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Group Of 20 Meet In Washington D.C. This Week

The Group of 20 meet in Washington D.C. on Thursday and Friday for talks on how to avert a sovereign-debt crisis in Europe. Three years after the collapse of Lehman Brothers and the fallout affecting the global economy, once again a major crisis is threatening to rock the world’s financial system. Europe’s future and the economic recovery of major economies in the world is at stake.

Economists, investors, and consumers alike are calling on financial leaders to make some significant policy changes that will ensure movement forward. The financial leaders hope to prevent a sovereign-debt crisis facing Greece and Europe in order to avoid financial turmoil in world markets.

“We have entered a dangerous new phase of the crisis,” said Christine Lagarde, managing director of the International Monetary Fund. “To navigate it, we need strong political will across the world, leadership over brinkmanship.” World Bank President Robert Zoellick has commented that the time for muddling is over. He stated it’s time to fix the problem.

Pieces of the multi faceted approach have become clearer, and the meeting of the Group of 20 should solidify the steps to move forward.

There are two main factors driving the crisis. First, political discord within Europe over how much support to give indebted euro-zone governments that are implementing tough fiscal austerity programs; and second, vulnerabilities within the region’s financial system, especially in France where banks hold 671.6 billion euros of government debt of high-deficit euro-zone countries. German officials have also exacerbated the cycle by talking about a Greek default or leaving the euro zone altogether. Germany is the largest economy in the euro zone.

The world will be watching to see if the Group of 20 have the political as well as the financial resolve to tackle this crisis before it gets completely out of hand.

“Buffett Tax” Proposed By President Obama

In an appeal to voters, President Barack Obama has proposed a so-called “Buffett Tax” on people making more than $1 million a year as part of his deficit recommendations to Congress on Monday. Such a proposal would appeal to his Democratic base ahead of the 2012 Presidential election, although it probably would not raise much revenue.

White House Communications Director Dan Pfeiffer said the tax would act as a “kind of AMT” also know as alternative minimum tax. The purpose of the tax would be to ensure millionaires pay a minimum rate of tax that at least matches up with the middle class.

Obama has repeatedly called on Congress to close the tax loopholes for the rich as he tries to draw a clear distinction between himself and the Republicans in the 2012 election.

The “Buffett Tax” refers to billionaire investor Warren Buffett. Mr. Buffett stated earlier in the year that rich people like him often pay less in taxes than the people he employs because of loopholes in the tax code. Buffett is a close advisor to the President on economic matters.

President Obama will present his plans for deficit reduction to a “super committee” in Congress on Monday. Obama is likely to get a lot of blow-back from the Republicans as House Speaker John Boehner adamantly reiterated last week that all tax increases are “off the table”.

According to reports, Obama’s deficit cuts will top $1.5 trillion. A package of spending and revenue larger than $1.5 trillion would send the message that Obama “is serious about deficit reduction,” said Ethan Siegal, a political analyst with the Washington Exchange. “The White House wants to be ahead of the curve for deficit reduction,” Siegal said. Other analysts have put the figure well over $2 trillion. Most economists believe that would not be sustainable and the lower figure would be a better start.

If an agreement isn’t reached by Congress on deficit cuts, an automatic trigger of $1.2 trillion in cuts would come into play.

World Bank Sounds Warning

According to the news agency Reuters, the head of the World Bank said on Wednesday that the world has entered a new economic danger zone and Europe, Japan, and the United States need to make hard decisions to avoid dragging down the global economy.

World Bank President Robert Zoellick spoke today at George Washington University. Speaking about Europe, Japan, and the United States, Zoellick said, “They have procrastinated for too long on taking the difficult decisions, narrowing what choices are now left to a painful few,” he said, according to a prepared text of his remarks, which come ahead of meetings of the World Bank and International Monetary Fund next week. “The time for muddling through is over,” Zoellick said. “If we do not get ahead of events; if we do not adapt to change; if we do not rise above short-term political tactics or recognize that with power comes responsibility, then we will drift in dangerous currents.”

