The Financial Times [Economic News]

US economic growth slows to 1.5%



The US economy grew at an annualised rate of 1.5 per cent in the second quarter of 2012 as consumption growth stuttered and government spending continued to decline.

The figure, which was broadly in line with market expectations, confirms the loss of momentum in the world’s largest economy since the spring and is not fast enough to bring down high unemployment.

It will add to the Federal Reserve’s fears about progress towards higher employment but may not be alarming enough to force immediate action at an interest rate meeting next week.

“US economic growth has slowed to a crawl,” said Kathy Bostjancic, director for macroeconomic analysis at the Conference Board. “Given the anaemic pace of consumption and investment, plus continued austerity for state and local government spending, and weak exports, it is difficult for the domestic economy to produce at a more robust pace.”

Consumption grew at an annualised rate of 1.5 per cent, contributing 1.1 percentage points to growth, while government spending declined at a pace of 1.4 per cent, subtracting 0.3 percentage points.

One encouraging sign was a rebound in housing investment, which rose at an annualised rate of 9.7 per cent, albeit from a very low base.

The release included revisions to GDP data going back to 2009, but unlike past years, they did not cause a big shift in the apparent health of the economy. Upward and downward revisions set each other off.

The recession turned out to be slightly shallower than previously thought, with growth in 2009 revised upwards from a 3.5 per cent decline to a 3.1 per cent decline, but the recovery was slower, with 2010 growth revised down, from 3 per cent to 2.4 per cent.

Growth in 2011 was little changed, with an upward revision from 1.7 per cent to 1.8 per cent. For the whole period, corporate investment was revised down and government spending was revised up.

The figures did show how revisions to the data can make a big difference to understanding of the economy. At the time, strong growth was reported in the first two quarters of 2010, with a seeming pace of about 4 per cent creating optimism about the economic recovery.

The revisions show that actual growth in that period was closer to 2 per cent, which might have prompted earlier and greater stimulus to the economy had it been understood.

[i]Article taken from FT Website

Obama Vetos Corporate Tax Decrease, "Corporations Must Shoulder the Burden Too"



President Obama vetoed today a plans, narrowly passed through congress aimed at reducing the Corporate Tax rate to 26.5%. The measure was designed as a way to encourage and stimulate business. The veto was somewhat unexpected as Obama several senior democratic sources indicated that the White House had supported the move. However, in a press conference earlier today, the President stated that the legislation was too much of a loophole for corporations and instead did not hold them accountable for their fair share of the "American Burden". House Republicans are infuriated with House Speaker John Boenher reportedly accusing Obama of showing his "true anti-business stripes" while Some Senate Democrats, supporters of the move, are reportedly becoming disillusioned with the Obama Administration. whom they accuse of giving mixed signals, with many members privately saying that Obama's chances for re-election are diminishing. Already Obama has decreased in the polls with Republican Contender Mitt Romney taking a four point lead ahead of President Obama, the highest lead he has held since early April 2012.

Elections have always been difficult for first year incumbant Presidents, but for Obama its becoming clear that if political mistakes such as this continue, the closer the chances of a change of leadership occuring in Washington are. Even if Obama wins, pundits say, based on his current approval ratings, it will be a close victory and at that Republicans may even have a shot at a majority in the Senate and picking up an even greater margin in the House, both of which will pose difficulties for Obama having a successful second term as both sides of Congress would likely be united in opposition. Some small business owners when hearing about this veto were angered by the actions of the President. Whilst many in the democratic party have been confused by the Obama administration's handling of this issue, several members of the House Democratic Caucus were jubilant, stating that no lowering of the Corporate Tax should occur in a time in which the economy is so fragile. Economists close to the Democratic National Committee say that this decision was difficult but ultimately demonstrated Obama putting his country ahead of political ambition. And it is true, while not a popular decision by any means it will ensure revenue streams are not disturbed in a time in which the markets are already fragile and shaky after the current diplomatic dispute between the Greeks and the Germans.

