Football: Brazil challenger Lula says Neymar supports Bolsonaro over debt woes

Brazilian presidential candidate Lula da Silva criticized football star Neymar's support of far-right incumbent Jair Bolsonaro, accusing the player of being motivated by a debt "pardon". 

Last month, Neymar endorsed hardline conservative Bolsonaro as he fights to win reelection in his October 30 runoff battle against leftist ex-leader Lula.

"Neymar has the right to choose whoever he wants to be president. I think he is afraid that if I win the election I will find out what Bolsonaro pardoned from his income tax debt," Lula said in a YouTube interview on Tuesday.

"I think that's why he's afraid of me," Lula added, laughing, when asked about Neymar's support for the president.

Expectations of a close contest have pushed both sides to intensify their attacks before the runoff, with Lula the frontrunner after the first-round election on October 2.

"Obviously, Bolsonaro made a deal with (Neymar's) father. He now has an income tax problem in Spain," Lula said, alluding to a favorable ruling the player obtained in a tax evasion trial in Brazil, as well as the charges he faces in Barcelona for alleged irregularities in his 2013 club transfer. 

Lula added that it was ultimately a problem for the country's tax collection agency, and not him.

This week, Lula secured the backing of another football legend. 

Former Brazilian player and Paris Saint-Germain star Rai gave Lula a silent shout-out at a gala awards ceremony in Paris, mentioning his country's elections before flashing an "L" sign with his right hand.

Lula has 53 percent of the vote heading into the October 30 runoff, to 47 percent for Bolsonaro, according to a poll released Friday by the Datafolha institute.

Agence France-Presse

Philippines launches new long-term U.S. dollar bonds issue

MANILA - The Philippine government launched an offering of 10.5-year and 25-year U.S. dollar-denominated bonds on Wednesday to raise funds needed to mitigate the economic damage of the coronavirus pandemic.

The long-term benchmark bonds would carry a yield of around 100 basis points above the 10-year U.S. Treasury benchmark, based on the government's initial guidance.

National Treasurer Rosalia De Leon could not say at this stage how much the government aimed to raise from the bond sale, which follows a similar U.S. dollar bond offering in April that raised $2.35 billion. 

The Philippines, one of Asia's most active issuers of sovereign debt, would use the proceeds from the bond sale to support its budget, the Bureau of the Treasury said.

Both chambers of congress have approved a record 4.5 trillion pesos ($93.7 billion) budget for 2021, part of which will be used to purchase COVID-19 vaccines as the government aims to immunize a third of its 108 million population.

Credit Suisse, Daiwa Capital Markets, Deutsche Bank, Morgan Stanley, Standard Chartered Bank and UBS are joint bookrunners, IFR reported. 

Fitch assigned a 'BBB' rating to the country's proposed USD bonds, while Moody's gave the Philippines' global dual-tranche bond offerings a 'Baa2' rating.

-reuters-

Pope steps up call for poor country debt cancellation

VATICAN CITY, Holy See - Pope Francis renewed a call on Tuesday for the cancellation of debt owed by poor countries in the face of the coronavirus pandemic, saying it was time for restorative justice.

The pope is preparing for an audience with the public on Wednesday, his first since the pandemic hit Italy nearly six months ago.

"I repeat my call for the cancellation of the debt of the most vulnerable countries, in recognition of the severe impact of the medical, social and economic crises they face as a result of COVID-19," the Roman Catholic Church's highest official said.

"We also need to ensure that the recovery packages being developed and deployed at global, regional and national levels must be regeneration packages.

"It is a time for restorative justice."

In April, the Argentinian-born pontiff called for debt to be reduced or cancelled in a message from an empty Saint Peter's Basilica.

On Tuesday he said: "Policy, legislation and investment must be focused on the common good and guarantee that global social and environmental goals are met."

The World Bank warned last month that coronavirus may have driven as many as 100 million people into extreme poverty.

The situation made it "imperative" that creditors reduce the amount of debt held by poor countries, the Washington-based institution's president David Malpass warned.

Advanced economies in the Group of 20 have already committed to suspending debt payments from the poorest nations until the end of the year.

There is growing support for extending that moratorium into next year amid a pandemic that has already killed more than 840,000 people and registered 25.2 million cases globally.

Agence France-Presse

US Treasury to borrow record $2.999 trillion in Q2

The United States Treasury said Monday it will to borrow a record $2.999 trillion in the April-June period largely to finance spending on relief programs amid the coronavirus pandemic.

That amount for the second quarter is five times the most spent in any three month period and far outstrips total debt issued in most years. In the 2019 fiscal year, the government issued just $1.28 trillion in debt, a Treasury official told reporters.

The increase is "primarily driven by the impact of the COVID-19 outbreak, including expenditures from new legislation to assist individuals and businesses" and deferred taxes, Treasury said in a statement.

Congress rushed out nearly $3 trillion in aid for individuals and businesses as the pandemic forced much of the economy to shut down, including increased unemployment payments and loans to small businesses and major industries to try to keep them afloat and paying their workers.

In addition, the annual rite of paying income taxes by April 15 was pushed back three months.

The Treasury official said the borrowing assumptions "include only legislation that has been passed to date" and could be adjusted or shifted into later months depending on how quickly the funds are pushed out.

For the July-September quarter, Treasury currently estimates the need to borrow $677 billion.

Despite the massive amount, the US government should not have any problems finding buyers for the debt, which is seen as a solid investment for domestic and foreign investors alike.

