All Blog Posts from Econwatch

(AP) WASHINGTON - China, the biggest buyer of U.S. Treasury securities, owns a lot more than previously estimated.

In an annual revision of the figures, the Treasury Department said Monday that China's holdings totaled $1.16 trillion at the end of December. That was an increase of 30 percent from an estimate the government made two weeks ago.

The government made the change to its monthly report based on more accurate information it obtains in an annual survey. That survey more does a better job of determining the actual owners of Treasury securities.

China was firmly in the top spot as the largest foreign holder of U.S. Treasury debt even before the revisions. But the big increase in Chinese holdings could ease fears that Chinese investors might begin dumping their U.S. holdings. Such a development could send U.S. interest rates rising. That would slow America's economic recovery and increase Washington's costs for financing the $14.3 trillion national debt.

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If you're in the market for a Chevy Volt, part of the plug-in hybrid's appeal is probably the gas money that its electric engine will save you. But if you're planning to plug one into the outlet in your garage anytime soon, you may be in for a shock -- sticker shock, that is -- at what's being charged for this rechargeable car.

The manufacturer's suggested retail price for the Volt starts at $40,280, but with the revolutionary vehicle in short supply and high demand, some Chevrolet dealers are marking the Volt's price up, way up, from its MSRP.

According to the Arizona Daily Star, Moises Paiewonsky, a 29-year-old assistant music professor from Tucson, flew cross-country to New York -- one of only a half-dozen states plus the District of Columbia where the car is currently available -- to plunk down $50,000 for his Volt, about $6,000 more than his particular model's sticker price.

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Some 713 million airline passengers took to the skies over the U.S. last year and the Federal Aviation Administration predicted today that the number would soar to a whopping one billion 10 years from now and would more than double in 20 years. More passengers mean more planes flying more flights and that, warns the federal government, means gridlock in the air and at airports on the ground unless the U.S. opens up a few extra lanes on the highways in the skies.

The FAA calls those extra lanes "NextGen", short for Next Generation Air Transportation System, a state-of-the-art satellite-based air traffic control system that would replace the current decades-old radar-based one and allow the rising number of planes to fly closer together on more direct and precise routes, effectively opening up those extra lanes and averting an otherwise unavoidable aviation traffic jam.

"Only a modernized air transportation system will be able to keep up with our forecasted demand," FAA Administrator Randy Babbitt said in a statement this morning.

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Is it the end of one of the best-kept (and most-hyped) commercial secrets in history - or much ado about nothing? Probably a bit of both.

The radio program "This American Life" aired a segment Friday claiming to have unraveled the secret formula for Coca-Cola. The show's producers discovered a photograph in a 1979 article in the Atlanta Journal-Constitution showing a copy of the secret recipe from a notebook belonging to an (alleged) friend of Coke's creator.

The photographed notebook page also allegedly showed the ingredients and proportions for a secret ingredient - known as Merchandise 7X - necessary for the recipe.

The show contacted flavor and beverage makers, including the Jones Soda Company, for help reproducing the recipe. The replica was good enough to fool many tasters in blind tests - including flavor experts at Jones.

On the other hand, many testers who identified themselves as frequent Coke drinkers were not fooled. And although there is a single recipe considered the "original formula," it was developed in a series of attempts by 19th century chemist John Pemberton. Even if the recipe identified by "This American Life" is authentic, it was likely an intermediary step in Pemberton's process.

Furthermore, "It's not what they have now," noted Mark Pendergrast, the author of For God, Country & Coca-Cola: The Definitive History of the Great American Soft Drink and the Company that Makes It."

Since the drink was invented in 1886, the roughly 8 milligram dose of cocaine has been removed, the amount of caffeine has been reduced, and the types of sweeteners and acids used have been replaced, to name a few changes.

"The irony of everybody paying attention to the formula again, is they always miss the historical context," said Pendergrast, who detailed the drink's history as a cocaine-laden "combination patent medicine and beverage" largely ripped off from a coca-infused wine and marketed to relieve the mythical disease of neurasthenia.

"This whole story is a whole hoo-ra over old news," Pendergrast said, noting that he published a similar recipe in the 1993 first edition of his book and that an updated recipe would appear in a forthcoming edition.

An official company historian said people were welcome to try the recipe presented on the show. He said he was confident they'd find it just wasn't the same.

(The This American life radio piece can be found at www.thisamericanlife.org. But - apparently due to surging interest in the story - the website was down Tuesday morning.)

TOKYO - It was first reported last year that China had the world's second biggest economy, but data released from Japan Sunday finally confirmed that.

A late-year downturn was Japan's first quarterly contraction in more than a year, and is partly the reason for the change in international economic hierarchy.

Japan's real GDP expanded 3.9 percent in the calendar year in the first annual growth in three years, but it wasn't enough to hold off a surging China. Japan's nominal GDP last year came to $5.4742 trillion, less than China's total of $5.8786 trillion, the Japanese Cabinet Office said.

