Sunday, September 26, 2010
Telecom Ministry has made it clear that a decision to bail out new telecom operators who want to surrender 2G licences along with spectrum will be taken in consultation with the Finance Ministry.The Telecom Commission, a decision-making body of the Telecom Ministry, would first consider the issue and if found viable, the Department of Telecom (DoT) would approach the Finance Ministry with the options available, senior DoT officials said.The government had issued new pan-India telecom licences bundled with start-up 2G spectrum to eight companies in January, 2008, for Rs. 1,651 crore each, but some of them have not been able to meet the roll-out obligations, which may prompt the government to either impose a penalty on them or cancel their licences.There are apprehensions that in case no option was given to the struggling operators, they might take legal course and that may result in locking of precious spectrum. However, the officials made it clear that no decision would be taken without consulting the Finance Ministry.Asked whether the issue may be referred to the Empowered Group of Ministers headed by Finance Minister Pranab Mukherjee, officials said although no such decision was taken, this cannot be ruled out. According to sources, at least two new telecom licencees, including Swan Telecom (which has tied up with UAE-based Etisalat), have approached the DoT for surrendering the licences and spectrum they bagged two years ago in lieu of a refund of the entry fee they had paid.As many as eight players, including Swan, Uninor, Videocon-owned Datacom, Shyam-Sistema and Loop Telecom, had bagged spectrum in 2008 and several operators are yet to start their services.The official said the matter would be taken up by the Telecom Commission. The Commission may consider several possibilities, including allowing new companies to merge with larger operators and shortening the three-year lock-in period during which the promoter of a new company is barred from selling out.The current M&A norms restrict new telcos, who got pan-India licences and spectrum at Rs. 1,651 crore, from selling them. With 14 telecom players jostling in each circle, analysts feel that a shake-out is inevitable as the margins of telcos are under pressure due to a tariff war and falling average revenue per user.When asked who were the new players that had approached the DoT for surrendering spectrum, officials declined to give names, but confirmed that at least three new players have sought a refund in lieu of exiting the space.Among the new players, Shyam-Sistema has already rolled out services in several circles, while Uninor (a JV between Unitech and Telenor of Norway) has also started services in 13 circles and is in the process of covering other circles. Besides these two, S Tel has also almost covered its areas and the RCom and Tatas have also launched GSM services in most of the circles.
Wednesday, September 22, 2010
Each year, Oracle’s presence looms over this city for a week, during the company’s Open World customer conference. About 41,000 people arrived this week to discuss business software in fine detail and talk over beers. Stretches of downtown streets closed and gave way to makeshift tents housing coffee stands, bars, Lego play areas and candy buffets.But Oracle’s annual takeover of San Francisco pales against its larger ambitions — to supply just about all the technology, software and hardware, that businesses might need. This sweeping agenda has rattled the nerves of customers, who fear that Oracle has its own best interests, not theirs, at heart. The worry is that instead of saving money, customers will end up paying more over the long term, and that Oracle, already known for its aggressive tactics, will use its strong position in software to gain even more leverage over a larger array of products.Companies have long used Oracle’s software to keep track of their most prized information. For Oracle, this resulted in sales of $26.8 billion last year and hints of an annual revenue goal of $100 billion. Over the last five years, Oracle has acquired a staggering 66 companies, most of which were software makers that provided expertise in niche areas.This year, it bought Sun Microsystems, a hardware maker, signaling its intention to dominate the data centers of businesses by controlling more of their technology purchases. It is a prospect that its traditional partners and, more important, its customers, find unnerving.“It’s freaking terrifying for some people,” said Jason Carey, a database software developer for a credit services company.Maureen Miller, who oversees technology infrastructure work for the National Science Foundation, put it this way: “We are becoming an all-Oracle shop, but not by choice. They bought every company we deal with. And we don’t tend to want to put all of our eggs in one basket.”Lawrence J. Ellison, Oracle’s chief executive, argued that the company’s new strategy would benefit customers. “If you want to go faster and you want a system that is more reliable, you have to be willing to spend less,” he said in his opening pitch at this week’s event, while extolling the virtues of linking hardware and software. But customers are skeptical, and pushing back.Oracle built its business by dominating the database market, providing the central repositories of crucial information that businesses must maintain and use to complete transactions. This has given it an unrivaled position of power when dealing with customers. Capitalizing on such an edge, Oracle’s sales representatives have earned a fearsome reputation as hard-line negotiators determined to squeeze customers.But through its acquisition spree, Oracle moved well beyond the database and into business software, buying up the important products that companies use to keep track of their technology infrastructure, employees, sales, inventory and customers.With Sun, Oracle has found a way to sell customers hardware bundled with all that software in a fashion similar to that of its main database rival, I.B.M. Oracle executives say they can build better, faster, cheaper products this way by engineering complete systems rather than requiring customers to cobble together the parts.It is akin to the Apple model of limiting choice and controlling the crucial pieces in a computer, as opposed to the PC model, where the Windows software from Microsoft can run on hundreds of different machines.Later this year, Oracle also plans to give select customers access to a product suite called Fusion. This arrives after five years of work and will unite many of the products Oracle has acquired into a single software platform — one that will combine functions found in rival products from companies like SAP, I.B.M., Microsoft and Salesforce.com.But customers are objecting to Oracle’s moves. For example, some of Sun’s largest former customers consist of the large Wall Street players, and they pushed back this year when Oracle moved to limit their choices around the Sun technology. Oracle ultimately gave in to their pleas, reaffirming deals that would let Hewlett-Packard and Dell offer prized Sun software on their hardware.“Customers will always gripe about giving too much control to any one company,” said Israel Hernandez, director of software research at Barclays Capital.Like it or not, many of the largest technology companies — H.P., I.B.M., Cisco Systems and Oracle — have made their data center conquest plans clear. Oracle now competes directly with its partners H.P. and Dell, as does Cisco, the networking specialist, through its move into computer servers. Meanwhile, H.P., once one of Cisco’s closest allies, has begun a major assault in the networking arena.“We will see more concentration because that’s where the marketing is going,” Mr. Hernandez said.At least Oracle has the courtesy to assuage customer’s nerves for one week through its Open World largess.The downtown tents covering parts of Howard and Mason Streets house alcohol-soaked evenings sponsored by Fujitsu, fully stocked candy bars and Lego playpens where people win prizes from Google for interesting constructions. People also dine inside the tents on 59,000 lunches said to have an eco-friendly touch with 60 percent of the food coming from within 100 miles of the city.Just outside the tents, show attendees can pick up a Services Serum smoothie at the Dell-sponsored juice bar and then relax on white leather lounges. Or people can look past the white-gloved guards to sneak a peek at the America’s Cup trophy that Mr. Ellison won this year.But the main party will take place on Wednesday night, when Oracle will bus people to a series of concerts held on Treasure Island, which sits between San Francisco and Oakland. The headlining acts include the Black Eyed Peas, Don Henley and the Steve Miller Band.Six acts will perform on two stages surrounded by amusement rides, four laser systems, 150,000 cocktail napkins, mounds of food and 12 searchlights beaming into the sky. Typically, a few brave female souls will dance near the music stages, while hundreds of male database gurus sip free drinks and ogle.“I don’t know if any of the customers or the nerds that show up care that much about the fancy production,” said Christine Stamper, who paid $1,800 to attend the conference and runs her own software consulting business in Portland, Ore. “It’s a little goofy.”Ms. Stamper said she hoped to learn the latest and greatest about Oracle’s products.“That they have stayed healthy and grown has meant that I could make an entire career out of this,” she said.This month, Oracle hired Mark V. Hurd, the former chief executive of H.P., as a co-president. Analysts viewed the hiring as a positive for Oracle as it looks to expand. At H.P., Mr. Hurd oversaw the largest computer server business around and ran the world’s largest technology company.“As Oracle continues to grow, we need people experienced in operating a $100 billion business,” noted Safra A. Catz, Oracle’s other co-president, at the time of Mr. Hurd’s hiring.The $100 billion total would put Oracle in the same class as H.P. and I.B.M.“I read that statement as a signal that Oracle intends to get aggressive and pursue growth,” Mr. Hernandez said. “It implies a step up in mergers and acquisitions.”Such talk only makes already weary Oracle customers more anxious. And San Francisco officials must wonder if the city could survive the demands of an Oracle four times its current size.
