PPI INCREASES SLIGHTLY IN OCTOBER

From Reuters via USA Today:

Producer prices advanced by a smaller-than expected 0.1% in October as prices for energy and light trucks fell, Labor Department data showed Wednesday, while a key measure of core inflation at the producer level was flat with September.

The October gauge of prices paid at the farm and factory gate was below economists' forecasts for a 0.3% rise after a 1.1% increase in September.

Energy prices fell 0.8% in October after a 4.1% rise in September, while prices for light trucks, which include slow-selling sport-utility vehicles and pickups, fell 2.7% in October.

Core producer prices, which strip out volatile food and energy costs, were unchanged from September. They had been forecast to rise 0.2% after a 0.1% rise in September.

Core prices excluding cars and light trucks, however, rose 0.2% in October.

WAL-MART POSTS SURPRISINGLY GOOD RESULTS

From AP via Yahoo:

Wal-Mart Stores Inc. posted third-quarter earnings Tuesday of $2.86 billion, an 8 percent rise that beat Wall Street expectations as the world's largest retailer heads into the holiday shopping season.

The company earned 70 cents per share, up from 62 cents per share in the same period a year ago. The 70 cents includes an after-tax gain equal to 1 cent per share. Analysts surveyed by Thomson Financial had forecast earnings of 67 cents per share on revenue of $91.67 billion

Third-quarter sales at stores open at least a year, not counting fuel, were up 1.5 percent in the company's U.S. stores, same as a year ago. The company expects same-store sales for the fourth quarter to rise no more than 2 percent.

UPS PREDICTS SMALL INCREASE IN SHIPPING THIS HOLIDAY SEASON

From Reuters via MSN:

Package delivery company United Parcel Service Inc said on Sunday it expects to handle 22 million packages on its peak day ahead of the holidays this year, an increase of less than 5 percent from its forecast of 21 million in 2006.

UPS’ peak day is on December 19 this year.

Officials at the Atlanta-based company have predicted that package volume growth in this year’s peak holiday season will be “less robust” than in the previous four years, reflecting slowing U.S. economic growth, the housing sector slowdown and expectations for low fourth-quarter retail sales growth.

Main rival Memphis-based FedEx Corp has said it expects package volumes to reach 11.3 million on its peak day of December 17. Last year the company predicted a peak 9.8 million packages. A company spokesman said this year’s forecast includes a low-cost service that did not figure in last year’s prediction. A comparable forecast for this year would be 10.4 million, a gain of 6.1 percent.

PROGRESSIVE ADDS PETS TO AUTO INSURANCE

From AP via MSN:

Progressive Corp. is providing collision coverage for customers' dogs or cats at no additional premium cost. It will pay up to $500 if a customer's dog or cat is hurt or dies in a car accident.

There are over 150 million pets in the U.S., and Americans spend over $40 billion on their pets annually, according to a recent Insurance Information Institute study.

The Progressive benefit has been in place since Sept. 6, and it's still too soon to determine if the company's undetermined cost of offering it will be offset by better sales, Progressive spokeswoman Leah Knapp said.

Progressive is the third-biggest auto insurer, ranking behind State Farm and Allstate and slightly ahead of National Indemnity (Berkshire Hathaway), which includes GEICO.

MERCK MAKES SETTLEMENT PROPOSAL TO VIOXX PLAINTIFFS

From The New York Times:

Three years after withdrawing its pain medication Vioxx from the market, Merck has agreed to pay $4.85 billion to settle 27,000 lawsuits by people who claim they or their family members suffered injury or died after taking the drug, according to two lawyers with direct knowledge of the matter.

The settlement, one of the largest ever in civil litigation, comes after nearly 20 Vioxx civil trials over the last two years from New Jersey to California. After losing a $253 million verdict in the first case, Merck has won most of the rest of the cases that reached juries, giving plaintiffs little choice but to settle.

The settlement will help put Vioxx behind Merck, as well as sharply reduce its Vioxx-related legal defense fees, which are now running at more than $600 million annually.

Based on the fact that the 27,000 suits cover about 47,000 sets of plaintiffs, the average plaintiff will receive just over $100,000 before legal fees and expenses, which usually swallow between 30 and 50 percent of payments to plaintiffs. Plaintiffs who do not want to accept the settlement can pursue their own claims, but with so many of the top trial lawyers in the United States agreeing to the deal, they may have difficulty doing so.

AQUA DOTS TOYS RECALLED AFTER CAUSING COMAS

From CNN.com:

Millions of Chinese-made toys have been pulled from shelves in North America and Australia after scientists found they contain a chemical that converts into a powerful date rape drug when ingested. Two children in the U.S. and three in Australia were hospitalized after swallowing the beads.

With only seven weeks until Christmas, the recall is yet another blow to the toy industry -- already bruised by a slew of recalls this past summer.

In the United States, the toy goes by the name Aqua Dots, a highly popular holiday toy distributed by Toronto-based Spin Master Toys. They are called Bindeez in Australia, where they were named toy of the year at an industry function earlier this year.

It could not immediately be learned whether Aqua Dots beads are made in the same factories as the Bindeez product. Both are sold by Australia-based Moose Enterprises.

The toy beads are sold in general merchandise stores and over the Internet for use in arts and crafts projects. They can be arranged into designs and fused together when sprayed with water.

Scientists say a chemical coating on the beads, when ingested, metabolizes into the so-called date rape drug gamma hydroxy butyrate. When eaten, the compound -- made from common and easily available ingredients -- can induce unconsciousness, seizures, drowsiness, coma and death.

Naren Gunja from Australia's Poisons Information Center said the drug's effect on children was "quite serious ... and potentially life-threatening."

The recall was announced by the Consumer Product Safety Commission on Wednesday several hours after published reports about the recall in Australia.

The two U.S. children who swallowed Aqua Dot beads went into nonresponsive comas, commission spokesman Scott Wolfson said Wednesday afternoon.

In Australia, the toys were ordered off store shelves on Tuesday when officials learned that a 2-year-old boy and a 10-year-old girl were hospitalized after swallowing the beads. A 19-month-old toddler also was being treated.

CHICAGOANS CAFFEINE CHAMPS

Sure the Bears are in last place in the division, the Bulls have not won a game (0-4), the Cubs got bounced from the first round of the playoffs, and the White Sox were just plain horrible, but Chicagoans can hold their heads up high as a survey has shown the people in Chicago are the biggest consumers of caffeine in the United States. We're #1, we're #1, we're #1!

From Reuters via Yahoo:

The windy city is also the most wired, according to a survey that showed people in Chicago are the most caffeinated in the United States.

Chicagoans eat more chocolate and drink more cola than other U.S. urbanites, and are among the top consumers of energy drinks and coffee.

They are also likely to say caffeine is good for you, according to the poll conducted by Prince Market Research.

Tampa, Miami, Phoenix and Atlanta rounded out the top five most caffeinated cities, while residents of San Francisco, Philadelphia, New York, Detroit and Baltimore consumed the least caffeine.

Seattle took the top spot in just caffeinated coffee consumption. Nearly 60 percent of residents in the city said coffee would be the most difficult caffeine product to give up.

Half of all the people questioned in the poll said they drank coffee every day, followed by 21 percent who drank caffeinated cola.

BUSH ADMINISTRATION TO PUT FORWARD CONSUMER SAFETY PROPOSALS

From The New York Times:

The Bush administration on Tuesday will propose a significant expansion of the authority of the federal drug and consumer product safety agencies to inspect and certify imports, White House and other administration officials said Monday.

A White House official said a major part of the plan would entail stationing inspectors in foreign countries to examine drugs, food and other potentially dangerous products before they were shipped to American shores. The official said that with $2 trillion in imports annually, inspections at the ports had become ineffective.

The official said the plan would give the agencies the authority to certify the safety of products and to list certified products on a Web site that could be viewed by consumers.

Officials said that the plan would require significant budget increases for the Consumer Product Safety Commission and the Food and Drug Administration.

In Congress last Tuesday, the Senate Commerce Committee approved without objection legislation that would increase penalties, let the product safety agency publicly disclose reports of defective products and increase the maximum penalty on violations to $100 million, from $1.8 million.

Senior Democrats in both houses called for the resignation of Nancy A. Nord, the acting head of the Consumer Product Safety Commission, after she sent letters to Congress vigorously opposing the legislation. Ms. Nord’s letters closely resembled complaints raised by a coalition of manufacturing associations.

At the urging of industry groups, the White House has objected to a provision that would reward industry whistle-blowers for reporting defective products and another that would give state prosecutors the authority to enforce federal safety laws.

Consumer groups and Democratic lawmakers say those provisions are vital in restoring the credibility of federal safety efforts, while White House officials say the measures would encourage frivolous litigation.

CITIGROUP PUSHES PRINCE OFF OF CLIFF, WRITES DOWN ANOTHER $8-$11 BILLION

From USA Today:

With firm determination, Citigroup CEO Charles Prince declared earlier this year that 2007 was going to be the "year of no excuses."

Now he's run out of them.

Amid growing losses from subprime mortgages at the giant financial services firm, Prince, 57, retired under pressure on Sunday. He said it was "the only honorable course for me to take." Former Treasury secretary Robert Rubin, a board member and chairman of the company's executive committee, will serve as chairman of the board. Sir Win Bischoff, chairman of Citi Europe, will serve as acting CEO, the company said.

Citigroup also is lowering the value of some of its securities tied to subprime mortgages. It estimates the value of those securities, at fair market value today, would be $8 billion to $11 billion less than it expected just Sept. 30. That write-down would be in addition to a $6.5 billion write-down it has already taken. The company also said a special unit has been set up to handle the subprime mortgage problems. Citi said it has no plans to reduce its dividend.

