Michigan Consumer Sentiment Dives

U.S. consumer confidence fell in December to a five-month low as Americans grew more concerned about the possibility of higher taxes next year.

The Thomson Reuters/University of Michigan consumer sentiment index decreased to 72.9, the weakest since July, from 82.7 in November. Economists projected a final reading of 75 for December, according to the median of 66 estimates in a Bloomberg survey. Today’s figure was lower than a preliminary report earlier this month.

American households are growing uneasy as the federal government moves toward more than $600 billion of higher taxes and spending cuts starting early in 2013. At the same time, as the world’s largest economy enters the new year, job growth, rising home values, lower gas prices and stock market gains might help boost consumer spending, which accounts for about 70 percent of the economy. Read more>> 

Two Brothers Patent Toilet Paper Ads

Jordan and Bryan Silverman are offering businesses the chance to advertise on a slightly unusual platform — toilet paper. "It's an unmatched active audience," Jordan, co-founder of Star Toilet Paper, told the Daily News. "A person looks at the average advertisement for two to five seconds. People will look at ours for a lot longer."

The environmentally friendly paper, printed with coupons and ads in soy-bean-based ink, sells for half a cent per ad. Users can redeem the coupons through Star Toilet Paper's website. Venues that want to put in the ad-filled paper in their stalls get the rolls for free. Jordan, a recent graduate of University of Michigan, came up with the innovative marketing plan about two years ago when he found himself taking a minute to look at the wall of a bathroom stall at the Ann Arbor, Mich., campus.

"I was thinking that it's one of the times that people want to read," Jordan, who quickly turned to his brother with the plan, said. "We've really felt that we were on to something." Since then, Jordan, 22, and Bryan, 18, have found that the idea is flush with opportunities. Read more >>

Consumer Sentiment in U.S. Falls to Lowest Since December

Consumer sentiment (Photo credit: Wikipedia)

Confidence among U.S. consumers declined in June to the lowest level this year as Americans grew more pessimistic about prospects for the economy. The Thomson Reuters/University of Michigan final index of sentiment fell to 73.2 this month from 79.3 in May. The gauge was projected to hold at the preliminary reading of 74.1, according to the median forecast of economists surveyed by Bloomberg News.

The Michigan survey’s index of current conditions asks Americans whether they’re better off than they were a year ago and if they think it’s a good time to buy big-ticket items like cars. In June that measure dropped to 81.5 from 87.2.

The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, decreased to 67.8 from 74.3, which was the highest since July 2007. Read more >>

JP Morgan Derivatives Exposure: Systemic Risk Is Everywhere

The $2 billion loss of JP Morgan in derivatives trading is signaling, once again, the enormous risks big banks take with taxpayer backing.  All U.S. banks are covered by the FDIC, and if a loss is big enough, it could threaten the financial system just as it did in 2008.  JP Morgan has $70 trillion in total derivative exposure. 

The entire world has a little more than $700 trillion in derivative exposure, and one bank has 10% of all the derivative exposure on the planet!  If JP Morgan gets into trouble, it alone could cause systemic failure.  Today, the FBI announced an investigation into the surprise $2 billion (or more) trading loss that happened last week at the bank. 

Reuters reported, “The probe was seen in some quarters as necessary, given the ongoing debate in Washington about bank regulation and reform, and one expert said it raised the level of concern around what happened.  ‘The FBI looks for evidence of crimes and goes after people who it alleges are criminals. They want to send people to jail. The SEC pursues all sorts of wrongdoing, imposes fines and is half as scary as the FBI,’ said Erik Gordon, a professor in the law and business schools at the University of Michigan.” More...

Forget All The Hype - US Consumers Are Not Spending

The Commerce Department said retail sales rose only 0.1 percent last month. Consumers cut spending sharply at department stores and clothing stores. And sales dropped 1.8 percent at hardware stores.

In the January-March quarter, overall economic growth slowed to an annual pace of 2.2 percent. That's down from the 3 percent increase in the October-December period. And job growth has slowed from the start of the year, where the average fell to just 135,000 jobs per month in March and April.

Excepted from Source.

One in Five U.S. Households Have a Negative Net Worth

About one in five U.S. households owe more on credit cards, medical bills, student loans and other debts that aren't backed by collateral — so not including car loans — than they have in savings, checking accounts and other liquid assets, according to a new University of Michigan report.

"Some families have not been able to make substantial headway," said Frank Stafford, an economist at the U-M Institute for Social Research and co-author of the report, in a statement.