The World Bank President said emerging market nations would not sit on the sidelines as more advanced economies try to fix themselves. Zoellick focused on the shifting economic landscape of the world pointing out that emerging economies are playing a much greater role in the overall global economy these days.

Zoellick also said it is time to rethink foreign aid to developing countries. Although millions of people around the world depend on foreign aid as a life or death issue, many countries are using the aid to develop and grow economies. Zoellick believes the goal should not be charity, but a mutual interest in building more poles of growth.

“We will not release the full potential of half of the world’s population until globally we address the issue of equality; until countries, communities, and households around the world acknowledge women’s rights and change the rules of inequality,” Zoellick said.

U.S. Economy Is Flat

Official word from the Commerce Department and Labor Department is no job growth, no sales growth, and no price growth for the month of August. The flat performance the economy is exhibiting leads analysts to believe we might not be in a recession, but the economy is going nowhere and is quite vulnerable to contraction at this point.

Sales growth in August was unchanged from a month earlier, according to a report by the Commerce Department. It was a weaker reading than had been expected. Sales growth for July was also revised downward.

The U.S. economy saw consumer confidence take a nosedive in August after a stinging battle over the nation’s budget by Congress and the White House, bringing the U.S. to the brink of default. The U.S. government’s coveted AAA+ credit rating was also knocked down a notch to AA+. Consumer spending accounts for about two-thirds of the U.S. economy.

The nation’s unemployment rate is standing at 9.1% with little or no relief in sight. Although President Barack Obama has proposed a $447 billion jobs package, many economists are wondering if a repeat battle like we saw in August, is now looming in the near future between the President and the Congress.

The Labor Department also released a report today and said its wholesale price index was flat last month as a drop in energy prices helped to offset the rise in higher food costs. Excluding energy and food, the U.S. saw the smallest increase in wholesale prices in three months. The Labor Department is also reporting the Producer Price Index was unchanged for August as compared to a.02% increase in July.

Economists are now seeing a substantial chance the U.S. could go back into recession by the end of 2011 or early 2012. Many are hoping the Federal Reserve will unveil new measures at their September 20-21 meeting that would help boost the economy. The nation’s top economists are also hoping there won’t be a long bitter battle between the President and Congress on how to move the country forward.

Greece Default Could Be Imminent

German Chancellor Angela Merkel tried to squash talk of an imminent default by Greece as U.S. President Barack Obama’s administration voiced concerns over the euro zone’s inability to stem the debt crisis it faces.

Chancellor Merkel said in a radio interview that Europe was doing everything in its power to avoid a default by Greece and cautioned politicians to weigh their words carefully in order to avoid creating turmoil in the financial markets. “We are using all the tools we have to prevent this. We need to avoid all disorderly processes with regards to the euro.” Merkel said.

Chancellor Merkel called the debt crisis now facing Europe a “historic challenge”. She emphasized that everything must be done to keep the euro zone intact “because we would see domino effects very quickly.”

Chancellor Merkel and French President Nicolas Sarkozy spoke by telephone on Monday concerning the crisis. According to the news agency Reuters, there are no plans for a joint statement at this time

Meanwhile, President Obama told a group of Spanish journalists that euro zone leaders need to show the financial markets that they were taking responsibility in solving the debt crisis that threatens to derail the European monetary system.

U.S. Treasury Secretary, Timothy Geithner, will take the unprecedented step of attending a meeting of European Union finance ministers in Poland on Friday. It will be his second trip to Europe in a week after he met his main EU counterparts at a G7 meeting last weekend.

Geithner said, “In the end the big countries in Europe, the leaders in Europe must meet and take a decision on how to coordinate monetary integration with more effective co-ordinated fiscal policy”.

