Berlusconi has refused to substantiate reports that he is to step down as Prime Minister to allow someone else to form government or to push for early elections. Berlusconi does not have enough confidence in the Italian Parliament to pass the reforms that are being called for by investors to increase growth and cut debt. The President can choose to let a government be formed by technocrats rather than call an election, although a political government can still be formed if a loss of confidence vote passes in Parliament.

A large part of the problem seems to be Berlusconi himself. After being rocked with a number of scandals, Berlusconi barely clings to power. His critics say that he puts his own business interests ahead of the interests of the country. His People of Freedom coalition has failed to produce any policies to try and combat the growing debt, which sits at €1.9 trillion.

The future in Italy looks dim. The European Central Bank has been buying government bonds to try and keep the Italian economy from going over the 7 per cent yield level, which is where both the Portugese and Irish governments were forced to accept bailouts. If the Italian economy succumbs to pressure it is big enough to bring down the entire Eurozone with it. With rumours that Fiat, Italy’s largest private sector employer, may be looking to vacate the country where it has been traditionally based, the Italian economy does not show any signs of looking up.

Debt management companies know more than most how tough many families are finding the current economic climate. While it’s necessary for many households all over the country to cut back, it’s just as important to identify the things we shouldn’t cut back on - such as pensions.

With life expectancy increasing, many of us will have longer retirements. Paying into a pension offers some security of a comfortable lifestyle in retirement.

Think Money says people who aren’t paying into pensions because of debt may find debt management puts them “in a better position to give their pension the attention it deserves and get some advice from a qualified financial adviser.”

This is exactly what the largest shareholder, Carl Icahn, has been urging Motorola to do for some time. He wants the company to capitalize on the surge in interest for wireless technology and patents. Icahn holds 11.36% stake in the company.

Should it go through, the acquisition would put Google’s Android platform in direct competition with Apple’s iPhone, Microsoft and RIM’s Blackberry. This may scare other wireless hardware providers who use Android as the operating system on their phones. Google says that Android will remain free and accessible to all those who want to use it as a platform. This is a marked deviation from the general Google business plan which has in the past centred on the internet and social media. Android controls 43.4% of the market for smartphone platforms, with Nokia’s share at 22% and Apple’s at 18%.

Google will also acquire Motorola’s set-top box businesses, which will bolster its young television department.

For the United States to regain its top rating the country would have to reduce the national debt and stabilize the economy. This does not look likely in the near future as Washington has been in a deadlock over debt reduction policies. The Republicans want reductions in spending while the Democrats are unwilling to compromise without similar increases in taxes.

This downgrade has led to a lack of confidence in all areas of the economy. The Dow Jones fell 5.56% or 634.76 points, the NASDAQ dropped 6.9% or 174.72 points and the S&P 500 fell 79.92 or 6.66%. This was the biggest single day loss for the Dow since 2008. S&P also downgraded Fannie Mae, Freddie Mac, and Federal Home Loan Bank’s credit rating to AA+ from AAA. Berkshire, an insurance company owned by Warren Buffet, had its outlook downgraded from neutral to negative. Oil is at $81.31 a barrel and gold has surged to $1714.09.

This could be the beginning of the second part of a double dip recession that could completely rock the world economy. Many of the tools that countries used to get out of the recession in 2008, such as decreasing interest rates and stimulus spending, will not be available for another round. Interest rates are already almost zero in most OECD countries, and there is no one left to borrow money from.
Alan Greenspan, former Chair of the Federal Reserve, has suggested that the United States will never default, because they can simply print more money. If they were to do so it would devalue the American dollar, which would essentially result in losses for firms and countries holding on to American debt. For example, China holds $3.718 billion of the US debt. The yuan trades at 6.4263 per dollar. If the value of an American dollar were to be devalued, the Chinese would get less yuan per dollar of debt they owned. Theoretically they could go from having 23.89 trillion yuan at a rate of 6.4263 per dollar to 16.73 trillion yuan at a rate of 4.5 yuan to the dollar. I am not claiming that this is what the American dollar will fall to; it just demonstrates the impact of the move.

Devaluing the American dollar will destabilize the world economy and will destroy the wealth of anyone who holds their assets in dollars. It would also cement the downfall of the United States as the world economic hegemon.