Average savings levels have gone up since 2008. But the U-M research showed that there had been no improvement in financial liquidity between 2009 and 2011 — except among families with more than $50,000 in savings and other liquid assets. Families who could afford to save more money often did so because they feared the worst. More...

New Yorkers' consumer confidence hits 14-month low

Image via Wikipedia

Richard A. D'Errico
New Yorkers consumer confidence dropped to its lowest point in more than a year, according to the latest Siena Research Institute poll.

Consumer confidence in New York fell 4.6 points in June to 63.4, while the nation’s consumer confidence rose 2.4 points to 76.0. The national figure is compiled by the University of Michigan. In June 2009, consumer confidence stood at 64.3; in June 2008 it was 52.6.

The latest consumer confidence breaks a two-month streak of consumer confidence improvements. The current figure is the lowest since April 2009, when it hit 62.1.

A reading of 75.0 is the break-even point, where an equal percentage of people are optimistic and pessimistic. The consumer confidence index measures peoples’ willingness to spend, as opposed to their ability to spend.

Buying plans were down in all categories—cars and trucks, computers, furniture, homes and major home improvements, according to the Siena Research Institute poll. The institute is affiliated with Siena College in Loudonville.

“It hasn't happened recently,” said Douglas Lonnstrom, founding director of the Siena Research Institute, said of buying plans being down in all categories. The last time it happened was in October 2008.

There is no margin of error associated with the confidence readings, because they are index numbers developed in a series of statistical calculations.

Read more: New Yorkers' consumer confidence hits 14-month low - The Business Review (Albany)

Strikes & Labor Unrest Ignite Across China

Image by Cain and Todd Benson via Flickr

nytimes.com
KEITH BRADSHER
A Labor Movement Stirs in China
Striking workers at a Honda auto parts plant here are demanding the right to form their own labor union, something officially forbidden in China, and held a protest march Friday morning.

Meanwhile, other scattered strikes have begun to ripple into Chinese provinces previously untouched by the labor unrest.

A near doubling of wages is the primary goal of the approximately 1,700 Honda workers on strike here in this southeastern China city, at the third Honda auto parts factory to face a work stoppage in the last two weeks.

A chanting but nonviolent crowd of workers gathered outside the factory gates on Friday morning and held a short protest march before dissolving into a large group of milling young workers who filled the two-lane road for more than a block outside the factory.

They were met by black-clad police with helmets, face masks and small round riot shields. But the workers showed no signs of being intimidated. The police marched off at midmorning, leaving the workers to block the road into the small industrial park next to a eucalyptus-lined muddy canal that runs past the factory.

The workers dispersed about an hour after the police left and remained on strike.

Management helped defuse the march by distributing a flier that essentially offered 50 renminbi, or about $7.30, for each of the eight days that the factory was closed beginning in late May as part of a nationwide shutdown of Honda manufacturing set off by a transmission factory strike. Management previously wanted to treat the shutdown as unpaid leave, workers said.

Only 50 or so striking workers showed up outside the factory after lunch on Friday. Managers distributed a new flier urging them to return to work in the afternoon and saying that all would be forgiven if they did.

But the flier contained no new offer on wages, and there was no sign that any workers were going back into the factory. One worker said that the newly chosen factory council was not holding any negotiations because it could be physically dangerous for all of the representatives to gather in one place with management and the authorities.

The worker, an activist in the labor unrest here, said that the strikers were waiting for a genuinely new offer from management before holding any more talks.

This latest strike, which started Wednesday morning, has taken on political dimensions.

The strikers here have developed a sophisticated, democratic organization, in effect electing shop stewards to represent them in collective bargaining with management. They are also demanding the right to form a trade union separate from the government-controlled national federation of trade unions, which has long focused on maintaining labor peace for foreign investors.

“The trade union is not representing our views; we want our own union that will represent us,” said a striking worker, who insisted on anonymity for fear of retaliation by government authorities or the company.

Geoffrey Crothall, the spokesman for China Labour Bulletin, a labor advocacy group based in Hong Kong that seeks independent labor unions and collective bargaining in mainland China, expressed surprise when told how the Honda workers here in Zhongshan had organized themselves. “It does reflect a new level of organization and sophistication” in Chinese labor relations, he said.

A Honda spokesman declined to comment on the details of the strike. The Chinese government has been relatively lenient in allowing coverage of the labor unrest because Honda is a Japanese company, and some anti-Japanese sentiment lingers in China as a legacy of World War II.

Despite unusual forbearance in allowing the various strikes so far, the Chinese government has shown no interest in tolerating unions with full legal independence from the national union.

Dozens of workers gathered in clumps shortly before sunset on Thursday in front of the sprawling parts factory and outspokenly criticized local authorities for seeming to side with the company.