UNIONIZED MOVIE AND TV WRITERS TO STRIKE MONDAY

From The New York Times:

Hollywood’s two decades of labor peace shattered Thursday night, as movie and television writers declared they would embark on an industrywide strike for the first time since 1988, when both writers and Teamsters walked out.

The writers’ union announced this afternoon that the strike would begin on Monday morning.

Unless there is a last-minute settlement, the strike will pit union writers, whose position has been eroded by reality television and galloping technological change, against studios and networks that are backed by big corporate owners like General Electric and News Corp., but are also unsure of the future.

The walk-out threatens an instant jolt to television talk shows like “Late Show With David Letterman,” which rely on guild writers to churn out monologues and skits. “The Daily Show With Jon Stewart,” “The Colbert Report,” “Late Night With Conan O’Brien,” and “The Tonight Show With Jay Leno” will all revert to repeats on Monday, at least for the time being.

And if the strike drags on, audiences could see the eventual shutdown of soap operas, TV series and movie productions, as they exhaust their bank of ready scripts.

In the near term, a writers’ strike will have an immediate impact on more than 200,000 workers in the movie and TV industry here and the thousands more who produce or sell entertainment elsewhere in the United States and abroad. The dispute may also signal more labor trouble to come, as directors and actors face similar issues when their contracts expire next June.

UAW AND FORD REACH TENTATIVE AGREEMENT

From The New York Times:

The United Automobile Workers union reached a tentative agreement with the Ford Motor Company early this morning after a 41-hour marathon bargaining session, completing a series of new contracts with the American auto companies.

No details of the deal were released, but it is expected to resemble contracts reached earlier this fall for General Motors and Chrysler LLC.

Unlike the G.M. and Chrysler contracts, the agreement at Ford was reached without a strike. Analysts say that Ford, which lost $12.6 billion last year, is the weakest of the Detroit auto companies.

"Our bargaining committee came through for our active and retired members," the U.A.W.'s president, Ron Gettelfinger, said in a statement. He said that its bargaining team had "encouraged Ford to invest in product and people while addressing the economic needs of our active and retired members."

"We face enormous challenges – and we also have enormous potential," said U.A.W. Vice President Bob King, who directs the union's National Ford Department. "Our goals for this contract were to win new product and investment, to enhance job security and protect seniority – and we made progress in all these areas."

Any job guarantees will be closely scrutinized by union members at Ford, who have watched G.M. and Chrysler cut jobs since their new contracts were reached.

Ford had no immediate comment. Union leaders will review the contract next week, before it is presented to members for a vote.

MIXED EMPLOYMENT REPORT ISSUED

From The New York Times:

Two distinctly different views of the economy emerged today in a single report: the crucial employment survey issued by the Labor Department.

The economy added 166,000 jobs in October, the fastest pace in five months, according to employers. Payrolls grew at a pace more than twice what analysts had predicted, led by a sharp increase in the service sector.

But a survey of consumers showed that fewer Americans were employed last month over all. The labor force shrank by 211,000 jobs, and 465,000 Americans said they were no longer working.

The mixed employment report underscores the uncertainty on Wall Street, as analysts insist the fourth quarter will include a broad slowdown in growth and spending even as some recent reports suggest a sunnier outlook.

“You’ve got what’s good and what’s scary about this economy in this one report,” said Jared Bernstein, an economist at the Economic Policy Institute.

The estimate of job growth, which beat even the highest estimates, follows a downwardly revised 96,000 gain in September and a 93,000 gain in August, the Labor Department said. Still, payrolls are increasing at the slowest annual rate since June 2004.

The unemployment rate held steady at 4.7 percent in October, the highest rate since August 2006, but only because the survey found that more people stopped looking for work and were therefore not counted by the government as unemployed.

Manufacturing and retail jobs dropped sharply in October, underscoring analysts’ expectations that consumer spending and business activity will slow in the fourth quarter as problems in the housing market affect the broader economy.

Wages ticked up 0.2 percent, to $17.58, slightly below expectations, and are up 3.8 percent compared with those a year earlier. The length of the average workweek stayed flat at 33.8 hours.

Adding to the uncertainty about the report, most of the job gain — 103,000 of the 166,000 net new jobs — came from an estimate that the Labor Department makes each month about how many jobs were added by new businesses. The Labor Department did not actually find evidence of these jobs; it assumed they were created based on historical patterns.

NARDELLI SWINGS AX, CHOPS 11,000 CHRYSLER WORKERS

As we've discussed previously, Robert Nardelli was brought in to Chrysler to tame the labor union and fire thousands of workers. In his short tenure, he has negotiated a controversial contract that was barely ratified and less than a week later cut 11,000 jobs. Nardelli and Cerberus will be ruthless in cutting costs to make Chrysler more attractive for a future sale. Building the brand for the long term is not what Nardelli and Cerberus are about. They are only interested wringing every last penny of value from a once proud brand and extracting as much profit in as short of a time period as possible. When they are finished with Chrysler, they will sell what is left, likely a shell of the former company, and look for their next victim.

From The New York Times:

Chrysler LLC said today that it would cut up to 10,000 more hourly jobs, eliminate 1,000 salaried positions, and discontinue shifts at five assembly plants in the United States and Canada, in the first major steps under its new private owners.

The company also is dropping four models from its lineup, including the convertible version of its PT Cruiser sport wagon, as well as the Chrysler Pacifica, a crossover vehicle criticized as being too big and too expensive for family buyers.

Also leaving the lineup are the Dodge Magnum, a low-slung station wagon, and the Chrysler Crossfire two-seater. Both those vehicles are based on underpinnings from Mercedes-Benz, which is owned by Chrysler’s former parent, Daimler.

The job cuts, which will take effect through 2008, are in addition to a plan announced in February that would eliminate 13,000 North American positions. Altogether, they represent a 30 percent reduction in Chrysler’s 2006 work force of 80,000.

Today’s cuts, though expected, were more than twice as deep as some industry analysts anticipated.

Chrysler said the cuts at its factories would affect 8,500 to 10,000 workers. It said it would eliminate third shifts at plants in Belvidere, Ill., Toledo, Ohio, and Brampton, Ontario.

It also is eliminating the second shift of workers at the Jefferson North plant in Detroit and its plant in Sterling Heights, Mich.

The company also said it would reduce a shift at its Mack Avenue engine plant in Detroit, which has been working on three shifts.

The Canadian Auto Workers union president, Basil Hargrove, called the job cuts an “absolute disaster.”

“This is a huge hit to us,” he said during a news conference this morning in Toronto.

PERSONAL INCOME AND CONSUMER SPENDING REPORT ISSUED

From The New York Times:

Personal income and spending continued to grow in September, a government report showed today, suggesting strength in the economy even as analysts fear widespread troubles in the next few months.

Still, consumption began to slow, and manufacturers may be starting to feel the effects of a tightening housing market.

Personal spending, which accounts for two-thirds of the gross domestic product, grew at 0.3 percent in September, a slight deceleration from the 0.5 percent growth in August, the Commerce Department said today.

Spending is up 5.6 percent over the last 12 months, probably bolstered by a comparable rise in personal income, which has increased 6.8 percent over the last year.

Income rose 0.4 percent last month after an identical gain in August. Disposable income, a measure of the money employees take home after taxes, dipped to 0.4 percent from 0.5 percent in August.

Today’s report offered few surprises, though it could provide some comfort to economists who predict a decline in economic growth in the fourth quarter. Analysts are waiting for a worsening housing recession to make its way into the broader economy, but for now consumers appear to be comfortable with opening their wallets.

The personal consumption expenditures index, an inflation gauge closely watched by the Federal Reserve, also stayed steady. Core inflation, which excludes volatile food and energy prices, rose 1.8 percent on an annual basis, keeping pace with a downward trend over six months.

But overall inflation, as measured by the P.C.E. deflator, is up 2.4 percent for the year, above the Fed’s so-called comfort zone of 1 percent to 2 percent. That rise, compared with 1.8 percent in August, likely reflected the surging cost of crude oil, which pushes up gasoline and energy prices.

HOMES FACING FORECLOSURE DOUBLES IN 3RD QUARTER

From USA Today:

A soaring number of U.S. homeowners struggled to make mortgage payments in the third quarter, with properties in some stage of foreclosure more than doubling from the same time last year, a mortgage data company said Thursday.

A total of 446,726 homes nationwide were targeted by some sort of foreclosure activity from July to September, up 100.1% from 223,233 properties in the year-ago period, according to RealtyTrac.

The current figure was 33.9% higher than the 333,731 properties in foreclosure in the second quarter.

There was one foreclosure filing for every 196 households in the nation during the most recent quarter, RealtyTrac said.

WILL GOVERNMENT CREATE A DO-NOT-TRACK LIST FOR INTERNET?

From The New York Times:

A coalition of privacy groups asked the government today to set up a mandatory do-not-track list for the Internet.

The groups — which include the Consumer Federation of America, World Privacy Forum and several others — are worried that online advertising companies are collecting too much data about consumers’ Web habits.

For a few years, advertisers have been using information about what Web sites people visit to deliver ads to them later on. The practice is called behavioral targeting, and the Federal Trade Commission is hosting a forum tomorrow and Friday about the privacy issues it raises.

While advertisers often say that consumers like receiving ads that are relevant to them rather than generic, privacy advocates say that most people do not realize the amount of personal information they are sharing with marketers.

FEDERAL RESERVE CUTS KEY RATE QUARTER POINT

From The New York Times:

The Federal Reserve gave investors what they wanted today, lowering short-term rates for the second time in two months.

