Finance Blog number 1

The Serbian government adopted a draft 2009 budget that projects a deficit equivalent to 1.5 percent of gross domestic product, in line with recommendations from the International Monetary Fund and narrower than this year.

“The government has adopted a budget that makes no one happy,” Finance MinisterDiana Dragutinovic said at the press conference in Belgrade today. “This is a restrictive budget, and the government has acted responsibly.”

GDP growth is forecast at 3.5 percent, about half the pace of 2008. Inflation is projected at 8 percent, or 1.5 percentage points less than this year. The budget deficit this year is predicted to be 2.7 percent of GDP.

The cabinet’s approval came after a month-long delay, as the parties in Mirko Cvetkovic coalition government argued over distribution of cuts through ministries.

Parliament is scheduled to debate the proposed budget in the coming week online pay day loan.

The draft budget projects the current account deficit at 16.3 percent of GDP in 2009, 2.2 percentage points less than in 2008. State revenue is projected at 698.7 billion dinars ($10.2 billion) and expenditure at 748.3 billion dinars.

Serbia secured a $516 million standby loan on Nov. 14 from the International Monetary Fund, the fourth eastern European nation to tap the institution for funds, to help stabilize the economy during the global financial crisis.

The IMF warned that government overspending may push the current-account deficit in 2008 above 18 percent of GDP, which it must cover through increased borrowing.

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Indonesia's economy grew at the slowest pace in six quarters as declining prices of palm oil, rubber and coal reduced the value of exports.

Southeast Asia's largest economy expanded 6.1 percent in the third quarter from a year earlier, after growing 6.4 percent in the preceding three months, the Central Statistics Bureau said in Jakarta today. That's more than the median 5.9 percent forecast of 22 economists in a Bloomberg News survey.

Exporters in Indonesia, the world's biggest producer of palm oil and the second-largest maker of rubber, are reeling from a slump in commodity prices amid recessions in the U.S. and Europe. Japan fell into its first recession since 2001, according to a Cabinet Office report today in Tokyo, after the world's second-largest economy unexpectedly shrank in the third quarter.

“Export demand will feel the impact of global slowing going forward,'' said David Cohen, director of Asian forecasting at Action Economics in Singapore. “Sentiment is likely to be impacted as the stock market has slipped and people are just nervous.''

The rupiah fell 2 percent to 11,810 against the dollar at 2:52 p.m. in Jakarta.

The government last month cut next year's target for Indonesia's overseas-sales growth to below 11.9 percent. Frozen credit markets are making it difficult for companies to obtain the letters of credit needed to secure payment for their shipments.

`Financial Turmoil'

“A few months ago I had five out of six containers already on their way to the port returned because the client suddenly called and said he couldn't secure the payment,'' said Umar Chotob, owner of CV Java Marindra Jaya, which exports wooden furniture. “The impact of the financial turmoil is remarkable. It's overwhelming.''

Exports growth slowed to 14.3 percent in the quarter from a year earlier. Farm output grew 2.4 percent in the three months ended September, the slowest pace in six quarters creditscore.com. Construction increased 7.5 percent, the least since the quarter ended December 2005.

Rising prices of coal, palm oil, coffee and rubber earlier this year increased the income of farmers and miners. That helped boost sales of motorcycles to a record 612,032 in August, after Indonesians purchased an unprecedented 60,830 cars in July.

Since then, commodity prices have tumbled. Power station coal prices at Australia's Newcastle port, a benchmark for Asia, fell 6.2 percent in the week to Nov. 14 amid declines in global energy prices.

“All export prices are down and you can't compensate that with extra volume because demand is not there,'' said Tony D. Costa, the president of PT Bank Rabobank International Indonesia, a unit of the world's biggest agricultural lender. Consumer spending is slowing and “motorcycle sales will be much lower. That means the economy will slow.''

Global Slump

Indonesia's economic growth may ease to as low as 5 percent next year as the world tilts toward a recession, Finance Minister Sri Mulyani Indrawati said on Nov. 9.

“It will be very, very challenging for us to maintain growth under the current circumstances,'' Sri Mulyani said. “Just like other developing countries, we have to be prepared for a longer period of weakening in the economy.''

Government spending rose 16.9 percent, the fastest pace since the three months ended June 2006.

