 Brett Favre $18.9 million
*Incomes include salary and bonuses paid between June 2009 and June 2010 as well as endorsement and licensing income.
Image by Getty Images via @daylife
There are several ways to slice who the NFL’s highest-paid players are as the NFL system of non-guaranteed contracts is unlike any of the other three major U.S. sports leagues. You can look at average salary, total contract values or one-year payouts. The biggest deals usually include significant signing and/or roster bonuses paid out in the first year.The list below looks at cash paid out over a 12-month period to gauge the money players. Our list of the world’s 50 highest-paid athletes in July looked at earnings between June 2009 and June 2010 and nine NFL players made the final cut. The players below were the 15 highest-paid when you include salaries and endorsement income over that same time period (only the Manning brothers and Favre made big cash off-the-field and the rest relied on their playing contracts for almost their entire income).
Tom Brady was not among the top paid guys as he made $8 million from his Pats deal over that time and another $5 million from licensing, memorabalia and endorsements with the likes of Smartwater (owned by Coca-Cola), Stetson, Movado and Audi (his current deal with the Pats pays him $6.5 million this season). He’ll be on our highest-paid athletes list next year though as his contract is sure to include significant upfront money. It was important for Brady to get this deal done before the season started as it was only two years ago that his season ended with a knee injury in the first quarter of the first game of the year.Brady’s title as the NFL’s top-paid player will likely be short-lived as Colts’ owner Jim Irsay has vowed that Peyton Manning’s next contract will make him the league’s financial alpha dog (Manning’s current average salary of $14 million doesn’t rank among the five highest-paid QBs). Manning is already the league’s top earner off-the-field with annual endorsement income of $10 million annually thanks to deals with Reebok, MasterCard, Gatorade, DirecTV, Sony and others.
#1 Eli Manning $39.9 million
#2 Terrell Suggs $38.3 million
#3 Julius Peppers $36 million
#4 Philip Rivers $32.1 million
#5 Albert Haynesworth $27.3 million
#6 Demarcus Ware $26.7 million
#7 Peyton Manning $24.8 million
#8 Jake Delhomme $22.4 million
#9 Matthew Stafford $21.4 million
#10 DeAngelo Hall $20.8 million
#11 Vince Wilfork $$20.6 million
#12 Nnamdi Asomugha $20.5 million
#13 Kurt Warner $20.3 million
#14 Jason Smith $19.4 million
#15 Brett Favre $18.9 million
*Incomes include salary and bonuses paid between June 2009 and June 2010 as well as endorsement and licensing income.
The Highest-Paid Female Athletes
Maria Sharapova struggled in recent years with injuries and inconsistent play on the tennis court. Her worldwide ranking plummeted to a low of No. 126 in 2009 and she was rarely a factor in Grand Slam events. But this year Sharapova has rebounded and won 80% of her matches. She is now ranked No. 5 in the world and reached the Wimbledon finals in July; her first Grand Slam final in more than three years.
While Sharapova has bounced back on the court, off the court she never left. Sharapova is the world’s highest-paid female athlete for the seventh straight year and this year it is not even close. Sharapova earned $25 million over the last 12-months, double the amount of any other female athlete in the world.
Sharapova maintains an impressive endorsement portfolio that includes Nike, Head, Evian, Clear Shampoo, Sony Ericsson, Tiffany and Tag Heuer. Sharapova has 5.2 million Facebook fans and her partners are constantly doing things on her Facebook page to reach them. Cole-Haan (a Nike subsidiary) ran a promotion for her 24th birthday where her fans got 24% off that day.
Li is set to see her earnings soar as she has been busy signing new seven-figure deals with companies like Mercedes-Benz maker Daimler and others which joined Nike, Haagen-Dazs and Rolex in her endorsement portfolio. Before her French Open title in June, she was making $2.5 million annually off the court, but her newfound celebrity could see that figure jump by more than $10 million. We estimate Li earned $8 million (ranked eighth) in the 12-months through June, which is before most of her new deals kicked in.
While Sharapova has bounced back on the court, off the court she never left. Sharapova is the world’s highest-paid female athlete for the seventh straight year and this year it is not even close. Sharapova earned $25 million over the last 12-months, double the amount of any other female athlete in the world.
Sharapova maintains an impressive endorsement portfolio that includes Nike, Head, Evian, Clear Shampoo, Sony Ericsson, Tiffany and Tag Heuer. Sharapova has 5.2 million Facebook fans and her partners are constantly doing things on her Facebook page to reach them. Cole-Haan (a Nike subsidiary) ran a promotion for her 24th birthday where her fans got 24% off that day.
Click for full photo gallery: The 10 Highest-Paid Female Athletes
Sharapova extended her Nike agreement in 2010 for eight years that could net her as much as $70 million. Sales of her Nike line of tennis apparel were up 26% in 2010 and she now has five other Tour pros wearing the collection. Her ballet flat was the top selling shoe in 2010 at Cole Haan. She receives royalties on both her Nike and Cole Haan lines.In Pictures: World’s Highest-Paid Athletes
Our earnings estimates are for the 12-months ending July 1, 2011. We factor in prize money, salaries, appearance fees, licensing income and endorsements in our totals. Tennis players dominate the list with seven of the ten spots. The ten highest paid women made $113 million over the past 12-months, up 1% from last year. By comparison the 10 highest-paid men earned a collective $449 million.
The second highest-paid female athlete over the past year is the world’s No. 1 ranked tennis player, Caroline Wozniacki at $12.5 million. She banked $6 million in prize money and another $6.5 million from sponsors and appearances. Companies are lining up behind the 21-year old Dane hoping to catch tennis’ next big star. She added deals this year with Yonex, Compeed and Oriflame, but her biggest partner is Adidas which paid out lucrative bonuses in 2010 thanks to her No. 1 year-end ranking.Racing’s Danica Patrick ranked No. 3 at $12 million. Patrick continues to split her time between IndyCar and Nascar’s Nationwide Series. Her fourth place finish in the Sam’s Town 300 in March was the highest finish ever by a woman in a Nascar race. Rumors are swirling that Patrick will race full-time in Nascar in 2011. A permanent move to Nascar would certainly boost Patrick’s income.
In the future Sharapova’s stiffest competition as the top-paid female athlete should come from another breakout tennis star, Li Na. Li turned pro 12 years ago, but the 29-year-old’s big moment came at this year’s French Open where she became the first Chinese player to win a singles Grand Slam event. Her win was seen by 116 million people in China according to the WTA Tour.Li is set to see her earnings soar as she has been busy signing new seven-figure deals with companies like Mercedes-Benz maker Daimler and others which joined Nike, Haagen-Dazs and Rolex in her endorsement portfolio. Before her French Open title in June, she was making $2.5 million annually off the court, but her newfound celebrity could see that figure jump by more than $10 million. We estimate Li earned $8 million (ranked eighth) in the 12-months through June, which is before most of her new deals kicked in.
China’s Low Roaming Fees Won’t Be Matched Soon
BERLIN — When Su Xiaoqin, a Chinese translator living in Düsseldorf, calls family and friends back in Shanghai, she does not use the mobile network of her German operator, O2. She pops in the SIM card for China Mobile.
As a result, Ms. Su’s calls home cost as little as 2.86 renminbi, or 44 cents, a minute, a small fraction of what a call using the German SIM card would run. That is because China Mobile, the world’s largest operator, with 617 million customers, recently cut its international roaming rates, following similar cuts by its domestic rivals, China Unicom and China Telecom.
“The word has gotten around that the Chinese operators now have the best rates to China,” Ms. Su said.
While Europeans and Americans traveling abroad still face steep roaming charges, travelers from mainland China can call home for as little as it costs to make a local call in that market.
In part, that reflects the growing global clout of the Chinese mobile phone industry, where the three big operators, with a combined 889 million customers, are able to negotiate less expensive roaming deals for their users with international operators.
As a result, one should not expect the lower roaming prices paid by travelers from the mainland to come soon to consumers in Europe, the United States or other parts of the world. In part, that is because European and U.S. operators do not compete directly with their counterparts in China for mobile customers, so they have little financial incentive to match the lower prices.
David Dyson, the chief executive of Three U.K., a British mobile phone operator owned by Hutchison Whampoa, the Hong Kong company, cited another reason. He said that high roaming prices in Europe, especially for downloading data, reflected the operators’ profit expectations, not the true costs of service.
Mr. Dyson said that smaller operators, especially, could not lower roaming rates because of what it costs them to connect calls using the networks of larger operators, whose rates are driven by those profit demands.
In 2007, the European Union stepped in to limit the price of mobile roaming charges in the 27-nation bloc, but those retail price caps — 35 euro cents, or 50 U.S. cents, a minute for making a call — are higher than those paid by consumers from mainland China. In the United States, the level of roaming charges is not regulated by the government but set by American and international operators through private agreements on the costs of using each other’s networks to connect calls.
For travelers from the United States, the roaming charges can still be startlingly high.
In May, Paul O’Brien, the general legal counsel of an international maker of industrial sealants based near Philadelphia, returned home after a business trip to Milan and Rome to a $2,300 roaming bill, which he had incurred in two days of normal calling and surfing.
Mr. O’Brien described his iPhone activity during his Italy trip as moderate — making and receiving calls to the United States through Telecom Italia, and downloading and reading e-mail.
Just two days into what was a four-day trip, his U.S. operator, which he declined to name, shut off his service, citing his company’s policy.
“I was blindsided,” Mr. O’Brien said, adding that he did not know what the limit was that he had exceeded.
Local operators — in Mr. O’Brien’s case, Telecom Italia — tend to reap the most profit from roaming charges, said Deep Basu, the vice president for product strategies and consumer products at Roamware, a software maker in San Jose, California, that helps operators manage roaming traffic. But the U.S. operator, which has more customers than Telecom Italia and thus more clout in negotiating deals on roaming rates, would have received a sizable slice as well.
Customers of China Unicom, the country’s No.2 operator after China Mobile, with 182 million mobile users, pay about 2.8 renminbi, or 44 cents, a minute to call China from most countries in Europe, and as little as 1.5 renminbi from the United States.
The operator makes its low rates possible by running a huge phone callback program, called **100 Program, which assigns local land line phone numbers to its mobile customers while they are abroad and then has a company computer in China call them back over less-expensive land lines to complete their long-distance calls.
China Unicom introduced the service in May, effectively cutting its roaming rates as much as 90 percent. Sophia Tso, a spokeswoman for China Unicom in Hong Kong, said the decision to reduce roaming prices drastically had been made to serve the company’s customers, who are among the 100 million Chinese citizens who travel abroad each year.
As a result, Ms. Su’s calls home cost as little as 2.86 renminbi, or 44 cents, a minute, a small fraction of what a call using the German SIM card would run. That is because China Mobile, the world’s largest operator, with 617 million customers, recently cut its international roaming rates, following similar cuts by its domestic rivals, China Unicom and China Telecom.
“The word has gotten around that the Chinese operators now have the best rates to China,” Ms. Su said.
While Europeans and Americans traveling abroad still face steep roaming charges, travelers from mainland China can call home for as little as it costs to make a local call in that market.
In part, that reflects the growing global clout of the Chinese mobile phone industry, where the three big operators, with a combined 889 million customers, are able to negotiate less expensive roaming deals for their users with international operators.
As a result, one should not expect the lower roaming prices paid by travelers from the mainland to come soon to consumers in Europe, the United States or other parts of the world. In part, that is because European and U.S. operators do not compete directly with their counterparts in China for mobile customers, so they have little financial incentive to match the lower prices.