Pundits are warning that the White House must be careful to ensure that it projects an image of being business friendly. This veto has caused some strain on the markets at a time of some significant international concerns. Democrats in both houses are already saying that they will respect the decision of the President and the veto and as such they will not try to reverse the veto through a Congressional vote. The House Republican majority is working on a symbolic vote to demonstrate support for business leaders but experts say that it will not have any effect other than showing the disdain Republicans already have for the President. If anything this move has caused millions of dollars to flood into the Romney campaign in just a few hours after the veto. Businesses are reportedly working closely with Mitt Romney's campaign and the superpacs backing him. All in all this is a bad development for President Obama and Senate Democrats are responsible for pushing Obama to sign something that he obviously was not comfortable with.

[EFFECTS]

USA
-3.00 Domestic Popularity (Republicans capitalise on presidential veto, some Dem's angered at confused White House policy)
+1.00 Domestic Popularity ("This was a damaging decision, but ultimately right")
Mitt Romney leads Obama by 4 percentage points nationwide, potential to win unless something happens to change things.

Russia Embarks on Rail Modernizing Program



Above: One of the main lengthy train networks in the Russian Federation


Moscow: The Russian Federation has announced today that they will be expanding rail services across the vast tundra of the Russian Federation to logging camps, iron mines and other industrial sectors to increase access to ports of export and to increase the level of rail utilization in the Russian Federation which some sources say they hope exceeds 1981 levels. The plans of this government-funded project are to expand the industrial railways to once again reach their height numbers in 1981 (thus equaling the length of common-freight railroads). This will include the repairing of the existing Industry Railroads, and an expansion by almost 100% of lines which will be used to connect remote mining and lumber camps with industrial cities and port cities.

The work will be done Russian Railways, the government-owned railway company that operates throughout Russia. The Railways also are one of the largest companies in the world employing 950,000 people and is also a monopoly within Russia. It will hire another 400,000 people from the current unemployment pool to work on the expansion and repair of the railways. This will be a temporary hiring for the most part, though at the companies discretion it could maintain the workforce to continue repairs using its own funds on the rest of the railway. The cost of this project is believed to be around 9 billion, sources state that 5 billion will be provided by the Russian Federation while 3 billion will be provided by the Russian rail company involved in the project. Our analysts believe this is a potentially huge move which could cause the Russian Federation to experience an economic boom if played right which would give Russia a huge economic advantage in a time in which every advantage counts particularly as global economies are already fragile and shaky.

Within Russia support for Putin and the United Russia Party is steadily increasing despite the small groups that have protested Putin's supposed iron grip on power. The United Russia Party is being seen as the party that achieves real results and puts money where their mouth is something that has enthused even the most cynical of Russians in the political process. Gains are small but if successful economic policies such as this continue to be enacted in which unemployment is already seeing a 2-4% fluctuated drop across Russia the gains for United Russia could potentially be even bigger in the next elections. Opponents of the plan however argue that this increased use of rail rather than aeroservices puts a strain on the environment and causes vast areas of pristine forest to come in jeopardy from the hand of the mighty Russian rail corporations who now have new incentive to create jobs through rail expansion. This environmental impact if trumpeted successfully by opponents of the program could become a thorn in the side of Putin and United Russia but for now it does not appear likely as many are enjoying the growth of new jobs and the potential for new wealth in the Russian Federation something this country has not had hope of since the fall of communism and the rise of Boris Yeltsin into Russian politics years ago.

Russian Federation:

+6.00 Domestic Popularity (The Government is creating jobs, they are putting their money where their mouth is. Russians are feeling very pleased with the Putin government)
-2.00 Domestic Popularity (Putin cares more about staying in office than saving the trees! Environmentalists in Russia are extremely upset with this new proposal as they do not fully understand it yet)
+2.25% GDP Growth
-5,000,000,000
Environmentalists are energized, but so is United Russia which is gaining widespread national support

Turkish Government Approves a Massive Reduction in Corporate Taxes



Above: Turkish Beaches beckon rich corporatists as the corporate tax on companies has been drastically slashed.

Ankara, Turkey - Turkish finance minister Mehmet Simsek today announced a cut in the corporate tax rate, from 20% to 9%. Speaking at a press conference, he said that this was “part of the wider economic strategy to attract ever-greater amounts of Foreign Direct Investment into Turkey”. The opponents of Prime Minister Edrogan stated that this is merely the continuance of irresponsible politics of not holding companies accountable for their fair share of economic responsibility. But those closest to the government state that this is a way in which the economy of Turkey can rebound over the long term and while the deficit caused by the loss of revenue will hurt Turkey in the short term the long term benefits of companies reinvesting their money into the economy through an increase in hiring will be instrumental in improving the economic outlook of this country over the longterm.