Agence France-Presse

Top creditors to suspend poorest countries' debt payments, France says

PARIS - Major international creditors have agreed to suspend debt payments owed by the poorest countries this year, throwing a financial lifeline to help cope with the coronavirus crisis, France's finance minister said on Tuesday.

Some 76 countries, of which 40 are in sub-Sahara Africa, were eligible to have debt payments worth a combined $20 billion suspended, out of a total of $32 billion the countries were to spend on debt servicing this year.

"We have obtained a debt moratorium at the level of bilateral creditors and private creditors for a total of $20 billion euros," Bruno Le Maire told journalists.

The government creditors, including not only the Paris Club but also China and other members of the Group of 20 economic powers, are to suspend $12 billion under the agreement, which remains to be finalised on Wednesday.

Separately, a senior German official spoke of a debt moratorium by official creditors worth up to $14 billion.

"We're glad in particular that China agreed to participate in this moratorium. All that will free up money for the countries that need it the most," Le Maire said.

China has become a major creditor to developing countries, especially in Africa, but there is little transparency about how much they owe.

Private creditors have agreed on a voluntary basis to roll over or refinance $8 billion in debt, a French finance ministry source said.

Of the total $32 billion due this year, the remaining 12 billion euros is owed by multilateral lenders, mainly the World Bank, Le Maire said, urging such lenders to join the debt relief initiative.

The World Bank and the International Monetary Fund called last month on government creditors to give debt relief and the IMF said on Monday it would do so for 25 countries under its Catastrophe Containment and Relief Trust, which has about $500 million in resources on hand.

French President Emmanuel Macron said in a television address to the French nation on Monday that African countries should be helped by "massively cancelling their debt".

Le Maire said that at the end of the year outright debt cancellation should take place on a case-by-case basis and in coordination with multilateral lenders depending on the economic situation of the countries as well as developments in commodity markets and capital flows. 

-reuters-

World Bank sees 'huge willingness' to suspend debt payments for poorest countries

WASHINGTON -- The World Bank is seeing "a huge willingness" on the part of official bilateral creditors to suspend debt payments by the world's poorest countries so they can focus on fighting the coronavirus pandemic, a top Bank official said on Monday.

World Bank Managing Director Axel van Trotsenburg said the Group of 20 major economies and the Group of Seven (G7) had been largely supportive of a call by the World Bank and International Monetary Fund for a temporary halt in debt payments.

"Everybody understands that we need to help the poorest countries. There is a huge willingness - as in nobody is questioning that, absolutely nobody," he told Reuters in an interview. "I think we are in a good place to move forward."

Finance officials from the G7 and G20 countries are due to discuss the debt relief issue this week. Three sources familiar with the process said details were still being finalized, but they expected the G20 countries to back a suspension of debt payments at least until the end of the year.

World Bank President David Malpass said last week he expected a "broad endorsement" of the proposal by the 25-member joint Development Committee of the World Bank and IMF on Friday.

The World Bank and the IMF have begun disbursing emergency aid to countries struggling to contain the virus and mitigate its economic impact. They first issued their call for debt relief on March 25, but China - a major creditor - and other G20 nations have not formally endorsed the proposal.

The IMF announced on Monday a first round of debt relief grants to 25 of its poorest member countries, including Afghanistan, Mali, Haiti and Yemen.

The funds will cover those countries' debt service payments to the Fund for the next 6 months, but the IMF is pushing donor countries to more than double the $500 million available in its Catastrophe Containment and Relief Trust so it can extend the debt relief for a full two years.

The IMF-World Bank push for broader bilateral debt relief won significant backing over the past week, including from Pope Francis and the Institute of International Finance (IIF), which represents over 450 global banks, hedge funds and sovereign wealth funds.

The two institutions are urging China and other big creditors to suspend debt payments from May 1 for International Development Association (IDA) countries that are home to a quarter of the world's population and two-thirds of the world's population living in extreme poverty. With a combined gross domestic product of around $2 trillion, those countries face official bilateral debt service obligations of $14 billion through the end of 2020, the World Bank estimates.

The World Bank has already approved $2.1 billion in emergency funding for 32 countries to respond to the COVID-19 crisis, with decisions on 40 more expected this month.

Van Trotsenburg said it was crucial that commercial creditors also provide debt relief for the poorest countries, which have also seen massive outflows of capital and a sharp drop-off in remittances by citizens living overseas.

"This is a global problem affecting everybody. Unless everybody acts, it will not add up," van Trotsenburg said. "That means every institution has the obligation to see what can it mobilize to the best of its ability, and to be fast."

IIF President Tim Adams said official bilateral debt relief could be provided relatively quickly but that it would take longer to provide commercial debt relief given the lack of details and oversight about who exactly holds all the debt.

Van Trotsenburg said it was also important to ensure that unsustainable debt levels not impede the poorest countries' movement toward more sustainable development, when asked about the need for a broader round of debt restructuring.

Adams said that discussion was premature, with circumstances and needs varying widely from country to country. But he said the crisis highlighted the need for greater transparency about lending to poor countries by China and others.

-reuters-

France urges debt freeze for poor countries hit by pandemic

PARIS - French Finance Minister Bruno Le Maire on Thursday called for a $500-billion war chest and a debt moratorium for developing countries, especially in Africa, to help them cope with the coronavirus crisis.

The world's poorest continent is far behind other regions in terms of confirmed cases and deaths but infections are rapidly increasing amid endemic poverty and often threadbare health care.

"We have the responsibility of avoiding a drama in developing nations, especially in Africa," Le Maire said, days after urging the G20 group of rich nations to take steps to help poor countries hit by the pandemic.

