'No way forward for US economy'

The United States economy has "no way forward" unless the administration addresses the root causes of the current economic crisis which includes extensive "military expenditures", said Rodney Shakespeare, professor of binary economics.

"There is no way forward unless the United States addresses the causes of the problems and starts by cutting its military expenditure. And secondly it must stop exporting jobs and it must address the problems of Main Street America," Shakespeare told Press TV's U.S. Desk Friday.

He said recent warnings by rating firms over the U.S. debt crisis are "serious" as the debt has reached "unrepayable levels." "Debt cannot be repaid and won't be repaid", he added.

Leading rating firms have warned that the U.S. triple-A credit rating could be jeopardized if the government does not reverse the upwards trend of debt rations.

China moves to prop up Europe's economy

The Asian nation pledges to buy billions of dollars' worth of bonds in European Union governments to restore confidence in the debt-ridden region. The EU is China's biggest trading partner.

Reporting from Beijing and London —

Growing into its role as a global economic power, China is pledging to buy billions of dollars' worth of bonds in European governments to help restore confidence in the debt-ridden region.

The move is the latest evidence that the giant Asian nation is developing ties with strategically important trading partners and expanding its influence in areas where it has long played a minor role.

In what European media have dubbed a charm offensive, Chinese Vice Premier Li Keqiang was all smiles on a recent swing through the continent, assuring the Germans that their economy was complementary to China's and praising the Spanish as good friends.

He also dispensed plenty of largess, promising to aid the souring economies of Spain and Portugal — pledges that were seen as more than just goodwill.

If Beijing wants its economy to keep flourishing, China can't afford the collapse of the euro any more than the nations that use it. The European Union is China's biggest trading partner, and China is the EU's second-biggest export market.

That adds impetus for helping the Spanish consumers who buy Chinese-made clothes and other exports or the German firms that provide Chinese manufacturers with the sophisticated equipment they need.

"There are mutual benefits behind China's diplomacy where both sides can win," said Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation, a think tank under the Ministry of Commerce.

China already has significant holdings of European debt. In Spain alone, it owns 43 billion euros ($57.3 billion) in that country's debt — about a fifth of existing Spanish bonds.

On Thursday, Spain easily raised 3 billion euros ($3.9 billion) in a debt auction that was a key test of investor confidence, and Italy sold 6 billion euros ($7.8 billion) in medium- and long-term bonds. The offerings came a day after Portugal conducted a successful bond sale.

It wasn't immediately known how much debt China bought, but the nation wasn't alone. Japan, for instance, also has said it would buy European government debt.

Still, China's foray into the European crisis underscores the growing influence that Beijing's deep pockets play.

Portugal's finance minister, Fernando Teixeira dos Santos, met with Chinese banking and finance officials in Beijing last month to promote the sale of Portugal's debt. The heavily indebted country has resisted calls for an EU bailout despite record yields for its bonds — a sign of how risky investing in Portugal remains.

In Spain, where unemployment hovers at 20%, domestic media reported that China had offered to buy 6 billion euros more in government bonds. On Li's trip this month the two countries signed business deals worth more than $7 billion.

Alfredo Pastor, an economics professor at the IESE Business School of the University of Navarra in Barcelona, said China's intervention to help prop up Spain sent a strong signal to other investors that Spain was a safe bet.

"China has very deep pockets," Pastor said. "If you can see on the other side somebody who's willing to sustain the paper, then your urge to short it may be lower, [and that] may contribute to stabilizing the situation."

Experts warn, however, that China's largess alone is not large enough to resolve the worsening state of many European balance sheets.

"This can help on the margins, definitely, but that's not what's going to shift the balance," said Antonio Garcia-Pascual, chief economist for southern Europe at Barclays Capital in London. "While the Chinese announcement is welcome, it's not a solution."

Countries on the EU's so-called periphery, such as Ireland and Greece, in addition to Spain and Portugal, are deeply troubled financially. Reversing their downward spiral would require not only hundreds of billions of dollars but also new growth drivers to build the nations out of debt.

"It's a solvency crisis," said Michael Pettis, a senior associate at the Carnegie Endowment for International Peace and a professor at Beijing's Peking University specializing in financial markets. "And you can't keep borrowing yourself out of insolvency.

Read on at source

Bernanke Expresses Concern Over Sluggish United States Economy January 09, 2011

The United States Federal Reserve chair Ben Bernanke said while the US economy was showing signs of a recovery, this was not yet sufficient to address lingering unemployment.

Addressing the Senate Budget Committee, Bernanke said it would take a number of years for the employment situation in the United States to reach “normal” levels. He said :” We have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold”. He added that the job market improvement had been “modest” at best.

Bernanke said that :” Persistently high unemployment, by damping household income and confidence, could threaten the strength and sustainability of the recovery”. He added that low inflation was also a key concern as :” Very low inflation increases the risk that new adverse shocks could push the economy into deflation”.

United States Labour Department figures showed that US unemployment dropped marginally in December to 9.4% from 9.8% the month before. The drop was the largest recorded in a single month in over 12 years. This is mitigated however by the statistic that 260,000 Americans were removed from the calculation after giving up on seeking employment.

Job Creation Not Good; Bernanke Says to Give It Four or Five Years

The Labor Department has reported that the economy created 103,000 jobs last month. That’s not good. With revisions, the economy created 71,000 jobs in November and 210,000 in October.

The unemployment rate fell to 9.4%. Ben Bernanke testified before Congress this morning. Here’s the bit getting a lot of attention:

Although it is likely that economic growth will pick up this year and that the unemployment rate will decline somewhat, progress toward the Federal Reserve’s statutory objectives of maximum employment and stable prices is expected to remain slow. The projections submitted by Federal Open Market Committee (FOMC) participants in November showed that, notwithstanding forecasts of increased growth in 2011 and 2012, most participants expected the unemployment rate to be close to 8 percent two years from now. At this rate of improvement, it could take four to five more years for the job market to normalize fully.