In the latest in a series of unusual efforts to make Paris green, the city is now offering residents free sparkling water to try to wean Parisians not from red wine, but from over consumption of plastic bottles.Inaugurated on Tuesday by Eau de Paris, the public water company, "la pétillante" -- "the bubbly" -- is a water fountain installed in a wooden hut of the Jardin de Reuilly, in eastern Paris, that delivers sparkling water."We chill the water between 6 and 8 degrees Celsius," said Philippe Burguière, the spokesman for Eau de Paris, "and then we inject carbon dioxide into regular tap water to make the bubbles thin and tasty." Those temperatures translate to 42.8 to 46.4 degrees Fahrenheit.The new water fountain is part of an operation "aimed at promoting tap water in a country where we invest a lot to preserve its quality," Burguière added.
The fountain is connected to the public water system and uses six taps to provide both sparkling and flat water.The idea was conceived in Italy and grew very popular there, Burguière said.Italians, who are known as the world's biggest consumers of sparkling water, have installed 215 fountains of the same type in the country's northern regions.Each of them provided an average of more than 920 gallons a day, "of which half is sparkling water, so it means saving 2,300 plastic bottles of 1.5 liters each a day," Eau de Paris said in a news release."In France, it's only an experiment," Burguière said, "but we will see how people react to it, and we'll try to put water fountains in other parks."The French consume about 40 gallons of bottled water per person each year, one of the highest per capita amounts not only in Europe, but also in the world.
Tuesday, September 21, 2010
AT&T Inc. has weathered plenty of complaints about spotty cell phone coverage. On Tuesday, it began selling its first phone that includes a backstop for AT&T's own network, over a satellite. That means blanket coverage of the U.S., even in the wilderness or hundreds of miles offshore.
The new phone, the TerreStar Genus, could be an important tool for boaters, fishermen, forest rangers, emergency crews and others who go outside regular cellular coverage.
There are a number of caveats, though. To use the phone, it has to have a clear view of the southern sky, where the satellite hovers, with no intervening trees, buildings or hills. That restricts its use to the outdoors. The satellite is aimed at the U.S. and doesn't provide global coverage in the same way Iridium Communications Inc.'s satellite constellation does.
AT&T will initially be selling it to professional customers through business channels, but it will be in retail stores later this year, said Chris Hill, the Dallas-based phone company's vice president for Advanced Enterprise Mobility Solutions.
The phone will cost $799 and requires regular AT&T voice and data service plans but no contract. It uses the AT&T network where it's available. The option to be able to switch over to the satellite costs $25 extra per month, and then 65 cents per minute of calling.
Calls won't be the only way to communicate using the Genus: It's the first satellite phone that's also a full-blown smart phone. It runs Windows Mobile 6.5 software and has a full-alphabet keyboard and looks much like a slightly thicker BlackBerry. It doesn't have a large, protruding antenna, like other satellite phones do.
It can send and receive data over the satellite, which means it can be used for e-mail and Web surfing. The cost, like the satellite, is sky-high: $5 per megabyte, or 400 times more expensive than a standard $25-per-month terrestrial data plan.
Text messages, by comparison, are a bargain. They're 40 cents each, only four times the piece rate for cell phones.
The phones will communicate with the world's largest commercial satellite, owned by TerreStar Corp. It launched last year, and unfolded an umbrella of gold mesh, 60 feet wide, as a dish antenna to pick up the faint signals from phones 22,000 miles below.
The giant antenna in the sky means the phones can be relatively small. But it's uncertain whether TerreStar can avoid the fate of other satellite phone companies, even with a smart phone that's almost up to date. The industry has suffered a string of bankruptcies, wiping out billions in investor capital. TerreStar's stock price reflects this: it was at 31 cents, up 5 cents, on Tuesday.
AT&T and TerreStar said last year that they'd have the phone out early this year, but didn't provide details like pricing. It was delayed for six months to straighten out the system, Hill said.
It's not the first time a phone company has tried to sell combined satellite-terrestrial phones. Sprint Nextel Corp. sold Iridium phones in 1999, and Airtouch, a predecessor of Verizon Wireless, sold Globalstar phones a year a later.
"Neither of them had any meaningful success because there just wasn't mass market demand for the phones," said Tim Farrar, a satellite industry consultant.
Hill said the Genus is a different breed, because it can be used a main phone, with most of the conveniences expected from smart phones, without the bulk of a traditional satellite phone. The cost to include the satellite option is also coming down, which means the feature could show up in more, and cheaper, phones in the near future, he said.
European officials are jostling over plans to tighten the region's fiscal rules to ward off another sovereign debt crisis, but agreement on anything that could be enforced by meaningful sanctions is far from certain.At the same time, some observers are arguing that any changes might be a sideshow and that the real means of avoiding problems in the future lies in the discipline imposed by investors who are asked to finance government debts -- a fundamental rethinking of the way the euro works.With the decade-old euro project nearly brought down this year by the profligacy of Greece, pressure is again building -- notably from German and French leaders -- to enact rule modifications that bring about real changes in behavior.How times have changed. Back in 2003, the rules were effectively cast aside when France and Germany persuaded their partners to block planned sanctions against them for exceeding the fiscal deficit ceiling. Since then, the rules have been more loosely interpreted even as the number of countries breaching them has exploded.
According to Eurostat, the latest data from 2009 shows that of the 27 members of the European Union, only Denmark, Estonia, Luxembourg, Sweden and Finland had deficits below the pact's limit of 3 percent of gross domestic product.Now, because of the political crisis over the Greek bailout, there are many views on how tough the new rules should be, and even who should be in charge of rewriting them.The European Commission, which alone has the formal power to propose changes, is working on one set. So is a committee drawn from the bloc's 27 member states, which have to sign off on them -- not to mention foot any bill.It is unclear how the two sets of proposals will be reconciled. The issue has the potential to escalate into a long and ugly institutional tussle, further undermining the euro's stability.Indeed, the debate over the budget rules goes to the heart of the success or failure of the euro project.The sovereign debt crisis showed the inherent problems of running a currency union without central fiscal authority. Yet sovereign countries are reluctant to hand over politically tricky tax and spending policy to an unelected committee.In a speech last week, the managing director of the International Monetary Fund, Dominique Strauss-Kahn, made clear his preference for a "centralized fiscal authority, with political independence," comparable to that of the European Central Bank. Strauss-Kahn conceded, though, that the chances of national governments ceding control over their budgets "appears unlikely in the foreseeable future."Undeterred, the European Commission is preparing to present its ideas soon. These are likely to add a country's ratio of debt to gross domestic product as a criterion that could lead to sanctions, rather than just deficit ratios, as is the case now.Under the current rules, euro one countries can eventually be fined up to 0.5 percent of their GDP each year if it is agreed to by a majority of ministers. Such a fine has never been imposed.One alternative being discussed would be to withhold so-called structural and cohesion funds, which are allocated by Brussels primarily to the bloc's poorer nations. Strauss-Kahn also suggested that fines could be "smoothed" over time by trimming such transfers.But political and legal objections to more complex sanctions have been raised -- not least because they could push economically weak nations into deeper trouble. In March, Chancellor Angela Merkel of Germany described the idea of fining countries in financial trouble as "idiotic."There also has been a suggestion of suspending political voting rights for countries that breach budget limits.Paris and Berlin sent a letter to Herman Van Rompuy, president of the European Council, in July backing the idea of withdrawing voting rights within the union from budget offenders.But officials worry about the political fallout and whether Paris or Berlin would be willing to apply the sanction to themselves.Because of the difficulty of achieving consensus, the governmental committee, led by Van Rompuy, is now focusing on securing an agreement among the nations that use the euro, an easier task than reaching consensus among all 27 nations of the European Union. But even here there are complications.One involves how to calculate the level of debt. Several of the union's newer member states argue that pension obligations must be considered when calculating debt levels. Italy is pressing for private as well as public debt to be taken into account.The debate is delicate because several nations have debt levels greater than 60 percent of GDP, the original ceiling set out for membership of the euro. That means that any future sanctions could apply widely.Van Rompuy's group will meet again at the start of next week. It aims to present initial findings to leaders at a summit at the end of October. Van Rompuy may seek to extend the group's mandate to discuss measures that would involve a change to the European Union treaty.This would require agreement of all 27 nations and might involve time-consuming and politically risky referendums in some. For that reason, most nations oppose the idea.So officials are now focusing on working within the existing rule book, arguing that the union's new Lisbon Treaty allows them sufficient leeway.Sixten Korkman, director of the Research Institute of the Finnish Economy, said treaty changes were unlikely, given their legal and political complexity.But he said certain rule changes within the current framework could be effective -- notably, improving the independence of fiscal policy in certain weak members, particularly Greece. He also backed some kind of mechanism to restructure ballooning debts through discounts on bond holdings, whereby investors also pay a price; and establishing a means for the European Central Bank to make it more expensive for countries with weak finances to get access to funds.David Clark, a former adviser to the British government on European affairs, said tinkering with the current rules would only prolong the "inherent instability" of the economic and monetary union.He said a fundamental problem needed to be addressed, formally or informally - how to "rebalance" the euro zone's structure. Currently, he argued, Germany's export-oriented economy is accruing the benefits, while poorer neighbors are being forced to retrench.Mr. Korkman added, "What is most important is the behavior of investors and politicians. I think and hope that this crisis has been a steep learning curve for both." .