One of the largest companies in Turkey is that of the conglomerate Koc Holdings which controls 38.7% of the Turkish private sector, already sources close to the company are stating that the company could increase its hiring by an estimated 12-25% over the next two years as money can be re-allocated to increase production and increase operations. What this means however is that larger companies will be increasing in size and while good for the economy it creates problems for the small business across Turkey who will become edged out of competition by the larger business as the larger corporations begin to dramatically increase the scale and scope of their operations over the next few years. Economists in the United States are jubilant however as this will increase stability of US investments in the region and will increase the positioning of Turkey to enter formally into the Eurozone something that the country has been angling for many years to achieve but to no avail yet.

Indeed the United Kingdom when asked for comment stated that reducing the tax rates in Turkey while a relatively benign domestic move is instrumental in increasing consumer and international investor confidence within Turkey to create a profitable climate for future business. The Cameron Government has reportedly expressed an interest in signing new economic agreements between the United Kingdom and Turkey citing the new and favorable business environment. But many within the United Kingdom are questioning this move citing the Turkish government's new Islamist bent that has continued in that direction to the extent that earlier in the year the Turkish government compared women who were not wearing a head scarf or covering to a house with no curtains which in Turkish culture means for sale or for rent, the connotations in that context clearer than ever to the casual listener.

Whether Turkey can translate this into sustained business growth is yet to be seen but one thing is for sure many in Turkey are viewing this move positively as a move in the right direction by the Edrogan government and a step forward for prosperity in a nation that so desperately wants to hold its head high and be in the same league as the titans of the global economy something that is becoming more and more of a reality particularly if this move creates a higher gain of wealth for Turkish citizens across the board which in turn will increase the standard of living and reduce overhead costs for the average citizen.

Republic of Turkey:

+5.00 Domestic Popularity (Businesses are excited and see this as a real tangible way for growth)
+3.25% GDP growth in the short-term. (Check back in Q.1 of 2014 for more results)
+5.00 International Popularity (Outside investors are excited by the opporotunities this brings and the increased ability for investment in Turkey)

Germany invests in Alternative Energy Sources



Berlin, Germany: The German government is investigating ways in which it will fully replace its current nuclear power industry which is being phased out by 2022 and one such way is in the form of alternative energy particularly wind energy. Offshore wind turbines are being used in a number of countries to harness the energy of the moving air over the oceans and convert it to electricity. Offshore winds tend to flow at higher speeds than onshore winds, thus allowing turbines to produce more electricity. Much of this potential energy is near major population (and energy load) centers where energy costs are high and land-based wind development opportunities are limited. Because the potential energy produced from the wind is directly proportional to the cube of the wind speed, increased wind speeds of only a few miles per hour can produce a significantly larger amount of electricity. For instance, a turbine at a site with an average wind speed of 16 mph would produce 50% more electricity than at a site with the same turbine and average wind speeds of 14 mph.

Many offshore areas have ideal wind conditions for wind facilities. Denmark and the United Kingdom have installed large offshore wind facilities to take advantage of consistent winds. Today, just more than 600 MW of offshore wind energy is installed worldwide, all in shallow waters (<30 meters) off the coasts of Europe. Proposed offshore wind projects through 2010 amount to more than 11,000 MW, with about 500 MW each in the United States and Canada, and the remainder in Europe and Asia. Commercial-scale offshore wind facilities currently are similar to the onshore wind facilities, but with modifications to prevent corrosion and protect against wave and wind interactions. Because roughly 90% of the U.S. OCS resources are over waters that are much deeper than European waters where commercial wind facilities are currently sited, new technologies are being developed (e.g., for strengthened tower foundations) to harness the wind in the harsher conditions associated with deeper waters. Offshore wind facilities today are generally developed and operated as follows. Once a suitable place for the wind facility is located, piles are driven into the seabed. For each turbine, a support structure and a tower to support the turbine assembly, to house the remaining plant components, and to provide sheltered access for personnel are attached to the piles. After the turbine (generally a three-bladed rotor connected through the drive train to the generator) is assembled, wind direction sensors turn the nacelle (a shell that encloses the gearbox, generator, and blade hub) to face into the wind and maximize the amount of energy collected. Wind moving over the blades makes them rotate around a horizontal hub connected to a shaft inside the nacelle. This shaft, via a gearbox, powers a generator to convert the energy into electricity.