David Dyson, the chief executive of Three U.K., a British mobile phone operator owned by Hutchison Whampoa, the Hong Kong company, cited another reason. He said that high roaming prices in Europe, especially for downloading data, reflected the operators’ profit expectations, not the true costs of service.
Mr. Dyson said that smaller operators, especially, could not lower roaming rates because of what it costs them to connect calls using the networks of larger operators, whose rates are driven by those profit demands.
In 2007, the European Union stepped in to limit the price of mobile roaming charges in the 27-nation bloc, but those retail price caps — 35 euro cents, or 50 U.S. cents, a minute for making a call — are higher than those paid by consumers from mainland China. In the United States, the level of roaming charges is not regulated by the government but set by American and international operators through private agreements on the costs of using each other’s networks to connect calls.
For travelers from the United States, the roaming charges can still be startlingly high.
In May, Paul O’Brien, the general legal counsel of an international maker of industrial sealants based near Philadelphia, returned home after a business trip to Milan and Rome to a $2,300 roaming bill, which he had incurred in two days of normal calling and surfing.
Mr. O’Brien described his iPhone activity during his Italy trip as moderate — making and receiving calls to the United States through Telecom Italia, and downloading and reading e-mail.
Just two days into what was a four-day trip, his U.S. operator, which he declined to name, shut off his service, citing his company’s policy.
“I was blindsided,” Mr. O’Brien said, adding that he did not know what the limit was that he had exceeded.
Local operators — in Mr. O’Brien’s case, Telecom Italia — tend to reap the most profit from roaming charges, said Deep Basu, the vice president for product strategies and consumer products at Roamware, a software maker in San Jose, California, that helps operators manage roaming traffic. But the U.S. operator, which has more customers than Telecom Italia and thus more clout in negotiating deals on roaming rates, would have received a sizable slice as well.
Customers of China Unicom, the country’s No.2 operator after China Mobile, with 182 million mobile users, pay about 2.8 renminbi, or 44 cents, a minute to call China from most countries in Europe, and as little as 1.5 renminbi from the United States.
The operator makes its low rates possible by running a huge phone callback program, called **100 Program, which assigns local land line phone numbers to its mobile customers while they are abroad and then has a company computer in China call them back over less-expensive land lines to complete their long-distance calls.
China Unicom introduced the service in May, effectively cutting its roaming rates as much as 90 percent. Sophia Tso, a spokeswoman for China Unicom in Hong Kong, said the decision to reduce roaming prices drastically had been made to serve the company’s customers, who are among the 100 million Chinese citizens who travel abroad each year.
Obama and Leaders Reach Debt Deal
WASHINGTON — President Obama and Congressional leaders of both parties said late Sunday that they had agreed to a framework for a budget deal that would cut trillions of dollars in federal spending over the next decade and clear the way for an increase in the government’s borrowing limit.
With the health of the fragile economy hanging in the balance and financial markets watching closely, the leaders said they would present the compromise to their caucuses on Monday in hopes of enacting it before a Tuesday deadline to avert default.
Even as the president was speaking from the White House on Sunday night, Speaker John A. Boehner was on a conference call with House Republicans, trying to sell them on the proposal he had signed off on only minutes before.
Since he is likely to lose the most conservative elements of his rank and file, Mr. Boehner faces the task of framing the pact as friendly enough to Republican principles to win over a significant group of House Republicans without alienating Democrats he will need to push it over the top.
President Obama, in a hastily called appearance with reporters that ended a day of uncertainty, said that the compromise would “allow us to avoid default and end the crisis that Washington imposed on the rest of America.”
“It ensures also that we will not face this same kind of crisis again in six months, or eight months, or 12 months,” he said. “And it will begin to lift the cloud of debt and the cloud of uncertainty that hangs over our economy.”
Just before Mr. Obama spoke on television, the two Senate leaders, Harry Reid and Mitch McConnell, took the floor to endorse the pact as well.
“I am relieved to say that leaders from both parties have come together for the sake of our economy to reach a historic, bipartisan compromise that ends this dangerous standoff,” said Mr. Reid, the majority leader.
The tentative agreement calls for at least $2.4 trillion in spending cuts over 10 years, a new Congressional committee to recommend a deficit-reduction proposal by Thanksgiving, and a two-step increase in the debt ceiling.
The announcement concluded a tumultuous 24 hours that saw hopes rise Saturday night over the prospect of a deal that might have concluded the budget stalemate. By Sunday, worry set in again as lawmakers and White House officials struggled to hammer out the fine points of an agreement that must clear a Senate controlled by Democrats as well as the Republican House.
If the deal is approved, establishing a special joint committee to explore deficit reduction, it will ensure that the size and scope of the federal government and the tension between spending and taxes will remain front and center in the Washington debate headed into the 2012 election.
Markets reacted favorably to the announcement, with Asian markets jumping on news of the deal. The Nikkei was up nearly 2 percent in late-morning trading; the dollar rose against the Japanese yen.
President Obama tempered his comments by noting that “there are still some very important votes to be taken” and that winning House approval would be a particular challenge.
On the conference call, Mr. Boehner sought to portray the new agreement as one heavily tilted toward the Republican call for no new revenue, and he said it met the goal of instituting cuts greater than the amount of the debt limit increase. In a presentation, he said the pact would prevent a “job-killing default” — a warning to lawmakers that failure to raise the limit could add to the bleak employment picture.
“Our framework is now on the table that will end this crisis in a manner that meets our principles of smaller government,” said Mr. Boehner, who said he hoped to get the legislation onto the House floor as quickly as possible. Participants on the call, which lasted about an hour, said that the tone was cordial and that lawmakers expressed less resistance than had been anticipated.
At the same time, Representative Nancy Pelosi of California, the former speaker and current Democratic leader, was noncommittal about the plan, suggesting that Democrats might not rally behind it. “I look forward to reviewing the legislation with my caucus to see what level of support we can provide,” she said in a written statement.
With the health of the fragile economy hanging in the balance and financial markets watching closely, the leaders said they would present the compromise to their caucuses on Monday in hopes of enacting it before a Tuesday deadline to avert default.
Even as the president was speaking from the White House on Sunday night, Speaker John A. Boehner was on a conference call with House Republicans, trying to sell them on the proposal he had signed off on only minutes before.
Since he is likely to lose the most conservative elements of his rank and file, Mr. Boehner faces the task of framing the pact as friendly enough to Republican principles to win over a significant group of House Republicans without alienating Democrats he will need to push it over the top.
President Obama, in a hastily called appearance with reporters that ended a day of uncertainty, said that the compromise would “allow us to avoid default and end the crisis that Washington imposed on the rest of America.”
“It ensures also that we will not face this same kind of crisis again in six months, or eight months, or 12 months,” he said. “And it will begin to lift the cloud of debt and the cloud of uncertainty that hangs over our economy.”
Just before Mr. Obama spoke on television, the two Senate leaders, Harry Reid and Mitch McConnell, took the floor to endorse the pact as well.
“I am relieved to say that leaders from both parties have come together for the sake of our economy to reach a historic, bipartisan compromise that ends this dangerous standoff,” said Mr. Reid, the majority leader.
The tentative agreement calls for at least $2.4 trillion in spending cuts over 10 years, a new Congressional committee to recommend a deficit-reduction proposal by Thanksgiving, and a two-step increase in the debt ceiling.
The announcement concluded a tumultuous 24 hours that saw hopes rise Saturday night over the prospect of a deal that might have concluded the budget stalemate. By Sunday, worry set in again as lawmakers and White House officials struggled to hammer out the fine points of an agreement that must clear a Senate controlled by Democrats as well as the Republican House.
If the deal is approved, establishing a special joint committee to explore deficit reduction, it will ensure that the size and scope of the federal government and the tension between spending and taxes will remain front and center in the Washington debate headed into the 2012 election.
Markets reacted favorably to the announcement, with Asian markets jumping on news of the deal. The Nikkei was up nearly 2 percent in late-morning trading; the dollar rose against the Japanese yen.
President Obama tempered his comments by noting that “there are still some very important votes to be taken” and that winning House approval would be a particular challenge.
On the conference call, Mr. Boehner sought to portray the new agreement as one heavily tilted toward the Republican call for no new revenue, and he said it met the goal of instituting cuts greater than the amount of the debt limit increase. In a presentation, he said the pact would prevent a “job-killing default” — a warning to lawmakers that failure to raise the limit could add to the bleak employment picture.
“Our framework is now on the table that will end this crisis in a manner that meets our principles of smaller government,” said Mr. Boehner, who said he hoped to get the legislation onto the House floor as quickly as possible. Participants on the call, which lasted about an hour, said that the tone was cordial and that lawmakers expressed less resistance than had been anticipated.
At the same time, Representative Nancy Pelosi of California, the former speaker and current Democratic leader, was noncommittal about the plan, suggesting that Democrats might not rally behind it. “I look forward to reviewing the legislation with my caucus to see what level of support we can provide,” she said in a written statement.
China 'orders shutdown' of fake Apple stores
 |
| China's law prohibits firms from copying the 'look and feel' of other companies' stores, but enforcement is patchy [AFP] |
Chinese officials have ordered the shut down of two fake Apple stores in Kunming in Yunnan province, in apparent reaction to media publicity over unauthorised stores in the country, a local newspaper has reported.
A total of five self-branded 'Apple stores' were found to be operating without authorisation from Apple according to the Metropolitan Times report, posted on the Kunming government website on Monday.
Two stores were told to shut down because they did not have an official business licence, the paper said, rather than concerns over copyright or piracy.
Inspections of around 300 shops in Kunming were carried out after a blog post by an American living in this southwestern town exposed a near flawless fake Apple store where even the staff were said to be convinced they were working for the iPhone and iPad maker.
That store, one of three found by the "BirdAbroad" blogger in the city, was not one of the stores closed.
Countless unauthorised resellers of Apple and other brands' electronic products throughout China sell the real thing but buy their goods overseas and smuggle them into the country to skip taxes.
All five unauthorised Apple shops in Kunming were selling genuine Apple products, the newspaper said.
Most valuable company
Apple has just four genuine Apple stores in China, all in Beijing and Shanghai.
The company, which has 13 authorised resellers in Kunming, could not be reached for comment.
Apple's brand is the world's most valuable, worth some $153bn, according to a report earlier this year.
In addition to protecting trademarks, Chinese law prohibits companies from copying the "look and feel" of other companies' stores, but enforcement is patchy.
The US and other Western countries have often complained that China is woefully behind in its effort to stamp out intellectual property theft.
In May, China was listed for the seventh year by the US Trade Representative's office as a country with one of the worst records for preventing copyright theft.
Piracy and counterfeiting of US software and a wide range of other intellectual property in China cost US businesses alone an estimated $48bn and 2.1 million jobs in 2009, the US International Trade Commission has said.
China dives deeper in resource race
Submersible conducts country's deepest manned dive that points to its fast-growing technical capabilities.
Chinese submersible has conducted the country's deepest manned dive in the latest technological milestone for China, which theoretically puts most of the ocean floor's vast resources within its reach.
The Jiaolong undersea craft - named after a mythical sea dragon - reached 5,057 metres below sea level in a test dive on Tuesday in the northeastern Pacific, China's oceanic administration said.
Though less than half as deep as a record dive by the US Navy in 1960, the achievement highlights China's push to catch up with advanced nations in space, sea, and polar exploration, and points to its fast-growing technical capabilities.
Chinese scientists aim to complete the world's deepest dive in a manned submersible in 2012 by going to 7,000 metres, state news agency Xinhua reported on Tuesday.