But it quietly warned Wall Street not to expected to assume that more reductions are ahead.

The move, to reduce short-term rates by a quarter point to 4.5 percent, was aimed at preventing the meltdown in housing from crippling the rest of the economy. But the vote was not unanimous, reflecting disagreement among policymakers about the risks that confront the economy.

Investors were generally pleased, and stocks were up modestly after briefly giving up most of their gains for the day immediately after the announcement. But Treasury prices fell, reflecting some concerns that lower interest rates could stoke inflation. Oil prices surged nearly 4 percent and gold futures were up about 1 percent. The dollar modestly weakened against other major currencies.

GOOGLE'S CONTINGENCY PLAN: TAKE ON FACEBOOK WITH ORKUT & A NEW STRATEGY

From The New York Times:

Google and some of the Web’s leading social networks are teaming up to take on the new kid on the block — Facebook.

On Thursday, an alliance of companies led by Google plans to begin introducing a common set of standards to allow software developers to write programs for Google’s social network, Orkut, as well as others, including LinkedIn, hi5, Friendster, Plaxo and Ning.

The strategy is aimed at one-upping Facebook, which last spring opened its service to outside developers. Since then, more than 5,000 small programs have been built to run on the Facebook site, and some have been adopted by millions of the site’s users. Most of those programs tap into connections among Facebook friends and spread themselves through those connections, as well as through a “news feed” that alerts Facebook users about what their friends are doing.

For Google, the effort could breathe new life into Orkut, which is popular in Brazil and other countries, but not in the United States.

Facebook’s success with its platform has proved that the combination of social data and news feeds is a powerful mechanism to help developers distribute their software. They are now seen as must-have functions for many Internet companies. Other social networks and Web companies, including MySpace and the instant messaging service Meebo.com, have announced plans to open their sites in similar ways.

GDP COMES IN AT SURPRISING 3.9% FOR 3RD QUARTER

From AP via The New York Times:

The economy picked up speed in the summer, growing at a brisk 3.9 percent pace, the fastest in 1 1/2 years and an impressive performance even as a credit crunch plunged the housing market deeper into turmoil.

The latest snapshot of the country's economic health, released by the Commerce Department on Wednesday, suggested that the economy is demonstrating much resilience and thus far holding up well to the strains in the housing and credit markets, which had intensified during the third quarter and rocked Wall Street.

Individuals ratcheted up their spending. U.S. businesses sold more goods abroad and boosted some investment at home. Those were some of the main factors helping to push up overall economic activity in the July-to-September quarter.

The third quarter's growth rate was up slightly from a 3.8 percent pace logged in the second quarter. It marked the strongest showing since the first quarter of last year.

The increase in third quarter gross domestic product exceeded analysts' forecasts for a 3.1 percent growth rate for the period. Gross domestic product is the value of all goods and services produced within the United States and is considered the best barometer of the country's economic fitness.

Consumers, whose spending is an important ingredient for the economy's good health, actually rediscovered their appetite to spend in the third quarter. Their spending rose at a 3 percent pace, a considerable improvement from the second quarter's rather weak 1.4 percent growth rate.

CONSUMER CONFIDENCE HITS TWO-YEAR LOW

From USA Today:

A key barometer of consumer sentiment dropped to the lowest level in two years, igniting concern that the upcoming holiday shopping season would be lukewarm.

The Conference Board said Tuesday that its Consumer Confidence Index fell to 95.6 from a revised 99.5 in September. The reading marked the lowest level since October 2005 when it was 85.2. Analysts had expected 99.5.

Economists closely monitor confidence since consumer spending accounts for two-thirds of U.S. economic activity.

OVER 18,000 DIED FROM MRSA IN U.S. IN 2005

MRSA, methicillin-resistant Staphylococcus aureus, a staph infection that is drug resistant, is rapidly spreading, and can kill. Several cases have been confirmed in the Chicagoland area. When we discussed this in a class this morning, several people were unfamiliar with this deadly infection, so I'm posting a link to the story here.

From the Houston Chronicle:

About 18,700 people die in this country each year from drug-resistant staph infections, according to a federal study released Tuesday — more deaths than the United States sees from AIDS annually.

The study by the Centers for Disease Control and Prevention, scheduled to be published in today's edition of the Journal of the American Medical Association, is the first of its kind to track methicillin-resistant Staphylococcus aureus, known as MRSA.

Based on data from 2005, the agency estimated that about 94,400 patients nationwide suffer an invasive MRSA infection each year. And in the vast majority of cases, the infections originated in health care settings.

CONSUMER PRODUCTS SAFETY COMMISSION CHAIR: DO NOT INCREASE BUDGET OR STAFF

From The New York Times:

The nation’s top official for consumer product safety has asked Congress in recent days to reject legislation intended to strengthen the agency, which polices thousands of consumer goods, from toys to tools.

On the eve of an important Senate committee meeting to consider the legislation, Nancy A. Nord, the acting chairwoman of the Consumer Product Safety Commission, has asked lawmakers in two letters not to approve the bulk of legislation that would increase the agency’s authority, double its budget and sharply increase its dwindling staff.

Ms. Nord opposes provisions that would increase the maximum penalties for safety violations and make it easier for the government to make public reports of faulty products, protect industry whistle-blowers and prosecute executives of companies that willfully violate laws.

The measure is an effort to buttress an agency that has been under siege because of a raft of tainted and dangerous products manufactured both domestically and abroad. In the last two months alone, more than 13 million toys have been recalled after tests indicated lead levels that sometimes reached almost 200 times the safety limit.

Ms. Nord’s opposition to important elements of the legislation is consistent with the broadly deregulatory approach of the Bush administration over the last seven years. In a variety of areas, from antitrust to trucking and worker safety, officials appointed by President Bush have sought to reduce the role of regulation and government in the marketplace.

GAP LINKED TO CHILD LABOR IN INDIA

From USA Today:

The Indian children reportedly found making clothes for Gap Inc. should be reunited with their families and compensated by the government, activists said Monday amid a spreading scandal about the use of child labor by the international clothing chain.

The reported discovery of children as young as 10 sewing clothes for clothing retailer Gap Inc. in a New Delhi factory has renewed concerns about child labor in India, but government officials offered no comment Monday.

"The biggest responsibility here lies with the Indian government — they don't develop a way of monitoring" factories, said Bhuwan Ribhu, a lawyer who works with Bachpan Bachao Andolan, or the Save Childhood Movement.

"International companies hire subcontractors and then forget about it. There is no monitoring at all," Ribhu added. "Where the Gap is concerned, at least they've taken a good pro-active stand against the subcontractors."

Britain's Observer newspaper on Sunday reported that it had found children making clothes with Gap labels in a squalid factory in New Delhi. It quoted the children as saying they were from poor parts of India and had been sold to the sweatshop by their impoverished families. Some said they were not paid for their work.

Child labor remains a widespread problem in India, despite the country's economic boom and its growing wealth.

The government has repeatedly tried to ban the use of child workers — in 1986 outlawing them from working in dangerous industries, such as glassmaking, and last year banning them being employed as domestic servants or in restaurants.

But the prohibitions have had only a minimal impact and children's rights activists estimate that 13 million children are still working in India, with many being used in labor-intensive businesses like carpet-weaving and in dangerous industries, such as making fire crackers.

FCC TO CHANGE RULES, ALLOW COMPETITION IN CABLE TV FOR APARTMENT DWELLERS

From The New York Times:

The Federal Communications Commission, hoping to reduce the rising costs of cable television, is preparing to strike down thousands of contracts this week that gave individual cable companies exclusive rights to provide service to an apartment building, the agency’s chairman says.

Commission officials and consumer groups said the new rule could significantly lower cable prices for millions of subscribers who live in apartment buildings and have had no choice in selecting a company for paid television. Government and private studies show that when a second cable company enters a market, prices can drop as much as 30 percent.

“Exclusive contracts have been one of the most significant barriers to competition,” Kevin J. Martin, chairman of the commission, said in an interview. Cable prices have risen “about 93 percent in the last 10 years,” he said. “This is a way to introduce additional competition, which will result in lower prices and greater innovation.”

UAW RATIFIES CHRYSLER DEAL

From USA Today:

UAW members have ratified the national labor agreement with Chrysler LLC, the union said in a statement [Saturday].

The announcement comes shortly after voting ended at Chrysler's Belvidere Assembly Plant in Illinois. Workers there voted to reject the agreement with 55% of voters against it, a person familiar with the results said.

Belvidere's Local 1268 was the final union local to vote but the defeat was apparently not enough to overcome the number of yes votes already logged.

According to a statement issued by the UAW, the contract passed overall with 56% in favor among production workers and 51% in favor among skilled trade workers.

In addition, 94% of office and clerical workers and 79% of engineering workers voted to approve the deal.

INDEX FUND INVESTING: NOT EXCITING, BUT VERY EFFECTIVE

I get many questions from students regarding investing. I do not consider myself to be an expert in the sense that I am a guru who can pick the hot stock or outperform the market.

What I can do is give what I believe to be good advice for investing for retirement. Put your money in index mutual funds and let compound interest take care of setting you up for a fantastic retirement.

Many investment professionals push investors to buy actively managed funds instead of index funds? Why? Well, the fees associated with index funds are very low (typically about 80-90% less than actively managed funds) and many investment professionals steer clients to the investments that pay them the most (trust me, that isn't index funds).

Check out the article below for more information about index fund investing.

And, if you are interested in taking a class that should help you to make smart moves with your money and plan for a wonderful retirement, consider signing up for FIN205.920, Personal Finance and Investing, in the spring semester.