The workers said that large numbers of police officers had been positioned in the factory on Wednesday and Thursday in an attempt to intimidate them. The two other Honda parts factories shut down by walkouts in recent weeks have reopened after workers were promised large pay increases.

The Chinese government has not allowed unions with full legal independence from the national, state-controlled union. But the government has occasionally finessed the issue by letting workers choose their factories’ representatives of the national union, or by allowing the creation of “employee welfare committees” in parallel with the official local units, said Mary E. Gallagher, a China labor specialist at the University of Michigan.

But these exceptions have tended to be in less prominent industries like shoe and garment manufacturing, and not in bastions of heavy industry like automaking. More...

More US Govt Idiocy - $500 for Every Newborn

Kimberly Palmer
Coming Soon: $500 for Every Newborn?
Imagine a world where every baby received a trust fund at birth. It might sound like a fairy tale, but being born into money--or at least into a $500 savings account--could soon become reality for all children born in the United States. Lawmakers are considering a bill that would give each newborn just that, with the goal of promoting savings that would later be used for education, a first home, or retirement. Here's what you should know about the ASPIRE ("America Saving for Personal Investment, Retirement, and Education") Act:

How would this program work?

The ASPIRE Act would give each child born in the United States a $500 savings account. Recipients could then use that money once they were older to pay for education, a first home, or retirement. Low-income children would receive additional funding, and all participants could add to their accounts over time.

Would it really help people save more money? Five hundred dollars isn't much.

The purpose of the accounts, says Reid Cramer, director of the Asset Building Program at the New America Foundation, is to get people invested in their future. "Having an asset has the potential to change the way people think and plan for their future, and sometimes those effects can be generated just from small asset holdings," he says, adding that it's possible for people to build up significant savings over time. The ASPIRE Act also pairs the creation of the accounts with financial literacy programs in schools.

Indeed, pioneering research by University of Michigan professor Michael Sherraden suggests starting individual savings accounts for lower-income people can lead them to feel more confident about the future. Recipients of such accounts also report feeling that they have greater control over their lives, including the ability to plan for education and retirement costs. Further studies have shown that owning assets is associated with greater empowerment and civic participation, increased income, and positive educational outcomes.

Why not just give the money to low-income people who really need it?

Entitlement programs that benefit everyone, such as Social Security and Medicare, tend to enjoy more widespread support and therefore last longer. Programs aimed exclusively at lower-income groups, such as welfare programs, often attract more controversy and receive less political support.

"The important thing is that everybody gets an account," says Cramer, and that it's opened automatically so families don't need to take much action. It would still be a progressive program, he adds, because as the ASPIRE Act is currently written, poorer families would receive additional funding.

Don't we already have a lot of policies in place that encourage savings?

Yes, but they tend to mainly help people with higher incomes. According to Sherraden, two thirds of retirement tax benefits go to households that earn incomes of $100,000 and higher. Policies that encourage homeownership, such as tax deductions on interest payments, similarly benefit those who can already afford to purchase homes. Other savings systems, such as 529 accounts for college savings, depend on parents opening the accounts and making deposits. The ASPIRE Act is different because each child would have an account and receive an initial deposit.

Has this been tried anywhere before?

Yes--in Great Britain. Since September 2002, children born in the United Kingdom have received a $500 savings account, just as the ASPIRE Act would provide in the United States. Recipients can withdraw the money after the age of 18; unlike in the proposed U.S. version, there are no restrictions on how they can spend the money. About one quarter of the recipients add extra money to the account, and, according to calculations by Cramer, most of the accounts go up in value so they are worth over $600. (The money is invested in a diversified portfolio of stocks, much like college savings, or 529, accounts in the United States.) Since the program's first enrollees are now only 7 years old, it's too early to say how they will spend the money once they turn 18.

Could this really become law in the United States sometime soon?

Lawmakers are expected to reintroduce the ASPIRE Act before the end of the year, and it already enjoys bipartisan support. The main challenge for supporters will most likely be over how to justify the cost at a time of great budget deficits and competing demands for federal dollars. Critics argue that the program would simply create another costly entitlement program. Writing for the Portland-based think tank Cascade Policy Institute, policy analyst Sreya Sarkar says the program would provide benefits to one generation by taxing another.

How would this program be paid for?

Over the first decade of its life, the program would cost around $37.5 billion, and would start at around $3.25 billion per year. Cramer argues that because the money would be invested through the savings account, it would help spur economic growth. Lawmakers sponsoring the bill have said they would pay for it by making other cuts, but the bill doesn't specify what those cuts would be.