"Such a depth means the Jiaolong is capable of reaching over 70 per cent of the seabeds in the world," Xinhua quoted head of the diving operation Wang Fei as saying.
Undersea resource race
The current depth record holder is Japan's Shinkai 6500, which dived to 6,527 meters in August 1989.
"At a depth of 5,000 meters, the Jiaolong withstood great pressure amounting to 5,000 tonnes per square meter," Wang said.
China has pushed hard in recent years to obtain oil, minerals and other resources needed to fuel its growth, and has said its submersible programme is aimed at scientific research and the peaceful exploration and use of natural resources.
Scientists say the oceans' floors contain rich deposits of potentially valuable minerals, but the extreme depths pose technical difficulties in harvesting them on a wide scale.
But it may not take China long to begin reaching these riches, Jian Zhimin, director of the marine geology laboratory at Shanghai's Tongji university, told the AFP news agency.
"I don't think it will be a very long time before China can perform deep-sea ocean-floor mining," he said, noting that many of the most valuable oceanic mineral resources are located around the Jiaolong's maximum designed depth of 7,000 metres.
Regional rivalries
During a Jiaolong dive to the bottom of the disputed South China Sea last year, it planted a Chinese flag in the seabed in what some saw as a provocative act.
The South China Sea, believed to be rich in oil and gas, is claimed in whole or in part by China and several other nations.
Some concerns also have been raised that deep-sea vessels could have military applications such as tapping into or severing communications cables.
China's successful dive comes after Japanese media earlier this year said Japan planned to step up its search for undersea mineral reserves, setting up a potential race for seabed resources.
Japanese researchers earlier this month said they had detected vast reserves of rare earths - substances used in many high-tech electronics - on the Pacific seabed.
Chinese state news agency Xinhua quoted the submersible's chief designer, Xu Qinan, as touting its "state-of-the-art" systems but noting that some components had been imported from abroad, such as the high-definition video and transmission equipment.
Chinese submersible has conducted the country's deepest manned dive in the latest technological milestone for China, which theoretically puts most of the ocean floor's vast resources within its reach.
The Jiaolong undersea craft - named after a mythical sea dragon - reached 5,057 metres below sea level in a test dive on Tuesday in the northeastern Pacific, China's oceanic administration said.
Though less than half as deep as a record dive by the US Navy in 1960, the achievement highlights China's push to catch up with advanced nations in space, sea, and polar exploration, and points to its fast-growing technical capabilities.
Chinese scientists aim to complete the world's deepest dive in a manned submersible in 2012 by going to 7,000 metres, state news agency Xinhua reported on Tuesday.
"Such a depth means the Jiaolong is capable of reaching over 70 per cent of the seabeds in the world," Xinhua quoted head of the diving operation Wang Fei as saying.
Undersea resource race
The current depth record holder is Japan's Shinkai 6500, which dived to 6,527 meters in August 1989.
"At a depth of 5,000 meters, the Jiaolong withstood great pressure amounting to 5,000 tonnes per square meter," Wang said.
China has pushed hard in recent years to obtain oil, minerals and other resources needed to fuel its growth, and has said its submersible programme is aimed at scientific research and the peaceful exploration and use of natural resources.
Scientists say the oceans' floors contain rich deposits of potentially valuable minerals, but the extreme depths pose technical difficulties in harvesting them on a wide scale.
But it may not take China long to begin reaching these riches, Jian Zhimin, director of the marine geology laboratory at Shanghai's Tongji university, told the AFP news agency.
"I don't think it will be a very long time before China can perform deep-sea ocean-floor mining," he said, noting that many of the most valuable oceanic mineral resources are located around the Jiaolong's maximum designed depth of 7,000 metres.
Regional rivalries
During a Jiaolong dive to the bottom of the disputed South China Sea last year, it planted a Chinese flag in the seabed in what some saw as a provocative act.
The South China Sea, believed to be rich in oil and gas, is claimed in whole or in part by China and several other nations.
Some concerns also have been raised that deep-sea vessels could have military applications such as tapping into or severing communications cables.
China's successful dive comes after Japanese media earlier this year said Japan planned to step up its search for undersea mineral reserves, setting up a potential race for seabed resources.
Japanese researchers earlier this month said they had detected vast reserves of rare earths - substances used in many high-tech electronics - on the Pacific seabed.
Chinese state news agency Xinhua quoted the submersible's chief designer, Xu Qinan, as touting its "state-of-the-art" systems but noting that some components had been imported from abroad, such as the high-definition video and transmission equipment.
Friday, July 29, 2011
China: New Role for Military Vessel
China’s defense ministry said the nation’s much-publicized first aircraft carrier, a Soviet-era hulk being refitted in a north China shipyard, will be used purely for research and training and not for deployment in military situations, Xinhua reported.
Speaking at a ministry news briefing for Chinese journalists on Wednesday, the spokesman, Geng Yansheng, said the ship would be used in part to train pilots in the delicate art of taking off and landing carrier-based jets from the deck of a ship rolling in ocean waters.
Speaking at a ministry news briefing for Chinese journalists on Wednesday, the spokesman, Geng Yansheng, said the ship would be used in part to train pilots in the delicate art of taking off and landing carrier-based jets from the deck of a ship rolling in ocean waters.
China's High-Speed Politics
HONG KONG — In the wake of a deadly train collision in China that claimed at least 39 lives, a single photograph has for many Chinese become emblematic of a callous, unresponsive political culture that prioritizes instant results over public well-being and accountability.
The news photograph shows a high-speed train zipping along a viaduct in Wenzhou, the site of the accident last Saturday, less than a day after rescue work was halted, some say far too soon. The wreckage of the crash is piled carelessly on the barren ground below, a tragedy swept rashly into the past.
From the outset, China’s government did its utmost to keep public doubts from gathering speed. The Central Propaganda Department instructed media across the country to avoid hard questions and focus instead on “stories that are extremely moving, like people donating blood and taxi drivers refusing to accept fares.” The overarching theme, it said, should be “great love in the face of great tragedy.”
Meanwhile, China’s rail ministry cited lightning as the cause of the accident, sidestepping questions of human error and institutional failure. When journalists asked pointedly how a young girl had been found alive after officials called an end to the rescue effort, the ministry again favored emotion over candor, calling the discovery a “miracle.”
Over the last several days, however, Chinese have insistently pushed the Wenzhou tragedy front and center, refusing to accept the government’s rationalizations and distractions. Using Twitter-like platforms on an unprecedented scale, people have clamored for answers to a hornet’s nest of questions.
How was the accident caused by lightning? Why was the train behind not aware there was a train in front? Why was the rescue effort halted so soon? Why was the wreckage piled up into shallow pits before there had been a proper investigation into the accident’s cause? Why has a list of victims not been made public?
Magazines and newspapers have followed suit, reporting boldly on the facts and pressing for answers.
At the very heart of all of these questions — and indeed of the tragedy itself — is a government that refuses to be held accountable for its decisions, and that admits no criticism when criticism might make the difference between bold vision and monstrous folly.
Questions about the rapid development of China’s high-speed rail network have simmered under the surface for years but were never given a proper hearing. Led by the former railway minister Liu Zhijun, who was jailed for corruption in February, a handful of government officials were entrusted with vast resources while being exempted from public scrutiny. (The general budget estimate for the Beijing-Shanghai high-speed railroad alone surpasses the entire budget for the Three Gorges Dam Project.) China’s railroads were Liu’s private fiefdom, and he was rewarded politically for pushing ahead with big plans through unilateral decision-making, earning the nickname “Great Leap Liu.”
Dominating resources of both power and money, Liu monopolized the debate among would-be experts. Dissenting voices, like that of Zhao Jian, a professor at the Economy Management Institute of Beijing Transportation University, were elbowed aside. In an interview published on the eve of the Wenzhou tragedy, Zhao told a magazine in southern China that his university president had discouraged him from criticizing high-speed rail development because it might hinder the school’s ability to secure research grants.
Until this month, Chinese media were almost entirely complicit, trumpeting high-speed rail as a glorious enterprise reflecting the prestige of the Chinese Communist Party. No matter that the cost of tickets placed it out of reach for the vast majority of Chinese.
Last December, the party’s flagship People’s Daily newspaper ran a front-page story valorizing an ordinary train driver who had been given a “dead order” from superiors back in 2008 to master a new high-speed train in just 10 days, against the judgment of a German trainer who said trainees needed at least two months. With all the high foolishness of state propaganda, the article relished the fact that the odds were stacked against the trainees and the fact that there was “no room for error.”
The “great leap” culture that Liu Zhijun epitomized is the way things operate across China, from county towns bursting with development all the way up to the top. Party and government officials are accountable only to superiors with whom they hope to score expedient political points. The legitimate concerns of citizens are routinely ignored.
Chinese people have pleaded with their leaders to slow down and prioritize the quality of development. “China, please slow your soaring steps forward,” one social media user wrote. “Wait for your people ... wait for your conscience! We don’t want derailed trains, or collapsing bridges, or roads that slide into pits. We don’t want our homes to become death traps. Move more slowly. Let every life have freedom and dignity.”
China’s leaders must recognize that the political culture of expediency and secrecy is the root cause of this and other tragedies, from food and mine safety to violent property demolition. Political reform is needed to empower Chinese citizens to monitor the government and eliminate corruption and mismanagement. Reform is the only way to enable real and sustained accountability.
In the face of mounting public anger, the government is now dealing more seriously with the crisis. Prime Minister Wen Jiabao has visited the crash site, pledging to hold those responsible to account, and the government has ordered an “urgent overhaul” of the national railway system. But this urgency must not, yet again, become mere expediency, another high-speed solution to a crisis of public opinion.
The news photograph shows a high-speed train zipping along a viaduct in Wenzhou, the site of the accident last Saturday, less than a day after rescue work was halted, some say far too soon. The wreckage of the crash is piled carelessly on the barren ground below, a tragedy swept rashly into the past.
From the outset, China’s government did its utmost to keep public doubts from gathering speed. The Central Propaganda Department instructed media across the country to avoid hard questions and focus instead on “stories that are extremely moving, like people donating blood and taxi drivers refusing to accept fares.” The overarching theme, it said, should be “great love in the face of great tragedy.”
Meanwhile, China’s rail ministry cited lightning as the cause of the accident, sidestepping questions of human error and institutional failure. When journalists asked pointedly how a young girl had been found alive after officials called an end to the rescue effort, the ministry again favored emotion over candor, calling the discovery a “miracle.”
Over the last several days, however, Chinese have insistently pushed the Wenzhou tragedy front and center, refusing to accept the government’s rationalizations and distractions. Using Twitter-like platforms on an unprecedented scale, people have clamored for answers to a hornet’s nest of questions.
How was the accident caused by lightning? Why was the train behind not aware there was a train in front? Why was the rescue effort halted so soon? Why was the wreckage piled up into shallow pits before there had been a proper investigation into the accident’s cause? Why has a list of victims not been made public?
Magazines and newspapers have followed suit, reporting boldly on the facts and pressing for answers.
At the very heart of all of these questions — and indeed of the tragedy itself — is a government that refuses to be held accountable for its decisions, and that admits no criticism when criticism might make the difference between bold vision and monstrous folly.
Questions about the rapid development of China’s high-speed rail network have simmered under the surface for years but were never given a proper hearing. Led by the former railway minister Liu Zhijun, who was jailed for corruption in February, a handful of government officials were entrusted with vast resources while being exempted from public scrutiny. (The general budget estimate for the Beijing-Shanghai high-speed railroad alone surpasses the entire budget for the Three Gorges Dam Project.) China’s railroads were Liu’s private fiefdom, and he was rewarded politically for pushing ahead with big plans through unilateral decision-making, earning the nickname “Great Leap Liu.”