In the 1990s Portugal had a huge social and economic problem with the volume of intravenous and ‘hard’ drug users, with the number of users estimated at 100,000 in a country of only 10 million. There were also high costs associated with the drug mortality rate, contraction of blood borne illnesses as well as the costs of catching and punishing users which was wasting resources that could be put to better use. Portugal is not a rich country by any means and as it stood they could no longer afford to pay the costs of the war on drugs.

In 2001 Portugal decriminalized all narcotics under heavy criticism from other Western nations. That is not to say that they legalized drugs, but it was no longer a criminal offense to possess a personal amount of any narcotic (a personal amount is defined as what one would use in a 10-day period). This also does not mean that producing or trafficking drugs is condoned. Instead of putting those who are reprimanded through the justice system they created panels composed of psychologists, judges and social workers to deal with users and provide the most effective method of treatment if it is necessary. Now, instead of having 100,000 criminals the system is concerned with about 40,000 patients to help them get their lives in order.

Although there was wide speculation about the effects that the change of laws would cause, there has been no spike in narco-tourism or drug use in the Portugal. In fact, drug use has declined in Portugal to the point where it is below the European average and significantly below its’ closest neighbour, Spain. The number of new HIV/AIDS and hepatitis infections has plummeted, along with other blood-borne illnesses. There has also been a dramatic reduction in drug-related crimes. It is estimated that intravenous drug use has fallen by half since the mid-1990s.

Portugal’s approach may be less Libertarian and more intervention by the state than some would like, but it appears to be working. It is more effective and costs less than hard line policies such as that in the United States. In these hard economic times it can only make sense to at least give programs such as that in Portugal a try.

The bill signed on August 2nd raised the debt limit $2.4 trillion dollars, which should be enough to last the country until 2013. It also cut spending $2.1 trillion in the next 10 years. $900 billion of the cuts were decided in this bill. A 12-member committee was also created to come up with $1.5 trillion more in cuts over the same time period. If the panel cannot come up with at least $1.2 trillion in cuts then spending cuts would happen all across the U.S. budget, targeting things like the Pentagon, domestic agencies, farm subsidies, and payments to doctors and other Medicare providers. However much the committee comes up with in cuts the same amount would be added to the debt ceiling. This all came without imposing any new taxes, a key Republican demand. This was a success for the Tea Party movement, and a complete failure for the Democrats.

Although he signed the bill that would raise the debt ceiling today, Obama criticized the Republicans for manufacturing this entire ordeal. Raising the debt ceiling has in the past been a ceremonial rubber stamp, and never a debate as was witnessed over the past month and a half. This will hinder the economic recovery of the United States and there is no telling what effects this will have on markets in the coming months and years. An estimate by members of a U.S. securities industry trade group believe that a downgrade would add 0.7 percentage points to Treasury debt yields, which would result in up to $100 billion in lost value.

The spending cuts were not enough for sovereign credit rating agencies, who were hoping that America would cut more than $4 trillion over the same 10 years to ensure their AAA credit rating. S&P went as far as to say that unless there is a more meaningful plan for the United States to cut the deficit in the next three months they would be forced to downgrade America’s rating. Moody’s and Fitch have not been as severe, but their outlooks are still negative.

Predictions by the IMF for the US debt for 2011 are at $15.5 trillion while predictions for GDP are $15.0 trillion. This would put the GDP of the United States lower than the national debt for the first time in the country’s history. There is no doubt that the United States needs to learn how to live within its means and start reducing its deficit.

Today alone the Dow Jones Industrial average fell 265.87 points, the TSX fell 193.31 points and the NASDAQ fell 75.37 points. The price of gold has risen to $1659.65 per ounce, up $40.65 in one day. The markets may continue in this free fall, as the passing of this bill has not restored any confidence in America’s ability to remain a financial world leader.

The name of the movement was taken from the Boston tea party, which occurred on December 16, 1773. Colonists in the British colony of Massachusetts were upset about the continuing rise of taxes being imposed on the colonies by the crown without any consultation. Specifically, it was in opposition to the Tea Act, which expanded the British East India Company’s monopoly on trade in the Empire and gave them the ability to sell excess tea at a reduced rate. In a few colonies the protestors successfully blocked the unloading of tea from several ships which were then turned around and sent back to Britain. However, the Royal Governor in Boston would not allow the ship to leave. Eventually protestors boarded the ship and tossed all of the tea aboard into the harbour. This was one of the contributing actions that led to the American Revolution.