"We support a moratorium in the coming months on the debt of the poorest countries," he told reporters in Paris.

Le Maire also said France wanted an increase in special drawing rights (SDRs), the currency of the International Monetary Fund, to over $500 billion (460 billion euros) as well as "a swift new credit line to complement swap lines between central banks to support countries which are most in need."

Swap lines are temporary reciprocal currency arrangements between central banks primarily aimed to keep liquidity in the currency available, especially for countries that have debt in US dollars.

On March 25, the IMF and World Bank urged a freeze on debt repayments "to provide a global sense of relief for developing countries as well as a strong signal to financial markets."

Nearly 6,500 cases of coronavirus have been recorded across all of Africa, 238 of them fatal, according to an AFP toll.

South Africa is the worst-hit country on the continent with more than 1,400 cases, including five deaths.

Agence France-Presse

COVID-19 cases and deaths rising, debt relief needed for poorest nations: WHO

GENEVA -- The head of the World Health Organization voiced deep concern on Wednesday about the rapid escalation and global spread of COVID-19 cases from the new coronavirus, which has now reached 205 countries and territories.

WHO Director-General Tedros Adhanom Ghebreyesus said that his agency, the World Bank and the International Monetary Fund backed debt relief to help developing countries cope with the pandemic's social and economic consequences.

"In the past five weeks there has been a near-exponential growth in the number of new cases and the number of deaths has more than doubled in the past week," Tedros told a virtual news conference at the organization's Geneva headquarters.

"In the next few days we will reach 1 million confirmed cases and 50,000 deaths worldwide," he said.

China, where the coronavirus outbreak first emerged in December, reported dwindling new infections on Wednesday and disclosed for the first time the number of asymptomatic cases, which could complicate how trends in the outbreak are read.

Asked about the distinction, Dr. Maria ver Kerkhove, a WHO epidemiologist who was part of an international team that went to China in February, said the WHO's definition included laboratory-confirmed cases "regardless of the development of symptoms".

"From data that we have seen from China in particular, we know that individuals who are identified, who are listed as asymptomatic, about 75 percent of those actually go on to develop symptoms," she said, describing them as having been in a "pre-symptomatic phase". The new coronavirus causes the respiratory disease COVID-19.

The outbreak continues to be driven by people who show signs of disease including fever and cough, but it is important for the WHO to capture that "full spectrum of illness", she added.

Tedros praised India's $22.6 billion economic stimulus plan - announced after a 21-day lockdown imposed last week - to provide free food rations for 800 million disadvantaged people, cash transfers to 204 million poor women and free cooking gas for 80 million households for the next 3 months.

"Many developing countries will struggle to implement social welfare programs of this nature," he said.

"For those countries, debt relief is essential to enable them to take care of their people and avoid economic collapse. This is a call from the WHO, the World Bank and IMF - debt relief for developing countries," he said.

But debt relief processes are lengthy, Tedros said.

"What we are proposing together with the World Bank and IMF is an expedited process to support countries so their economies will not be getting into crisis and their communities will not be really getting into crisis," he said. 

source: news.abs-cbn.com

EU members won't agree to pooled debt

ROME - The European Union's economics commissioner said Monday that member states would never all agree to mutualized debt, but that a compromise with Germany was key to Europe surviving the coronavirus crisis.

One way to finance the massive effort needed to shore up Europe's economy during the crisis "is to issue bonds, but not generically to mutualize the debt, which will never be accepted," EU Economics Commissioner Paolo Gentiloni told Italy's Radio Capital.

Ongoing disagreements among member states on what policy to take risked splitting and dooming the European project, added Gentiloni, a former prime minister of Italy. 

Gentiloni's comments came after Italy and other southern countries lobbied unsuccessfully last week for so-called "coronabonds," which would allow for pooled debt shouldered collectively by eurozone members.

On Thursday, Germany and other northern EU states rejected a proposal backed by nine countries, including Italy, Spain and France, for such mutualized debt issued in the name of the eurozone as a whole -- a long-established red line in Berlin. 

Gentiloni said he had expected that reaction by Germany, calling it a "long-standing vision that we know by heart".

Germany has repeatedly dismissed the idea of mutualized European debt as an attempt by over-spending southerners in need of economic reforms to take advantage of the cheap borrowing rates enjoyed by states with balanced budgets, without being subject to fiscal austerity measures.

Also on Monday, Italian Prime Minister Giuseppe Conte said Europe needed to deliver a "decisive blow" in face of the crisis. 

"No one is asking Europe to assume sovereign debt, only to be capable of delivering a decisive blow to be able to get out of this socioeconomic tsunami," Conte told Spain's El Pais newspaper. 

"Italy isn't asking that its accumulated public debt be shared," he said. "This debt will remain the responsibility of every country."

"Now is the moment to introduce a common European debt instrument that allows us to win this war as fast as possible to revive the economy," he told the paper. 

Conte said the dismantling of restrictive measures in Italy, such as the closing of most businesses and the quarantine of citizens, would be assessed only when the "curve" began to fall, cautioning that such loosening of restrictions would be gradual.

DYING OUT 

Gentiloni told Radio Capital that without cohesion in its response to the coronavirus crisis, "the European project is in danger of dying out." 

"It is clear that if the economic differences between European countries, rather than shrinking in the face of a crisis like this, instead increase... it will be very difficult to keep the European project together," he warned. 

Without Germany, he added, "we cannot find a compromise".

European member states should "start with the common objectives" in order to break the standstill, he said.