Dominating resources of both power and money, Liu monopolized the debate among would-be experts. Dissenting voices, like that of Zhao Jian, a professor at the Economy Management Institute of Beijing Transportation University, were elbowed aside. In an interview published on the eve of the Wenzhou tragedy, Zhao told a magazine in southern China that his university president had discouraged him from criticizing high-speed rail development because it might hinder the school’s ability to secure research grants.
Until this month, Chinese media were almost entirely complicit, trumpeting high-speed rail as a glorious enterprise reflecting the prestige of the Chinese Communist Party. No matter that the cost of tickets placed it out of reach for the vast majority of Chinese.
Last December, the party’s flagship People’s Daily newspaper ran a front-page story valorizing an ordinary train driver who had been given a “dead order” from superiors back in 2008 to master a new high-speed train in just 10 days, against the judgment of a German trainer who said trainees needed at least two months. With all the high foolishness of state propaganda, the article relished the fact that the odds were stacked against the trainees and the fact that there was “no room for error.”
The “great leap” culture that Liu Zhijun epitomized is the way things operate across China, from county towns bursting with development all the way up to the top. Party and government officials are accountable only to superiors with whom they hope to score expedient political points. The legitimate concerns of citizens are routinely ignored.
Chinese people have pleaded with their leaders to slow down and prioritize the quality of development. “China, please slow your soaring steps forward,” one social media user wrote. “Wait for your people ... wait for your conscience! We don’t want derailed trains, or collapsing bridges, or roads that slide into pits. We don’t want our homes to become death traps. Move more slowly. Let every life have freedom and dignity.”
China’s leaders must recognize that the political culture of expediency and secrecy is the root cause of this and other tragedies, from food and mine safety to violent property demolition. Political reform is needed to empower Chinese citizens to monitor the government and eliminate corruption and mismanagement. Reform is the only way to enable real and sustained accountability.
In the face of mounting public anger, the government is now dealing more seriously with the crisis. Prime Minister Wen Jiabao has visited the crash site, pledging to hold those responsible to account, and the government has ordered an “urgent overhaul” of the national railway system. But this urgency must not, yet again, become mere expediency, another high-speed solution to a crisis of public opinion.
Lessons From the U.S. Economy's Malaise
When I began covering the American economy 11 years ago, it was the envy of the world.
The last 11 years have not been kind to it. First came the dot-com bust. Then there was the weakest economic expansion in decades, followed by the worst financial crisis and deepest recession in decades. Now we’re suffering through a painfully slow recovery, which Washington may soon make worse.
The malaise obviously has several causes, some of which are beyond our control. One major cause, however, is entirely our doing. We do not spend enough time focusing on our actual economic problems.
We are too often occupied with distractions, rather than trying to answer a simple question: What works? What economic policies have succeeded before and are most likely to lead to the best life for the largest number of people? Instead, we’ve effectively decided that because the United States is the richest, most successful country in the world, it is guaranteed to remain so.
Today’s column is my last in this space. I will continue to write in my next job, as Washington bureau chief, but not every week and not this column. So I want to take a step back today and look at what we know about the American economy and, almost as important, what we do not.
One of the tricky things about the subject is that almost nothing is certain in the way that, say, two plus two equals four. Economics — which is at root a study of human behavior — tends to be messier. Because it’s messier, it can be tempting to think that all uncertainty is equal and that we don’t really know anything.
But we do. It’s just that the knowledge tends to come with caveats and nuances. Economic truths may not rise to the level of two plus two equals four, but they are not so different from the knowledge that the earth is round or that smoking causes cancer.
The earth is not perfectly round, of course. Some smokers will never get cancer, while most cancer is not caused by smoking. Yet in the ways that matter most, the earth is still round, and smoking does cause cancer. Both of these facts are illustrative in another way, too: seemingly smart people spent decades denying them.
When it comes to economics, we know that a market economy with a significant government role is the only proven model of success. The United States has outgrown Europe partly because of our greater comfort with market forces. China and India boomed after allowing more of a market economy. On the other hand, unencumbered market forces often lead to disaster, as 1929 and 2008 made clear.
We also know that ever-rising levels of education are crucial to a country’s success. Not only is the evidence all around us — the college wage premium has been higher than ever lately — but careful studies have found that, on the margin, education itself tends to make people wealthier, healthier and happier. The next time you hear naysayers poormouth college, ask them if they plan to send their own children.
We know that the federal government has promised more benefits than it can currently afford. The only way out of this problem involves some combination of tax increases and cuts to Medicare, Social Security and the military. Anyone who won’t get specific about which ones they favor is not a fiscal conservative.
We know this country spends vastly more on health care than any other country — about 75 percent more per person than other rich countries — without getting vastly better results. The waste in our medical system offers the best chance to reduce the deficit without harming our living standards.
We know the planet is getting hotter. Last year tied for the warmest on record, and the 10 hottest have all occurred since 1998. The resulting risks, economic and otherwise, may be even more serious than the risks from the deficit, but receive far less attention in Washington. (And climate worriers do not need to be so skittish about making the connection between heat waves and the larger trend. The thing about global warming is that it warms the globe.)
We know that Wall Street, having bounced back from the crisis, remains a historically large part of the economy. Not coincidentally, we know that income inequality remains sharply higher than it used to be.
The most common income statistics can exaggerate the stagnation of middle-class pay, partly because they exclude health benefits. The American middle class is not disappearing. But it’s not doing well, and has not been for some time.
The bottom 50 percent of households, based on pretax income, make less combined than the top 1 percent. Only three decades ago, the bottom half made more than twice as much. The middle class has also received a much smaller tax cut in recent decades than the affluent.
•
This list is obviously a partial one. You could add the fact that the United States has benefited enormously from immigration, especially high-skill immigration, or the fact that discrimination, while hardly vanquished, is greatly reduced. But I think the issues here cover most of the high points.
The place where economic knowledge gets murkier is how to best deal with many of our biggest problems.
We cannot know, for example, what would happen if the government raised taxes to cut the deficit. A moderate increase seems unlikely to do much damage to economic growth, given that the increases by George H. W. Bush and Bill Clinton did not prevent the 1990s boom — and that George W. Bush’s tax cuts were followed by mediocre growth. All things equal, though, tax increases do not lift growth.
Likewise, we do not know precisely how to regulate Wall Street so that it will remain the global financial capital without also being a drain on our national resources. We do not know whether the most promising attack on climate change involves a carbon tax or more money for clean energy research. We don’t know how much medical costs would fall if people had to pay more out of pocket, as conservatives advocate, or how much costs would fall if Medicare tried to crack down on dubious care, as the Obama administration prefers.
The real problem with so many of these issues is that the political system is not even trying to find solutions.
Instead of a spirited, even partisan, debate over how health reform could be do a better job of controlling costs, lawyers are skirmishing over whether all Americans should have health insurance. Some of the world’s most talented people — students and would-be entrepreneurs who would like nothing more than to remain in this country — are told they are not welcome. Amazingly, Congress may be about to create a whole new economic problem by voluntarily defaulting on the national debt.
Democracy, not unlike economics, is often messy. And there are certainly some reasons for optimism, whether it’s the bipartisan push to improve schools or the simple fact that American society in 2011 is quite different from what many people could have imagined only a few decades ago. Much of that change has been for the good.
Perhaps the last refuge for optimists is Churchill’s reputed line: “In the long run, Americans will always do the right thing — after exploring all other alternatives.” The sentiment is nice. It would be comforting to have a little more reason to believe that history was going to repeat itself.
The last 11 years have not been kind to it. First came the dot-com bust. Then there was the weakest economic expansion in decades, followed by the worst financial crisis and deepest recession in decades. Now we’re suffering through a painfully slow recovery, which Washington may soon make worse.
The malaise obviously has several causes, some of which are beyond our control. One major cause, however, is entirely our doing. We do not spend enough time focusing on our actual economic problems.
We are too often occupied with distractions, rather than trying to answer a simple question: What works? What economic policies have succeeded before and are most likely to lead to the best life for the largest number of people? Instead, we’ve effectively decided that because the United States is the richest, most successful country in the world, it is guaranteed to remain so.
Today’s column is my last in this space. I will continue to write in my next job, as Washington bureau chief, but not every week and not this column. So I want to take a step back today and look at what we know about the American economy and, almost as important, what we do not.
One of the tricky things about the subject is that almost nothing is certain in the way that, say, two plus two equals four. Economics — which is at root a study of human behavior — tends to be messier. Because it’s messier, it can be tempting to think that all uncertainty is equal and that we don’t really know anything.
But we do. It’s just that the knowledge tends to come with caveats and nuances. Economic truths may not rise to the level of two plus two equals four, but they are not so different from the knowledge that the earth is round or that smoking causes cancer.
The earth is not perfectly round, of course. Some smokers will never get cancer, while most cancer is not caused by smoking. Yet in the ways that matter most, the earth is still round, and smoking does cause cancer. Both of these facts are illustrative in another way, too: seemingly smart people spent decades denying them.
When it comes to economics, we know that a market economy with a significant government role is the only proven model of success. The United States has outgrown Europe partly because of our greater comfort with market forces. China and India boomed after allowing more of a market economy. On the other hand, unencumbered market forces often lead to disaster, as 1929 and 2008 made clear.
We also know that ever-rising levels of education are crucial to a country’s success. Not only is the evidence all around us — the college wage premium has been higher than ever lately — but careful studies have found that, on the margin, education itself tends to make people wealthier, healthier and happier. The next time you hear naysayers poormouth college, ask them if they plan to send their own children.
We know that the federal government has promised more benefits than it can currently afford. The only way out of this problem involves some combination of tax increases and cuts to Medicare, Social Security and the military. Anyone who won’t get specific about which ones they favor is not a fiscal conservative.
We know this country spends vastly more on health care than any other country — about 75 percent more per person than other rich countries — without getting vastly better results. The waste in our medical system offers the best chance to reduce the deficit without harming our living standards.
We know the planet is getting hotter. Last year tied for the warmest on record, and the 10 hottest have all occurred since 1998. The resulting risks, economic and otherwise, may be even more serious than the risks from the deficit, but receive far less attention in Washington. (And climate worriers do not need to be so skittish about making the connection between heat waves and the larger trend. The thing about global warming is that it warms the globe.)
We know that Wall Street, having bounced back from the crisis, remains a historically large part of the economy. Not coincidentally, we know that income inequality remains sharply higher than it used to be.
The most common income statistics can exaggerate the stagnation of middle-class pay, partly because they exclude health benefits. The American middle class is not disappearing. But it’s not doing well, and has not been for some time.
The bottom 50 percent of households, based on pretax income, make less combined than the top 1 percent. Only three decades ago, the bottom half made more than twice as much. The middle class has also received a much smaller tax cut in recent decades than the affluent.
•
This list is obviously a partial one. You could add the fact that the United States has benefited enormously from immigration, especially high-skill immigration, or the fact that discrimination, while hardly vanquished, is greatly reduced. But I think the issues here cover most of the high points.
The place where economic knowledge gets murkier is how to best deal with many of our biggest problems.
We cannot know, for example, what would happen if the government raised taxes to cut the deficit. A moderate increase seems unlikely to do much damage to economic growth, given that the increases by George H. W. Bush and Bill Clinton did not prevent the 1990s boom — and that George W. Bush’s tax cuts were followed by mediocre growth. All things equal, though, tax increases do not lift growth.