Monday, September 20, 2010
The US military will soon have a new solar-powered unmanned spy aircraft that can fly non-stop for more than five years. The aircraft, called SolarEagle, which is being built by Boeing is designed in such a way that it can soar in the upper atmosphere for years, constantly sending surveillance and intelligence information back to the ground. The US military has already given Boeing an US $89-million contract to develop a SolarEagle demonstrator which will make its first flight in 2014, the Daily Mail reported. During testing, the SolarEagle demonstrator will remain in the upper atmosphere for 30 days, harvesting solar energy during the day that will be stored in fuel cells and used to provide power through the night, US military said.
The aircraft will have highly efficient electric motors and propellers along with a 400-foot wing for increased solar power and aerodynamic performance.Pat O'Neil, Boeing Phantom Works program manager for Vulture II, said: "SolarEagle is a uniquely configured, large unmanned aircraft designed to eventually remain on station at stratospheric altitudes for at least five years. "That's a daunting task, but Boeing has a highly reliable solar-electric design that will meet the challenge in order to perform persistent communications, intelligence, surveillance and reconnaissance missions from altitudes above 60,000 feet."According to the report, the aircraft's developer Phantom Works, Boeings research and development arm, is also working on a fighter-sized, unmanned, advanced technology demonstrator called Phantom Ray, scheduled to make its first flight in early 2011. Its other projects included a hydrogen-powered aircraft called Phantom Eye - a High Altitude Long Endurance aircraft that can stay aloft for up to four days. It is also scheduled to make its first flight in 2011.
Thursday, September 16, 2010
The economy is rough. But that's not stopping auto major McLaren from rolling out a new high-end, carbon fiber consumer sports car called the MP4-12C. The English race car company 'McLaren Automotive' showed off it's new MP4-12C in New York Thursday.It's in the price range of other exotic super cars but the car makers say its' in a class of its own.Auto designer Frank Stephenson says, "If they drive this car, they'll freak out. I mean this car is not competing with Ferrari, it's not competing Lamborghini, or Aston Martin or Porsche."
Instead, he says, they've focused on function instead of form."The design of the car is basically influenced by the aerodynamics. It's more designed for purpose rather than beauty, it looks like it does because it works so efficiently."The car is made with a one piece moulded carbon chassis, which the makers say makes it lighter, faster and more fuel efficient.It will be available for purchase next year for around 240-thousand dollars. Mark Harrison of McLaren Automotive says, "The commercial market for cars in the price point we're looking at is proving very positive."The car makers say bringing a new high end sports car to market in a bad economy has some advantages."We've started with absolute from zero as a company during a recession and we've been able to build up during that time almost the ideal business plan." The specs on the car seem almost ideal as well: it has close to 600 horsepower and goes from zero to sixty in under three seconds.
The Census Bureau in America has reported that the number of Americans living in poverty jumped to 14.3 percent in 2009, with the ranks of working-age poor reaching the highest since at least 1965.About 43.6 million people, or 1 in 7, were in poverty. That is up from 39.8 million, or 13.2 percent, in 2008.The number of people lacking health insurance rose from 46.3 million to 50.7 million, due mostly to the loss of employer-provided health insurance during the recession. Congress passed a health overhaul law earlier this year.The statistics released Thursday cover President Barack Obama's first year in office, when unemployment climbed to 10 percent in the months after the financial meltdown.The median - or midpoint - household income was $49,777.
Boeing said Wednesday that it was entering the space tourism business, an announcement that could bolster the Obama administration's efforts to transform the National Aeronautics and Space Administration into an agency that focuses less on building rockets and more on nurturing a commercial space industry. The flights, which could begin as early as 2015, would most likely launch from Cape Canaveral in Florida to the International Space Station. The Obama administration has proposed turning over to private companies the business of taking NASA astronauts to orbit, and Boeing and Bigelow Aerospace of Las Vegas won an $18 million contract this year for preliminary development and testing of a capsule that could carry seven passengers. Current NASA plans call for four space station crew members to go up at a time, which would leave up to three seats available for space tourists. The flights would be the first to give nonprofessional astronauts the chance to go into orbit aboard a spacecraft launched from the United States. Seven earlier space tourists have made visits to the space station, riding in Russian Soyuz capsules. "We're ready now to start talking to prospective customers," said Eric C. Anderson, co-founder and chairman of Space Adventures, the space tourism company based in Virginia that would market the seats for Boeing.
Boeing and Space Adventures have not set a price, although Mr. Anderson said it would be competitive with the Soyuz flights, which Space Adventures arranged with the Russian Space Agency. Guy Laliberté, founder of Cirque du Soleil, paid about $40 million for a Soyuz ride and an eight-day stay at the space station last year. But the prospects that anyone buying a ticket will get to space on an American vehicle hinge on discussions in Congress about the future of NASA. As the era of the space shuttle winds down -- two, perhaps three shuttle flights remain -- a clash of visions over what should come next has kept the space agency adrift for much of the past year. An authorization bill written by the House Science and Technology Committee to lay out the direction of NASA for the next three years would largely follow the traditional trajectory for human spaceflight. It calls on NASA to build a government-owned rocket -- likely the Ares I, which NASA has been working on for five years -- for taking astronauts to the space station and then a larger one for missions to the Moon, asteroids and eventually Mars. The competing vision, embodied in President Obama's 2011 budget proposal for NASA, focuses instead on investing in companies like Boeing that want to develop the space equivalent of airlines. NASA would then just buy seats on those rockets to send its astronauts to the International Space Station. Competition, the thinking goes, would drive down the costs of getting to space, leading to a profitable new American industry and freeing more of NASA's budget for deep-space missions. Advocates of the free enterprise approach are rallying to block the House version of the NASA authorization bill, which provides only $150 million a year over the next three years for the private-sector space travel initiative, which is known as commercial crew. Bob Werb, chairman of the Space Frontier Foundation, was blunt in his assessment of the House bill. "I think it's awful," he said. "It's leaving NASA with way more pork than program. I see that as a disaster for the agency." Mr. Werb's group is urging its supporters to register disapproval with their Congressional representatives. By contrast, the president's budget proposed $6 billion over five years for the commercial crew program. At Wednesday's news conference, Boeing officials said that the federal government would have to pay much of the development costs in order for the effort to succeed. "This is an uncertain market," said John Elbon, program manager for Boeing's commercial crew effort. "If we had to do this with Boeing investment only and the risk factors were in there, we wouldn't be able to close the business case." The tight constraint, of course, is money. Last year, a panel led by Norman R. Augustine, a former chief executive of Lockheed Martin, concluded that the ambitious program started under President George W. Bush to establish a permanent moon base was "not executable" because of inadequate financing. In fact, the panel could not devise any program that could send astronauts beyond low-Earth orbit and still fit within the $100 billion allocated to the human spaceflight program in the fiscal years of 2010 through 2020. It offered several alternatives that would require an extra $30 billion over the next decade. Mr. Obama's budget request for 2011 sought a modest increase in NASA over all, to $19 billion, but kept the budget projections for the human spaceflight program almost unchanged from the levels that the Augustine panel found inadequate. The panel said that without an increase, the United States should scale back its space ambitions. "With that budget," Mr. Augustine said in an interview this summer, "I still think there is no really meaningful space exploration program that involves humans." The administration worked around the budget shortfall by proposing the cancellation of the entire moon program, known as Constellation, including the Ares I rocket and the Orion crew capsule. Instead, NASA would essentially take a five-year hiatus from large-scale development initiatives and instead work on new technologies that could make the task of space exploration easier and cheaper. The House Science and Technology Committee, in its effort to squeeze NASA's human spaceflight program into the budget box, deleted almost all the money from commercial crew and large-scale technology demonstration projects and applied it to slimmed-down Constellation rockets. Last month, the Senate passed its version of the NASA authorization bill, which is more of a compromise. It provides less for commercial crew in the first three years than the president's request, but the longer-term plan is to provide the same $6 billion, spread over six years instead of five. It cancels the Ares I rocket and instead directs NASA to begin development of a heavy-lift rocket and indicates that the design should be based on space shuttle technologies, a boon for those contractors. However, some experts like Scott Pace, a former NASA official who now heads the Space Policy Institute at George Washington University, said the Senate bill might be repeating the mistake of asking NASA to do too much with too little money. The Senate bill provides less money for development of a larger heavy-lift rocket than the House does for completing the Ares I, already well under development. "I respect the need for political compromise," Dr. Pace said of the Senate bill, but added, "It takes some programmatic risk. It spreads itself out too much." Staff members of the House science committee have been meeting with their counterparts on the Senate's Committee on Commerce, Science and Transportation seeking a middle ground. House leaders could move forward with the science committee's bill or substitute the Senate bill or a compromise. If no final NASA authorization emerges, the Senate and House appropriation committees would decide what to include in NASA's 2011 budget and could end up with something closer to the original Obama proposal.