“Private consumption may still be able to sustain Indonesia's growth trajectory amidst deteriorating external trade position,'' said Enrico Tanuwidjaja, an economist in Singapore at Oversea-Chinese Banking Corp.

The statistics agency forecasts 2008 economic growth to be a “minimum'' 6 percent and less than 6 percent next year.

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The Bush administration sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.

Through his plan, Treasury Secretary Henry Paulson aims to avert a credit freeze that would bring the financial system and the world's largest economy to a standstill. The bill would prevent courts from reviewing actions taken under its authority.

“He's asking for a huge amount of power,'' said Nouriel Roubini, an economist at New York University. “He's saying, `Trust me, I'm going to do it right if you give me absolute control.' This is not a monarchy.''

As congressional aides and officials scrutinized the proposal, the Treasury late yesterday clarified the types of assets it would purchase. Paulson would have authority to buy home loans, mortgage-backed securities, commercial mortgage- related assets and, after consultation with the Federal Reserve chairman, “other assets, as deemed necessary to effectively stabilize financial markets,'' the Treasury said in a statement.

The Treasury would also have discretion, after discussions with the Fed, to make non-U.S. financial institutions eligible under the program.

The plan would raise the ceiling on the national debt and spend as much as the combined annual budgets of the Departments of Defense, Education and Health and Human Services. Paulson is asking for the power to hire asset managers and award contracts to private companies. Most provisions of the proposal expire after two years from the date of enactment.

Markets `Fragile'

Paulson spent the morning today appearing on the Sunday television talk shows to build public support for his plan. He urged quick approval by Congress, saying financial markets are “fragile.'' While the plan should have “mortgage relief components,'' he suggested legislative changes should be kept to a minimum.

“We want this to be clean, we want this to be quick,'' Paulson said on Fox News Sunday.

Speaking on NBC's “Meet the Press, he said: “This is not a position where I like to see the taxpayer, but it is far better than the alternative.'' He added that assets bought by the Treasury would later be sold, recovering some money for the government.

A failure by the government to support the U.S. financial system could lead to “a depression,'' Senator Charles Schumer, a New York Democrat told reporters yesterday. “To do nothing is to risk the kind of economic downturn this country hasn't seen in 60 years.''

Buyer of Last Resort

The Treasury is seeking authority to step in as buyer of last resort for mortgage-linked assets that few other financial institutions in the world want to buy, following government takeovers of mortgage giants Fannie Mae and Freddie Mac and insurer American International Group Inc.

“Democrats will work with the administration to ensure that our response to events in the financial markets is swift,'' House Speaker Nancy Pelosi said in a statement.

The majority party will seek to reduce mortgage foreclosures and create “fast-track authority'' for an overhaul of financial regulation, Pelosi said. Democrats will ensure “the government is accountable to the taxpayers in any future actions under this broad grant of authority, implementing strong oversight mechanisms.''

The proposal will include curbs on executive pay for the companies whose assets the government will be buying, Steve Adamske, a spokesman for Representative Barney Frank, said yesterday in an interview.

Preventing Foreclosures

Democrats also will include a plan to stem foreclosures, which may involve tapping the loan-modification abilities of the Federal Housing Administration, the Federal Deposit Insurance Corp., and Freddie Mac and Fannie Mae, Adamske said. Frank, a Democrat from Massachusetts, is chairman of the House Financial Services Committee.

Senate Majority Leader Harry Reid said that while he has misgivings about the rescue plan, “the consequences of inaction could be catastrophic.''

“While the Bush proposal raises some serious issues, we need to resolve them quickly,'' he said yesterday in a statement. “I am confident that, working together, we will.''

House minority leader John Boehner, an Ohio Republican, said yesterday he is reviewing the proposal but didn't say whether he was inclined to support it.

“The American people are furious that we're in this situation, and so am I,'' Boehner said in a statement. “We need to do everything possible to protect the taxpayers from the consequences of a broken Washington.''

Protection for Taxpayers

Congress, which may pass legislation as soon as Sept cash til payday loan. 26, needs to “make sure there are protections built in for taxpayers,'' said Schumer, a New York Democrat on the banking committee. Lawmakers should ensure “taxpayers who gave the money will be put ahead of the stockholders, bondholders and others.''