From The New York Times:

IS it worth the risk to try to outperform the market?

“I have yet to meet a retiree that couldn’t have met his or her retirement goals just with market returns — and this is over a 40-year career,” said Paul Merriman, the editor of FundAdvice.com and an investment adviser at Merriman Berkman Next in Seattle.

In his experience, most retired people regard an 8-to-12-percent compounded annual return as satisfactory for their needs. Any investor who simply bought and held a no-load mutual fund that replicated the Standard & Poor’s 500 stock index would have had an 11.2 percent compounded return from 1970 to 2006. So why keep trying to pick stocks and time a volatile market when you can own the market through low-cost index funds?

Index funds are not just for the little guy who can’t take the heat, either. Theodore R. Aronson, an institutional money manager at Aronson Johnson Ortiz in Philadelphia, is paid by his clients to beat various benchmarks like the S.& P. 500 or the Russell 1000 — not to match them. His family’s money, by contrast, goes into 11 Vanguard index funds allocated 80 percent to equities and 20 percent to bonds. “Statistically it is so hard to prove that active managers can outperform, and that any outperformance is due to skill and not luck,” Mr. Aronson said.

His one-year return from indexing as of Oct. 2 was 23.5 percent; his three-year annualized return is 18.8 percent.

CONSUMER SENTIMENT AT 17-MONTH LOW

From USA Today:

Consumer sentiment fell more than expected in late October to its lowest in more than a year as concerns about the housing slump darkened the economic outlook, a survey released Friday showed.

The Reuters/University of Michigan Surveys of Consumers said its late October figure on consumer sentiment was 80.9, down from the month's preliminary reading of 82 and the final September reading of 83.4. It was the lowest reading since May 2006 when the index stood at 79.1.

Economists polled by Reuters had expected the final October figure to remain unchanged from early in the month at 82.

Consumer sentiment is often seen as a proxy for future spending, which accounts for two-thirds of the U.S. economy.

OIL CLOSES OVER $90

From The New York Times:

Oil prices shot past $90 a barrel today on what one analyst described as a “perfect storm” of economic news, ranging from tensions in the Middle East to growing anticipation of a Fed rate cut.

Crude oil futures jumped $3.36 to close at $90.46 a barrel, exceeding the highs reached last week, though still shy of the inflation-adjusted record price of $101.70 set in 1980.

Concerns over supply levels spurred the price increase after the Energy Department reported yesterday that crude oil stockpiles fell last week and investors learned that OPEC shipments from the Middle East were expected to slow. Fewer oil supplies and steady demand mean that oil prices will go up.

Military tensions between Turkey and Iraqi Kurds also contributed to the sudden spike, along with a decision by the United States to impose sanctions against oil-rich Iran. Prices were also pushed up by a weak dollar and expectations that the Federal Reserve will cut its benchmark interest rate next week, analysts said.

“It’s almost like a perfect storm,” said Fadel Gheit, managing director of oil and gas research at OppenheimerFunds.

CHINESE ECONOMY POSTS 11.5% THIRD QUARTER GROWTH

From USA Today:

China's sizzling economy registered more double-digit growth in the third quarter, but the expansion slowed slightly amid efforts to avert overheating, the government said Thursday.

Economists said the peak of the latest boom may have passed.

The 11.5% annual growth rate in economic output for the July-September period kept China on track to surpass Germany as the world's third-largest economy by early 2008.

The figure, a decline from the 11.9% rate reported for the previous quarter, suggests China's expansion has peaked, economists said. They said growth is expected to slow further, but still stay above 10% next year.

Also in September, inflation eased slightly, with consumer prices up 6.2% over the same month last year, down from an 11-year high of 6.5% in August, the government said.

Authorities have blamed a recent spike in inflation on a shortage of food items, especially pork. They say it should ease as government efforts to encourage farmers to raise more pigs take effect.

MICROSOFT EARNINGS UP 23%, STOCK RISES

From USA Today:

Microsoft registered a sharp rise in financial results Thursday, propelled by brisk sales of its Vista operating system, Office 2007 software suite and Halo 3 video game.

The software giant said earnings increased 23% in its fiscal first quarter, to $4.3 billion, or 45 cents a share. Revenue climbed 27% to $13.8 billion.

In the year-ago quarter, Microsoft earned $3.5 billion, or 35 cents a share. The results beat analyst forecasts of 39 cents per share on sales of $12.6 billion, according to a poll by Thomson Financial.

It was Microsoft's best first quarter since 1999, when Microsoft's Windows 98 operating system was launched in Japan and several European countries. The news sent Microsoft soaring 11%, to $35.53, in after-hours trading Thursday.

NEW INCOME TAX PROPOSAL UNLIKELY TO BE ADOPTED NOW

From The New York Times:

The House’s leading Democratic tax writer will propose a sweeping overhaul of the tax code on Thursday that would increase taxes on many people with incomes above $200,000 but cut them for most others.

The bill, to be introduced by Representative Charles B. Rangel of New York, chairman of the Ways and Means Committee, would also overhaul corporate taxes by eliminating many major tax breaks and lowering overall tax rates.

Mr. Rangel has acknowledged that he does not expect to enact such a bill this year, and President Bush would almost certainly veto legislation that raises taxes on the wealthy.

The plan is probably most important as a preview of what Democrats are likely to pursue after the 2008 elections, especially in rolling back a good part of Mr. Bush’s tax cuts for people at the top of the income ladder.

MICROSOFT BUYS PIECE OF FACEBOOK

From USA Today:

Microsoft said Wednesday it would pay $240 million for a small slice of Facebook in a deal that values the red-hot social networking website at $15 billion.

In selling a 1.6% stake to the software giant, Facebook rebuffed a competing offer from search-engine giant Google. Google had no comment.

Microsoft also will sell ads on Facebook outside the USA, extending a marketing relationship that began last year. The deal, announced after several weeks of negotiations, is considered a coup for Microsoft as it slugs it out with Google for online ad sales. Facebook, founded in 2004, has more than 47 million users.

The hefty price paid by Microsoft validates the gambit by Facebook CEO Mark Zuckerberg to spurn a $1 billion takeover bid from Yahoo last year. In 2005, News Corp., parent of Fox News, paid $580 million to acquire Facebook rival MySpace.

Microsoft covets the data Facebook collects about its members' tastes and preferences. Microsoft wants to sell ads based on those preferences, ads that appear when Facebook members use Windows Live services, Windows Mobile smartphones — even its Xbox Live online-gaming service, says online search expert Kevin Lee, chairman of Did-it.com.

NEUMANN HOMES FILES FOR BANKRUPTCY

From the Chicago Sun-Times:

The crash in the Chicago area market for new homes has claimed its biggest casualty. Suburban builder Neumann Homes Inc. said Monday it will file for bankruptcy and has laid off most of its employees.

Warrenville-based Neumann, the Chicago area's ninth largest builder, blamed its predicament on a drop of more than 50 percent in annual sales within the Chicago and Denver markets. It also pointed to a decision in 2005 to invest in the Detroit market, a move it said cost the company more than $60 million.

Neumann said it will file for Chapter 11 bankruptcy and that its lenders have agreed to provide limited additional funding so that its assets can be evaluated and sold.

It also said the earnest money of customers whose new homes haven't started construction is safe in escrow. Neumann said it will ask a bankruptcy judge to approve refunds from those accounts.

It also said it will work with lenders to ensure that homes will be completed if construction has started.

APPLE POST 67% EARNINGS GAIN FOR QUARTER

From The New York Times:

Apple reported earnings on Monday that leapt ahead of analysts’ already optimistic expectations on record sales of its Macintosh computers.

The numbers showed that the company was slowly climbing back into the league of the dominant personal computer makers, Hewlett-Packard and Dell.

Apple reported fourth-quarter profit of $904 million, or $1.01 a share, up from $542 million, or 62 cents, in the quarter a year ago, an increase of 67 percent. Analysts had predicted profit of 85 cents a share.

Sales rose to $6.22 billion, from $4.84 billion. Gross margin also surged, to 33.6 percent, from 29.2 percent a year ago.

Apple said it sold 2.16 million Macintosh computers worldwide in the quarter, an increase of 400,000 over the previous record. It does not break out domestic and foreign sales.

The market research firm Dataquest estimated last week that Apple sold 1.3 million computers in the United States, and IDC put the figure at 1.1 million. In the same period, Dell sold 5 million computers and H.P. sold 4.3 million in the United States, according to the IDC report.

CALIFORNIA WILD FIRES DESTROY OVER 700 HOMES, FORCE 250,000 TO EVACUATE

From Reuters:

Wildfires burned unchecked on Tuesday in Southern California from Santa Barbara to the Mexican border, with hundreds of thousands of people forced to evacuate, at least 700 homes destroyed, and little hope for relief from the hot desert winds fanning the flames.

The National Weather Service said "strong and damaging winds" will continue near Los Angeles through mid-afternoon, and high wind warnings may be issued for some areas Tuesday night. In San Diego, the hot, dry winds fanning the flames were expected through Wednesday.

At least 13 fires, whipped by hot, gale-force Santa Ana winds have swept unchecked over the lower half of the state over the past two days, overwhelming fire crews and state emergency services. Some 200,000 acres were torched, one person killed and more than three dozen injured.

Gov. Arnold Schwarzenegger summoned aid from 1,500 National Guard troops, including 200 from the Mexican border, to help with firefighting, evacuations and crowd control.

Meanwhile, some 250,000 people who had been ordered to evacuate ahead of the flames spent the night out of their homes, about 10,000 of them at a San Diego area football stadium that had been converted to an emergency shelter.