This Tea Party opposes the same things that the original one did. The group opposes all forms of taxation. This is accompanied by a commitment to fiscal responsibility, and is against excess government spending and debt. They believe in constitutionally limiting the size of government, and would have it so that any power not explicitly set out in the constitution of the United States as the province of the individual. The last main tenet of the movement is the freedom of markets so as not to impede the individual. Generally the group focuses on domestic issues, as they feel that the United States should end all foreign commitments.

The movement coalesced from a number of protests against taxes and tax reform through 2008 and 2009.
There exist thousands of affiliated grassroots groups across the United States that group themselves together as the Tea Party Patriots, FreedomWorks, and Americans for Prosperity. Tea Party Nation is for-profit group that hosted the very memorable Tea Party National Convention. There is also the Tea Party Caucus in the House of Representatives led by Michelle Bachmann. It boasts membership of 60 congress-people, all Republicans. This translates to a seventh of the total House and a quarter of the Republican’s majority. They are committed to upholding the tenets of the tea party movements, but do not speak for the movement itself.

The movement itself has endorsed a number of candidates for the Republican primary race. These contenders include Ron Paul and Michelle Bachmann who have declared their candidacy. Of course, the figurehead of the movement is none other than Sarah Palin. The candidates share similar views, banding together on points such as deficit reduction, spending cuts, opposition to minimum wage increases, opposition to universal healthcare, and support for domestic oil drilling as well as nuclear energy.

The Tea Party movement seems to be gaining momentum ahead of the primaries and the potential default of the United States on its national debt. It could be that by this time next year the whole Republican Party’s cup will be filled to the brim with tea, but we will have to wait to see if it goes bitter from sitting too long.

The Republicans had proposed the Cut, Cap and Balance bill into the Senate, where it failed today as predicted. The Act would have cut federal spending $111 billion in 2012, capped spending at 18 per cent of GDP by 2021 and would also have authorize a $2.4 trillion increase to the debt limit after Congress passes a balanced budget amendment. The Senate cannot originate any bill regarding revenue or taxes, and thus any new proposal would start in the House of Representatives. Any such bill would have to be passed in the House by next Wednesday to give it enough time to go through the Senate.

The President and the Speaker of the House John Boehner have been in talks, but have come to another standstill. The Republicans want reductions in spending, but the Democrats are unwilling to agree to that without also increasing taxes and ending tax breaks for wealthy Americans. Democrats are worried that massive cuts to spending would gouge social programs that they have championed and hurt the elderly. The Republican Party seems that it is being guided by the Tea Party faction, which of course is opposed to any
taxes at all.

To make matters worse, those seeking re-election are trying to win over voters as the primaries loom on the horizon. No one on either side wants to sacrifice their ideals this close to re-election and risk it being easily recalled by those who refused to be swayed. If moderate Republicans give in to the Democrats it could spell the complete takeover of the GOP by the Tea Party faction. This stubbornness may be the cause of the next global recession.

Italy has a precarious balance in their economy. Rigid labour markets are one of the reasons that Moody’s cited as responsible for their review. Italy has other structural impediments to growth, such as aging infrastructure and limited resources. The European Central Bank has signalled that they are going to raise interest rates in July from the current 1.25%. The fear is that the Italian economy will not be able to hold up through the changes in

UK banks have been the first to majorly pull out of the continent. Billions of pounds worth of liquidity has been withdrawn from the continent, even as Britain joins in discussions about the pending secondary bail out of the Greek economy. This could create a new economic problem for the entirety of Europe, with loans becoming much more difficult to acquire. Britain has been assured that it will not have to contribute more than its IMF commitments.

Angela Merkel has abandoned the tough line that she has taken on Germany’s involvement on the bailout. This is probably for the best, as the first ever default on a European loan could have harmed the growth of Germany if the Euro were to plummet as a result. Germany is pressing for a plan similar to the one forged in 2009 for banks to voluntarily maintain exposure in Eastern Europe.

Although an agreement was expected on June 19th, none so far has been announced. This would realistically be the fifth instalment of the €110 billion bailout plan which was agreed upon last May. Debates are still raging over the percentage of the burden which will be placed on taxpayers and on the private sector. There is talk of an incentive for private investors to take part, but in a way that does not trigger another ‘credit event’. There is also stress on the voluntary nature of the involvement, from both the public and private sectors. Any agreements made in the following days will be a stop gap until the main problem, of digging Greece out of this hole of debt, can be solved.