"We need a new unemployment guarantee instrument, a business support plan and we need the "Green Deal" development model to not be forgotten," he said.

In addition to his skepticism over the viability of coronabonds, Gentiloni said he was "not very optimistic" about continued discussions over the possible use of the European Stability Mechanism, which normally attaches strict fiscal conditions to its emergency borrowing. 

Some say that mechanism, set up in 2012 during the European sovereign debt crisis, would in the current coronavirus crisis unfairly punish already highly indebted countries such as Italy, imposing new and unattainable conditions for fixing its public finances.

Comparisons with past crises were unhelpful in confronting the challenge posed by the coronavirus pandemic, Gentiloni suggested, a view also voiced by Italy's minister for European affairs.

"It's a new crisis, it's not comparable to the crisis of 2008, there is no guidebook, there are no clues that leaders recognise from the past," European Affairs Minister Vincenzo Amendola told journalists on Monday. 

"When we think about the sacrifices of the people, it's a huge, extraordinary novelty with dramatic consequences, and leaders must respond to the challenge."

source: news.abs-cbn.com

How to get rid of personal debt

Incurring personal debt is among the problems hounding some Filipinos as the new year approaches. But a financial advisor reminds the public the cycle of borrowing can be overcome.

source: news.abs-cbn.com

Billionaires' wealth falls for first time since 2015

ZURICH - The world's richest people became a little less well off last year, according to a report by UBS and PwC, as geopolitical turmoil and volatile equity markets reduced the wealth of billionaires for the first time since 2015.

Billionaires' wealth fell by 4.3% globally to $8.5 trillion last year, the UBS/PwC report found, with a sharp decline in Greater China, including Hong Kong, and the Asia-Pacific region more broadly.

Private wealth in Hong Kong fell 4% in 2018 to $319.8 billion, the report showed, with months of anti-government protests in the Chinese-ruled city and an economic recession clouding the outlook this year.

Some Hong Kong tycoons have begun moving personal wealth offshore, Reuters reported in June, as concerns deepen over the protests.

"We haven't seen any significant outflows, we have been tracking some of these numbers on a regular basis," said Amy Lo, UBS co-head of Asia Pacific wealth management. "Our clients have been diversifying all along, it's not in the last one year."

Private banks including the world's largest wealth manager UBS have felt the effects of U.S.-China trade tensions and global political uncertainties, as clients last year shied away from trading and taking on debt in favour of hoarding cash.

The net worth of China's richest dropped 12.8% in dollar terms on the back of tumbling stock markets, a weaker local currency and a slowdown in growth, the report found, knocking dozens off the billionaires list.

Despite the drop, China still produces a new billionaire every 2-2.5 days, UBS's head of ultra-high net worth clients, Josef Stadler, said in the report released on Friday.

Worldwide, the number of billionaires fell everywhere except in the Americas, where tech entrepreneurs continued to buoy the ranks of the United States' wealthiest.

"This report shows the resilience of the U.S. economy," where there were 749 billionaires at the end of 2018, said John Matthews, head of private wealth management and ultra-high net worth business for UBS in the United States.

While a stock market recovery from a steep drop in late 2018 has helped wealth managers increase their assets, the world's richest families remain concerned about global affairs from trade tensions and Brexit to populism and climate change and are keeping more of their money in cash.

"It is likely that billionaire wealth will go up again this year," said Simon Smiles, UBS's chief investment officer for ultra-wealthy clients, adding it would likely be a more muted increase than the wider financial market rally might suggest. 

source: news.abs-cbn.com

Chile's middle class takes to streets over crushing debt

It is not poverty that is driving Chile's middle class into the streets to join massive protests: it is debt, brought on by sky-high private health and education costs that have created an economic fragility many find unbearable.

That is why so many have taken part in two weeks of social upheaval, protesting against the economic policies of Chile's ruling elite.

Chile has an economic record that is the envy of Latin America: poverty has never been lower, dropping from 40 percent to less than 10 percent in 30 years, and transforming this country of 18 million into one where middle class citizens are the majority.

But for many, the ultra-liberal economic model inherited from the Augusto Pinochet dictatorship (1973-90) -- which privatized water, health, education and pensions -- has generated a "permanent worry" about unexpected expenses.

Nicolas Achondo, 33, was forced to close his restaurant.

After paying bills, wages and taxes, he had nothing left for private health insurance.

A motorbike accident left him owing thousands of dollars for treatment.

"I couldn't pay, they put me on the debtors list. That closes all doors to you: you can no longer get a bank loan or rent an apartment," he said.

"I no longer had access to credit and my business started generating debts. It's very unfair."

Thanks to help from his family, he managed to pay off his debts but has no capital to relaunch his restaurant business. He now wants to emigrate to Canada.

"We don't get state subsidies. The only thing we can do is access bank loans to pay for housing, health, education, clothing," said Achondo.

His parents suffered the same fate. They owned a video store in the 1980s-90s but fell victim to evolving technology.

They managed to pay for their two eldest children's private education without needing loans, but could not afford the same for their younger two children, both of whom are in the vastly inferior public school system.

- 'With or without uterus' -
Marisol Berrios, a social worker, took out loans to pay for her two children's higher education.

"Now they're both university professors but they have insecure contracts. They receive the minimum wage and have no health care."

In a model with minimal state intervention, profitability is king.

As is often is the case, women are the hardest hit. They have to pay up to three times as much as men for health insurance when they want children.

"There are 'with uterus' contracts and 'without uterus' contracts that are cheaper. You pay a higher percentage when you're fertile," said Berrios.

