Official Launch of MoneyBob.com Coming Soon

I am excited to announce that our little MoneyBob Blog on WordPress
will soon migrate to his very own official landing page on http://www.MoneyBob.com.
Hope to see you there. Good things will be coming soon.
I would be interested to here your comments. Have any suggestions?
MoneyBob.com

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Why This Crisis is Still Far from Finished

Financial Times

Why this crisis is still far from finished

By Mohamed El-Erian

Published: April 24 2008

During the past few weeks we have seen a growing number of market participants predict an end to the dislocations that erupted last summer and claimed victims throughout the financial system and beyond. While their predictions are understandable, they are premature. The dynamics driving the disruptions are morphing and may again move ahead of both the market and policy responses.

The optimistic view is based on two distinct elements. First, that the de­leveraging process is reaching its natural end as valuations stabilise and institutions come clean about their losses and raise capital; second, that a series of previously unthinkable policy responses have been effective in restoring liquidity to the financial system.

Both views have merit. Financial institutions, particularly in the US, have recognised the scale of the problem and are taking remedial steps. Just witness the recent round of capital raising by Citigroup, Merrill Lynch, JPMorgan and Wachovia. At the same time central banks in Europe and the US have opened up their financing windows, expanding the size of the financing, the range of institutions that can access it and the list of eligible collateral.

Yet, consistent with what we have seen since last summer, the dislocations are entering a new phase. As such, bold reactions on the part of policymakers may, once again, prove to be too little and too late.

Persistent financial dislocations have now caused the real economy to become, in itself, a source of potential disruption. During the next few months there will be a reversal in the direction of causality: the unusual adverse contamination by the financial sector of the real economy is now morphing into the more common phenomenon of recessionary forces threatening to undermine the financial system.

Economic data in the US have taken a notable turn for the worse. Most im­portantly, the already weakening employment outlook is being further undermined by a widely diffused build-up in inventory and falling profitability. History suggests that the latter two factors lead to significant employment losses.

Pity the US consumers. Their ability to sustain spending is already challenged by the declining availability of credit, a negative wealth effect triggered by declining house values, and a lower standard of living as the result of higher energy and food prices and a depreciating dollar. Job losses will accentuate the pressures on consumers, leading to income declines and a further loss of confidence.

While the financial system has taken steps to enhance balance sheets, they speak essentially to addressing the consequences of excessive leveraging and imprudent financial alchemy. As such, the nasty turn in the real economy may fuel another wave of disruptions that, this time around, would also have an impact on mid-size and smaller banks.

It is thus too early to declare the end of the turmoil that started last summer. Instead, during the next few months we may witness a new phase of dislocations, led this time by the real economy. The blame game will intensify; political pressure will continue to mount; momentum will build for greater and broader regulation of financial activities within the banking system and beyond.

The focus will also be on the reaction of policymakers. Here the outlook is mixed. The good news is that the crisis is now moving to an area where traditional policy tools are more effective. This is in sharp contrast to the situation of the past few months, where central banks were forced to use instruments that were too blunt for the purpose at hand.

But there is also bad news. The sharp slowdown in the US real economy will occur in the context of continued global inflationary pressures. As such, the Federal Reserve’s dual objectives – maintaining price stability and solid economic growth – will become increasingly inconsistent and difficult to reconcile. Indeed, if the Fed is again forced to carry the bulk of the burden of the US policy response, it will find itself in the unpleasant and undesirable situation of potentially undermining its inflation-fighting credibility in order to prevent an already bad situation from becoming even worse.

It is still too early for investors and policymakers to unfasten their seatbelts. Instead, they should prepare for renewed volatility.

The writer is co-chief executive and co-chief investment officer of Pimco. His book, ‘When Markets Collide: Investment Strategies for the Age of Global Economic Change’, will be published by McGraw Hill in June

They Said It Could Not Be Done

They Said It Could Not Be Done

A Poem by Benny Hill

They said that it could not be done, he said just let me try.
They said, “Other men have tried and failed,” and he answered, “But not I.”
They said, “It is impossible,” he said, “There is no such word.”
He closed his mind, he closed his heart to everything he heard. Continue reading

What a new Federal Minimum Wage means for the states

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With the recent passage of a federal minimum wage bill, the first national minimum wage increase in over a decade is imminent. This bill will provide a wage boost for 12.5 million workers. Under the legislation, the first step of the minimum wage increase—from $5.15 to $5.85—will go into effect on July 24, 2007, 60 days after the president signed the bill. The minimum wage continues to rise annually for two years under the legislation, reaching $7.25 in 2009.

The interaction between the federal minimum wage and state minimum wages varies. Currently, 33 states have passed minimum wage laws establishing higher wage floors than the federal $5.15 level. Several of these states are in the midst of phased-in minimum wage increases of their own, and some index their wages to inflation. The federal phased-in hike will in some cases surpass state minimum wages and in some cases not. By September 2009, the number of states with minimum wages above the federal level will be down to 12, with several states tied with the federal rate of $7.25.

The table below shows how the federal increase will impact minimum wage workers state-by-state. The dates do not necessarily reflect effective dates of change (which vary), but rather show what the operative minimum wage in the state will be on the date specified. Values that are in bold are wage rates that will increase due to the federal increase. This table only describes the effective minimum wage rate for workers covered by the federal Fair Labor Standards Act (FLSA).

Effective minimum wage rates for workers covered by FLSA

MoneyBob Launches Official Blog Site!

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Hello and Goodbye World – My name is “MoneyBob” and I have finanlly launched my Official Money Blog, I mean MoneyBob Blog – to help, inform, educate, and teach consumers all about personal finance and how to prosper in today’s world of economic challenges.