Yesterday on Capitol Hill, legislative aides wearing polo shirts and jeans instead of their usual business suits filed into the House Financial Services Committee hearing room to question Treasury officials including David Nason, assistant secretary for financial institutions, and Neel Kashkari, a senior adviser to Paulson and former investment banker at Goldman Sachs Group Inc., where the Treasury secretary was previously chief executive officer.

Paulson is seeking an expansion of federal influence over markets that hasn't been seen since the Great Depression, said Charles Geisst, author of “100 Years of Wall Street'' and a finance professor at Manhattan College in New York.

Depression Era Agency

Geisst likened the plan to the Reconstruction Finance Corp., which was chartered by Herbert Hoover in 1932 with the goal of boosting economic activity by lending money after credit markets seized up.

President George W. Bush said he called leaders in both houses of Congress and “found a common understanding of how severe the problem is and how necessary it is to get something done quickly.''

“This is going to be a big package because it's a big problem,'' Bush said following a meeting with Colombian President Alvaro Uribe at the White House. “We need to get this done quickly, and the cleaner the better.''

Democratic presidential nominee Barack Obama said in a radio address that he “fully supports'' Paulson and Fed Chairman Ben S. Bernanke's efforts to stabilize the financial system. The plan, however, should benefit both main street and Wall Street, he said.

McCain Comments

Republican Presidential nominee John McCain “looks forward'' to reviewing the proposal while focusing at least in part on “minimizing the burden on the taxpayer,'' said Jill Hazelbaker, communications director for the McCain campaign.

The ban on legal challenges of actions by Treasury is “distasteful, it's unfortunate and it's bad precedent, but this is an emergency and you have to act,'' said Jerry Markham, a law professor at Florida State University and author of “A Financial History of the United States.''

“What you don't want happen is to have lawsuits that will slow things down and cause problems,'' he said.

The proposal would raise the nation's debt ceiling to $11.315 trillion from $10.615 trillion and require the Treasury secretary to report back to Congress three months after Treasury first uses its new powers, and then semiannually after that.

Paulson would gain discretion to act as he “deems necessary'' to hire people, enter into contracts and issue regulations related to a revival of U.S. mortgage finance, according to a three-page proposal. The Treasury would “take into consideration'' protecting taxpayers and promoting market stability.

Reverse Auctions

The Treasury may hire managers to purchase the assets through so-called reverse auctions, seeking the lowest prices, Treasury said yesterday. The document specifies that Treasury may buy only assets issued or originated on or before Sept. 17.

The House will pass legislation to implement the plan by the end of this week, and the Senate will act soon after, Frank said on Sept. 19 in an interview on Bloomberg Television's “Political Capital with Al Hunt.''

Bush said yesterday he's unconcerned that the price tag on the package may seem high.

“I'm sure there are some of my friends out there that are saying, `I thought this guy was a market guy, what happened to him?''' the president said. “My first instinct was to let the market work, until I realized, while being briefed by the experts, how significant this problem became.''

The Bush administration seeks “dictatorial power unreviewable by the third branch of government, the courts, to try to resolve the crisis,'' said Frank Razzano, a former assistant chief trial attorney at the Securities and Exchange Commission now at Pepper Hamilton LLP in Washington. “We are taking a huge leap of faith.''

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More than half of the offices in the Oregon State Capitol will reopen on Wednesday as cleanup from last weekend’s fire continues.

An environmental assessment concluded that the building is safe and that many offices can reopen Wednesday morning. Officials hope to re-open the entire building on a limited basis by the end of the week.

“Smoke and water damage from the fire was extensive,” said Senate President Peter Courtney, in a statement. “The biggest concern at present is air quality and some areas will have to remain closed pending a thorough cleaning of portions of the Capitol’s ventilation system.”

State employees in offices that will remain closed are being asked to work from home.

The offices that will reopen on Wednesday include the state treasurer’s office, the House offices for the speaker and majority staffers, Senate offices for both Democrats and Republicans, the chief clerk’s office, the Senate secretary and the facility’s state police office.

Other areas opening on Wednesday include facilities services, legislative supply, the pressroom and the legislative media, counsel and fiscal offices.

The information services office in the building’s basement will be open, as will the Indian services office and the governor’s staff offices in Room 160.