WOMEN NARROW PAY GAP, BUT STILL LAG BEHIND MEN

From The New York Times:

When it comes to the advancement of women in the workplace, progress is almost never sudden. But often it is steady. And so it is with women’s wages.

In 1979, women working full time made only 63 percent as much pay as men, according to data compiled by the Bureau of Labor Statistics. Now working women make 81 percent as much as men.

Yes, that’s an improvement, but it still means that median weekly earnings were $600 for women last year, compared with $743 for men.

What is the reason for the disparity? Discrimination? Choices that women and men have made? That is not entirely clear.

What is clear is that wage differences vary by age group. Among workers aged 45 to 64, women made 73 percent as much as men. But in the 25-to-34 group, the number rises to 88 percent.

SEC INVESTIGATING COUNTRYWIDE FINANCIAL CEO FOR INSIDER TRADING

From USA Today:

The Securities and Exchange Commission is examining stock sales of the chief executive of Countrywide Financial, the nation's largest mortgage lender, a person familiar with the matter said Wednesday.

The informal SEC inquiry of stock sales by CEO Angelo R. Mozilo has been underway for a while, the person said, speaking on condition of anonymity because the probe has not been made public.

The inquiry was reported online Wednesday afternoon by The Wall Street Journal.

Mozilo sold some $130 million in Countrywide stock in the first half of the year through a prearranged 10b51 trading plan. These plans allow a company insider to set up a program in advance for such transactions and proceed with them even if he or she comes into possession of material non-public information.

North Carolina's state treasurer last week asked the SEC to investigate Mozilo's stock sales. He raised questions about changes made to Mozilo's plan in the months before the company's stock plunged, allowing Mozilo to significantly increase his sales of Countrywide shares.

CRUDE OIL SURGES AS TURKEY VOTES TO USE MILITARY FORCE AGAINST KURDS

From Bloomberg:

Crude oil rose to a record $89 a barrel in New York after Turkish lawmakers voted to allow the use of military force against Kurdish rebels in northern Iraq.

The assembly in Turkey's capital of Ankara backed the motion by 507 votes to 19, Parliament Speaker Koksal Toptan told lawmakers. An Energy Department report today showed that U.S. oil, gasoline and heating-oil supplies rose last week.

``The Turkish vote has scared traders,'' said Rick Mueller, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts. ``The doomsday scenario is that things will spiral out of control and lead neighboring countries like Iran and Saudi Arabia to become involved. This isn't likely but it encourages people to be long oil.'' Longs are bets prices will rise.

Crude oil for November delivery rose 31 cents, or 0.4 percent, to $87.92 a barrel at 1:20 p.m. on the New York Mercantile Exchange. Futures reached $89, the highest since the contract was introduced in 1983. Prices are up 49 percent from a year ago. This is the seventh straight daily gain.

On Oct. 15, prices passed the previous all-time inflation- adjusted record reached in 1981, when Iran cut oil exports. The cost of oil used by U.S. refiners averaged $37.48 a barrel in March 1981, according to the Energy Department, or $84.73 in today's dollars.

CONSUMER INFLATION UP 0.3% IN SEPTEMBER

From The New York Times:

Inflation stayed steady in September, indicating that the Federal Reserve has room to cut interest rates again, but most likely not this month.

Prices of consumer goods ticked up 0.3 percent in September, slightly faster than expectations and a reversal of a 0.1 percent decline in August. The core rate, a key gauge of inflation that excludes more volatile food and energy prices, held at 0.2 percent, where it has stood since June, the Labor Department said this morning.

Core inflation rose 2.1 percent since last September — the lowest year-over-year growth in 18 months — suggesting that pricing pressures have stayed in check. But the Fed, which keeps close tabs on inflation to determine its benchmark interest rates, prefers a rate between 1 percent and 2 percent. A bubbling-up of inflation, coupled with recent reports that point to a more resilient economy than analysts had expected, makes it more likely the Fed will keep rates unchanged when it issues its decision on Oct. 31.

APPLE TO RELEASE NEW OPERATING SYSTEM ON OCTOBER 26TH

From the San Jose Mercury News:

Leopard is ready to leap into the computing world.

Apple announced Tuesday that its newest operating system, one in a long line named after cats, will be released at 6 p.m. Oct. 26. That should please Macintosh enthusiasts, who have followed development of the delayed system through blogs and online discussion groups.

The new system will include 300 new features, including Stacks, which will allow users a new way to access files. They will spring up accordion-style from a redesigned, three-dimensional dock. Another highlight is Time Machine, a quick way to automatically backup everything on the Mac.

Boot Camp - software that lets users of Macs running on Intel chips to choose at start-up whether to run the Mac OS or Windows operating system - will be built into Leopard. Apple will also ship a complete set of Windows drivers with Leopard, so that Windows applications will be able to use the Web cameras and other hardware features built into the Macintosh computers. There's also a parental control content filter and the ability to limit the times children can use the computer.

CHINA TRYING TO COOL ECONOMY, FIGHT INFLATION

Many observers had wondered for years how China's economy could grow at 10+% per year and yet only encounter minimal inflation. Some suspected, and many still suspect, that the Chinese have simply underreported inflationary data. Others think that while China may have actually enjoyed low inflation in the past, that the country now will have to grapple with rapidly rising inflation. What is clear, is that China is now trying to slow the economy and fight inflation.

From USA Today:

China's central bank said Saturday it was boosting the amount of money that its banks must hold in reserve for the eighth time this year, reducing the amount available for lending in an effort to cool an investment boom.

The bank said in a statement on its website that it had raised the rate by half a percentage point to 13% to "strengthen liquidity management in the banking system and check the excessive credit growth."

The change takes effect Oct. 25, the People's Bank of China said.

The order, which had been expected by industry analysts, comes on top of repeated interest rate hikes and investment curbs imposed on real estate, auto manufacturing and other industries in an effort to cool a boom that Chinese leaders worry could ignite inflation or a financial crisis.

The rate rise also follows the recent release of government figures on inflation.

The inflation rate jumped 6.5% in August — its highest monthly rate in 11 years — propelled by a double-digit rise in food prices, including pork, the country's staple meat.

That follows a rise in consumer prices in July of 5.6% over the same month last year.

The central bank has already said it expects the inflation rate for the year to exceed the government's 3% target.

China announced on Friday that the trade surplus, a key source of domestic liquidity, remained high at US$23.91 billion in September.

The last reserve ratio hike took effect Sept. 25.

PRODUCER PRICE INDEX UP IN SEPTEMBER

From The New York Times:

The Producer Price Index, which measures wholesale prices paid by businesses, rose 1.1 percent in September after a 1.4 percent dip in August. The core rate of inflation, a less volatile gauge that excludes food and energy costs, rose 0.1 percent, a slight deceleration from the month before, the Labor Department said this morning.

Prices for raw materials, or so-called crude goods, continued to increase, with the core rate jumping 1.6 percent last month. Overall crude prices are up 11.4 percent from last September, compared with a 4.4 percent year-over-year increase in finished goods. These costs, located higher up the production pipeline, are typically passed on to consumers, signaling a likely increase in retail prices in the months ahead.

CHRYSLER WORKERS GO ON STRIKE

From The New York Times:

The United Automobile Workers union walked off the job at Chrysler LLC plants nationwide this morning after the two sides failed to reach agreement on a new four-year contract by a union-set deadline.

Chrysler has about 48,000 workers in the United States. About 12,000 workers are exempt from the strike, however, while their plants are temporarily closed by Chrysler.

The strike is the second in two weeks by the union against a Detroit automaker. Workers at General Motors struck for two days before the union reached a tentative deal with G.M. on Sept. 26.

DEAL BETWEEN SABMILLER AND MOLSON COORS COULD BE BLOCKED

Will the proposed Molson Coors/SABMiller deal decrease or increase competition? The answer to that question could determine whether the deal is allowed to go through.

From The New York Times:

Analysts and investors seem to be waving aside the possibility that the proposed merger of SABMiller and Molson Coors in the United States could run into trouble with regulators. But not that long ago, a similar deal seeking to combine the No. 2 and No. 3 players in a consolidated industry — sometimes called a 3-to-2 deal, because it reduces the industry leaders from three to two — was blocked on antitrust grounds.

That was H.J. Heinz’s attempt to buy the maker of Beech-Nut baby food, a $185 million transaction Heinz ended up abandoning.

Together, Heinz and Milnot, the parent of Beech-Nut at the time, would have controlled nearly 33 percent of the retail baby-food market; Gerber, the industry leader, controlled 65 percent. Compare that with the numbers in Tuesday’s proposed deal, in which a combined MillerCoors would have a 29 percent share of the U.S. beer market, and Anheuser-Busch would have 49 percent, according to analysts at Citigroup.

Many think that regulators won’t blink at the MillerCoors transaction. They have argued that the deal could be seen as increasing competition, rather than diminishing it, because it will create a stronger and more efficient rival to Anheuser-Busch, whose brands include Budweiser and Bud Light.

A similar argument was put forward in favor of the Heinz-Milnot transaction — and it did get some traction early on. A lower court initially approved the deal, only to have it overturned by an appeals panel in April 2001. At the time, Robert Pitofsky, the departing chairman of the F.T.C., now in private practice at Arnold & Porter, told The New York Times that the decision was one of the most important antitrust cases during his six years leading the agency.

MOLSON COORS & MILLER COMBINE U.S. OPERATIONS IN JOINT VENTURE

From AP via The New York Times:

Brewers Molson Coors Brewing Co. and SABMiller said Tuesday they will combine their U.S. operations in a joint venture.