In another protectionist measure primarily aimed at China, the US House of Representatives passed two different bills that mandate the Congress and the Department of Homeland Security to purchase only US-made goods.The Congressional Made in America Act, introduced by Congresswoman Marcy Kaptur, requires the Congress to buy goods and services made in America for the first time in nearly seven decades.Similarly, the Berry Amendment Extension Act, introduced by Congressman Larry Kissell directs the Department of Homeland Security to buy clothing, tents, and other products made in America.These two bills, unanimously passed by the House, will help in creating American jobs, and expand America's manufacturing sector, said Nancy Pelosi, Speaker of the US House of Representatives.
"In passing these bills, we reaffirm that when we make it in America, we create jobs, promote our competitiveness, and lead the world economy," Pelosi said."Democrats will continue to move our nation forward to prosperity for the middle class. Democrats are committed to 'Making it in America,' while Republicans are standing with corporations that that ship American jobs overseas," she alleged."We can protect our American economy while also protecting our national security and borders. The only way to ensure this is the case is to make these items right here at home," Kissell said. "For the last 60 years the Berry Amendment has served our nation well, and its expansion to the Department of Homeland Security will further benefit American manufacturing."The Berry Amendment, originally enacted in 1941, requires the Department of Defence to procure a range of domestically produced or grown items with 100 per cent US content.The legislation has been supported by many groups, including the American Manufacturing Trade Act Coalition, the National Textile Association, the National Council of Textile Organizations, the National Cotton Council and the United States Industrial Fabrics Association International.It is estimated that for every $ 10 million spent annually, the US government will create or save 500 badly needed US manufacturing and other jobs, said Auggie Tantillo, Executive Director of the American Manufacturing Trade Action Coalition."Congressman Kissell's 'buy-US' legislation will provide a shot in the arm to America's economy that has suffered more than 5.6 million US manufacturing jobs losses in the last decade," Tantillo said.
Companies here in China's industrial heartland are toiling to reinvent their businesses, fearing that the low-cost manufacturing that helped propel the nation's economic ascent is fast becoming obsolete. The TAL Group, which operates an immense garment-making plant in this coastal boom town, is moving beyond piecework by helping J. C. Penney electronically manage its inventory of dress shirts, from factory floor to retail shelves as far away as Connecticut.Chicony, maker of a power device used in the Xbox from Microsoft and a major supplier of computer keyboards to Dell, is diversifying by opening department stores, with three so far around China and seven more planned.And after years of assembling vacuum cleaners and rechargeable toothbrushes for Philips and other Western companies, Kwonnie Electrical Products is planning its own line of home appliances.
"We want to do more original design and build our own brand," Benjamin Kwok, a company founder, said during a recent tour of a sprawling factory complex that has 3,000 workers, a huge warehouse and labs for testing juice makers, vacuum cleaners and other appliances."Many customers won't be happy with the decision to compete with them," Kwok said. "But we have no choice."It is too soon to know whether such makeovers will succeed. But economists consider such efforts necessary -- and overdue.For years, factories here in the Pearl River Delta region have served as the low-cost workshops for global brands, turning this part of China into the nation's biggest export zone. The city of Dongguan, about 35 miles northwest of Hong Kong, has long churned out toys, textiles, furniture and sports shoes -- including hundreds of millions of sneakers a year for companies like Nike and Adidas.But now, with manufacturing costs rising and China looking to create a consumer middle class, experts say the revamping of this region's industries could help reduce the nation's wide income gap and encourage more balanced and sustainable economic growth."It is my hope that China's comparative advantage as a low-wage producer does disappear -- the sooner the better," Fan Gang, an economics professor at Peking University, wrote in a recent essay, adding that China needed to upgrade and embark on "the next stage of development."Manufacturing costs have risen rapidly here in response to nagging labor shortages and worker demands for higher wages to help offset soaring food and property prices.Those pressures were evident a few months ago, when a series of big labor strikes in southern China disrupted several Japanese auto factories and resulted in hefty pay raises.There is also the looming prospect that China's currency, the renminbi, will strengthen against other world currencies in the coming years. That would make goods produced here even more expensive to export, and further erode what manufacturers say are already thin profit margins.Seeking lower costs, some Pearl River Delta factories are relocating to poor inland regions of China where wages are as much as 30 percent lower than in coastal provinces. Other factories are moving to lower-wage countries like Bangladesh and Vietnam.But for companies that have invested billions of dollars in factories here, simply packing up and pulling out is not always financially feasible. That is why many owners of Dongguan factories are experimenting with other solutions."We've decided that we're not going to be on the low end," says Roger Lee, the chief operating officer at TAL Apparel, part of the TAL Group.TAL, which is based in Hong Kong and says it makes one of every six dress shirts sold in the United States, is expanding into supply-chain management for J. C. Penney, one of its big shirt-buyers. Through an extensive computerized system, TAL can stock and restock shirt shelves in all 1,100 of Penney's retail stores in the United States, as demand warrants."Too much inventory kills retailers," Lee said. "Now, we're managing inventory in each store. We gets sales data. We know what's in the warehouse, what's on the boat. We help reduce inventory."TAL is a fortunate survivor. After the global financial crisis hit, Dongguan's exports plummeted by about 25 percent. Thousands of factories simply closed. Now -- even though exports have rebounded to 2008 levels -- there are worries that regional growth is slowing drastically."Since 2008, the investment environment has worsened in Dongguan," said Lin Jiang, a professor of finance at Sun Yat-sen University in Guangzhou. "A lot of companies don't see a future in Dongguan. And they feel pressure from the government to upgrade."In Qingxi, an economic zone in the southeastern part of Dongguan, district government officials are trying to help desperate factories adjust to the new realities. If many companies are reluctant to leave, the local government is just as loath to lose the companies and their tax revenue.The 56-square-mile Qingxi district is crowded with textile and electronics factories, mostly backed by companies from Hong Kong and Taiwan, that produce for global brands like Burberry, Hewlett-Packard and Sony. The country's export boom helped Qingxi transform vast tracts of farmland into bustling factories with noisy assembly lines. That created enormous wealth for the country and the local region. But the labor equation is rapidly changing. Years ago, migrant workers lined up outside factories here hoping to apply for work. As a result, 90 percent of Qingxi's 350,000 residents are migrant workers. Most of them traveled from China's poor interior provinces to find factory jobs that today often pay about 90 cents an hour, which is the typical wage in the Shenzhen-Dongguan area.But a demographic shift tied to the nation's one-child policy means fewer young people are entering the work force. And government efforts to improve conditions in the interior provinces have lifted growth in those regions and persuaded many young workers to find jobs closer to home.So companies here can no longer pick and choose among workers."We used to prefer women because they are easier to manage," said Frank Chen, a manager at a Qingxi factory called Lite-On Technology, which makes Internet-access cards for Wi-Fi devices. "Before, we wanted three females for every male. But because of the labor shortage, it's hard to get that ratio now."Chicony, trying to drum up workers, has taken to sending a bus around Dongguan with a loudspeaker blaring, "Chicony is the best."Because of labor shortages and government efforts to raise the minimum wage to improve the livelihoods of migrant workers, pay rates in the Shenzhen-Dongguan area have nearly doubled in the last five years.Still, factories here often have to pay middlemen and vocational schools to find migrant labor. The Qingxi government has also tried to step in, organizing recruiting drives into the country's poorest regions.But longer term, district officials want to encourage innovation.Zhu Guorong, the vice director of the Qingxi Office of Trade and Economic Cooperation, is among those trying to remake Qingxi. Recently, he drove a sparkling blue Toyota FJ Cruiser -- a kind of miniature Hummer -- through the city's economic zones, talking about the shift under way."Every company now wants to be a high-tech company, and we want to encourage them," Mr. Zhu said, as he headed for an electronics factory, where he would inquire about profitability.The national government has preferential tax policies to encourage technology companies, and the Qingxi district government has a research and development fund -- officials decline to say how much money it has -- to support efforts.One company that has already received government money for research and development is a division of Lite-On Technology, the electronics supplier.But even for innovators like TAL, the garment maker, success is far from guaranteed."The price of a shirt has gone down," Lee said. "But our costs have gone up."
