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5th August 2011 is a historic day when ratings agency Standard and Poors downgraded the US public debt from AAA to AA+ for the first time in modern history. S&P downgrade explanation S&P took this decision to reflect the lack of leadership from US politicians to tackle urgently and decisively the mounting US public debt, which may exceed GDP soon as seen on the chart below. The debate frontier is now between the "spenders" like Paul Krugman - who think the US can recover from the crisis through more public spending which will lead to economic growth necessary to repay debt in the future - and the "deficit hawks" - who highlight that excessive debt raises the risk of a catastrophic default and therefore debt should be reduced urgently. The first view prevailed when a stimulus package was decided on the onset of the recession. The downgrade by S&P, which reflects the increasing riskiness of the US debt, goes in the direction of the second view by sh...

As we are in a period of significant credit risk (sovereign debt crisis, following a bank's crisis), it is necessary to check the credit worthiness of the institutions that you lend money to. So if you plan to put money in saving's account, don't only check the interest rate they offer you but also the bank's credit rating for the probability that you won't get your money back. This credit rating can be found in sites like  BankCreditRatings.co.uk  for the United Kingdom.

Foxconn International Holdings, one of the largest manufacturer of mobile phones, whose clients include Nokia, Motorola and Apple, plans to automate a lot of its manufacturing processes by using increasingly more robots instead of humans as labour costs in China surge. Foxconn, a Taiwanese firm, is a typical example of the High Tech industry organization: Foxconn manufactures in China products designed in developed countries but now faces strong demand to increase salaries of Chinese workers. Looking at the broader picture, it is interesting to notice that rising salaries in China will have some macro impact on highly integrated industries like the High Tech industry. Historically, high tech jobs have been moved from developed countries to developing countries like China because of the savings related to using a cheap labour force. However, now that the gap in salaries is shrinking and humans are replaced with robots in manufacturing plants, there is no more competitive adva...