The makers of Miller Lite, Original Coors and Coors Light said they will share ownership equally in the new venture which they said should help them compete more effectively.

The industry leader in the United States is Anheuser-Busch Cos., maker of Budweiser, Michelob and Bud Light.

The financial terms of the deal were not disclosed.

The new company will be called MillerCoors, the companies said. London-based SABMiller, which brews Miller Lite as well as a slew of European beers, and Molson Coors, the brewer of Coors Light and the craft beer Blue Moon, will each have a 50 percent voting interest in the venture and have five representatives on its board of directors.

Under the terms of the agreement, the companies said they will conduct all of their U.S. business exclusively through the venture.

The companies project MillerCoors will have combined annual beer sales of 69 million U.S. barrels with revenue of about $6.6 billion.

UAW SETS WEDNESDAY STRIKE DEADLINE FOR CHRYSLER

From The New York Times:

The United Automobile Workers union has set an 11 a.m. Wednesday deadline in its bid to reach a new four-year contract with Chrysler, a Chrysler spokeswoman said this morning.

The deadline appeared to be an effort to keep the talks from dragging on for days as they did at General Motors last month, where the contract covering 73,000 workers expired on Sept. 14. After talking for nine days, the union walked out for two days before reaching a deal on Sept. 26.

People with direct knowledge of the negotiations said Sunday night that a deadline had been set, and the deadline was confirmed today by Michele Tinson, a Chrysler spokeswoman.

If the deadline passes without a deal, the union could strike the company, or it could extend its contract hour to hour, as it initially did at G.M., one person with direct knowledge of the talks said today. The U.A.W. could also set aside the talks with Chrysler and seek a deal first with the Ford Motor Company, said this person, who spoke on anonymity because the discussions are private.

The union and Chrysler officials intensified their talks on Friday and continued through the weekend. Discussions recessed late Sunday and resumed this morning.

ATTITUDES TOWARD GLOBAL TRADE, FOREIGN COMPANIES, FREE MARKETS, AND MORE

Want to know how people around the world feel about issues such as global trade, free markets, and immigration? Check out the summary of results from the Pew Global Attitudes Project. If you are pressed for time, then just examine the charts and graphs. I think you will find some of the results surprising. The "Wealth and Religiosity" graph was particularly interesting to me and does a good job of illustrating different perspectives globally regarding religion, morality, values, and wealth. For that matter, one does not need to think globally about such issues to find different perspectives, as there is quite a split here in the United States.

GM & UAW TO CREATE NATIONAL INSTITUTE FOR HEALTH CARE REFORM

From The New York Times:

For years, General Motors has said it supports the United Automobile Workers union in its push for change in the nation’s health care system. Now the U.A.W. has persuaded G.M. to put its money where its mouth is.

In a labor agreement reached last week between the company and the union, G.M. has agreed to spend up to $15 million over the next few years to create a National Institute for Health Care Reform.

The institute, run by G.M. and the U.A.W., would engage economists, analysts, academics and other experts, who would conduct studies on the current health care system as well as alternatives. It would look at ways to lower drug costs and would sponsor forums on health care changes.

A G.M. spokeswoman, Michelle Bunker, said the company had not specifically called for a single-payer health care plan, in which a government program would be created to offer health care benefits.

But she said G.M. “believes that all Americans should have access to insurance, and we are working with key players to make sure that everyone has high-quality care at low cost.”
Although G.M. is making the initial investment, Ford Motor and Chrysler also would make proportional contributions, if they agree to similar terms in their new contracts with the U.A.W., according to the contract language.

The U.A.W. has supported national health care for generations. It was a primary focus for Walter P. Reuther, one of the union’s founders. He began arguing in favor of universal health care after World War II, and was one of the forces behind the creation of Medicare for older Americans.

Mr. Reuther’s successor, Leonard Woodcock, urged American businesses in 1970 to support a national health care plan as a way to fight raging health care inflation.

In the absence of a national system, the union instead secured generous health care benefits for its members and retirees, which have since added up to a $55 billion liability for G.M. and a nearly $100 billion liability for the industry over all.

JURY FINDS WOMAN GUILTY OF MUSIC PIRACY, CHARGES HER $9,250 PER SONG

From Wired:

Jammie Thomas, a single mother of two, was found liable Thursday for copyright infringement in the nation's first file-sharing case to go before a jury.

Twelve jurors here said the Minnesota woman must pay $9,250 for each of 24 shared songs that were the subject of the lawsuit, amounting to $222,000 in penalties.

They could have dinged her for up to $3.6 million in damages, or awarded as little as $18,000. She was found liable for infringing songs from bands such as Journey, Green Day, Aerosmith and others.

After the verdict was read, Thomas and her attorney left the courthouse without comment. The jurors also declined to talk to reporters.

The verdict, coming after two days of testimony and about five hours of deliberations, was a mixed victory for the RIAA, which has brought more than 20,000 lawsuits in the last four years as part of its zero-tolerance policy against pirating. The outcome is likely to embolden the RIAA, which began targeting individuals in lawsuits after concluding the legal system could not keep pace with the ever growing number of file-sharing sites and services.

"This is what can happen if you don't settle," RIAA attorney Richard Gabriel told reporters outside the courthouse. "I think we have sent a message we are willing to go to trial."

According to BigChampagne, an online measuring service, the number of peer-to-peer users unlawfully trading goods has nearly tripled since 2003, when the RIAA began legal onslaught targeting individuals.

At the time, BigChampagne says, there were about 3.8 million file sharers trading over the internet at a given moment. Now, the group has measured a record 9 million users trading at the same time. Roughly 70 percent of trading involves digital music, according to BigChampagne.

MINIMIZING LIABILITY BY CHOOSING THE RIGHT FORM OF BUSINESS OWNERSHIP STRUCTURE

Yesterday I stumbled upon this column that describes the benefits of choosing the correct form of business ownership structure. Since we are covering this in class now, and it is certain to be a part of the upcoming midterm, I'm including a link. Check it out at businessweek.com.

SEPTEMBER JOBS REPORT MODESTLY POSITIVE DESPITE SMALL UNEMPLOYMENT RATE INCREASE

You can view the official release at the Bureau of Labor Statistics.

From USA Today:

Employers added 110,000 workers in September, fastest rate in four months, but the unemployment rate ticked up to the highest level in more than a year as companies didn't add enough jobs to absorb a steady stream of people coming into the labor force.

The numbers suggest that the job market, although it has lost some steam, is still relatively healthy.

"Slowdown in place — but no collapse nor recession," Wachovia chief economist John Silvia said in a note to clients.

The seasonally adjusted 110,000 workers that companies and the government added in September was the biggest increase since May, the Labor Department said. And in a big reversal, the department revised its estimate of job creation in August to a positive 89,000 after saying last month that employers cut workers for the first time in four years.

But despite the payroll gains, the unemployment rate rose to 4.7% in September from 4.6% in August, to the highest rate since August 2006. The increase came as the number of people entering the labor force jumped in September after dropping in August. While most of those people were hired, not everyone was able to find work.

ECB AND BANK OF ENGLAND HOLD INTEREST RATES

From The New York Times:

The European Central Bank held its benchmark interest rate steady at 4 percent on Thursday, resisting pressure for a cut in the face of a rising euro that some fear will hurt Europe's economies.

Markets will be paying close attention to what ECB President Jean-Claude Trichet says about how the central bank plans to ward off more disruption from U.S. subprime credit woes and the dollar, which has weakened since the U.S. Federal Reserve made a larger-than-expected rate cut.

In London, the Bank of England decided to leave its key interest rate unchanged at 5.75 percent, a move most analysts had predicted. Howard Archer, chief U.K. and European economist at Global Insight, said a move by the British bank to cut rates would have been premature.

"Indeed, a cutting of interest rates at this stage could have been seen as a panic move and risked damaging the bank's anti-inflation credibility," he said in a statement.

NORTH KOREA TAKES PROMISING FIRST STEPS TOWARD JOINING THE INTERNATIONAL COMMUNITY

From USA Today:

The South Korean president signed a commitment with North Korea Thursday to seek a formal end to the Korean War, ending a historic three-day summit during which he was snubbed by his host and upstaged by a nuclear agreement 600 miles away in Beijing.

South Korea never signed the cease fire that ended hostilities in the 1950-53 Korean War; so the two Koreas have remained technically at war ever since. In their declaration Thursday in the northern capital Pyongyang, South Korean President Roh Moo Hyun and North Korean dictator Kim Jong Il agreed to pursue a permanent peace. South Korea has said it will need to work with the other combatants in the Korean war — China and the United States — to reach a formal peace deal. President Bush has said there can be no permanent peace on the Korean peninsula until North Korea gives up nuclear arms.

In their 8-point agreement Thursday, the wealthy South and destitute North also promised to expand economic cooperation, open regular freight service along a recently restored rail link and create a joint fishing zone on their disputed sea frontier.

But the lofty pronouncements in Pyongyang were overshadowed by a nuclear deal late Wednesday in Beijing: In talks with five other countries, North Korea agreed to complete the disabling of its nuclear facilities at Yongbyon and reveal all its nuclear programs by the end of the year.

In return, the isolated Stalinist state will get the equivalent of one million tons of heavy fuel oil in energy, economic and humanitarian assistance, and the United States will work toward establishing normal diplomatic relations with North Korea and taking it off a blacklist of countries that sponsor terrorism.

WAL-MART FORCED TO PAY ADDITIONAL $62 MILLION TO PENNSYLVANIA WORKERS

From USA Today:

Wal-Mart workers in Pennsylvania who previously won a $78.5 million class-action award for working off the clock will share an additional $62.3 million in damages, a judge ruled Wednesday.