President Obama Pushes $447 Billion Jobs Package

Thursday evening, President Barack Obama laid out his plan for a $447 billion jobs package in an address to Congress and the nation. Obama stated that he believes the United States is in a crisis and called on Congress for urgent action on sweeping proposals to revive the economy and to hopefully steer away from another recession.

While taking aim at the Republicans who have thwarted his initiatives, President Obama said, “stop the political circus and actually do something to help the economy.”

President Obama wants Congress to pass the “American Jobs Act” by the end of this year and offset the costs with deficit reductions. The President is looking to seize the moment in a battle of ideology with the Republican Party. Recent polling shows the President’s favor-ability at an all time low. President Obama is looking to turn around his presidency with 14 months left until voters go to the polls in the 2012 Presidential election.

Bipartisan between the Democrat and Republican Parties could be hard to come by in the current climate of political wrangling where a blistering debt feud this summer brought the country to the brink of default and led to an unprecedented U.S. credit downgrade by Standard & Poor’s. President Obama insisted that “everything in here is the kind of proposal that’s been supported by both Democrats and Republicans ,including many who sit here tonight, and everything in this bill will be paid for, everything.”

Some of the major points in the jobs plan are:

Cutting the payroll tax in half for 98% of small businesses to encourage them to hire workers and grow their companies. Also cutting payroll taxes in half for 160 million workers next year.

Allow more homeowners to refinance mortgages at the low 4% rate.

Tax credits from $5600-$9600 for hiring “Returning Heroes”

Preventing up to 280,000 teacher layoffs and modernizing 35,000 public schools across the nation.

Reform to the unemployment insurance program.

A $4000 tax credit for hiring long term unemployed workers.

A”Bridge to Work” program for the unemployed.

New Jobless Claims Rise

In the U.S. unemployment continues to dog the Obama administration as new jobless claims rose unexpectedly last week. Applications for unemployment benefits rose to 414,000 in the week ending September 3. Analysts on Wall Street had forecasted a dip to 405,000. Except for one week in April of this year, claims have held steady above 400,000. The Labor Department released the figures today and also reported that hurricane Irene had no real effect on the figures. The total number of Americans receiving unemployment benefits stands at 7.17 million.

Job growth in the U.S. ground to a halt in August with net job creation at zero. This has economists fearing another recession in this country. A slew of data suggests businesses are hesitant to hire as they fear the economy may slip back into recession. The unemployment rate in the U.S. is 9.1%.

The lack of job growth in the United States has become the topic of the day for President Barack Obama and Congress. President Obama is expected to unveil his proposals for job creation in a televised address to Congress and the nation on September 8. President Obama is expected to receive a chilly reception from the Republican party. “In many respects, his hands are tied. It takes time to create jobs,” said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey. “And he’s not going to have much cooperation from the other side of the aisle.”

It is being reported that President Obama will push a $300 billion job creation package that will include tax cuts, infrastructure spending, and aid to local and state governments. The stakes for the economy are high. Financial markets will be hanging on every word of Obama’s speech, and watching for some bipartisanship in Washington D.C. to steer the economy forward.

U.N. Study: Austerity Measures=Disaster

The annual report of the United Nations economic think tank UNCTAD, was released on Tuesday with dismal news. The UNCTAD wrote that austerity measures and deficit cuts are pushing the world economy towards disaster in somewhat misguided attempts to please global financial markets.

The report, entitled “Post-crisis policy challenges in the world economy,” degraded U.S. and European economic policies and called for wage increases, stricter regulation of financial markets, including a return to a system of managed exchange rates, and a conscious break with market-led thinking. “The message here is very pragmatic: we need to reverse our course quickly,” said UNCTAD Secretary General Supachai Panitchpakdi. Supachai, a former head of the World Trade Organization, said the policy response to the crisis, with an emphasis on fiscal tightening, was misconceived.