Likewise, we do not know precisely how to regulate Wall Street so that it will remain the global financial capital without also being a drain on our national resources. We do not know whether the most promising attack on climate change involves a carbon tax or more money for clean energy research. We don’t know how much medical costs would fall if people had to pay more out of pocket, as conservatives advocate, or how much costs would fall if Medicare tried to crack down on dubious care, as the Obama administration prefers.
The real problem with so many of these issues is that the political system is not even trying to find solutions.
Instead of a spirited, even partisan, debate over how health reform could be do a better job of controlling costs, lawyers are skirmishing over whether all Americans should have health insurance. Some of the world’s most talented people — students and would-be entrepreneurs who would like nothing more than to remain in this country — are told they are not welcome. Amazingly, Congress may be about to create a whole new economic problem by voluntarily defaulting on the national debt.
Democracy, not unlike economics, is often messy. And there are certainly some reasons for optimism, whether it’s the bipartisan push to improve schools or the simple fact that American society in 2011 is quite different from what many people could have imagined only a few decades ago. Much of that change has been for the good.
Perhaps the last refuge for optimists is Churchill’s reputed line: “In the long run, Americans will always do the right thing — after exploring all other alternatives.” The sentiment is nice. It would be comforting to have a little more reason to believe that history was going to repeat itself.
Saturday, July 23, 2011
Surveys Point to Slowdowns in Euro Zone and China
LONDON — While most investor attention was focused on a meeting of European leaders attempting to resolve the Greek debt crisis, survey data released Thursday suggested a backdrop of stagnating economic activity in the euro zone and softening output in China.
The composite euro zone purchasing managers’ indexes, known as P.M.I.s and complied by Markit, showed growth in the euro area’s manufacturing and service sectors stalled in July, with the composite index showing its lowest reading in 23 months.
In China, a closely watched survey of purchasing managers produced the lowest level in 28 months, according to HSBC, which published the index.
That suggested that a series of regulatory and policy measures is having the desired effect of cooling the red-hot Chinese economy.
The euro zone composite P.M.I. fell to 50.8 in July from 53.3 in June, Markit said. The consensus forecast among economists had been for a more modest decline to 52.6. The drop in the P.M.I.s was broad, with the services index slowing to 51.4 from 53.7 and manufacturing falling to 50.4 from 52.
The indexes provide a fairly good indication of where quarterly economic growth rates are heading, according to analysts.
Nick Kounis, head of economic research at ABN Amro in Amsterdam, said higher oil prices, budget cuts and the global economic slowdown having been dragging on growth in Europe.
“More recently,” he added, “it’s possible that business confidence also took a blow because of the escalating sovereign debt crisis.”
He said the P.M.I.’s current levels were consistent with a slowdown in euro area growth in the third quarter to flat or up just 0.1 percent from the previous quarter. The region posted a preliminary growth rate during the second quarter of 0.2 percent after a gain of 0.8 percent in the first three months.
“The slowdown in euro zone G.D.P. growth to near-stagnation levels is another warning shot to Europe’s leaders about the high stakes at today’s summit,” Mr. Kounis said. “It might not take too much of a shock to push the economy into recession from these levels.”
The releases of both sets of data came before European leaders reached an agreement Thursday in Brussels on new aid for Greece.
In China, the vast manufacturing sector appears to have contracted in July for the first time in a year, according to the closely watched HSBC survey.
The initial results of the poll of purchasing managers produced a reading of 48.9 in July, the lowest level in 28 months and down from 50.1 in June. The final reading will be released Aug. 1.
Readings below 50 represent contraction, so the slide below that level indicated that manufacturers had seen business slow markedly over the past few months, based on a combination of feeble global demand and tighter conditions at home.
For the past year and a half, Chinese policy makers have used a wide variety of tools to rein in booming growth and limit the rising prices that have accompanied it. Formerly free-flowing bank loans have become harder to obtain, for example, as banks were instructed to lend less.
Those measures have slowed the economy, but at a gradual pace that leaves room for still more tightening by Beijing in the coming months, most analysts say.
A P.M.I. reading of below 50 does not imply a “hard landing” for China, said Qu Hongbin, chief China economist at HSBC.
Industrial growth is likely to continue to decelerate in the coming months as tightening measures filter through, Mr. Qu said, but “resilient consumer spending and continued investment in ongoing mass infrastructure projects should support a G.D.P. growth rate of almost 9 percent for the rest of this year.”
The International Monetary Fund echoed that sentiment in its latest assessment of the Chinese economy, published Thursday, noting that “China’s near-term growth prospects continue to be vigorous and are increasingly self-sustained, underpinned by structural adjustment.”
“Wage and employment increases have fueled consumption, the expansion in infrastructure and real estate construction has driven investment upward, and net exports are once again contributing positively to economic growth,” the fund said.
The I.M.F. projects 9.6 percent economic growth for China this year, and 9.5 percent expansion for 2012, in line with many other forecasts. That is down from 10.3 percent last year, but well above what developed nations like the United States are managing.
But an aging population and gradually shrinking labor force risks fanning inflation in the longer term, the I.M.F. said, while low interest rates and a lack of places for savers to invest their cash mean there is a lingering risk of bubbles in the already hot property sector.
Those factors could lead to potential “significant risks” to financial and macroeconomic stability in China, the fund said, and it urged Beijing to address the challenges by raising interest rates further and allowing the renminbi to strengthen.
Beijing has so far relied heavily on so-called reserve requirement ratios for lenders as a policy tool. Successive increases in the ratio since early last year have gradually restricted the amount of money banks have been able to lend. Interest rate increases came into the policy mix relatively late: The central bank began nudging rates up again in October 2010.
Alexander F. Yuan/Associated Press
Assembling a wind turbine in Baoding, in northern China. China's manufacturing showed contraction for the first time in a year.
The composite euro zone purchasing managers’ indexes, known as P.M.I.s and complied by Markit, showed growth in the euro area’s manufacturing and service sectors stalled in July, with the composite index showing its lowest reading in 23 months.
In China, a closely watched survey of purchasing managers produced the lowest level in 28 months, according to HSBC, which published the index.
That suggested that a series of regulatory and policy measures is having the desired effect of cooling the red-hot Chinese economy.
The euro zone composite P.M.I. fell to 50.8 in July from 53.3 in June, Markit said. The consensus forecast among economists had been for a more modest decline to 52.6. The drop in the P.M.I.s was broad, with the services index slowing to 51.4 from 53.7 and manufacturing falling to 50.4 from 52.
The indexes provide a fairly good indication of where quarterly economic growth rates are heading, according to analysts.
Nick Kounis, head of economic research at ABN Amro in Amsterdam, said higher oil prices, budget cuts and the global economic slowdown having been dragging on growth in Europe.
“More recently,” he added, “it’s possible that business confidence also took a blow because of the escalating sovereign debt crisis.”
He said the P.M.I.’s current levels were consistent with a slowdown in euro area growth in the third quarter to flat or up just 0.1 percent from the previous quarter. The region posted a preliminary growth rate during the second quarter of 0.2 percent after a gain of 0.8 percent in the first three months.
“The slowdown in euro zone G.D.P. growth to near-stagnation levels is another warning shot to Europe’s leaders about the high stakes at today’s summit,” Mr. Kounis said. “It might not take too much of a shock to push the economy into recession from these levels.”
The releases of both sets of data came before European leaders reached an agreement Thursday in Brussels on new aid for Greece.
In China, the vast manufacturing sector appears to have contracted in July for the first time in a year, according to the closely watched HSBC survey.
The initial results of the poll of purchasing managers produced a reading of 48.9 in July, the lowest level in 28 months and down from 50.1 in June. The final reading will be released Aug. 1.
Readings below 50 represent contraction, so the slide below that level indicated that manufacturers had seen business slow markedly over the past few months, based on a combination of feeble global demand and tighter conditions at home.
For the past year and a half, Chinese policy makers have used a wide variety of tools to rein in booming growth and limit the rising prices that have accompanied it. Formerly free-flowing bank loans have become harder to obtain, for example, as banks were instructed to lend less.
Those measures have slowed the economy, but at a gradual pace that leaves room for still more tightening by Beijing in the coming months, most analysts say.
A P.M.I. reading of below 50 does not imply a “hard landing” for China, said Qu Hongbin, chief China economist at HSBC.
Industrial growth is likely to continue to decelerate in the coming months as tightening measures filter through, Mr. Qu said, but “resilient consumer spending and continued investment in ongoing mass infrastructure projects should support a G.D.P. growth rate of almost 9 percent for the rest of this year.”
The International Monetary Fund echoed that sentiment in its latest assessment of the Chinese economy, published Thursday, noting that “China’s near-term growth prospects continue to be vigorous and are increasingly self-sustained, underpinned by structural adjustment.”
“Wage and employment increases have fueled consumption, the expansion in infrastructure and real estate construction has driven investment upward, and net exports are once again contributing positively to economic growth,” the fund said.
The I.M.F. projects 9.6 percent economic growth for China this year, and 9.5 percent expansion for 2012, in line with many other forecasts. That is down from 10.3 percent last year, but well above what developed nations like the United States are managing.
But an aging population and gradually shrinking labor force risks fanning inflation in the longer term, the I.M.F. said, while low interest rates and a lack of places for savers to invest their cash mean there is a lingering risk of bubbles in the already hot property sector.
Those factors could lead to potential “significant risks” to financial and macroeconomic stability in China, the fund said, and it urged Beijing to address the challenges by raising interest rates further and allowing the renminbi to strengthen.
Beijing has so far relied heavily on so-called reserve requirement ratios for lenders as a policy tool. Successive increases in the ratio since early last year have gradually restricted the amount of money banks have been able to lend. Interest rate increases came into the policy mix relatively late: The central bank began nudging rates up again in October 2010.
Former China Mobile Official Sentenced in Bribery Case
SHANGHAI — A former executive at China Mobile, one of this country’s biggest state-owned telecommunications companies, was sentenced to death with a two-year reprieve Friday for accepting bribes, according to Xinhua, the state-run news agency.
Zhang Chunjiang, the former vice chairman of China Mobile, the world’s largest mobile phone operator by subscribers, was charged with accepting more than $1.15 million in bribes while working at a series of state-run telecom companies between 1994 and 2009, when he was removed from his post. The two-year reprieve means that with good behavior his sentence could be commuted to life in prison. The sentence, which was handed down by a court in north China’s Hebei province, is the latest development in an unfolding corruption investigation into this country’s powerful telecom oligopoly.
While state executives and government officials are regularly arrested on corruption charges, only a handful have received the death penalty in recent years. Four years ago, the head of China’s Food and Drug Administration was executed for corruption and failing to protect consumers.
In 2009, the former chairman of Sinopec, the Chinese oil giant, was also sentenced to death with a two-year reprieve for accepting millions of dollars in bribes. And this week, two former vice mayors in China were executed for accepting millions of dollars worth of bribes.
Beijing is in the midst of a major corruption sweep ahead of a leadership change expected next year. In some cases, analysts say those charged with corruption may be singled out because of their relationships with high-ranking officials who are engaged in power struggles.
Recently, prosecutors have focused their attention on the telecom industry. At least seven other executives from China Mobile are under investigation in corruption cases, according to the nation’s state-run news media. And investigators are also looking into the role of several prominent Chinese businessmen, including Zeng Liqing, one of the founders of Tencent, a top Chinese Internet company, according to Caixin magazine, one of the nation’s most respected publications.
State-run news media said that Mr. Zhang, the 53-year-old former China Mobile executive, confessed to his crimes and therefore was given a penalty mitigated by the two-year reprieve. Xinhua said Mr. Zhang took the bribes while working as deputy director of the Liaoning Provincial Postal Administration, and also while working as general manager of the China Netcom Group and party chief and deputy general manager of China Mobile.