About 125,000 people will receive $500 each in liquidated damages under a state law invoked when a company, without cause, withholds pay for more than 30 days.

"By this statute the legislature created significant financial incentives for employers to pay workers all the money they've earned by their hard work," Philadelphia Common Pleas Judge Mark Bernstein wrote.

"The law in its majesty applies equally to highly paid executives and minimum wage clerks," he wrote.

A Philadelphia jury last year awarded the workers the exact amount they had sought, rejecting Wal-Mart's claim that some people chose to work through breaks or that a few minutes of extra work here and there was insignificant.

Similar suits charging that Wal-Mart violated state wage laws are in play across the country.
A California trial ended with a $172 million verdict that Wal-Mart is appealing while the Bentonville, Ark.-based company settled a Colorado suit for $50 million.

A trial opened last week in Minnesota while suits are pending in New Jersey and several other states.

MICROSOFT UPDATES ZUNE

From The New York Times:

Microsoft has revamped its slow-selling Zune digital music players and created a MySpace-style social-networking site in its drive to compete with Apple’s market-leading iPod player.

In large part, the Microsoft moves announced Tuesday — the introduction of a smaller, sleeker version of the Zune player and the planned Zune Social Web site — reflect an attempt to build scale for a brand that so far has achieved only niche status. Microsoft said it had sold about 1.2 million units of the original device in the last year.

Many of the changes are stylistic. The company reworked the device’s navigation button and dropped one of its signature colors, brown, from the list of options. The Zune will be available in black, pink, green and red.

But one of the most striking changes had to do with Microsoft’s effort to enhance what had been perhaps the most talked-about feature on the original device: the ability to share music files and other media wirelessly with other Zune owners. Far too few people, however, purchased the player for such sharing to become commonplace, and the function held little appeal because it was crippled by usage rules negotiated with the music industry. Shared songs expired within a few days, even if the recipient did not play them. And a file acquired from one Zune user could not be shared with a third user.

Under the new rules, Microsoft said, shared songs would have no expiration date and it would be possible repeatedly to pass along songs sent from one device to another. But a shared file can be played only three times on each Zune.

A version with 80 gigabytes of storage, available only in black, will sell for $250. A version using flash memory with 8 gigabytes of storage will sell for $200, and the 4-gigabyte flash player will cost $150, the company said.

U.S. ONLINE-ONLY BANK FAILS

From the Sunday Times of London:

NETBANK, a pioneering internet-based bank, has been shut down by US regulators in the biggest American banking collapse for 14 years.

The bank’s failure, revealed late on Friday night, comes as financial groups are still reeling from the fallout of America’s sub-prime mortgage crisis and recent freeze in credit markets.

NetBank is the largest US bank to fail since the savings-and-loans crisis in the early 1990s. The bank, based in Georgia and launched in the late 1990s, had $2.5 billion in assets and was seen as a leading inter-net-only savings bank. The Office of Thrift Supervision, which regulates American lenders, blamed the bank’s demise on thumping loan losses and poor underwriting standards.

NetBank’s problems were made worse by its decision to expand into sub-prime mortgages, leaving it exposed to the meltdown in the US housing market.

ING, the Dutch bank, is taking over NetBank’s customers and $1.5 billion in insured savings deposits. It paid just $15m for the savings book.

iPHONE TURNS TO iBRICK AFTER SOFTWARE UPDATE

From The New York Times:

Since the iPhone hit the market in June, tech-savvy owners of the phone have been busy messing with its insides, figuring out how to add unauthorized software and even “unlock” it for use on networks other than AT&T’s.

But the Web was filled Friday with complaints from people who had installed the latest iPhone software update, only to see all the fun little programs they had been adding to their iPhones disappear — or, still worse, see their phones freeze up entirely.

Since Monday, Apple officials have been warning iPhone owners that using unlocking software could cause the phone to become “permanently inoperable when a future Apple-supplied iPhone software update is installed.” But in many cases those warnings went unheeded.

People who had unlocked their phones to use them with another carrier ran the greatest risk of, in techie terms, having them “bricked” — rendered about as useful as a brick. Most of those who committed the lesser transgression of installing programs not authorized by Apple simply had those programs wiped out.

People have created dozens of programs for the iPhone, ranging from the useless but entertaining (a virtual popcorn popper) to the decidedly practical (a screen-shot capture program).

But for anyone who upgrades the iPhone’s system software, a routine process that adds Apple’s latest fixes and improvements, those programs can no longer be used. The update has made the iPhone “almost impervious to any third-party hacks,” said Erica Sadun, a technical writer in Denver who has created more than a dozen programs for the iPhone, including the screen-shot program and a popular voice recorder.

Jennifer Bowcock, an Apple spokeswoman, said that when people went to update their software with their computer through iTunes, a warning appeared on the computer screen, making it clear that any unauthorized modifications to the iPhone software violated the agreement that people entered into when they bought the phone. “The inability to use your phone after making unauthorized modifications isn’t covered under the iPhone warranty” Ms. Bowcock said.

SOME POSITIVE ECONOMIC NEWS, FINALLY

Although surveys indicate that consumer confidence is falling, consumer spending was on the rise in August. And, while inflation is a concern, core PCE, an inflation figure favored by the Federal Reserve that excludes food and energy, came in at an acceptable 1.8% on an annual basis.

From The New York Times:

Americans made more purchases than expected in August and a crucial inflation indicator cooled, the Commerce Department said yesterday, two indications that the economy is still somewhat insulated from turmoil in the residential housing market.

Consumer spending rose a better-than-forecast 0.6 percent last month, the largest uptick since April, led by strong sales of durable goods. Income increased 0.3 percent, down from a 0.5 percent rise in July but in line with Wall Street forecasts. The rate of wage increases was also slightly down from July.

Consumers also caught a break on rising prices in August. A closely watched inflation gauge, the core personal consumption expenditure deflator, posted its smallest year-over-year gain since February 2004. The core deflator index, which excludes food and energy prices, rose 1.8 percent on an annual basis, continuing a downward trend that stretches back to February.

DETAILS OF GM/UAW DEAL BEGIN TO EMERGE

From The New York Times:

For a generation, executives at the Detroit auto companies have complained that the huge cost of providing generous benefits for its unionized workers put them at a competitive disadvantage with surging foreign car companies like Toyota and Honda.

Now, with a new contract agreement with the United Automobile Workers reached before dawn yesterday, General Motors has taken a momentous step toward eliminating much of that burden, a step likely to be followed by Ford Motor and Chrysler.

The contract’s main feature — a health care trust called a voluntary employee benefit association, or VEBA — means that G.M. will no longer have to carry the debt it will owe for employee and retiree health care benefits on its books. Earlier this year, G.M.’s chief executive, Rick Wagoner, referred to those obligations as “very large and frankly formidable.”

That debt is estimated at $55 billion for the next 80 years. So G.M. will establish the trust with about 70 percent of that amount, making an upfront payment of cash, stock and other assets. The difference is expected to come from gains on investments by the trust.

In return, the union won guarantees that medical benefits for hourly workers and retirees and their families will remain in place for the next two years. G.M. will also invest money in its American plants, and will maintain its current union work force of 73,000, according to Ron Gettelfinger, the U.A.W. president.

GM & UAW REACH TENTATIVE AGREEMENT

From The New York Times:

The United Automobile Workers union and General Motors reached a landmark agreement early today, ending a two-day strike. The key provision of the new contract is a health care trust that would get G.M.’s massive liability off its books.

The deal was announced by the company and the union in separate statements. The U.A.W. had walked out on G.M. on Monday morning, but production will resume this afternoon.

G.M. said the tentative agreement was reached at 3:05 a.m. Eastern. The U.A.W. recessed the strike and said if the contract was not ratified, workers could return to picket lines. The agreement included a memorandum of understanding to establish an independent health care trust, as well as other changes to the national agreement.

G.M. said implementation of the trust would be subject to court approval, as well as a review by G.M.’s accounting for the trust by the Securities and Exchange Commission.

The memorandum apparently establishes the principle of the trust, and allows the two sides to complete its details later. Analysts had predicted the union and the company might have to take that step, because of the complexity of such a trust.

“There’s no question this was one of the most complex and difficult bargaining sessions in the history of the G.M./U.A.W. relationship,” Rick Wagoner, G.M.’s chief executive, said in a statement.

The union’s president, Ron Gettelfinger, said the new contract “will absolutely protect their jobs and keep jobs from being reduced.” He said, while not offering specifics, that the number of jobs at G.M. would be “pretty much the same if not higher” when the contract concludes in 2011.

Later, Mr. Gettelfinger confirmed in a radio interview that there was a signing bonus for workers, but declined to state its size. He also declined comment on reports that the contract contained a two-tier wage program, with sharply lower rates for any new workers hired by G.M.

EXISTING HOME SALES & CONSUMER CONFIDENCE DECLINE

From The New York Times:

Purchases of previously owned homes in August dropped 4.3 percent from July, sending sales to a five-year low, the National Association of Realtors said this morning. The annual sales rate fell to 5.50 million from 5.75 million in July. Existing home sales are down nearly 13 percent over the last 12 months.

The bad news in the housing sector was coupled with a discouraging report on consumer confidence from the Conference Board, whose index dropped to 99.8 in September from 105.6 in August, much more than forecast. The index is now at its lowest level in nearly two years. A weak job market and stagnant salary growth has caused anxiety among consumers, analysts said, suggesting potential declines in consumer spending and job creation over the coming months.