The lead author of the report Heiner Flassbeck said the situation in the global economy is extremely dangerous and without more stimulus, it could lead to a decade or so of stagnation worldwide. “The current policies were a disaster”, said Flassbeck, head of the globalization and development strategies division at the U.N. Conference on Trade and Development, and a former deputy finance minister in Germany.

“If interests rates everywhere are zero, and if governments stick to the policy of not only keeping fiscal deficits where they are but retrenching, cutting public expenditure, then we will end up in permanent recession,” Heiner Flasssbeck said. “Unemployment depends very much on demand. And if you have no demand then you need government to step in with a huge program for stimulating the economy. This was the U.S. scenario in the past. Now it’s worse because wages are rising less than in the past so you’re going to need a bigger stimulus program.” The recovery from the financial crisis was not only jobless, which was to be expected, but it was also “wageless”, Flassbeck said. Americans, Japanese and Europeans representing 70% of the world’s economy, are expecting their incomes to become stagnant.

Swiss Slated To Estimate U.S. Holdings In Swiss Banks

Switzerland is set to partially meet a U.S. government ultimatum and release an estimate of assets held by U.S. residents in secret Swiss banks by today. Estimates are the figure could run upwards of $30 billion.

The TagesAnzeiger ,a Swiss newspaper, cited unnamed sources saying Switzerland would hand over details that the FINMA financial market regulators have gathered from banks in recent months. The assets in question are those pertaining to Americans with accounts over $50,000. “According to unconfirmed estimates there were $20-30 billion from tens of thousands of clients,” the paper wrote.

The U.S. government is pressuring Switzerland saying Credit Suisse and nine other banks could face charges under Swiss law, unless information on U.S. tax evaders using Swiss bank accounts is turned over to U.S. authorities.

Swiss Finance Minister Eveline Widmer-Schlumpf said on Monday Switzerland would not deliver detailed client data by Tuesday, she said: “That would mean applying emergency law and we’re not applying emergency law here. I am against ultimatums. This is no way of dealing with other states,” she told Swiss television.

In recent months, the U.S. has stepped up pressure on the Swiss government mostly targeting Credit Suisse via a formal investigation and the subsequent indictment of several Swiss bankers. The allegations are the Swiss Bankers helped to shift client assets to other Swiss banks in order to elude paying the U.S. government income taxes on those assets.

A couple of Swiss newspapers have reported that a letter, by U.S. Deputy Attorney General James Cole, was sent to the Swiss on August 31, 2011 and demanded that detailed figures on tax evasion be revealed by today. The banks who do not comply with the letter may be fined up to 2billion Swiss francs.

Euro Zones’s Sovereign Debt Crisis Wreaks Havoc

European stock shares fell sharply on Tuesday reversing earlier gains as the regions sovereign debt crisis continues to mount. European banks exposed to the euro zone’s sovereign debt were hit hard in trading. The regions stocks fell 4% on Monday, with financial issues falling to their lowest in two years.

Every euro zone rescue over the past couple of years has been less effective. Investors and voters alike are starting to realize the cost and sheer magnitude of lost sovereignty is much greater than anyone had previously anticipated.

After volatile action overseas, futures on the Dow Jones Industrial Average futures on the Dow Jones Industrial Average (DJ1U -2.02%) fell 244 points to 10,964. Those on the Standard & Poor’s 500 Index (SP1U -2.32%) dropped 30.10 points to 1,139.20. Nasdaq 100 futures (ND1U -1.77%) shed 42.25 points to 2,122.50. The Dow Jones is set to open markedly lower.

Worries over the sovereign debt crisis facing Europe, became exaggerated after a weekend loss by German Chancellor Angela Merkel’s Christian Democratic Union in regional elections in her home state.

James Hughes, a senior market analyst at Alpari U.K. LTD. wrote in a note, it is widely thought the crisis in Europe will claim many of the euro zone governments, leaving administrations not willing to give financial aid to at-risk nations. He believes the creation of euro bonds are at risk. Some analysts believe the euro bond is the key to saving the euro.