Offices remaining closed include those housing staff for the secretary of state, legislative administration, financial services, employee services, committee services and capitol offices for other legislative assembly members free credit report .com. The Legislative Revenue Office, Information Services Development Office, visitor services, gift shop and hearing rooms will also remain closed.

Gov. Ted Kulongoski’s staff will occupy temporary offices two blocks from the Capitol building. The fire started early Saturday morning outside Kulongoski’s ceremonial office. Some parts of the capital received extensive smoke and water damage.

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Flat wages, a 28 percent rise in unemployment, and a dramatic slowing of job grow have combined to make it harder for Florida workers to get by, according to a university study.

The new study, released by the Research Institute on Social and Economic Policy at Florida International University, found job growth rose just 0.5 percent last year, down from a high of 4 percent in 2005. That’s compared to a national rate of 1.1 percent.

Now that the nation’s economy is slowing, the industries that elevated Florida above the rest of the country are dragging it down.

The construction industry felt the most pain, losing 54,000 jobs, according to the report’s co-author, Bruce Nissen, a professor of labor studies at FIU.

During the boom, Florida performed better than the country overall in job growth because of hyper-accelerated growth in construction and real estate. But, the gains spurred by the real estate boom have retreated, Nissen said.

“These numbers show that Floridians have already begun to feel the effects of the slowing economy, job loss and flat wages,” he said. “This, plus the simultaneous increases in the cost of living, makes the near future look very worrisome for working Floridians.”

Worker wages were flat last year and the wage gap for minorities is growing wider.

The high cost of living particularly impacts laborers. Workers here depend heavily on cars to travel to and from work faxless payday advances. In the last seven years, the Miami-Fort Lauderdale and Tampa Bay metropolitan areas had the second- and third-highest rates of inflation compared to other major metro areas nationwide.

One of the state’s most attractive financial features – its low tax rate – is a mirage that undercuts its growth, the report said. Floridians pay an average of 7.4 percent in state and local taxes – one of the lowest in the nation. But most of the taxes are not tax-deductible, so the tax burden on Florida residents is actually higher than it is for people outside the state.

The FIU study points to several steps needed to take to improve the lives of Floridians. It suggests Florida officials expand the state’s job sector beyond tourism and real estate, improve the education system, facilitate a more fluid relationship between educational institutions and industry, and reform the state’s tax system.

“The challenge has to be met head on, with an understanding that all the parts depend on each other,” the report stated. “An employer needs educated workers. Those workers need good teachers. Good teachers need the support of taxpayers, and taxpayers need to understand how their money is being invested.”

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Investment in Denver-area commercial real estate was down in all categories except apartment properties for the 12 months through the second quarter, according to LoopNet Inc.

In the biggest purchase category — office buildings — investors acquired $2.5 billion in properties for that period, down from $4.54 billion for the same period a year ago. It should be pointed out that metro Denver had its largest commercial real estate deal ever in 2007¹s first quarter, with the $770 million sale of five downtown Denver office buildings to Callahan Capital Partners LLC by The Blackstone Group LP.

Average selling price for office space per square foot also decreased, to $146 from $174.

Downtown Denver office space in the last year sold for $184 per square foot on average, compared to $232 for the same period a year earlier. Most buyers — 57 percent — were institutions or foreign investors. Office space capitalization, or "cap," rate averaged 7.3 percent, up from 7 percent. Cap rate is the rate of return used to calculate the capital value of an income stream.

Based in San Francisco, LoopNet (NASDAQ: LOOP) provides commercial real estate information.

Other investment data for metro Denver, for the previous 12 months through June compared to the same period a year earlier, includes:

• Apartment investment — Up to $1.59 billion from $1.46 billion overnight payday loans. Average price per unit decreased to $95,008 from $96,713. Most buyers — 59 percent — were private. Cap rate rose to 6.9 percent from 6 percent.
• Retail investment — Down to $616 million from $1.28 billion. Selling price per square foot down to $168 on average, from $182. The largest category of buyer, at 54 percent, was private investors. Cap rate increased to 7 percent from 6.7 percent.
• Industrial investment — Down to $615 million, or $68 per square foot on average, from $674 million, or $71 a foot. Warehouse space led the way in sales, with $389 million, compared to $226 million for flex space, which combination of types of space including office, laboratory and warehouse footage. Most buyers — 57 percent — were private. Cap rate roughly flat at 7.1 percent.