Women also pay more in old age, says the 59-year-old, who admits to fearing retirement.

"I will retire in one year and my pension will be 170,000 pesos ($230)," said Berrios, who currently earns 1.2 million pesos ($1,620) a month.

"I went into depression about it this summer."

Health, education and pensions may be the biggest worries but on top of that are increases in electricity costs, a proliferation of motorway tolls around Santiago and an unregulated medication market.

For fed-up Chileans, it's this accumulation of expenses that weighs so heavily.

It was against this backdrop that a seemingly innocuous 3.75 percent hike in the price of a metro ticket lit a fuse under decades of pent-up frustration.

In a bid to douse the flames of discontent, conservative President Sebastian Pinera announced a raft of social measures: suspending a 9.2 percent hike in electricity bills and an annual 3.5 percent increase in toll charges.

But that didn't calm the public.

"Chile has awoken," has become one of the main slogans of anti-government protesters since October 18.

"We've woken up to the brutality of the system," said Berrios.

source: news.abs-cbn.com

Student debt a 'life sentence' for millions of Americans

LOS ANGELES, United States—Haley Walters is 5 years away from earning her law degree. If everything goes according to plan, she will be under a mountain of $100,000 in student debt by the time she enters the workforce.

Like millions of Americans, Walters is paying a steep price for an education that will likely weigh her down financially for much of her adult life.

"I think the student debt crisis is truly a life sentence," the 19-year-old Californian told AFP.

With 45 million borrowers owing some $1.6 trillion, the debt burden of American college graduates has exploded in recent years.

It has emerged as a key issue in the 2020 presidential campaign, with candidate Bernie Sanders unveiling an ambitious plan Monday to erase all student loan debt.

"Somebody who graduates from a public university this year is expected to have over $35,000 in student loan debt on average," said Cody Hounanian, program director of Student Debt Crisis, a California non-profit that assists students and fights for reforms.

According to official statistics, 71 percent of US students are burdened by such debt, with minorities the hardest hit.

"Black women particularly are the most impacted group with the highest student debt total per graduate," Hounanian said.

Despite scholarships and financial aid available to many, the cost of higher education is such that the majority of students are unable to repay their loans on schedule.

"When borrowers leave school, they're in a program that's supposed to take 10 years... but more and more are enrolling in federal programs that are actually 20 or 25 years in length," Hounanian said.

In the long term, the loan balance for such people increases, interest accrues, and the debt burden just keeps going upwards, he added.

Hounanian spoke of his own experience as an example.

"I had $30,000 in student loan debt, I pay over $150 a month, and that's in one of these affordable repayment programs," he said. "By doing that, my loan balance is actually increasing. I'm not covering even the entire interest that's accrued." 

"I'm paying every month," he added, "just to be more in debt."

'SYSTEM ISN'T WORKING'

Several experts interviewed said it's not unusual to have 2 generations in one family burdened with student debt.

That's the case for Walters, who just graduated with a 2-year degree in political science from Pasadena City College, near Los Angeles.

While she managed to go through that school without accumulating debt, come autumn she will be entering the prestigious—and much more expensive—University of California Berkeley, with a law degree the ultimate goal. 

Despite being awarded scholarships, Walters said she will still have to take out loans to pay for nearly $20,000 in annual fees.

"That is basically going to turn into loan after loan after loan... each with individual interest rates and individual payments," Walters sighed.

She said she grew up listening to her mother, 58, bemoan the student debt that still haunts her.

"I would hear my mom talk about... how it was basically crippling our finances," she recalled. 

"You know, we couldn't go on vacation, sometimes I didn't get school supplies for the new school year, sometimes we got fewer birthday presents."

Walters said she hopes student debt will be a key issue in the 2020 White House race.

For some candidates, it is already front and center.

'REVOLUTIONARY' BILL

Sanders's "revolutionary" bill aims to erase all student loan debt and make public colleges tuition-free—and he wants the financial industry to help pay for it.

"The American people bailed out Wall Street," Sanders said, referring to lenders deemed "too big to fail" during the late 2000s recession.

"Now it is time for Wall Street to come to the aid of the middle class."

Democratic candidate Elizabeth Warren also has a debt cancellation and free public college plan.

"My dad grew up in an extremely poor family in southern California," said Walters. "The only reason he went to university was because it was free."

Tuition, however, is not the only financial burden of students. 

In California, for example, housing and living expenses represent more than half of the $35,000 needed annually on average for public university.

Hounanian said it was crucial to address those issues to ensure students don't end up saddled with heavy debt before starting their professional lives.

"The system isn't working for students," he said. "It's working for profiteers, for big companies and for those who are making money off of students and borrowers."

source: news.abs-cbn.com

American paradox: Deficit widens even as economy grows

WASHINGTON -- President Donald Trump likes to take credit for the US economy, with historic low unemployment and few signs of rising prices, but his promises that surging growth would pay for massive tax cuts are falling flat.

After an initial bounce in 2018 and in the first three months of 2019, the economy is expected to slow this year. And the US budget deficit is steadily widening, the yawning gap edging closer to $1 trillion after trending downward from its peak in 2009 during the worst of the global financial crisis.

Trump promised to supercharge growth to three percent or higher, and claimed the tax cuts would pay for themselves by spurring investment and employment, which in turn would generate higher tax revenue.

In fact, July will mark the longest economic expansion in US history, with continual growth since mid-2009. With a healthy economy, it is the ideal time for governments to shore up their finances and reduce debt, saving up for the next rainy day. 