Bobby Yip/Reuters
Zhang Chunjiang, the former vice chairman of China Mobile, was sentenced to death with a two-year reprieve.
Zhang Chunjiang, the former vice chairman of China Mobile, the world’s largest mobile phone operator by subscribers, was charged with accepting more than $1.15 million in bribes while working at a series of state-run telecom companies between 1994 and 2009, when he was removed from his post. The two-year reprieve means that with good behavior his sentence could be commuted to life in prison. The sentence, which was handed down by a court in north China’s Hebei province, is the latest development in an unfolding corruption investigation into this country’s powerful telecom oligopoly.
While state executives and government officials are regularly arrested on corruption charges, only a handful have received the death penalty in recent years. Four years ago, the head of China’s Food and Drug Administration was executed for corruption and failing to protect consumers.
In 2009, the former chairman of Sinopec, the Chinese oil giant, was also sentenced to death with a two-year reprieve for accepting millions of dollars in bribes. And this week, two former vice mayors in China were executed for accepting millions of dollars worth of bribes.
Beijing is in the midst of a major corruption sweep ahead of a leadership change expected next year. In some cases, analysts say those charged with corruption may be singled out because of their relationships with high-ranking officials who are engaged in power struggles.
Recently, prosecutors have focused their attention on the telecom industry. At least seven other executives from China Mobile are under investigation in corruption cases, according to the nation’s state-run news media. And investigators are also looking into the role of several prominent Chinese businessmen, including Zeng Liqing, one of the founders of Tencent, a top Chinese Internet company, according to Caixin magazine, one of the nation’s most respected publications.
State-run news media said that Mr. Zhang, the 53-year-old former China Mobile executive, confessed to his crimes and therefore was given a penalty mitigated by the two-year reprieve. Xinhua said Mr. Zhang took the bribes while working as deputy director of the Liaoning Provincial Postal Administration, and also while working as general manager of the China Netcom Group and party chief and deputy general manager of China Mobile.
China Fake Apple Stores Get Fake News Video
Earlier this week I wrote about a series of fake Apple Stores that have been cropping up in China. They look so real that even the store employees, who wear authentic Apple T-shirts and branded name-tags, believe they work for the real Apple.
Now the Apple stores have their own Taiwanese cartoon news video, which have become an Internet staple with major news events. You can watch the video in full above.
All the media attention has not been good for the fake stores. Reuters reported Friday that “customers at an apparent Apple Store in the Chinese city of Kunming berated staff and demanded refunds on Friday after the shop was revealed to be an elaborate fake.”
Now the Apple stores have their own Taiwanese cartoon news video, which have become an Internet staple with major news events. You can watch the video in full above.
All the media attention has not been good for the fake stores. Reuters reported Friday that “customers at an apparent Apple Store in the Chinese city of Kunming berated staff and demanded refunds on Friday after the shop was revealed to be an elaborate fake.”
Wednesday, July 20, 2011
The True Cost of a Speeding Ticket
Car insurance rates soar for drivers who have one moving violation and jump by more than 50 percent after three violations, according to an Insurance.com analysis of more than 32,000 insurance policies sold in 2010.
Drivers who bought a one-car, single-driver policy last year and had one violation in their driving history paid an average of 18 percent more for car insurance than drivers with no violations.The numbers get worse as your offenses pile up. Drivers with two violations paid 34 percent more for insurance, and drivers with three violations tacked on a whopping 53 percent to their insurance costs when compared to drivers who were violation-free.
Car insurance rates soar for drivers who have one moving violation and jump by more than 50 percent after three violations, according to an Insurance.com analysis of more than 32,000 insurance policies sold in 2010.
Drivers who bought a one-car, single-driver policy last year and had one violation in their driving history paid an average of 18 percent more for car insurance than drivers with no violations.The numbers get worse as your offenses pile up. Drivers with two violations paid 34 percent more for insurance, and drivers with three violations tacked on a whopping 53 percent to their insurance costs when compared to drivers who were violation-free.
Some of the violations that hurt your car insurance rates include:
- Speeding tickets
- Driving under the influence of drugs or alcohol
- Careless or reckless driving
- Running red lights
- Failure to yield or stop at a sign
- Fleeing from police
- Driving the wrong way down a divided highway
- Improper passing
- Unsafe U-turn
- Failure to use a child restraint
He says insurers raise rates on repeat offenders to account for the higher risk of insuring such drivers.
“It’s a pattern of behavior,” Passmore says. “If a person has one ticket in 10 years and someone else has three tickets in six months, you tell me [who is going to get the lower rate].”
The news is especially bad for drivers age 65 and older. A separate analysis of nearly 400,000 rate quotes from 2010 found that quoted car insurance rates for drivers in the 65 and older age group jumped 57 percent after two violations when compared to drivers with no violations. The next closet age group – drivers ages 55 to 64 – saw a less damaging 47 percent rise in their quoted rate after two violations.
Lowering your car insurance rates
Which violation hurts your rate the most?
“Obviously, a DUI is going to be one of the worst” for rate increases, Passmore says. But he adds that each insurer calculates rates differently, so a specific type of violation may be priced higher by one insurer than by another.
If an insurer raises your auto insurance rate after a violation, there are still ways to cut those costs, including:
- Shop around for a better rate. The first thing you should do is to compare quotes from various car insurance companies to see if you can find a lower rate. “Shopping around is great advice almost any time,” Passmore says.
- Take a driver safety course. Some states reduce or expunge points from your driving record if you take a defensive driving class. Depending on where you live, your auto insurance company may be required to lower your car insurance premium after you complete the class.
- Raise your deductible. Drivers who raise their collision and comprehensive deductibles from $250 to $500 or $1,000 will see their annual premium fall. However, before taking this route, make sure you have enough money in savings to cover the deductible should you have to make a claim.
“Insurance has gotten pretty competitive,” he says. “It’s not a matter of who is insurable and who is uninsurable. It’s a matter of finding the right rate for that risk.”
In other words, you can still find insurance if you have multiple infractions – but expect to pay for it.
MethodologyAverage annual premium on sold policies calculated by examining 32,746 single-driver, one-car insurance policies sold through Insurance.com in 2010. Average quoted rate calculated by examining 397,000 insurance quotes generated through Insurance.com in 2010.
Three Ways to Keep Those Secret Purchases Secret
Not everything in life is meant to be aired in public, and in the same vein, not all our purchases are ones we necessarily want others knowing we make. Fortunately, it is possible to buy things both online and off that keep you anonymous.
Here, we’ve compiled a few ways that you can buy those products and services that are not for public knowledge. Plus, since these strategies avoid your purchases being reflected on your monthly credit card bill, these can be great ways to keep a surprise away from a significant other who deals with the bills.
Google Checkout and Paypal
When your credit card bill or bank statement comes in, whatever purchase you make will read “Paypal” and not the company or individual you’ve bought from, keeping that purchase anonymous. However, another person knowing how to get into your Paypal account can compromise this anonymity since the name of whomever you’re giving money to will show up in your record of payments.
Google has also thrown its hat into the ring, creating Google Checkout to compete against Paypal. As with Paypal, any purchase made through Google Checkout will simply appear as “Google” on any records related to the bank account or credit card the payment is made from.
Checkout’s original purpose was to make online shopping more convenient by eliminating the need for consumers to have lots of hard-to-remember login information with different merchants. Sites that use Checkout allow online shoppers to log in with their Google account information. This not only keeps your purchases discreet, but closing your registration with Checkout will also allow you to nix your payment history.
Prepaid Gift Cards
These cards let you shop basically anywhere that takes credit cards without any anxiety about your purchases being linked to your identity.
In Conclusion
The major pitfall across these options is getting help if something goes wrong. Paypal and Google Checkout offer safeguards against getting scammed, but using them can be a hassle. At the moment, prepaid gift and debit cards don’t offer much in the way of assurance against fraud, though that will probably change in the future since ‘09’s CARD Act is ushering in more complete regulation of the burgeoning market in providing electronic money transfers.
If keeping your purchases hush-hush isn’t your top priority, a credit card is the safest way to buy. Speaking broadly, credit card companies are compelled by law to have fairly accessible mechanisms to deal with fraud and disputes over charges. Not only that, Regulation EFTA allows credit card companies to hold cardholders liable for up to fifty dollars as a result of fraud.
Here, we’ve compiled a few ways that you can buy those products and services that are not for public knowledge. Plus, since these strategies avoid your purchases being reflected on your monthly credit card bill, these can be great ways to keep a surprise away from a significant other who deals with the bills.
Google Checkout and Paypal
Paypal was founded to provide consumers with a method to shop online without needing to use a credit card directly. Today, their more than one hundred and fifty million users make Paypal the largest internet payment processor. Paypal’s services function by letting you spend and receive money using your email address. Through your Papal account, you can pay businesses or people either by drawing money from your credit card or taking it directly from your checking account.
When your credit card bill or bank statement comes in, whatever purchase you make will read “Paypal” and not the company or individual you’ve bought from, keeping that purchase anonymous. However, another person knowing how to get into your Paypal account can compromise this anonymity since the name of whomever you’re giving money to will show up in your record of payments.
Google has also thrown its hat into the ring, creating Google Checkout to compete against Paypal. As with Paypal, any purchase made through Google Checkout will simply appear as “Google” on any records related to the bank account or credit card the payment is made from.
Checkout’s original purpose was to make online shopping more convenient by eliminating the need for consumers to have lots of hard-to-remember login information with different merchants. Sites that use Checkout allow online shoppers to log in with their Google account information. This not only keeps your purchases discreet, but closing your registration with Checkout will also allow you to nix your payment history.
Prepaid Gift Cards
To start, it is important to remember that as far as your anonymity goes, gift cards and prepaid debit cards are two very different animals. When you buy a gift card, you buy something with no connection to your identity, particularly if you are using cash to make the purchase. On the other hand, setting up a prepaid debit card requires that you provide your social security number.
They may not be the technological cutting edge, but as far as keeping your identity under wraps, gift cards are perhaps the most effective strategy if you can get the one you want. Of course, if you get a gift card from the store at which you’re making the purchases you want to keep discreet, your credit card statement will probably blow your cover unless you buy it with cash. But, you can instead buy a non-specific prepaid gift card through a credit card company such as American Express. The supermarket or convenience store in your town probably carries this sort of product, which costs an additional five dollar fee to use.These cards let you shop basically anywhere that takes credit cards without any anxiety about your purchases being linked to your identity.
In Conclusion
The major pitfall across these options is getting help if something goes wrong. Paypal and Google Checkout offer safeguards against getting scammed, but using them can be a hassle. At the moment, prepaid gift and debit cards don’t offer much in the way of assurance against fraud, though that will probably change in the future since ‘09’s CARD Act is ushering in more complete regulation of the burgeoning market in providing electronic money transfers.
If keeping your purchases hush-hush isn’t your top priority, a credit card is the safest way to buy. Speaking broadly, credit card companies are compelled by law to have fairly accessible mechanisms to deal with fraud and disputes over charges. Not only that, Regulation EFTA allows credit card companies to hold cardholders liable for up to fifty dollars as a result of fraud.
The Best Credit Cards You’ve Never Heard Of
The internet is often a great source of information. In fact, these days it seems like it’s almost the only place to find information. But there’s a real economy behind providing and distributing all that information, and consumers would do well to keep that in mind when looking for advice.