The problems all come back to the Euro and the European Central Bank. The crises have highlighted the need for currency zones to be similar in growth and structure, lest a weaker country take advantage of low interest rates created by a stronger one. This is exactly what has happened with the Eurozone, where Germany has been so robust and other countries such as Greece, Portugal, Spain and Ireland have not. This disparity is hindering the recovery of the indebted countries, as well as hindering the growth of stronger countries such as Germany and France. Balancing between the two will help no one. Either the strong countries must languish while the weak rebuild their economies or those unable to compete will be sacrificed in the name of growth elsewhere.

No other sovereign nation has as low a rating as Greece does, and only Ecuador has a worse rating. This comes after Obama has pressed Germany to structure a new bailout for Greece. It is possible that the economy could be downgraded to an ‘SD’, or selective default, if Greece has to take on a debt restructuring or a maturity extension on terms that constitutes a distressed debt exchange. This whole issue has arisen because of a failure of the Greek government to accurately portray the national debt and a slow as a result of economic recession.

S&P has said they would rather have Greece refinance their debt than using a bond swap or extended maturity on bonds as a method of debt management. The outlook is also negative, with the distinct possibility that there will be another downgrade coming in the next 12 to 18 months. Greece has made statements to the effect that they feel that S&P has overlooked all of the EU/IMF deliberations that are currently going on to figure out a way out of the intense clusterfuck of the Greek economic crisis.

Read more about Greece’s economic troubles here.

A Chinese ratings house, Dagong Global Credit Rating Co. Ltd. is insisting that the US is already defaulting on its loans from China. The US has allowed its dollar to weaken against other currencies such as the Canadian dollar and the Euro. If this were true it would mean that the country’s credit rating would be lowered at least a grade, raising the interest rate on any further loans. This could be potentially disastrous for the already beleaguered nation. It would also send a ripple effect throughout the world’s economies.

Dagong has given many ratings that have differed from other large companies such as Standard & Poor’s, Fitch Ratings and Moody’s Investors Services, which are generally thought to be the biggest companies in the industry. Dagong has also criticized these and other large credit ratings companies for their downplay of failing economies leading up to and through the most recent recession and of businesses who shop around for the most favourable rating to increase their sales. The list of criticisms goes on to include concerns that the ratings companies have become too close to the businesses and governments that they are supposed to provide objective information on. Dagong has been barred from entering the market in the United States by the government there.

Dagong is possibly the first non-western ratings company to provide a full list of sovereign ratings on countries around the world. These ratings differ significantly from the generally accepted western ratings. China was rated higher than the US, Britain, France, Japan and most other major economies as being more financially and politically stable. This stability, of course, would come from the authoritarian, one-party governmental system that rules in China. The big three credit rating companies have also asked companies not to use their names on bond issues, as they are now liable for their credit ratings in court in the United States under the new Dodd-Frank financial reform law.

Although the SEC will not recognize Dagong’s ratings the company’s infamy is publicizing its findings. If this issue gets any bigger it could spell another global recession. The United States has kept afloat because of increases to already massive public spending. The US economy is also reliant on continuous access to new markets and growth in sheer numbers, which seem to be drying up as this access seems to have reached its natural limit. Another collapse so close to the 2008-2009 crisis could be much worse for the world. Millions more in the United States could join their colleagues in the unemployment line, straining the weak American welfare system. A loss of American markets and foreign direct investment, and ensuing protectionist policies, could spell the end of companies and livelihoods around the world.

Just think about it. The Canadian Pension Plan (investment) offers returns that hitherto could not be offered by other forms of savings (investments). CPP does not pay out returns from investments, but from the original money that was contributed by the individual. Often, more money is required to support that person, and this comes from money contributed by other individuals who are not yet drawing on the CPP. The young workers of Canada essentially subsidize the elderly through their contributions.

This system has been working up until now, but its success is dependent on a few factors. These include the assumption that the Canadian work force is constantly growing, as are CPP contributions. This pyramid is about to collapse with the retirement of a large generation, the baby boomers. With so much being drawn from the fund at once, there may not be enough in it to keep the CPP afloat.