Wednesday, September 15, 2010
For once, the poor are getting richer faster than the rich are getting richer.While most of the world’s stocks and other assets still belong to Americans and Europeans, the gap is narrowing as emerging markets grow faster and people in the advanced countries focus on paying down debt, according to a report on global wealth by the German insurer Allianz.The United States remains by far the nation with the most wealth, with 101,762 euros ($130,764) per person in stocks, bank accounts and insurance, Allianz researchers said Tuesday. Some 39 percent of the world’s wealth belongs to Americans, while Western Europe accounts for another 31 percent.But American dominance of the world’s financial assets is slipping. United States wealth has plunged 12 percent since 2007, as Americans’ stock portfolios lost value and people diverted assets to pay off mortgages.“Households are paying off debt they acquired during the boom, and that means less money is flowing into investments,” Allianz’s chief economist, Michael Heise, told reporters in Frankfurt on Tuesday.Only Greece, which is in a deep recession and trying to dig its way out of a fiscal crisis, has experienced a bigger decline in wealth since the financial crisis began — 14 percent, according to Allianz. Other big declines occurred in Spain, which also has fiscal and economic problems, as well as Japan and Switzerland. Switzerland remained the wealthiest country, though, with assets worth 163,732 euros per person.Globally, the world is still trying to recover the wealth it has lost since the financial crisis began. Wealth in the 50 countries surveyed rose 7.5 percent last year, but remains 4 percent below the precrisis level, Allianz said.Germany was one of the few advanced countries to have recovered its precrisis wealth, thanks to conservative investment habits. Germans typically have fewer stocks in their portfolios than Americans, Mr. Heise said.But the financial crisis is having a leveling effect on global wealth. In fact, poorer regions of the world have been gaining ground since the dot-com bubble burst at the beginning of the decade.In Eastern Europe, which has had the biggest gains, wealth has soared an average of more than 16 percent a year since in 2000. Asia (not including Japan) and Latin America are close behind with average annual gains of more than 12 percent, Allianz said. The United States and Europe have managed gains of 3 percent or less.In the 50 countries Allianz researchers looked at, more than one billion people out of a total of 4.7 billion have assets of more than 5,300 euros, not counting real estate.True, the gap between rich and poor is still huge. Per capita wealth in the richest countries is still 45 times that of the poorest countries. But a decade ago, wealthy countries had 135 times as much wealth.That is progress, of a sort.
Sunday, September 12, 2010
When three Chinese scientists plunged to the bottom of the South China Sea in a tiny submarine early this summer, they did more than simply plant their nation's flag on the dark seabed.The men, who descended more than two miles in a craft the size of a small truck, also signaled Beijing's intention to take the lead in exploring remote and inaccessible parts of the ocean floor, which are rich in oil, minerals and other resources that the Chinese would like to mine. And many of those resources happen to lie in areas where China has clashed repeatedly with its neighbors over territorial claims.After the flag planting, which was done in secret but recorded in a video, Beijing quickly turned the feat of technology into a show of bravado."It is a great achievement," Liu Feng, director of the dives, was quoted as saying by China Daily, an English-language newspaper, which telegraphs government positions to the outside world.
The global seabed is littered with what experts say is trillions of dollars' worth of mineral nodules as well as many objects of intelligence value: undersea cables carrying diplomatic communications, lost nuclear arms, sunken submarines and hundreds of warheads left over from missile tests.While a single small craft cannot reel in all these treasures, it does put China in an excellent position to go after them."They're in it for a penny and a pound," said Don Walsh, a pioneer of deep-ocean diving who recently visited the submersible and its makers in China. "It's a very deliberate program."The small craft that made the trip -- named Jiaolong, after a mythical sea dragon -- was unveiled publicly late last month after eight years of secretive development. It is designed to go deeper than any other in the world, giving China access to 99.8 percent of the ocean floor.Technically, it is a submersible. These craft differ from submarines in their small size, their need for a mother ship on the surface, and their ability to dive extraordinarily far despite the darkness and the crushing pressures. The world has only a few. Jiaolong is meant to go as deep as 7,000 meters, or 4.35 miles, edging out the current global leader. Japan's Shinkai 6500 can go as deep as 6,500 meters, outperforming craft "all over the world," according to its makers. Russia, France and the United States lag further behind in the game of going deep.American experts familiar with the Chinese undersea program say it is unusual in that Beijing has little experience in the daunting field. As a result, China is moving cautiously. Jiaolong's sea trials began quietly last year and are to continue until 2012, its dives going deeper in increments."They're being very cautious," Dr. Walsh said. "They respect what they don't know and are working hard to learn."In an interview, Dr. Walsh said that the Chinese were especially interested in avoiding the embarrassment of a disaster that ends with the aquanauts' entrapment or death. "If I'm the new kid on the block," he said, "I'm going to make sure that I've got bragging rights."Still, China is already waving flags. The move resembles how Russian scientists, in the summer of 2007, plunged through the ice pack at the North Pole and planted their flag on the bottom of the ocean. Upon surfacing, the explorers declared that the feat had strengthened Moscow's claims to nearly half the Arctic seabed.Wang Weizhong, a Chinese vice minister of science and technology, said that the Jiaolong's sea trials "marked a milestone" for China and global exploration. The recent successes of the craft, he said in late August at a news conference in Beijing, "laid a solid foundation for its practical application in resource surveys and scientific research."But at least one senior Chinese expert questioned what he called "the current propaganda." The expert, Weicheng Cui, a professor at the China Ship Scientific Research Center, which is building the submersible, said Thursday in an e-mail that the craft's sea trials had steered clear of contested islands "to avoid any diplomatic issues."The flurry of publicity over the flag planting, he said, "is not so helpful for us to complete the project."China's splash in the arcane world of submersibles comes after years of singling out major industries and technologies for rapid development. China is rushing to make supercomputers and jumbo jets. With expanding political ambitions and territorial claims in neighboring seas, it has paid special attention to oceanography and building a blue-water navy, one that operates in the deep waters of open oceans.The United States once held the submersible lead. In 1960, it sent Dr. Walsh, then a Navy officer, to the ocean's deepest spot, seven miles down. But over the decades, it lost its edge to France, Russia and, most recently, Japan.China began its push in 2002. A few Westerners became aware of the guarded effort when China ordered from Russia the forging of a spherical hull about seven feet wide.At the heart of any submersible lies the hollow sphere where the aquanauts work. It houses a pilot and two observers, who can peer out of tiny portholes. Typically, a dive into the abyss is an all-day affair, requiring hours to and from the bottom.American experts said China went on a global shopping spree to gather sophisticated gear for its submersible. From the United States, it bought advanced lights, cameras and manipulator arms. Dr. Cui estimated that 40 percent of the craft's equipment came from abroad.China also turned to the United States for tutoring. In 2005, five Chinese trainee pilots and one scientist participated in eight dives on Alvin, the oldest and most famous of the world's deep-diving craft, which is run by the Woods Hole Oceanographic Institution on Cape Cod. China "bought time on Alvin to gain experience," according to the Deep Submergence Science Committee, a group that advises the federal government and universities on ocean exploration.Though Alvin can go down only 4,500 meters, or 2.8 miles, it has made thousands of dives and discoveries, and is widely seen among experts as highly productive and well run.One of the Chinese trainees was Ye Cong, now a pilot on Jiaolong during its sea trials.Last year's tests went as deep as 1,000 meters (about a half mile), and this summer's as deep as 3,759 meters. Next year Jiaolong is to dive to 5,000 meters and in 2012 reach its maximum depth.Dr. Walsh said the flag issue prompted more awkwardness than swagger among those who are building and testing the new submersible."We had a laugh about it," he recalled of his China visit. "I said, 'Oh, you're copying the Russians,' and they kind of giggled. These guys are pretty apolitical and pretty well insulated" from Beijing. "They're just contractors doing their job."