Italy contributed to the worries also, as their government is under pressure to implement austerity measures. The country is bracing for a general strike on Tuesday against such measures.

Investors are bracing for a bumpy ride this week as news from around the world continues to drag down global financial markets.

Moody’s Investor Service Puts US Debt Rating on Downgrade Review

Moody’s warned on Wednesday that it may downgrade the U.S. credit rating because of the current impasse on debt ceiling talks in Washington. The credit rating agency says it will review the federal government’s AAA bond rating. If the agency does downgrade the bond rating it will most likely be to AA.

A downgrade to the credit rating would raise interest rates on U.S. treasury bonds, which would increase the interest paid by U.S. taxpayers. Other rates would also be pushed up such as mortgages and car loans. This news shouldn’t come as a surprise since Moody’s said back in June it would review the U.S.’s credit rating if the President and lawmakers failed to make progress on a new debt ceiling agreement by mid-July. Here’s Moody’s assessment, “An actual default, regardless of duration, would fundamentally alter Moody’s assessment of the timeliness of future payments.”

Many analysts and investors believe that some members of Congress would knowingly let the U.S. default, causing a market collapse that would give them political cover to compromise on the deficit without appearing weak in the eyes of their constituents. Congress and the President have set a joint deadline of July 22 in order to reach an agreement. The final date to avoid a default is on Aug. 2. Basically, Congress and the White House have about a week and a half to jump through a lot of political hurdles to get a deal done. One option that has also been floating around is a short term debt increase and the Treasury would prioritize payments with paying interest on Treasuries over Social Security payouts. The President has publicly opposed this option and wants a long term deal in place before Aug. 2.

The next week and a half will be an interesting one and could have far reaching consequences. If Congress and the White House can’t get a deal done in time, the credit rating will be downgraded causing a market collapse. Let’s hope the politicians on the Hill will stop playing games and get serious for a change.

Markets Post Gains Amid Debt Deal and Global Capital News

All of the markets are up today and the Dow leads the way climbing 150 points a rise of over 1.2%. The Nasdaq and S&P 500 are both up over 1.2% as well, rising 41 and 15 points respectively. The major driving forces behind the rise today include the fact that President Obama has made his first foray into the deficit negotiations today in hopes of getting a significant deal done. Hopes are that President Obama’s involvement will expedite a deal that will lower government spending and increase the nations debt ceiling. Another major announcement helping to push the market is the news that banks regulators have declare that the biggest of global banks must boost their ratios of common equity to risk-weighted assets by up to 2.5%. This is less than the 3% that some economist had expected. With the markets performing well today lets take a look at a few individual stocks posting strong gains.

Servidyne, Inc (Nasdaq:SERV) shares have posted strong gains today climbing 52% to $3.44 per share. Volume is well above average on news that Scientific Conservation Inc. has agreed to purchase SERV fro $3.50 per share. Servidyne will be taken private in the all cash transaction. The deal is expected to close in SERV’s fiscal second quarter and be worth nearly $13 million.

Continucare Corp. (NYSE:CNU) shares are on the rise today gaining nearly 31% to $6.24 per share with an intraday high of $6.32. Volume is trading very heavy as nearly 15.6 million shares have exchanged hands as news that Metropolitan Health Networks Inc. (AMEX:MDF) has agreed to purchase CNU. The buyout deal includes an offering of $6.25 in cash and .0414 shares of Metropolitan stock. The deal is expected to close within the third quarter and is worth a reported $391 million.

Icagen, Inc. (Nasdaq:ICGN) shares have shown the largest gains on the day increasing by 172% to $6.52 per share. Volume is up over 4 million shares as news that ICGN and Pfizer (NYSE:PFE) are in discussion about an acquisition. Icagen has a pain drug collaboration in place with Pfizer, and a deal between the two makes sense. Pfizer can possibly get in early on a drug that could potentially net the company a billion dollars. Currently Icagen has a Market value around $18 million.

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