But forecasts call for slower growth into next year -- with some economists even fearing a recession -- and last month the federal deficit hit a new record for May of $208 billion, a 42 percent increase from a year earlier.

Just eight months into the fiscal year which ends in September, the deficit is nearly as big as all of 2018, swelling to $739 billion, $206 billion higher than the same period of last year.

Even the billions in tariffs taken in during Trump's multi-country trade wars have not helped, since most of the funds taken in have gone back out to aid farmers hurt by retaliation from China and others.

At the same time government debt is expanding, and now is larger than the country's annual economic output at more than $22 trillion.

Normally this should leave Trump open to attacks from political opponents, but the Democratic party is on the horns of a dilemma: the progressive wing of the party, including many of the two dozen presidential candidates, favor massive spending programs.

With interest rates still very low, the adherents to "modern monetary theory" believe the government can continue to borrow to finance programs without negative consequences. 

Critics dismiss the theory, known as MMT, saying it is akin to supply-side economics espoused by Republicans in the 1980s, which argued that tax cuts would pay for themselves through higher economic output.

THE CLINTON BOON 

The last time the United States posted a budget surplus was during the economic boom under Democratic President Bill Clinton in 1999 and 2000, when Congress was controlled by Republicans. 

Then the Iraq war started under former President George W. Bush in 2003, followed by the response to the housing crash and financial crisis of 2008, pushed government finances back into the red.

Even with a steady, albeit slow, economic recovery for the past 10 years, the US economy is coping with an aging population, which has pressured government finances due to the higher rising health and retirement costs.

Spending on Medicare alone -- the health insurance for retirees -- soared by $100 billion so far this year. 

And while government revenues grew a modest two percent from October to May, total outlays jumped nine percent.

Trump's tax cuts, which mostly benefited big corporations and the very rich, reducing revenues by 11 percent while military spending increased 13 percent, also added to the bill.

Since the beginning of the fiscal year, punitive tariffs on imports from China and other countries have brought in an additional $21 billion to the US coffers.

But the Trump administration last year earmarked $12 billion in aid to farmers hurt by Chinese retaliation, and another $16 billion this year.

And while Trump continues to claim that the duties are paid by China, they in fact act as a tax on American businesses and consumers, which reduce profits and have started to drive up some prices.

source: news.abs-cbn.com

Richest black man in US to pay off graduating class's student debt

The 396 young men began the day as students in caps and gowns, ready to graduate from Morehouse College — full of hope, but burdened in most cases with the debts that financed their education.

Then their commencement speaker went off-script with an extraordinary pledge: the newly minted alumni of the historically black college in Atlanta would go forth into the world student debt-free.

Robert F. Smith, the billionaire investor who founded Vista Equity Partners and became the richest black man in America, told the crowd that he and his family would pay off the entire graduating class’s student debt.

“We’re going to put a little fuel in your bus,” Smith said near the end of his address Sunday at the school’s 135th commencement service.

“This is my class, 2019,” he said, personally claiming the graduating seniors as his own. “And my family is making a grant to eliminate their student loans.”

It seemed to take a moment for the immensity of what he had promised to sink in. Then the senior class, all male and mostly African-American, erupted in glee.

“We’re all in robes, hot, the sun was beaming on us,” said Ernest Holmes, who said he had about $10,000 in loans. “Everyone jumped up, cheered. People were crying. It was just the most amazing thing.”

“A blessing, a blessing!” were the words Brandon Manor offered as he imagined for the first time what life would be like without student loans to repay.

Smith, known for a range of philanthropic donations including one to Morehouse earlier this year to finance scholarships, told the audience Sunday that his gift was meant to set an example of paying forward.

“Let’s make sure every class has the same opportunity going forward, because we are enough to take care of our own community,” he said.

Many details remain unsettled, including how students will demonstrate the amount of debt they have and how it will be paid off. Also unclear is the total amount Smith will contribute. According to published figures, recent Morehouse classes have graduated with roughly $10 million in total debt.


2019 New York Times News Service

source: news.abs-cbn.com

US household debt in 2018 jumps $400 bn

Total debt held by US households surged by nearly $400 billion in 2018 to more than $13.5 trillion, marking the sixth straight annual increase, even as home mortgages declined, according to data released Tuesday.

That puts total debt $869 billion higher than the previous peak, just before the start of the global financial crisis in late 2008, the New York Federal Reserve Bank said in its quarterly report.

A decade after the crisis, mortgage debt increased $242 billion to $9.1 trillion, but new home loans originated last year fell $131 billion to the lowest point in four years, the data showed.

But auto loans and student debt continued to rise.

"Auto loan originations for 2018 reached an all-time high," said Joelle Scally, Administrator of the Center for Microeconomic Data at the New York Fed. 

Auto loans jumped $53 billion to $1.3 trillion -- the highest in the 19-year history of the data -- and despite a rise in loans going to more creditworthy borrower "its performance has been slowly worsening."

"Growing delinquencies among subprime borrowers are responsible for this deteriorating performance and younger borrowers are struggling most acutely to afford their auto loans," Scally said in a statement.

Student debt jumped $79 billion compared to 2017, to $1.5 trillion, according to the report.

Many economists see the rising student debt burden crimping the economy, preventing college graduates from buying homes.

Credit card debt also jumped $36 billion in the year and, though it has yet to break the $1 trillion level, it was the first time it hit the 2008 peak, the report said.

Delinquency rates for debt more than 90 days past due worsened for credit cards and auto loans but was about flat for mortgages and student debt.

source: news.abs-cbn.com

World Bank flags rising debt and other economic dangers

Rising trade tensions are the most high-profile risk to the global economy but the World Bank warned of other lurking dangers on Tuesday in its semi-annual Global Economic Prospects report.