Thursday, September 9, 2010
In an about-face, Apple announced Thursday that it would change some of the strict and perplexing rules for developers creating content for the iTunes App Store.It is unclear why Apple abruptly decided to change the guidelines.In a news release posted on the company's Web site, Apple said it is "relaxing all restrictions on the development tools used to create iOS apps, as long as the resulting apps do not download any code." This means app developers will be able to use third-party tools to create applications for the iOS platform, something Apple has steadfastly denied in the past.App approval has been a hot button issue between Apple and the mobile developer community, even drawing the normally reclusive company into a very public debate with Adobe, the software company.
Along with relaxing some restrictions on app development, Apple said it would publish the set of guidelines the company uses to approve, or shun, applications. The company notes in the press release: In addition, for the first time we are publishing the App Store Review Guidelines to help developers understand how we review submitted apps. We hope it will make us more transparent and help our developers create even more successful apps for the App Store.Apple said the reason for these changes point to the company's goal to make "the App Store even better" and that the company is listening to the requests of its developers.But there could be other forces at play here. Earlier in the year reports circulated that the Department of Justice and Federal Trade Commission were negotiating who could begin making antitrust inquiries to Apple over its stringent App Store restrictions.
Sunday, September 5, 2010
Whenever companies start hiring freely again, job-seekers with specialized skills and education will have plenty of good opportunities. Others will face a choice: Take a job with low pay — or none at all.
Job creation will likely remain weak for months or even years. But once employers do step up hiring, some economists expect job openings to fall mainly into two categories of roughly equal numbers:
• Professional fields with higher pay. Think lawyers, research scientists and software engineers.
• Lower-skill and lower-paying jobs, like home health care aides and store clerks.
And those in between? Their outlook is bleaker. Economists foresee fewer moderately paid factory supervisors, postal workers and office administrators.
That's the sobering message American workers face as they celebrate Labor Day at a time of high unemployment, scant hiring and a widespread loss of job security. Not until 2014 or later is the nation expected to have regained all, or nearly all, the 8.4 million jobs lost to the recession. Millions of lost jobs in real estate, for example, aren't likely to be restored this decade, if ever.
On Friday, the government said the August unemployment rate ticked up to 9.6 percent. Not enough jobs were created to absorb the growing number of people seeking work. The unemployment rate has exceeded 9 percent for 16 months, the longest such stretch in nearly 30 years.
The crisis poses a threat to President Barack Obama and Democrats in Congress, whose hold on the House and Senate appears to be at increasing risk because of voter discontent.
Even when the job market picks up, many people will be left behind. The threat stems, in part, from the economy's continuing shift from one driven by manufacturing to one fueled by service industries.
Pay for future service-sector jobs will tend to vary from very high to very low. At the same time, the number of middle-income service-sector jobs will shrink, according to government projections. Any job that can be automated or outsourced overseas is likely to continue to decline.
The service sector's growth could also magnify the nation's income inequality, with more people either affluent or financially squeezed. The nation isn't educating enough people for the higher-skilled service-sector jobs of the future, economists warn.
"There will be jobs," says Lawrence Katz, a Harvard economist. "The big question is what they are going to pay, and what kind of lives they will allow people to lead? This will be a big issue for how broad a middle class we are going to have."
On one point there's broad agreement: Of 8 million-plus jobs lost to the recession — in fields like manufacturing, real estate and financial services — many, perhaps most, aren't coming back.
In their place will be jobs in health care, information technology and statistical analysis. Some of the new positions will require complex skills or higher education. Others won't — but they won't pay very much, either.
"Our occupational structure is really becoming bifurcated," says Richard Florida, a professor at University of Toronto. "We're becoming more of a divided nation by the work we do."
By 2018, the government forecasts a net total of 15.3 million new jobs. If that proves true, unemployment would drop far closer to a historical norm of 5 percent.
Nearly all the new jobs will be in the service sector, the Labor Department says. The nation's 78 million baby boomers will need more health care services as they age, for example. Demand for medical jobs will rise. And innovations in high technology and alternative energy are likely to spur growth in occupations that don't yet exist.
Hiring can't come fast enough for the 14.9 million unemployed Americans. Counting part-time employees who would prefer full-time jobs, plus out-of-work people who have stopped looking for jobs, the number of "underemployed" is 26.2 million.
Manufacturing has shed 2 million jobs since the recession began. Construction has lost 1.9 million, financial services 651,000.
But the biggest factor has been the bust in real estate. The vanished jobs range from construction workers and furniture makers to loan officers, appraisers and material suppliers. Moody's Analytics estimates the total number of housing-related jobs lost at 2.4 million. When you include commercial real estate, the number is far higher.
One of them is Martha Escobar, who last month lost her $13.50-an-hour job cleaning an office tower owned by JPMorgan Chase & Co. in Century City, Calif. She was one of 16 janitors, mostly single mothers, who lost jobs as part of the real estate crunch that's squeezed landlords.
Some of them traveled to New York on Thursday to try to pressure JPMorgan to get its cleaning contractor to take them back, given that the bank earned $8.1 billion during the first half of this year.
"I don't know what I am going to do if I can't get my job back," Escobar, 41, said.
JPMorgan Chase spokesman Gary Kishner said the bank has no say over the layoffs, which he said are handled by the building's cleaning contractor.
On top of real estate-related job losses, manufacturing is likely to keep shedding jobs, sending lower-skilled work overseas. Millions who worked in those fields will need to find jobs in higher-skilled or lower-paying occupations.
"The big fear is the country is simply not preparing workers for the kind of skills that the country is going to need," says Gautam Godhwani, CEO of SimplyHired.com, which tracks job listings.
Sectors likely to grow fastest, according to economists and government projections, are:
• HEALTH CARE
The sector is expected to be the leading job generator, adding 4 million by 2018, according to Labor Department data. An aging population requires more doctors and nurses, physical therapists, home health aides and pharmacists.
Many of these jobs will pay well. Physical therapists averaged about $76,000 last year, according to the department's data. Others pay far less. Home health care aides earned an average of just $21,600.
Home health care and personal care aides are expected to add about 900,000 jobs by 2018 — 50 percent more than in 2008.
Jennifer Gamboa of Body Dynamics Inc., an Arlington, Va.-based physical therapy firm, says the drive to reduce health care costs should benefit her profession, which can treat pain less expensively than surgery. Gamboa plans to add two employees in the next year.
• INFORMATION TECHNOLOGY: Technology could be an economic elixir as computers and online networks expand ways to automate services, distribute media and communicate.
Companies will need people to build and secure those networks. That should boost the number of programmers, network administrators and security specialists by 45 percent to 2.1 million by 2018, the government forecasts. Most of these jobs will provide above-average pay.
