Tuesday, April 27, 2010

News: Greek economy rated junk by S&P

"The downgrade results from our updated assessment of the political, economic and budgetary conditions that the Greek government faces in its efforts to put the public debt burden onto a sustained downward trajectory" Marko Mrsnik, S&P credit analyst.

Standard & Poor's Ratings Services, that publishes financial research and analysis on stocks and bonds, downgraded Greece to a status of 'junk', as the government's economy actions are narrowing the, already, weak economic health of the country. Greek ratings went to the bottom, being lowered by three notches to double-B-plus, the lower level of S&P list, making Greece the first Eurozone member to achieve this status

News came after this Saturday, German parties took an aggressive stance against Greek, suggesting an expulsion of Greece from the Eurozone. The hard line came as Greek PM, George Papandreou, asked European Union and International Monetary Fund for a €45 bn aid

S&P observation is that a debt of 13% of gross domestic product (country's overall economic output) is a burden to Greek recovery, and should be the primary mission of government, as solve it would be the first step to solve the economic problems.

The deadline of Greek 'fundraising" is 19 May, expecting to achieve at least €9 bn euros. If not, recovery would become, nearly impossible.

Germans warned to Greek investors that recovery, if possible, will come with great effort and discipline. S&P are even more pessimistic: 'There is an average chance, between 30% and 50% of get the money back'

Also, the agency noted that long-term growth will be weak, making the Greek economy weak and less credit-worthy

Portugal was downgraded two-notch, and is expected a struggle of Portugal's economy to keep his debt under a sensible level, at least until 2013.

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S&P downgrades Greek debt to junk status

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How does Goldman Sachs make its profits? Know how in less than 20 minutes

Correspondent Paul Solman explores the secretive inner workings of Goldman Sachs. Videos made by PBS News Hour. Know how Goldman Sachs make it's profits in less than 20 minutes, while you eat, spend time with your family or do anything else:

Have any question about Goldman's case? Who and why are suing the company? What happened? Check our Guide to Goldman Sachs case

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Economy Lessons: Government Price-Fixing, by Henry Hazlitt

We have seen what some of the effects are of governmental efforts to fix the prices of commodities above the levels to which free markets would otherwise have carried them. Let us now look at some of the results of government attempts to hold the prices of commodities below their natural market levels.

The latter attempt is made in our day by nearly all governments in wartime. We shall not examine here the wisdom of wartime price-fixing. The whole economy, in total war, is necessarily dominated by the State, and the complications that would have to be considered would carry us too far beyond the main question with which this book is concerned.* But wartime price-fixing, wise or not, is in almost all countries continued for at least long periods after the war is over, when the original excuse for starting it has disappeared.

It is the wartime inflation that mainly causes the pressure for price-fixing. At the time of writing, when practically every country is inflating, though most of them are at peace, price controls are always hinted at, even when they are not imposed. Though they are always economically harmful, if not destructive, they have at least a political advantage from the standpoint of the officeholders.By implication they put the blame for higher prices on the greed and rapacity of businessmen, instead of on the inflationary monetary policies of the officeholders themselves.

Let us first see what happens when the government tries to keep the price of a single commodity, or a small group of commodities, below the price that would be set in a free competitive market.

When the government tries to fix maximum prices for only a few items, it usually chooses certain basic necessities, on the ground that it is most essential that the poor be able to obtain these at a “reasonable” cost. Let us say that the items chosen for this purpose are bread, milk and meat.

The argument for holding down the price of these goods will run something like this: If we leave beef (let us say) to the mercies of the free market, the price will be pushed up by competitive bidding so that only the rich will get it. People will get beef not in proportion to their need, but only in proportion to their purchasing power. If we keep the price down, everyone will get his fair share.

The first thing to be noticed about this argument is that if it is valid the policy adopted is inconsistent and timorous. For if purchasing power rather than need determines the distribution of beef at a market price of $2.25 cents a pound, it would also determine it, though perhaps to a slightly smaller degree, at, say, a legal “ceiling” price of $1.50 cents a pound. The purchasing-power-rather-than-need argument, in fact, holds as long as we charge anything for beef whatever. It would cease to apply only if beef were given away.

But schemes for maximum price-fixing usually begin as efforts to “keep the cost of living from rising.” And so their sponsors unconsciously assume that there is something peculiarly “normal” or sacrosanct about the market price at the moment from which their control starts. That starting or previous price is regarded as “reasonable,” and any price above that as “unreasonable,” regardless of changes in the conditions of production or demand since that starting price was first established.


News: Goldman Sachs: Trust is key to survival, says chief

WASHINGTON - JANUARY 13:  Lloyd Blankfein (L),...Image by Getty Images

BBC News: Goldman Sachs: Trust is key to survival, says chief

The chief executive of Goldman Sachs is to tell a US Senate hearing that the firm did not mislead clients and could not survive without their trust.

Lloyd Blankfein will also say that the day he learned that regulators were filing fraud charges against Goldman was the worst of his professional life.

Goldman chief Lloyd Blankfein will speak about the importance of trust.

Remember that you can read what's happening with SEC's Lawsuit against goldman and a timeline of what happened at Economy Lessons.

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