GM UAW WORKERS GO ON STRIKE

From AP via MSNBC:

Thousands of United Auto Workers walked off the job at General Motors plants around the country Monday in the first nationwide strike against the U.S. auto industry since 1976.

UAW President Ron Gettelfinger said that job security was the top unresolved issue, adding that the talks did not stumble over a groundbreaking provision establishing a UAW-managed trust that will administer GM's retiree health care obligations. Gettelfinger complained about "one-sided negotiations."

Workers walked off the job and began picketing Monday outside GM plants after the late morning UAW strike deadline passed. The UAW has 73,000 members who work for GM at 82 U.S. facilities, including assembly and parts plants and warehouses.

General Motors Corp. had been pushing hard in the negotiations for the health care trust — known as a Voluntary Employees Beneficiary Association, or VEBA — so it could move $51 billion in unfunded retiree health costs off its books. GM has nearly 339,000 retirees and surviving spouses.

"This strike is not about the VEBA in any way shape or form," Gettelfinger said at an afternoon news conference in Detroit.

"The No. 1 issue here is job security," Gettelfinger later said, adding that the union also was fighting to preserve workers' benefits.

It remained to be seen what effect the strike would have on the automaker and consumers. The company has sufficient stocks of just about every product to withstand a short strike, according to Tom Libby, senior director of industry analysis for J.D. Power and Associates.

SOME EUROPEANS FEAR POSSIBLE DOWNSIDE OF A STRONG EURO

From The New York Times:

Fears of an abrupt economic slowdown in Europe deepened on Friday, after the release of weaker-than-expected data and another record in the euro’s relentless rise against the dollar.

Europe’s stampeding currency prompted a warning from the plane maker Airbus that it might have to cut costs more deeply than expected to restore its troubled operations to financial health.

“If the euro remained durably at $1.45, that would mean we have to find 1 billion euros in additional savings,” Fabrice Brégier, the chief operating officer, said in an interview with a French radio station. The euro briefly traded at $1.41 on Friday morning before falling back slightly. It was at $1.4091 in late trading in New York.

Most European exporters have weathered the rally without complaint, having cut costs and hedged their exposure, either financially or by moving production to countries that do not use the euro.

But a noisy minority is starting to agitate, and political leaders, notably in France, have picked up their concerns, lobbying the European Central Bank to take steps to stem the euro’s appreciation.

“We hope the E.C.B., at its meeting in October, will examine the consequences and take appropriate action,” the French finance minister, Christine Lagarde, said during a visit to China on Friday.

Airbus is particularly vulnerable because it earns all its revenue in dollars and incurs about half of its operating costs in euros. That puts it at a big disadvantage to its American rival, Boeing.

Under its existing plan, Airbus plans to cut 2 billion euros ($2.8 billion) a year in costs by 2010, through the sale of several factories and the elimination of 10,000 jobs. In his radio interview, Mr. Brégier said the cost-cutting plan was predicated on a euro exchange rate of $1.35.

INTEL IS THE EUROPEAN COMMISSION'S NEXT TARGET

In the wake of the ruling against Microsoft this week, Intel seems to be the next target for the E.U. in terms of anti-competitive behavior. Rival AMD has complained since 2000 that Intel has used questionable practices, seemingly legal in the United States, but perhaps illegal in the E.U. In July of this year the European Commission charged Intel with illegal use of sales tactics such as rebates and incentives to maintain or increase its market share in microprocessors.

From BusinessWeek:

The EC cases against Microsoft and Intel are based on different kinds of alleged market abuse and draw on separate legal precedents. But both reflect a widening gap in how the U.S. and Europe view the legality of hardball business tactics by dominant companies. While regulators in both regions look for signs of harm to consumers from monopoly behavior, Europe gives as much or more weight to the impact on competitors.

That distinction played a critical role in the Microsoft ruling. On the face of it, Microsoft's free inclusion of Media Player in Windows was a boon to consumers. But the EC was able to show that the software bundling harmed rivals such as Real Networks and Apple and reduced competition in the media player market—thus potentially hurting customers in the long run by leading to less choice in digital content formats. A similar argument held that by limiting the information it gave out about Windows networking standards, Microsoft had foreclosed competition in desktop and server operating systems, to the detriment of consumer choice.

The same kind of thinking is at the core of the commission's case against Intel. Prompted by complaints from rival chipmaker AMD dating back to 2000, the EC has charged Intel with illegal use of sales tactics such as rebates and incentives to maintain or increase its market share in microprocessors. Such programs are normally permissible but can cross the line into abuse when practiced by companies with monopoly market share.

Intel strongly denies any wrongdoing and says it has acted within the law with its market incentive programs. It also argues that the programs have led to lower chip prices for consumers.

That may not be enough of a defense in Europe—especially now that the commission's hand has been strengthened in the wake of the Microsoft defeat. "European authorities and courts put a higher duty on dominant firms to deal fairly with their competitors," says Philip Marsden, a senior research fellow at the British Institute of International & Comparative Law. "They want to foster gentlemanly competition, a premise that is foreign to American antitrust thinking."

INDEX OF LEADING ECONOMIC INDICATORS FALLS IN AUGUST

The Conference Board's Index of Leading Economic Indicators includes the following:

*Real money supply (M2)
*Index of consumer expectations
*Average weekly initial claims for unemployment insurance
*Stock prices
*Building permits
*Vendor performance
*Manufacturers' new orders for nondefense capital goods
*Interest rate spread
*Manufacturers' new orders for consumer goods and materials
*Average weekly manufacturing hours

It is considered a good indicator for economic performance for the next three to six months.

From The New York Times:

The index of leading economic indicators fell in August by the most in six months, reflecting lower consumer confidence and a rise in initial claims for unemployment insurance.

The indicators index, compiled by the Conference Board, declined 0.6 percent, more than forecast, after a 0.7 percent increase in July that was larger than initially reported, the group, based in New York, said yesterday. The index points to the direction of the economy over the next three to six months.

The data underlined concerns that the economy might be in danger of stalling as a real estate slump, tougher lending standards and a recently softer job market threaten consumer spending.

GATES TOPS FORBES 400 RICHEST AMERICANS

No surprise here. Bill Gates is the richest American with $59 billion and Warren Buffett is second with $52 billion.

You can view the full rankings at Forbes.com.

This list includes only Americans. Interested in who is wealthier, Bill Gates or Mexican telephone mogul Carlos Slim Helú? As of August 31, 2007, they were even. Check out this article at Forbes.com for details.

CANADIAN LOONIE EQUAL TO U.S. DOLLAR

From CNNMoney.com:

The Canadian dollar reached parity with the U.S. dollar on Thursday for the first time since November 1976.

Known as the loonie because of the bird pictured on the one-dollar coin, the Canadian dollar has been gaining ground on its American counterpart since hitting an all-time low of 61.79 U.S. cents on Jan. 21, 2002.

This week the loonie rose sharply against its U.S. counterpart after the Federal Reserve announced a dramatic half-point cut in its benchmark interest rates. The Bank of Canada, meanwhile, has kept its equivalent rates stable.

As a result, the spread between U.S. and Canadian interest rates widened, making Canada a more attractive place for German, Japanese, American and other foreign investors to put their money.

"Canadians are getting a lot richer relative to Americans. The parity exchange rate is just one example of that," said Jeff Rubin, Chief Economist and Strategist at CIBC World Markets.

"It really reflects the rise of the resource economy in Canada and the rise of western Canada and the decline of the manufacturing sector and the manufacturing heartland of Canada in Ontario," Rubin said.

"The Canadian economy that once use to be the sleepy little resource backwater of the North American economy, is certainly turning the tables on its big brother in a hurry," Rubin said.

The high (Canadian) dollar will hurt Canadian manufacturers who sell goods in the U.S. Canadian Auto Workers economist Jim Stanford warned that the sector, largely based in Ontario, will lose hundreds of thousands more jobs if the dollar remains at current levels.

PRESIDENT'S FISCAL POLICY: NO TAX INCREASES

From the Los Angeles Times:

Sidestepping the turmoil in the housing market and the credit problems associated with it, President Bush said today that the nation's economy was strong and would remain so if Congress steered clear of tax increases.

But he would not rate the risk of recession, saying, "You need to talk to economists. I think I got a B in Econ 101. I got an A, however, in keeping taxes low."

HOUSING STARTS DROP 2.6% IN AUGUST

From USA Today:

Construction of new homes fell in August to the slowest pace in 12 years as troubles in the housing industry continued.

The Commerce Department reported Wednesday that construction of new homes fell 2.6% in August to a seasonally adjusted annual rate of 1.331 million units.

That was the lowest pace for housing starts since the June 1995 rate of 1.281 million units.

By region, the drop in housing starts was the worst in the Northeast, where they fell 38% in August, the sharpest drop since December 1990. Starts were off 18% in the West but rose 4.2% in the Midwest and 11.4% in the South.

FEDERAL DEBT CEILING TO BE HIT IF IT ISN'T RAISED

From USA Today:

Treasury Secretary Henry Paulson told Congress on Wednesday that the federal government will hit the current debt ceiling on Oct. 1.

He urged quick action to increase the limit, saying it was essential to protect the "full faith and credit" of the country, especially at a time of financial market turmoil.

The current debt limit is $8.965 trillion. Unless Congress votes to raise that ceiling, the country would be unable to borrow more money to keep the government operating and to pay debt obligations coming due. The United States has never defaulted on a debt payment but the decision on whether to raise the debt ceiling often sparks a prolonged political battle in Congress.

The Senate Finance Committee earlier this month approved increasing the limit on the national debt to $9.82 trillion. That boost of $850 billion would be the fifth increase in the government's borrowing limit since President Bush took office in 2001.