Technology pay averaged $84,400 in 2008 — nearly double the average private-sector pay of $45,400, according to an analysis of the most recent full-year data by the TechAmerica Foundation, a research group.
• NEW INDUSTRIES: Deepak Advani, an IBM executive, has a title he says didn't exist five years ago: "Vice president of predictive analytics."
Companies and government agencies have amassed data on behavior ranging from shopping habits to criminal activity. Predictive analytics is the art of determining what to do with that data. How should workers' time be deployed? How best to target customers? Such jobs could grow 20 percent by 2018, the government predicts.
Still, economists say more will be needed to boost job growth. The answer may be some technological breakthrough akin to the personal computer or the Internet.
"Most big booms come from a particular sector that moves the rest of the economy," said Richard Freeman, a Harvard labor economist.
Technology spurred job growth after the 1982 and 1991 recessions. The PC became revolutionary in the early 1980s. Internet use exploded after the Mosaic Web browser was introduced in 1994. Housing eventually lifted employment after the 2001 dot-com bust.
"There's a lack of clarity on what the next big thing is going to be this time," said David Card, an economics professor at the University of California.
Until there is, many people will have to lower expectations and living standards as they enter fields with less pay and less job stability, said Dan Finnigan, CEO of online employment service Jobvite.
"People who are unemployed have to embrace this future that they are going to have many jobs," he said. "We will always be working on the next gig."
Saturday, September 4, 2010
It's been a brutal summer for the economy. The housing sector, like a balloon batted in the air one last time by the government credit, resumed its inevitable fall. Economic growth slowed to a lead-footed 1.6 percent, and job growth is even more anemic. Meanwhile, consumers are cranky, the trade gap is gaping.
Most signs point to a slow and steady recovery, but what if the pessimists are right, again? What if the United States isn't in the slow-lane to recovery, but rather on the precipice of another decline -- a double dip?
[Click here to check savings products and rates in your area.]
To see where this re-recession might begin, my colleague Dan Indiviglio and I imagined five financial earthquakes, each with a single epicenter: housing, consumers, toxic assets, Europe, and the debt. The following five scenarios are listed in order of likelihood.
1. Housing's Mini-Bubble Pops
Perhaps nothing poses as a big of a concern to the U.S. economy as its housing market. It's unclear how the government's efforts to stabilize the market through a buyer credit, ultra-low mortgage rates, and mortgage modification programs will pan out. Did it just create another mini-bubble that's beginning to pop now that the support has been withdrawn?
[See Why the Housing-Market Recession Isn't Over]
Here's the scenario. Weak home sales and continuing foreclosures result in climbing real estate inventory. This has two effects. First, it makes new homes even less attractive which further reduces construction jobs. Second, it puts downward pressure on home prices, which makes it harder for struggling homeowners to sell their home to avoid foreclosure and also keeps strategic default rates high, exacerbating the problem. Lower home values encourage Americans to save more and spend less, since their wealth is effectively reduced. The Dow drops and credit markets tighten even further, suffocating private investment just as homeowners bunker down and slash spending. Growth turns negative.
2. You Break the Economy
You, the American consumer, are reloading savings after a debt-fueled decade. But as any general will tell you, when an entire squad reloads at once, it leaves everybody vulnerable. It's the same with the economy.
Here's the scenario. Consumer sentiment continues to fall slowly, and spending turns negative again. Small businesses hold off to replenish their inventories or add new workers. Wages and hours freeze, and unemployment takes a leap toward 10 percent in October. Congress is paralyzed, because it's only weeks away from the mid-terms. The stock market sees business revenue trending flat, joblessness rising and Congress doing nothing, and it sparks a 300-point sell-off. Americans frightful for their savings cut back spending even more the next month, and overall growth turns negative.
[See 15 Freebies, From Tools to Treats to Entertainment]
3. Toxic Assets Return
If you closely followed the bank bailout, then you know it wasn't originally billed as simply throwing money at the banks. Instead, the Treasury intended to purchase the toxic assets from banks, which were the source of investors' uncertainty concerning bank stability. But the Treasury couldn't figure out a way to do this quickly enough to make it effective. As a result, the banks were largely stuck with these bad assets. We just don't know how bad, yet.
Here's the scenario. The residential real estate market's problems continue. Even once foreclosures begin to decline, we see waves of defaults, as modification program participants re-default at rates of 30% to 50%. Commercial mortgage-backed securities continue to deteriorate, as some businesses struggle with weak consumer demand. Home and commercial real estate values keep declining, and so do the value of the assets that back them. Banks with exposure to these toxic securities see another round of losses, and investors question their stability. The market plummets, credit freezes, and growth turns negative.
4. Europe Falls Apart
Europe seems to have avoided an all-out collapse of confidence in its ability to pay back its debt. But things can change, and fast fast. Indeed, the Greek debt crisis went from ignorable wire stories to front page news in a matter of days.
Here's the scenario. Slow growth in weak Eurozone states like Greece, Spain, and Italy turns negative and spooks investors, who demand higher returns on government debt. Europe's bond rates spike. Countries announce further austerity -- tax increases and spending cuts -- which strangles our biggest export market. The EU central bank responds by announcing a plan to write down troubled debt, which dings some Americans banks.
In a flight to quality debt, the dollar appreciates. This hurts our exports even more. As the trade deficit gapes open and manufacturing's good run dead ends, the stock market plummets, taking household wealth down with it. Families looking to restore balance sheets cut back on spending, and the American producer loses the American consumer and the European buyer. Growth turns negative.
5. Debt Finally Catches Up to Us
Interest rates on U.S. debt are low today for one big reason. Investors trust the United States, at least more than they trust other countries. If the people giving us money suddenly have as little faith in America as Americans, that could change, and quickly.
Here's the scenario. The IMF recently said the United States has a 25 percent chance of seeing dramatically higher interest rates in the near future. But the bond market can strike without warning, as it did in Europe earlier this year. If uncertainty with our political process gets reflected in our interest rate, we'll have a harder time affording debt, 55% of which has to be rolled over in the next three years. Pension and mutual funds with government debt would be written down, causing Americans to save even more of their paychecks. We'd be left with two bad choices: tax cuts to juice consumption or tax hikes to please our lenders. But at that point, it would be too late to avoid a double dip.