Credit cards are a perfect example, since there is big money in convincing you that certain cards are better than others. This means that almost every site that makes credit card recommendations gets paid to regurgitate the marketing of card issuers, and they rarely tell you that their “Editor’s picks” or “best credit card recommendations” are actually sponsored by the credit card companies. So you have to be on the alert for misinformation everywhere you turn.
Now that doesn’t mean that all sponsored credit cards are bad or that all credit card advice is flawed, just that there are often better cards out there, so make sure you do your research. Here I’m going to set the record straight on a number of credit cards that I feel too many websites recommend to users, and I’ll throw out some of my own recommendations for credit cards that outperform them, whether or not they pay big bucks.
This card suffers from all the same problems as the Chase Freedom, except that it also tends to have lower caps on reward categories, limiting your bonus rewards even further.
Check out: Discover Escape / Fidelity Amex / Fidelity Visa
A better option would be the Discover Escape since it pays 2% cash back on all purchases, which you can redeem for travel purchases. The $60 annual fee is more than made up for by the 25,000 bonus miles (or $250) you earn in the first two years. If travel rewards aren’t your thing, take a look at the Fidelity Amex, which pays a no-bull 2% cash back on every purchase, deposited directly into your Fidelity brokerage or checking account. The Fidelity Visa offers the same deal only after spending $15,000.
The first year is free and the card does pay a ton of bonus rewards–you’re eligible to earn more than 50,000 points the first year, and 47,500 every year after–but you also have to spend a ton of money to get them (more than $100k annually to get maximum bonuses). And if you account for the $95 annual fee going forward, your reward rate maxes out around 1.4% and decreases the more you spend.
Check out: Ink Cash or Capital One Venture
The fee structure on this card makes it hard to accept Russell’s claims that he’s trying to empower the un-banked. The “no monthly fee” version charges a $19.95 activation fee and $1 for every transaction (up to $10 per month). It also costs 50 cents to check your balance at an ATM and $1.95 any time you don’t use the card in a 90-day period. And since it’s a debit card, it doesn’t do anything to help your credit score.
Check out: Citibank Secured
Citibank Secured charges a $29 annual fee and no transaction fees, rather than the $120 that RushCard could cost you. Plus, your initial secured collateral earns roughly 4% in interest annually, and you can be eligible for a non-secured Citi card after 18 months. This helps users build credit, and is a feature that RushCard can’t offer.
Credit cards are a perfect example, since there is big money in convincing you that certain cards are better than others. This means that almost every site that makes credit card recommendations gets paid to regurgitate the marketing of card issuers, and they rarely tell you that their “Editor’s picks” or “best credit card recommendations” are actually sponsored by the credit card companies. So you have to be on the alert for misinformation everywhere you turn.
Now that doesn’t mean that all sponsored credit cards are bad or that all credit card advice is flawed, just that there are often better cards out there, so make sure you do your research. Here I’m going to set the record straight on a number of credit cards that I feel too many websites recommend to users, and I’ll throw out some of my own recommendations for credit cards that outperform them, whether or not they pay big bucks.
Rewards cards
Instead of: Chase FreedomDespite the claims of 5% cash back rewards, you’ll be hard-pressed to earn more than 1.5% to 2% rewards with this card. The bonus 5% rewards only apply to quarterly rotating categories, which means you can’t earn maximum rewards year-round on everyday purchases like groceries and gas. The bonuses are also capped, so you can only earn maximum rewards on $1,500 of spending over the months of Oct-Dec. You have to manually sign up online to get these rewards; it’s not automatic.
Check out: TrueEarnings Costco from AmexYou’d be better served with a card like the Costco TrueEarnings, whose 3% rewards on gas and restaurants, plus 2% rewards on travel are valid throughout the year. Rewards are unlimited except for a $3,000 spending cap on gas, and it’s the only card that pays bonus rewards on Costco’s discount gas.
Instead of: Discover MoreThis card suffers from all the same problems as the Chase Freedom, except that it also tends to have lower caps on reward categories, limiting your bonus rewards even further.
Check out: Discover Escape / Fidelity Amex / Fidelity Visa
A better option would be the Discover Escape since it pays 2% cash back on all purchases, which you can redeem for travel purchases. The $60 annual fee is more than made up for by the 25,000 bonus miles (or $250) you earn in the first two years. If travel rewards aren’t your thing, take a look at the Fidelity Amex, which pays a no-bull 2% cash back on every purchase, deposited directly into your Fidelity brokerage or checking account. The Fidelity Visa offers the same deal only after spending $15,000.
Business cards
Instead of: Ink Bold from ChaseThe first year is free and the card does pay a ton of bonus rewards–you’re eligible to earn more than 50,000 points the first year, and 47,500 every year after–but you also have to spend a ton of money to get them (more than $100k annually to get maximum bonuses). And if you account for the $95 annual fee going forward, your reward rate maxes out around 1.4% and decreases the more you spend.
Check out: Ink Cash or Capital One Venture
Compare this to its cousin card, the Ink Cash, which charges no annual fee, pays 1% on all purchases, and pays 3% on bonus categories your business needs, like fuel, home improvement, dining, and office supplies. Another option is the Capital One Venture for Business, which pays 2% rewards in the form of travel credits you can apply against your account statement. Plus the 15,000 mile sign-up bonus makes it well worth the $59 annual fee.
Poor Credit History Cards
Instead of: RushCard Prepaid DebitThe fee structure on this card makes it hard to accept Russell’s claims that he’s trying to empower the un-banked. The “no monthly fee” version charges a $19.95 activation fee and $1 for every transaction (up to $10 per month). It also costs 50 cents to check your balance at an ATM and $1.95 any time you don’t use the card in a 90-day period. And since it’s a debit card, it doesn’t do anything to help your credit score.
Check out: Citibank Secured
Citibank Secured charges a $29 annual fee and no transaction fees, rather than the $120 that RushCard could cost you. Plus, your initial secured collateral earns roughly 4% in interest annually, and you can be eligible for a non-secured Citi card after 18 months. This helps users build credit, and is a feature that RushCard can’t offer.
Best Sources for Summer Produce
The summer harvest season has finally begun here in Boston. Near my house, Farmers’ markets are popping up, brimming with fresh greens, ripe strawberries, and luscious radishes. Our first CSA share delivery of the season arrived last week. And my garden has started to cough up a few plump berries and herbs.
Image via Wikipedia
Make friends with the farmersMy family loves vegetables. The kids love kale chips and fresh strawberries. We all eat sugar snap peas by the fistful. Later in the summer, my husband and I will haul in the tomatoes that are just starting to grow in our yard and make as much salsa as we can.
Since we love vegetables so much, every summer I look for ways to economize on our fresh vegetables. There are two main aspects to this project: getting a good deal on the veggies, and making good use of them.
To get your veggies, you have several options:
Grow Your Own
J.D. has written extensively about the benefits, financial and otherwise, of growing a vegetable garden. Growing your own veggies is awesome. The more DIY you can be about it, the better deal you’ll get. For example, I paid about twenty-five cents for a packet of tomato seeds this spring that I grew half a dozen tomato plants from. When a few of them failed to thrive, I bought seedlings from my local garden shop. They cost $4 for a flat of six. Still a lot cheaper than buying fresh tomatoes, but much, much more expensive than starting from seed.
I find that growing your own vegetables is the most economical way to enjoy fresh summer produce, once you have a garden in place. Setting up your garden beds, buying tools and learning the ropes can be pricey the first year. After that, you’re looking at relatively small expenses for a lot of very high-quality produce.
If you have the time to invest in gardening. As one of my gardening guru friends likes to say, you can’t do half the work and get half the benefit. I’m a bit of a slacker gardener, and I still grow great veggies. But I don’t get nearly the haul my friend gets from the same amount of space, because I don’t put as much work into it as she does. I just plant some stuff and let it grow.
Not everyone can maintain a vegetable garden. Some people don’t have the space. Some don’t have the time. Some just really don’t enjoy gardening. If you’re not going to grow your own garden, you may want to get creative about how you buy your veggies.
Sign Up For A CSA
A CSA, or community-supported agriculture, is a program where a local farm sells shares of its summer produce directly to consumers. You buy a share for the season, paying up front. Then you get a weekly delivery of vegetables straight from the farm. You’re participating in the fortunes of the farm. If they have a great harvest, you get an abundance of produce at a great price. If it’s a lean growing season, you’ll get less.
It’s a great way to get fresh, local produce, but there are a few caveats.
For one thing, you need to be adventurous in your love of vegetables. You’ll get not only fresh heads of lettuce and juicy tomatoes, but a little of everything your farm grows. Kohlrabi. Brussels sprouts. Garlic. Sometimes we get vegetables in our share that I can’t even identify. This works for me because no one in my house is a particularly picky eater. We like trying new foods, and find a wide variety of vegetables exciting. But if you’d prefer to stick with your two or three favorites, a farm share might not be for you.
In addition to the adventuresome nature of a CSA, you want to be sure a farm share is a good value for you. I’ve experimented with several CSAs over the years. I found that they vary widely in value. They all cost different amounts, and you get different quantities of vegetables. Find out what the rough size of your share will be each week and do some math to compare those prices to your local farmer’s market or grocery store. Are you really getting the better deal?
The answer seems to be “usually”. Organic CSAs tend to be more expensive than conventional ones, but also a better bargain: you pay less for your organic produce getting it from a CSA than you would buying it at Whole Foods. At least in my neighborhood. Again, each farm share varies. The important thing is to do the math. Don’t assume it’s a good deal just because you’re getting it in bulk.
For a farm share to be a really good deal, you have to be sure you’ll use your full share of veggies each week. It’s like buying anything in bulk: it’s only a bargain if you use it. Seriously consider how many vegetables your family will eat, and how much time you’re willing to spend preparing and preserving your goodies. A farm share is a big commitment. If you let the produce go to waste, you’re wasting your grocery money as well.
Shop Farmers’ MarketsFarmers’ markets aren’t exactly a cheap source of summer produce, but they’re still often a great value. You may pay a little more for your food at a farmers’ market than you would at the local supermarket, but you’re getting much fresher, higher-quality produce. Often you’ll get things you just can’t find in the store.
To get the best deals at your farmers’ market, get to know the farmers who sell there each week. Ask about buying seconds quality produce, like bruised peaches or tomatoes. They’re not as pretty as the premium stuff, but they make great jams and sauces.
However you decide to get your summer produce, you’ll want to take care with how you use it. Getting a good deal on fruit and vegetables is just the first part of the equation. Next week I’ll talk about money-saving strategies for using and preserving your summer bounty so you can enjoy it all year long.
The Future Still Lives
In a week of big stories, the biggest didn’t take place in Pakistan or Washington, D.C., but in Santa Clara, California. Unlike Osama bin Laden, we managed to dodge a bullet. If we hadn’t, it wouldn’t have ended modern civilization, but it might have sent it off on a much different, and much less happy, path.
You probably didn’t read this story. So, put simply, Intel Corp. announced Wednesday that Moore’s Law isn’t going to end anytime soon. Because of that, your life, and that of your children and grandchildren are going to be a whole lot better than they might have been.
Today, almost a half-century after it was first elucidated by legendary Fairchild and Intel co-founder Dr. Gordon Moore in an article for a trade magazine, it is increasingly apparent that Moore’s Law is the defining measure of the modern world. Every other predictive tool for understanding life in the developed world since WWII – demographics, productivity tables, literacy rates, econometrics, the cycles of history, Marxist analysis, and on and on – have failed to predict the trajectory of society over the decades . . .except Moore’s Law.