This is largely being funded through feed in tariffs in which wind energy is being offered at a lower price through a long-term contract in order to attract buyers to help support the project over the long term. In addition the German Government is providing a $50M grant to improve cost efficiency, improve reliability, advance the level of integration into existing electricity grids, improve power storage technology and organise the expansion of offshore wind power in an eco friendly way that does not damage nature. This is good many environmentalists say but they argue it does not go far enough because wind turbines will be built as they have been done in Denmark, the Netherlands and the UK and the environmental studies will come later. Building these turbines environmentalists say disturbs maritime habitats and destroys migratory patterns for avian species of birds. But more alarming some say is the level of intense noise it generates which can be heard to a degree on land. These concerns are raising as people question whether or not wind energy is the best form of energy to utilize. Scientists however dispute many environmentalists claims stating that wind energy is by and large the best solution for energy production with pollution generation almost non-existant and its ability to create jobs outweighs objections over noise pollution which many say is softer than a jet flying overhead in the sky. Germans support this move for the most part and view this as a step forward for Germans and a step forward for the economy.

Deutschland:

+3.00 Domestic Popularity (Germans see this as responsible policymaking by Merkel. CDU is gaining support in large city centers)
-1.00 Domestic Popularity (The environmentalists are divided, some think that this could harm the birds while others would prefer wind energy over the alternative such as nuclear energy
-$50,000,000 in funding provided by the Environment Ministry. More results in Q2 of 2013

Note: A large amount of this article was copied from http://ocsenergy.anl.gov/guide/wind/index.cfm

Italy Public Debt Hits Record, Bailout Looms



Rome, Italy: Italy's public debt hit an all-time high in June of almost 2 trillion euros and the annual budget deficit was also bigger than a year before, due largely to Italy's share of bailouts for other euro zone states, the central bank said on Monday. Public debt at the end of June rose 6.6 billion euros to 1.973 billion euros, the Bank of Italy said, as the Treasury's cash reserves increased by 10.3 billion euros. Italy's benchmark bond yields remain close to 6 percent despite tough austerity measures introduced by Mario Monti's technocrat government.

With the country mired in a deep recession, markets are sceptical of Italy's ability to bring down a debt pile equivalent to around 123 percent of output, the second highest debt in the euro zone after Greece's. The economy contracted 0.7 percent in the second quarter and gross domestic product was down 2.5 percent from a year earlier. In another worrying sign for public finances, the Bank of Italy reported that in the first half of the year the annual budget deficit, at 47.7 billion euros, was 1.1 billion euros higher than in the same period of 2011. This was due to an increase in spending to help other euro zone countries, which rose to 16.6 billion euros from 6.1 billion in January-June 2011. Italy itself is under pressure to request help from Europe's bailout funds, a move now widely seen as the only way to bring down borrowing costs that have soared in recent months, but which the government has so far resisted. Italy's one-year borrowing costs rose marginally at auction on Monday, with uncertainty over how and when the European Central Bank might move to ease both the country's and the region's mounting debt problems tempering appetite for risk.

Rome is targeting the deficit to fall sharply this year to 1.7 percent of GDP from 3.9 percent in 2011, but Economy Minister Vittorio Grilli admitted on Sunday that this target would be missed. He nevertheless reiterated Rome's position that because the overshoot was due to the steep recession, no further austerity measures were needed. The structural deficit, the fiscal gap that persists even when an economy is operating at its full potential, would be eliminated next year as targeted, he told Rome daily Repubblica. Grilli asked the European Central Bank to move more quickly to put together plans to bring down Italy's yields and said no new policy conditions should be imposed on Italy. He said when the recession is over, Italy could lower its debt-to-GDP ratio by 20 percentage points in five years through a combination of real estate sales, spending cuts and prudent budget management.

Italy

-5 Domestic Popularity (Can't our government do anything right?)
-7 International Popularity (More trouble potential for the European Union to deal with)
European investors and markets are shaken, something should be done to reassure them lest this grow bigger and affect Europe in a much deeper way

European Union

-4 Popularity (People are worried. First Greece, now Italy? What next? France?)

Article: http://www.cnbc.com/id/48645158