Is the global economy out of the woods? Two years after near-meltdown, with the U.S. looking sluggish, equity markets groggy and Europeans fighting a debt crisis, experts gathered in Italy offered a generally gloomy outlook — especially for the United States and much of the industrialized world.The doomsayers were led by New York University economist Nouriel Roubini, who warned in booming tones that "there is a significant risk of a double-dip recession in the United States" as well as in Japan and many European countries.Some of the assembled experts and leaders at the annual Ambrosetti Forum on the shores of Lake Como were somewhat more upbeat: economist Edwin Truman, a senior fellow of the Peterson Institute for International Economics, predicted that "the most likely global outlook is subpar growth."But most appeared to agree on a sobering array of basic problems standing in the way of true recovery:— Many of the growth drivers in place since the collapse of Lehman Brothers are winding up or have ended, including not only the massive stimulus spending but tax breaks, schemes such as the "cash for clunkers" program and — for some countries like Russia — high commodity prices.— The stimulus deemed necessary to jump-start moribund economies soon causes deficits and debt, upsetting the markets enough to spur austerity — which undermines growth.— Most of the world's growth stems from a developing world led by China — which is so dependent on exports that it needs the West to continue to buy, and so will suffer if recovery in the rich world proves short-lived.— Europe continues to lose competitiveness partly because of the euro, which — for all the fretting over its dip earlier this year at the height of the Greek debt crisis — remains high in purchasing price parity terms versus the U.S. dollar.— The sector that is widely seen as the spark of the global recession — U.S. real estate — has not recovered, with house-buying flat and the mortgage market, with its related financial instruments, essentially still in ruins.— The jobs picture is not improving and in parts of the developed world — such as Spain, with some 20 percent unemployment — it is disastrous.The warnings come amid mixed news on indicators. The European Central Bank raised its growth projections Thursday and its president, Jean-Claude Trichet, said recession was "not in the cards." But the bank said the situation remained uncertain and that it would keep measures to supply banks with additional credit in place until the end of the year.The U.S. unemployment rate rose in August for the first time in four months as hiring by private employers proved insufficient to keep pace with a large increase in the number of people looking for work. The Labor Department said Friday that companies did add a net total 67,000 new jobs last month, down from July's upwardly revised total of 107,000.But more than a half-million Americans resumed their job searches, which drove up the jobless rate to 9.6 percent from 9.5 percent in July — a figure above the rate in Britain and Germany."I see a very weak labor market," said Roubini, who gained celebrity for predicting the global collapse of 2008 when others were still celebrating the boom times. He noted noting unemployment is close to 10 percent and almost 17 percent when including discouraged workers or partially employed ones.He puts the chance of recession at 40 percent or more — a position he has staked in recent weeks — and said even weak growth would still feel like a recession."The U.S. has to create 150,000 every month in the private sector just to stabilize the rate and prevent it from rising," he said. "We'd have to create 300,000 jobs every month for the next three years just to bring back the level of employment to before this recession started," Roubini said."Nobody ... believes the U.S. is going to create any time any amount of jobs like that," he said.And even that wouldn't be enough when taking into account the young people entering the labor market, he said.Harvard University historian Niall Ferguson noted that since 2001 the United States has seen its debt-to-GDP ratio double to 66 percent and that it may well be headed toward the danger zone of 100 percent. "This is a completely unsustainable fiscal policy," said Ferguson. "Pretty soon the U.S. will be spending more on debt service than national security. ... That's a tipping point for any global power."Americans "just have to go down in their living standards" after years in which their living standards soared in part based on foreign credit which is no longer there," said University of Munich economics professor Hans-Werner Sinn. Jacob Frenkel, Chairman of JP Morgan Chase International, urged the United States to rein in entitlements as part of a "political deal" that recognizes reality.Roubini warned that world growth leader China was too dependent on exports to the struggling West and predicted that within a year its economic growth will be overtaken by India, a huge nation much more reliant on its domestic market for development.The leading Chinese delegate to the forum, Cheng Siwei, seemed to agree with the criticism. "We must change our investment pattern from investment driven to relying more on domestic consumption," said Cheng, a former top Chinese official who chairs the China Soft-Science Research Society among other positions.What about Greece, whose near-default four months ago rattled the nerves of investors around the globe? "Greece will not make it," said Sinn. He said the world can either subsidize Athens indefinitely, force a degree of austerity that actually risks "civil war," or — in what he suggested was the least bad option — encourage Greece to restore its drachma currency despite the domestic banking collapse that could well result.Sinn noted that bond spreads — the difference between the cost of borrowing for troubled countries such as Greece and solid ones such as Germany — have swiftly returned to the startling levels that preceded the Greek bailout in May.Truman ended his remarks on a high note, noting that in recent quarters' "U.S. productivity increase has been significant." In the second recent quarter, productivity dropped 1.8 percent.But higher productivity, while good for companies' bottom lines, is also a reflection of the stagnant labor market and the shrinkage of payrolls as firms hope to produce as much as before with fewer and more productive staff.In perhaps an illustration of that psychology, several hundred business leaders at the forum were asked for their projections on their own companies' prospects. Voting electronically, some 70 percent predicted a rise in turnover by the end of 2010 and almost half predicted a rise in their firms' investment.But less than a third saw a chance for new hiring; almost half saw no change — and about a quarter predicted even more reductions.
Friday, September 3, 2010
About 20 per cent of UAE expatriates earn more than $250,000 (918,100 dirhams) making the country home to some of the wealthiest expatriates in the world, a recent survey has said.Russia received highest ranking overall in the survey, followed by Saudi Arabia, Bahrain, UAE, and Singapore.The third annual report found that expatriates, globally were generally upbeat in their assessment of their financial situation, with 66 per cent saying they have more disposable income in their new country.The Expat Economic survey, part of HSBC's Expat Explorer Survey of 4,100 expats from 100 countries, ranked 25 countries on scores linked to annual income, monthly disposable income, and a measure of defined luxuries.However, last year has been difficult for foreigners in UAE. Over three quarter (77 per cent) indicating that the economic situation has deteriorated over the past year.A quarter of expats believe there are reduced career opportunities in UAE. One in ten of those who thought the economy hadn't improved are actively looking to return home.Meanwhile, although saving levels amongst expats as a whole have dropped since 2009, 61 per cent of expatriates are still saving more while working abroad and one in five (20 per cent) are able to pay off more debt than when they lived in their country of origin, the report said."If you're in business in Dubai, you have best terms and conditions for being successful. There's no VAT on staff, no social benefits. So for people setting up business here there are far more chances of success and huge profits than other countries in world.Pakistani and Indian traders are among the wealthiest in Dubai," said Steve Gregory, Managing partner of Holborn Assets, a financial advisory firm.Expats enjoy a luxurious lifestyle in the UAE including more cars, more exotic holidays, posher and larger properties and domestic help and 94 per cent pay lower taxes than in their country of origin, the report said.Around 79 per cent of expatriates are saving more in the UAE than at home compared to the worldwide average of 61 per cent. However, about 50 per cent of them are spending more here.The ability to save has dropped since last year, when 82 percent of expatriates said they were able to save more since relocating, according to the report.Despite the increased spending and decreased saving ability, 73 per cent say the reason they became expats is driven by career and money prospects.While the UAE has the fourth wealthiest expats, salary cuts and package trimmings post-recession are not uncommon.
Thursday, September 2, 2010
The chances of the US economy slipping into another recession are close to 25-33 per cent, a noted American economist said. "I see a third to fourth of a chance of a double dip (in the US economy)," noted American economist and former Chairman of the Federal Reserve of the United States, Alan Greenspan, said while addressing an audience through video-conferencing during the NDTV Profit Business Leadership Awards function in Mumbai on Wednesday. Watch: Fed has done an excellent job: Alan Greenspan)The chances that the US slips into another recession are 25-33 per cent, Greenspan said. According to him, to reduce the double dip probability, recovery in asset base should be created through rising asset prices.The US Central Bank has done an excellent job to tackle the finance crisis, he said. "You have to sovereign credit for private credit in the wake of the crisis," Greenspan said. While expressing concern over the long-term impact of government deficits, Greenspan said that this had been a crisis of unprecedented proportions, but he did not see another round of stimulus in the US."We have had enough stimulus in the US for the moment. It is not a good idea to expand deficit levels in the US. Longer-term consequences of expanding deficits are 'extraordinarily negative.' We need to allow the markets to absorb stimulus and calm down," Greenspan said.The major problem right now is an extraordinary amount of risk aversion, he said. According to Greenspan, the idea that economies can decouple is an illusion as emerging economies are closely connected with the developed world.
"Emerging economies cannot hope to decouple from the developed world. The recovery of consumer demand in the US will be a critical part of sustaining growth in emerging economies," he said.While referring about stock markets, he said that the influence of stock markets on economic activity is underestimated."Stock markets should be seen as a leading indicator to the economy. The rebound in stock markets and other asset markets could help revive sentiments. Stock prices will be a lead indicator for a turn in any economy," he said.Indian economy is looking like one of the strongest economies from a structural viewpoint, he said, adding "India is doing better than anybody in part because it is largely self-contained."
Dell on Thursday pulled out of the bidding for 3Par, giving the data storage company and its promising cloud technology up for rival Hewlett-Packard.The white flag in technology’s fiercest bidding war this year was raised hours after 3Par announced that H.P. had increased its previous offer by 10 percent, to $33 a share. Dell’s last bid was for $32 a share, after H.P. raised its offer to $30 on Friday. H.P.’s latest offer values 3Par, based in Fremont, Calif., at $2.1 billion.“We took a measured approach throughout the process and have decided to end these discussions,” Dave Johnson, Dell’s senior vice president for corporate strategy, said in a statement.Under its previous agreement with 3Par, Dell is entitled to a breakup fee of $72 million.3Par said in its statement. 3Par said its board had accepted the H.P. offer as a “superior proposal.”The battle for 3Par exploded after H.P. landed a counteroffer to Dell’s agreement to acquire 3Par for $18 a share on Aug. 16. The bidding quickly escalated for a company that has lost money in its three years as a public company and for a stock that traded below $10 for most of this year.