There may be some hope, in the form of the Canadian Pension Plan Investment Board, which was created in 1997. The CPPIB operates as a Crown Corporation, and invests money from the Reserve Fund, which it created. The CPPIB has slowly evolved in its investments, going from non-market government bonds to passive index fund strategies to finally active market investment. It has been criticized by some groups for the ‘unethical’ choices it has made in terms of industries to invest in as well as certain companies who are known to have less than desirable business practices.

Whatever they are doing there, it is working. The CPPIB bought a 15% stock in Skype in 2009 for $300 million only to sell this year for $1 billion to Google. While they are slightly off their growth targets (posting $127.6 billion in the Reserve Fund in March 2010 vs. a projection of $140 billion for the same time), they are manageable goals for the future. The change in the way that the CPP acquires funds may be what saves it from coming down around Canada’s head.

Obama met with Angela Merkel and talked about the importance of Germany’s leadership in shoring up and growing the Greek economy. “Other countries in the euro zone are going to have to provide them a backstop and support,” he said.” And frankly, people who are holding Greek debt are going to have to make some decisions, working with the European countries in the euro zone, about how that debt is managed.”
Merkel will have to walk a fine line in coming months as she balances pressure from within Germany to avoid becoming the financial savior of Europe with the pressure from other countries to do exactly that. A preliminary proposal is in the works to give between 80 and 100 billion Euros of aid to Greece.

Greece first accepted a 100 billion Euro loan to cover its debts in April 2010 from the EU and 40 billion Euros from the IMF bailout package. Stock markets and the Euro declined in response to Standard & Poor decreasing the debt rating to BB+, essentially a junk rating. In May a series of austerity measures were implemented, which were met with rather minor objections. Greece’s bailout occurred at the same time as the one in Portugal.

The bailout has not seemed to work very well, and Greece is in danger of defaulting on its loans. The original problem came from the fact that the government had for years estimated the budget deficit rate at was at 6-8% of GDP. The new Socialist government in 2009 revised this to 15.4%. This, along with massive increases in personal debt, led to increased borrowing costs. There are also concerns that Greece has tried to cover up the extent of its debt in the midst of the recession.

The wireless company has been challenged by Public Mobile, another startup company, under CRTC regulations as insufficiently Canadian owned. The parent company, Globalive, is based in Toronto. However, 65 percent of Globalive’s equity and most of its debt is owned by Orascom. The Egyptian company does not hold majority control and only has a minority of seats on Globalive’s board of directors. Currently direct and indirect foreign ownership of companies is limited to 20 percent.

The original decision by Industry Minister Tony Clement to allow the company to operate was overturned by the Federal Court, which was urged by the CRTC on February 4, 2011. Justice Roger Hughes wrote in his decision that there was no objective in Telecommunications Act that encourages foreign investment or ownership. The company naturally appealed the ruling, and the Conservative cabinet is standing behind them.

The lawyer arguing for WIND Mobile has been hired by the federal government in the currently ongoing appeal. Robert Mackinnon has asserted that there is no limit on how much debt could be owned by a foreign company. He also has argued that the federal government was well within its powers to overrule the CRTC, and that by agreeing with the lower court’s ruling it would be suggesting that the Federal government acted in bad faith.

WIND Mobile is shaking up the telecommunications status quo in Canada. Canadian consumers are subjected to significantly higher prices than other countries. WIND’s structure eliminates activation fees, contracts, system access fees, enhanced 911 fees, incoming long distance charges, cancellation penalties, and incoming text charges. Their plans are also significantly cheaper than most other carriers.

Apple will be announcing the launch of iCloud, a new online service for storing and retrieving media. It will compete directly with Microsoft’s Cloud and Amazon’s EC2. Cloud services are designed to allow people to store all of their data and media off site and access it from anywhere in the world. It also allows users who download music to upload it to the cloud and pull it down onto various devices. While the current services do not work with the iPhone, iCloud will.

Apple is also building the largest data center outside of the US government to house all of the digital information. It will create hundreds if not thousands of jobs where it is situated in North Carolina.

This Worldwide Developers Conference will be the first one in a while that will not see a new version of the iPhone. There will be updates to the Lion operating system as well as iOS 5, the mobile operating system. Details of the conference will come following the announcements on June 6th.