"It's realistic to say that within 10 years China will be roughly the same size as the US economy," Tom Miller of GK Dragonomics, a Beijing-based economic consultancy, told the BBC.

Gross domestic product in Japan shrunk at an annualized rate of 1.1 percent in the October-December quarter, a sharp reversal from a revised 3.3 percent expansion in the third quarter, the government said.

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What's in a name?

For cars, quite a lot -- even for two cars as different as a full-size Ford pickup and a Formula One Ferrari. The Ford F-150, a quintessential American truck, and the Ferrari F150, a 785-horsepower Italian race car, couldn't be more different, but save for a hyphen, their names are identical.

The two vehicles will never be confused with each other on the road, but the American automaker doesn't much care for the European sports car company appropriating the name of the top-selling pickup for its single-seat supercar, even if Ferrari says it chose the name in honor of the 150th anniversary of Italian unification.

Today, Ford filed a lawsuit against Ferrari in federal court for trademark infringement. And the F-150, which could never hope of besting the F150 on the raceway, now has a darn good chance of doing it in court.

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The New York Times reports that the New York Stock Exchange is in "talks on a merger with the operator of the Frankfurt Stock Exchange." The exchange faces pressure from electronic upstarts that are taking business from it, reports the Times. The paper says a deal would create the world's largest financial market.

According to the Times, "A merger would potentially let customers trade stocks in New York, options tied to those shares in Paris and derivatives linked to them in Frankfurt."

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In a lawsuit filed last week, lawyers demanded $6.4 billion for Bernard Madoff's victims, accusing executives at JPMorgan Chase of being complicit in the disgraced financier's massive fraud.

Now the second-largest bank in the United States is firing back.

According to Reuters, JPMorgan says court-appointed trustee Irving Picard is circumventing the law by suing in bankruptcy court. Such a trial would be decided by a judge, not a jury.

"In substance," Retuers quotes the bank as saying, "the trustee is trying to pursue an enormous back-door class action."

JPMorgan, which served as the now-imprisoned financier's primary bank for two decades, asked the bankruptcy judge overseeing the Madoff proceedings to move the lawsuit to federal district court, where the bank has the right to a jury trial. A spokesman for Picard did not respond to Reuter's request for a comment.

Last week, the lawyers working on Picard's behalf cited numerous emails implicating JPMorgan, including an unidentified bank employee recounting being told "there is a well-known cloud over the head of Madoff and that his returns are speculated."

The bank has denied having any suspicions about Madoff, saying it followed all commercial banking regulations in its dealings with him.

Over the past year, hackers have repeatedly penetrated the computers at NASDAQ, reports the Wall Street Journal. Federal investigators are trying to identify the hackers and their purpose.

However, the trading platform wasn't compromised, people familiar with the matter told WSJ.

Investigators think unlawful financial gain, theft of trade secrets or a national-security threat designed to damage the exchange could be reasons for the penetrations.

"So far, [the perpetrators] appear to have just been looking around," one person involved in the Nasdaq matter told WSJ.

Sources familiar with the matter told WSJ that the Secret Service started investigating the attempts about a year ago.

Authorities have yet to identify any trail, specific individual or country associated with the incidents.

The 2008 U.S. financial market meltdown caused widespread damage throughout the economy and the world.

A federal commission established to investigate the crisis has concluded that the size of the meltdown's impact is similar to the breadth of parties there are to blame for it, reports the New York Times.

A short list of people and things that the recently concluded Financial Crisis Inquiry Commission will blame in its official report (to be released Thursday) include: Government regulators and policy makers; corporate mismanagement; two presidential administrations; two Fed chairmen; greed in several financial institutions; and unnecessary Wall Street risk taking.

Most importantly, the commission concludes that the financial meltdown was "avoidable," reports the Times, which got an early look at the commission's findings.

"The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done. If we accept this notion, it will happen again," the report states.

The 10-member commission was far from unanimous in its findings, as only the 6 members appointed by Democrats approved of the report's conclusions, the Times reports.

Republican dissenters on the commission will publish their own findings shortly, and are expected to place most of the blame for the crisis on government policies promoting homeownership, the Times reports.

The commission's official 576-page report places some of the blame with former Fed chairmen Alan Greenspan and his successor, Ben S. Bernanke. Greenspan is singled out for advocating financial deregulation and failing to "stem the flow of toxic mortgages."

Both the Clinton and Bush administrations are cited in the report for missteps and inconsistencies that contributed to the financial turmoil.

Lobbying is also blamed in the report, which highlights the $2.7 billion spent between 1999 and 2008 by the financial sector on convincing politicians and federal officials to let them have their way.

Overall, the report paints a grim picture of mismanagement, miscalculation and a general lack of will to tackle obvious flaws in the financial system by government officials, industry leaders and regulators.

The report states: "The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire. The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand and manage evolving risks within a system essential to the well-being of the American public. Theirs was a big miss, not a stumble."