World Bank economist Ayhan Kose, who heads the World Bank's Development Prospects Group -- which twice a year produces the global economic forecasts -- explained the major concerns in an interview with AFP.

Rising debt, rising interest rates
The report highlights a big jump in borrowing by the poorest nations, much of it in foreign currency and debt that increasingly is coming from private lenders that unlike the World Bank do not provide concessional terms.

And, with the US central bank and others raising interest rates, borrowing costs are increasing.

Total debt has risen worldwide to a record $184 trillion in 2017, according to the International Monetary Fund.

And the World Bank said low-income countries had seen public debt jump to above 50 percent of GDP, up from 30 percent in 2013.

"Debt levels are a concerns especially when you have financial conditions that are tightening," Kose said, noting that emerging market and developing economies "rely on external financing to roll over their debt liabilities." 

Corporate debt also has risen but "irrespective of the source of the debt, when you have balance sheet problems in a certain segment of an economy, ultimately it effects real activity," he said.

"Borrowers need to understand the implications of rapid accumulation of debt while you have interest rates increasing at the global level."

Informal economy
The World Bank said about a third of GDP in emerging market and developing economies comes from the informal sector, and in some countries the share is much higher.

"Informality is a major problem many emerging market and developing economies," Kose said.

"Ultimately informality is also a symptom of underdevelopment. So policies that promote growth also help improve the formal sector and provide the types of incentives for these informal firms to shift to the formal sector."

A key factor is government investments that promote growth, whether in infrastructure or in human capital -- which is especially critical to prepare workers for technological change.

"All of these things will stimulate the economy in the short-term while improving the economy's long-term potential."

Regulation too must be tailored to foster business activity, rather than impede it and "should not push firms to the informal sector."

Kose cautioned: "This is not a problem you can solve overnight or over a year, this is a problem you need to solve over time."

Sub-Saharan Africa's poverty
Another concern is the decline in per capita GDP growth in sub-Saharan Africa, which the World Bank says will average less than one percent in the next three years.

That makes it "very difficult if not impossible to have a meaningful reduction in poverty," Kose said.

Given the existing poverty challenge in the region, "policymakers need to find ways to increase growth prospects of the region to address this issue."

"As much as we think these problems are localized problems...at the end of the day they have implications for other countries, for other regions, and the problems require immediate attention."

The share of the world's poor residing in the region could grow to 87 percent by 2030 unless growth accelerates, the report warned.

source: news.abs-cbn.com

Doomsayers begin to see cracks in healthy world economy

WASHINGTON - Over the last decade, the world's major economies floated themselves out of recession on oceans of easy money and low, or even negative, interest rates.

For the moment, policymakers and analysts talk of a "Goldilocks economy" in the United States, which is enjoying low unemployment, brisk growth, improved household finances and a strengthened banking system.

But with much of the pain having subsided and US interest rates steadily rising, prominent investors and economists are shining a light on the issues that could trigger the next recession.

They point not to risky subprime mortgage lending, which sparked the last crisis 10 years ago, but instead to voracious borrowing by corporations and emerging market economies.

Martin Feldstein, chief economic adviser to President Ronald Reagan, paints a grim picture where rising interest rates could pop a debt-fueled Wall Street bubble, gutting investment portfolios and consumer confidence, and causing "another long, deep downturn."

He offered some eye-watering numbers in a column in The Wall Street Journal on Thursday, warning that a drop in stock prices back to their historical averages from current dizzying heights would eliminate $10 trillion of US household wealth, slashing consumer spending by about $400 billion, and cutting two percentage points off GDP growth.

"Add in the effects on business investment, and this spending crunch would push the economy into recession," Feldstein wrote.

Neither the Federal Reserve nor Congress are in a position to do much to respond, since there is little room to cut interest rates, and the government deficit and debt are high.

Outside the United States, liabilities may also lurk under all the accumulated debt.

Billionaire investor Stanley Druckenmiller warned that dollar-denominated borrowing by emerging markets, like Turkey, Argentina and others, meant they already are facing "a shrinkage of liquidity" as the US central bank raises interest rates.

- The trigger -
Federal Reserve rate hikes raise borrowing costs for companies and governments, particularly those with dollar-denominated debt, and those who need to refinance.

"My assumption is one of these hikes -- I don't know which one -- is going to trigger this thing," Druckenmiller said, according to Business Insider.

Ruchir Sharma, chief global strategist at Morgan Stanley Investment Management, said: "The Fed's tightening is already rattling emerging markets."

He worries that markets have grown "too big to fail," bloated by money which poured in following the 2008 meltdown as central banks tried to stabilize the system. 

Central bank balance sheets went from $5 trillion to $17 trillion in the last decade, he wrote this month in The New York Times, swelling the value of global markets to $290 trillion, or a record 360 percent of global Gross Domestic Product.

Meanwhile, debt held by S&P 500 corporations has risen to 1.5 times earnings since 2010, near peaks that preceded past recessions. 

The typical privately-held corporation purchased by private equity investors in that time is leveraged to six times earnings, twice what a ratings agency would consider junk, according to Sharma.

"When the American markets start feeling it, the results are likely be very different from 2008 -- corporate meltdowns rather than mortgage defaults, and bond and pension funds affected before big investment banks," he warned.

Economist Joel Naroff told AFP the fading boost of December's tax cuts, combined with stagnant wage growth, could leave consumer spending "out of gas" in the next six to nine months.