Alone, this oddly narrow and technical dictum – that the power, miniaturization, size and power of integrated circuit chips will, together, double every couple years – has done a better job than any other in determining the pace of daily life, the ups and downs of the economy, the pace of innovation and the creation of new companies, fads and lifestyles. It has been said many times that, beneath everything, Moore’s Law is ticking away as the metronome, the heartbeat, of the modern world.
Why this should be so is somewhat complicated. But a simple explanation is that Moore’s Law isn’t strictly a scientific law – like, say Newton’s Laws of Motion – but rather a brilliant observation of an implied contract between the semiconductor industry and the society it serves. What Gordon Moore observed back in the mid-1960s was that each generation of memory chips (in those days they could store a few thousand bits, compared to a few billion today), which appeared about every 18 months, had twice the storage capacity of the generation before. Plotting the exponential curve of this development on logarithmic paper, Moore was please to see a straight line . . .suggesting that this developmental path might continue into the foreseeable future.
This discovery has been rightly celebrated for years. But often forgotten is that there was technological determinism behind the Law. Computer chips didn’t make themselves. And so, if the semiconductor industry had decided the next day to slow production or reduce their R&D budgets, Moore’s Law would have died within weeks. Instead, semiconductor companies around the world, big and small, and not least because of their respect for Gordon Moore, set out to uphold the Law – and they have done so ever since, despite seemingly impossible technical and scientific obstacles. Gordon Moore not only discovered Moore’s Law, he made it real. As his successor at Intel, Paul Otellini, once told me, “I’m not going to be the guy whose legacy is that Moore’s Law died on his watch.” And that’s true for every worker in the semiconductor industry. They are our equivalent of our medieval workers, devoting their entire careers to building a cathedral whose end they will never see.
And so, instead of fading away like yet one more corporate five year plan, Moore’s Law has defined our age, and done so more than any of the more celebrated trend-setters, from the Woodstock generation to NASA to the personal computer. Moore’s Law today isn’t just microprocessors and memory, but the Internet, cellular telelphony, bioengineering, medicine, education and play. If, in the years ahead, we reach that Singularity of man and computer that Ray Kurzweill predicts for us, that will be Moore’s Law too. But most of all, the virtuous cycle of constant innovation and advancement, of hot new companies that regularly refresh our economy, and of a world characterized by continuous change – in other words, the world that was created for the first time in history only about sixty years ago, and from which we can hardly imagine another – is the result of Moore’s Law.
When Gordon Moore first enunciated his Law, only a handful of industries – the first minicomputers, a couple scientific instruments, a desktop calculator or two – actually exhibited its hyperbolic rate of change. Today, every segment of society either embraces Moore’s Law or is racing to get there. That’s because they know that if only they can get aboard that rocket – that is, if they can add a digital component to their business — they too can accelerate away from the competition. That’s why none of the inventions we Baby Boomers as kids expected to enjoy as adults – atomic cars! personal helicopters! ray guns! – have come true; and also why we have even more powerful tools and toys – instead. Whatever can be made digital, if not in the whole, but in part – marketing, communications, entertainment, genetic engineering, robotics, warfare, manufacturing, service, finance, sports – it will, because going digital means jumping onto Moore’s Law. Miss that train and, as a business, an institution or a cultural phenomenon, you die.
So, what made this week’s announcement — by Intel — so important? It is that almost from the moment the implications of Moore’s Law became understood, there has been a gnawing fear among technologists and those who understand technology, that Moore’s Law will someday end – having snubbed up against the limits of, if not human ingenuity, then physics itself. Already compromises have been made – multiple processors instead of a single one on a chip, exotic new materials to stop leaking electrons – but as the channels get narrower and bumpier with molecules and the walls thinner and more permeable to atomic effects, the end seems to draw closer and closer. Five years away? Ten? And then what? What will it be like to live in a world without Moore’s Law . . .when every human institution now depends upon it?
But the great lesson of Moore’s Law is not just that we can find a way to continuously better our lives – but that human ingenuity knows no bounds, nor can ever really be stopped. You probably haven’t noticed over the last decade the occasional brief scientific article about some lab at a university, or at IBM, Intel or HP, coming up with a new way to produce a transistor or electronic gate out of just two or three atoms. Those stories are about saving Moore’s Law for yet another generation. But that’s the next chapter. Right here and now, this week, the folks at Intel were almost giddy in announcing that what had been one of those little stories a decade ago – tri-gate transistors – would now be the technology in all new Intel chips.
I’m not going to go into technical detail about how tri-gate transistors work, but suffice to say that since the late 1950s, when Jean Hoerni, along with the other founders of the semiconductor industry at Fairchild (including Gordon Moore), developed the ‘planar’ process, all integrated circuits have been structurally flat, a series of layers of semiconductors, insulators and wiring ‘printed’ on an equally flat sheet of silicon. For the first time, Intel’s new tri-gate technology leaves the plane of the chip and enters the third dimension. It does so by bringing three ‘fins’ of silicon up from beneath the surface, having them stick up into the top, transistor, layer. The effect is kind of like draping a mattress over a fence – and then repeating that over a billion fences, all just inches apart. The result is a much greater density of the gates, lower power consumption, faster switching and fewer quantum side-effects. Intel claims that more than 6 million of these 22 nanometer Tri-Gate transistors can fit in the period at the end of this sentence.
The first processors featuring Tri-Gate transistors will likely appear later this year. And you can be sure that competitors, with similar designs, will appear soon after. But that’s their battle.
What counts for the rest of us is that Moore’s Law survives. The future will arrive as quickly as ever. . .
You probably didn’t read this story. So, put simply, Intel Corp. announced Wednesday that Moore’s Law isn’t going to end anytime soon. Because of that, your life, and that of your children and grandchildren are going to be a whole lot better than they might have been.
Today, almost a half-century after it was first elucidated by legendary Fairchild and Intel co-founder Dr. Gordon Moore in an article for a trade magazine, it is increasingly apparent that Moore’s Law is the defining measure of the modern world. Every other predictive tool for understanding life in the developed world since WWII – demographics, productivity tables, literacy rates, econometrics, the cycles of history, Marxist analysis, and on and on – have failed to predict the trajectory of society over the decades . . .except Moore’s Law.
Alone, this oddly narrow and technical dictum – that the power, miniaturization, size and power of integrated circuit chips will, together, double every couple years – has done a better job than any other in determining the pace of daily life, the ups and downs of the economy, the pace of innovation and the creation of new companies, fads and lifestyles. It has been said many times that, beneath everything, Moore’s Law is ticking away as the metronome, the heartbeat, of the modern world.
Why this should be so is somewhat complicated. But a simple explanation is that Moore’s Law isn’t strictly a scientific law – like, say Newton’s Laws of Motion – but rather a brilliant observation of an implied contract between the semiconductor industry and the society it serves. What Gordon Moore observed back in the mid-1960s was that each generation of memory chips (in those days they could store a few thousand bits, compared to a few billion today), which appeared about every 18 months, had twice the storage capacity of the generation before. Plotting the exponential curve of this development on logarithmic paper, Moore was please to see a straight line . . .suggesting that this developmental path might continue into the foreseeable future.
This discovery has been rightly celebrated for years. But often forgotten is that there was technological determinism behind the Law. Computer chips didn’t make themselves. And so, if the semiconductor industry had decided the next day to slow production or reduce their R&D budgets, Moore’s Law would have died within weeks. Instead, semiconductor companies around the world, big and small, and not least because of their respect for Gordon Moore, set out to uphold the Law – and they have done so ever since, despite seemingly impossible technical and scientific obstacles. Gordon Moore not only discovered Moore’s Law, he made it real. As his successor at Intel, Paul Otellini, once told me, “I’m not going to be the guy whose legacy is that Moore’s Law died on his watch.” And that’s true for every worker in the semiconductor industry. They are our equivalent of our medieval workers, devoting their entire careers to building a cathedral whose end they will never see.
And so, instead of fading away like yet one more corporate five year plan, Moore’s Law has defined our age, and done so more than any of the more celebrated trend-setters, from the Woodstock generation to NASA to the personal computer. Moore’s Law today isn’t just microprocessors and memory, but the Internet, cellular telelphony, bioengineering, medicine, education and play. If, in the years ahead, we reach that Singularity of man and computer that Ray Kurzweill predicts for us, that will be Moore’s Law too. But most of all, the virtuous cycle of constant innovation and advancement, of hot new companies that regularly refresh our economy, and of a world characterized by continuous change – in other words, the world that was created for the first time in history only about sixty years ago, and from which we can hardly imagine another – is the result of Moore’s Law.
When Gordon Moore first enunciated his Law, only a handful of industries – the first minicomputers, a couple scientific instruments, a desktop calculator or two – actually exhibited its hyperbolic rate of change. Today, every segment of society either embraces Moore’s Law or is racing to get there. That’s because they know that if only they can get aboard that rocket – that is, if they can add a digital component to their business — they too can accelerate away from the competition. That’s why none of the inventions we Baby Boomers as kids expected to enjoy as adults – atomic cars! personal helicopters! ray guns! – have come true; and also why we have even more powerful tools and toys – instead. Whatever can be made digital, if not in the whole, but in part – marketing, communications, entertainment, genetic engineering, robotics, warfare, manufacturing, service, finance, sports – it will, because going digital means jumping onto Moore’s Law. Miss that train and, as a business, an institution or a cultural phenomenon, you die.
So, what made this week’s announcement — by Intel — so important? It is that almost from the moment the implications of Moore’s Law became understood, there has been a gnawing fear among technologists and those who understand technology, that Moore’s Law will someday end – having snubbed up against the limits of, if not human ingenuity, then physics itself. Already compromises have been made – multiple processors instead of a single one on a chip, exotic new materials to stop leaking electrons – but as the channels get narrower and bumpier with molecules and the walls thinner and more permeable to atomic effects, the end seems to draw closer and closer. Five years away? Ten? And then what? What will it be like to live in a world without Moore’s Law . . .when every human institution now depends upon it?
But the great lesson of Moore’s Law is not just that we can find a way to continuously better our lives – but that human ingenuity knows no bounds, nor can ever really be stopped. You probably haven’t noticed over the last decade the occasional brief scientific article about some lab at a university, or at IBM, Intel or HP, coming up with a new way to produce a transistor or electronic gate out of just two or three atoms. Those stories are about saving Moore’s Law for yet another generation. But that’s the next chapter. Right here and now, this week, the folks at Intel were almost giddy in announcing that what had been one of those little stories a decade ago – tri-gate transistors – would now be the technology in all new Intel chips.
I’m not going to go into technical detail about how tri-gate transistors work, but suffice to say that since the late 1950s, when Jean Hoerni, along with the other founders of the semiconductor industry at Fairchild (including Gordon Moore), developed the ‘planar’ process, all integrated circuits have been structurally flat, a series of layers of semiconductors, insulators and wiring ‘printed’ on an equally flat sheet of silicon. For the first time, Intel’s new tri-gate technology leaves the plane of the chip and enters the third dimension. It does so by bringing three ‘fins’ of silicon up from beneath the surface, having them stick up into the top, transistor, layer. The effect is kind of like draping a mattress over a fence – and then repeating that over a billion fences, all just inches apart. The result is a much greater density of the gates, lower power consumption, faster switching and fewer quantum side-effects. Intel claims that more than 6 million of these 22 nanometer Tri-Gate transistors can fit in the period at the end of this sentence.
The first processors featuring Tri-Gate transistors will likely appear later this year. And you can be sure that competitors, with similar designs, will appear soon after. But that’s their battle.
What counts for the rest of us is that Moore’s Law survives. The future will arrive as quickly as ever. . .
Subscribe to:
Posts (Atom)