With the housing market already soft, a slowdown in the real economy could be the first shoe to drop, he added, with debt-fueled market bubbles being the second.

"My view is that the next recession will be an average recession," Naroff said, but added, "The worst-case scenarios are not unreasonable to project."

source: news.abs-cbn.com

China opens bond market to foreign investors

China will allow foreign investors direct access to its massive bond market from Monday, the Chinese central bank said.

A platform allowing one-way "northbound" investments from Hong Kong into the Chinese bond market will go into "experimental operation" on July 3, the People's Bank of China and the Hong Kong Monetary Authority said in a joint statement Sunday, which came as Hong Kong marked the 20th anniversary of its handover to China by Britain.

Access to the market will be restricted to "qualified investors" including central banks and sovereign wealth funds, but also commercial banks, insurers, brokerage firms and investment funds, according to the PBOC.

China's debt market is the third largest in the world, with a cumulative value of about $10 trillion according to Bloomberg news agency.

However, this booming market has been virtually out of reach for foreign investors, who currently hold only a small portion of the bonds issued in China -- less than 1.5 percent according to Bloomberg estimates.

China has moved gradually toward opening its capital markets.

In 2014, a trading link between the Hong Kong and Shanghai stock exchanges was introduced, and another was started in December 2016 between Hong Kong and Shenzhen, China's other exchange.

The links give foreigners some access to China-listed shares, while also allowing Chinese firms to buy Hong Kong-traded stocks.

The bond move is the latest in a series of liberalization pledges from China, which has regularly been hit by complaints from foreign companies and trading partners about access to its markets.

source: news.abs-cbn.com

Trapped in debt? Here are 7 steps to free yourself

MANILA - Do you feel like you're drowning in debt? If you are, and you think there is no way to escape the debt trap, don't despair. With good planning, discipline, and a measure of sacrifice, you can retire your debt and be free from its burden.

Before you address your problem, try to look back and see how it started. You may be among thousands of Filipinos who are saddled with debt accumulated slowly over the years. This may be the result of living beyond one’s income, lack of planning, or sudden emergencies that force one to borrow, among many other factors.

For many, debt can creep up unknowingly. A personal loan here, a mortgage there, plus months of just paying the minimum amount due on your credit card, could add up until you one day find it beyond your control.

Whatever the cause, what’s important is that you take immediate action before debt paralyzes you financially and even legally. Your action will have to be on two levels – behavioral and financial – so that you can effectively cut down your debt.

 Here are seven steps to help you surmount your mounting debt:

1. Take a hard look at your finances.



This step is necessary since retiring debt calls for a sound plan that you can implement. Try to determine what you are paying for and how much. Just knowing how much you owe can surprise you. By doing this, you will also be able to determine which debt you have to prioritize, e.g. those that cost the most to maintain. You would like to retire the debt that charges you 20 percent a month ahead of the debt that charges you 12 percent a year. Understanding your finances will also allow you to come up with a workable solution.

2. Restructure the most expensive loans.

Today is a great time to restructure loans, given the low-interest rate environment. Are you paying credit card debt? Possibly with more than one credit card company? You will never get out of debt if you do not manage this. Talk to your credit card providers about restructuring the loan. You may also get a personal loan at a lower interest rate to help bring down your interest costs. Study all options available to you, while taking note of penalties and transaction fees.


3. Slash, not just cut, your monthly expenses.

Look at your lifestyle to find out where you can scale back. If you spend so much on entertainment, then cut this drastically. No more expensive night outs or fancy dinners for the time-being, unless you can find more affordable alternatives. Forget expensive vacations. Turn off the aircon and use an electric fan instead. Skip the expensive hair treatments. The cutbacks you can make will all count.

4. Sell assets. Raise cash to retire your loan by selling off assets, big and small.

Do you really need two cars? Do you need to stay in that very expensive house or would a smaller unit in a less luxurious part of town suit your purposes? Those diamond rings sitting in the closet may be your ticket to debt freedom. Even those expensive bags you picked up in your shopping sprees could fetch a fortune in the second-hand market. Selling off assets could help you bring down debt levels drastically.

5. Find additional income sources.
Find other cash sources so that you can put this toward retiring your debt. Are there additional projects you can take on or other jobs you can hold? Try tutoring children in your spare time, or baking cookies on weekends. Your creativity is your limit. This new income source will give you the elbow room to wiggle out of debt.

6. Live below, not just within, your means.

Sometimes you have to change your lifestyle drastically. You may need to dress simpler, consume less, and live a less luxurious life. You may look into selling your car and going back to taking public transportation to work, if your car loan is the cause of your debt burden. If living independently is causing you to bleed financially, think about moving back to your parents. Perhaps the kids could go to a less pricey school. The situation varies per individual, so take what is most appropriate for you.

7. Pay off as much as you can.

Try to retire as much debt as you can, to keep interest costs low and to hasten the debt retiring process. Pay more than the minimum amount due on your card. The longer you are in this situation, the more stressful it can get for you. Bite the bullet now and embrace the inconveniences and hardships it brings, knowing that this is necessary on your way to getting out of debt.

In all these, do not forget to stay focused. Don’t lose sight of your goal, which is to free yourself from debt that can affect you for life if you do not act on it now. By staying focused, you will be less tempted to spend on unnecessary items or to slack off in your debt retirement efforts.

Have a spreadsheet to help you monitor how close you are to your targets. Stay positive and remind yourself that freedom from debt will soon be at hand.

source: www.abs-cbnnews.com