Why Today's "Recession" Tops The Great Depression

Michael Sanibel, On Tuesday September 27, 2011, 4:15 pm EDT

When the stock market crashed in October 1929, it was only the beginning of a long period of economic decline and uncertainty that would last more than a decade. The Dow Jones Industrial Average hit bottom in July 1932 and would take another 25 years to regain what it lost in just 34 months.

The last three years have often been described as the worst economic crisis since the Great Depression. While the technical definition of a recession is two successive quarters of GDP decline, it would be hard to convince anyone that recent GDP growth indicates the recession is over. There's lots of debate over whether or not the economy is slipping back into a double-dip recession. There's also considerable evidence that what we're experiencing is actually worse than the 1930s and should be labeled a depression.

Here's a comparison between then and now.

National Debt
In June 1929, the cumulative national debt was $17 billion. Up until that point in time, the U.S. only went into debt during wartime. Moreover, once those wars ended, the government's first priority was to pay off the debt. When the depression started several months later, the government was not saddled with servicing a huge debt burden, as the debt was only about 16% of the Gross National Product.

Contrast that with the current debt approaching $15,000 billion, with an estimated annual interest cost of over $434 billion for 2011, even with the benefit of extremely low interest rates. That interest burden is a huge drag on the economy that didn't exist during the depression. As of 2010, the U.S. GNP was around $15,000 billion as well, leaving the country with a 100% debt to GNP ratio.

$4,500 billion of the current debt is owned by foreign governments, with almost one-half held by China and Japan. This gives these countries influence over U.S. foreign policy that may not be overt, but is there nonetheless. They could also cause financial chaos if they simultaneously sold their treasury holdings. This was not an issue in 1929.

Entitlement Programs
Beyond the current debt are the unfunded liabilities for entitlement programs that come due in the future. These are promises already made without funding to back them up, and are not included in the $15,000 billion debt. A USA Today analysis published in June 2011 estimated that these liabilities amount to about $62,000 billion, or $528,000 per household. This includes an additional $5,300 billion in liabilities added in 2010 alone, primarily for Social Security and Medicare. The difference in total revenues and spending obligations for the year amounted to more than one-third of GDP.

The current unfunded liabilities are more than five times the personal debt of the average household, including mortgages, loans and credit cards. That debt will experience exponential growth as the baby boomer generation adds 10,000 retirees per day to the entitlement program roles. Skyrocketing health care costs only add to the problem.

These programs resemble a Ponzi scheme in that today's working generation is paying the taxes to fund the payments to those currently collecting benefits. These programs didn't exist in 1929, so there was no burden on the taxpayers to come up with the money to pay for them.

Unemployment
It's difficult to compare unemployment statistics because the methodology used to estimate the data has changed over time. At the peak of the depression in 1933, it's estimated that unemployment reached 25% nationwide. That compares to the 9.1% rate for August 2011 published by the U.S. Bureau of Labor Statistics which identifies the labor pool as follows:

Employed - People with jobs
Unemployed - People who are jobless, looking for jobs and available for work
Not in the labor force - People who are neither employed nor unemployed
It's important to note that people in the last category are not counted in the unemployment rate calculation. If they were, the rate would be 7 to 10% higher. In addition, the federal deficit of $1,600 billion is paying for about 9 million jobs that wouldn't exist if the budget were balanced. Eliminate those jobs and the unemployment rate jumps again. Adding in these missing elements brings today's adjusted rate to at least 22 to 25%, higher than the average 18% rate from 1930 to 1940.

On top of that, the savings rate for those with jobs plummeted from about 10% in the 70s and 80s to -1% in 2007. That portends a bleak future for consumer spending.

Home Prices
By the first quarter of 2011, home prices had dropped 33% below the 2006 peak reached in most areas of the U.S. This compares to the 31% drop experienced during the depression. It took nearly two decades to recover the lost equity. Whether or not housing has reached bottom yet is an open question, despite historically-low interest rates and generous government incentives.

Gross Domestic Product (GDP)
Government spending is included in GDP, which totaled $14,700 billion for fiscal year 2010. Part of that amount was $1,600 billion of deficit spending, which artificially inflated GDP by 12%. If the deficit is deducted from the total GDP, there has been no GDP growth in the U.S. in the past four years. This means that the government can create the illusion of recovery and prosperity by simply going into more debt.

The debt/GDP ratio hasn't been above 100% since World War II, and we are on a path to exceed that very soon if we don't significantly reduce spending. If the unfunded liabilities are added in, the ratio is already an astonishing 500%.

The Bottom Line
In 1929, the U.S. dollar was backed by gold. Now it's backed by nothing more than your faith. In 1929, credit cards and home equity loans didn't exist, and people of that era avoided debt like the plague. Today personal debt levels are near all-time highs. Iconic companies like General Motors and Lehman Brothers survived the depression without government help or bankruptcy relief, but that didn't happen this time around.

In 1929 we didn't face terrorist threats and weren't worried about a porous border allowing an influx of millions of illegal aliens. The high price of oil, oppressive regulatory environment, $40 billion monthly trade imbalance, bloated federal bureaucracy, ballooning state deficits, severely underfunded pensions, crippling tax burden and crumbling infrastructure weren't issues then either. They are now.

It's clear that the trillions of dollars borrowed and printed by the government are masking an extremely weak financial condition that has been in a downward spiral for many years. Calling it a recession instead of a depression doesn't change the stark reality.

USA becomes Food Stamp Nation but is it sustainable? - Yahoo! News

By Kristina Cooke | Reuters

NEW YORK (Reuters) - Genna Saucedo supervises cashiers at a Wal-Mart in Pico Rivera, California, but her wages aren't enough to feed herself and her 12-year-old son.
Saucedo, who earns $9.70 an hour for about 26 hours a week and lives with her mother, is one of the many Americans who survive because of government handouts in what has rapidly become a food stamp nation.
Altogether, there are now almost 46 million people in the United States on food stamps, roughly 15 percent of the population. That's an increase of 74 percent since 2007, just before the financial crisis and a deep recession led to mass job losses.
At the same time, the cost doubled to reach $68 billion in 2010 -- more than a third of the amount the U.S. government received in corporate income tax last year -- which means the program has started to attract the attention of some Republican lawmakers looking for ways to cut the nation's budget deficit.
While there are clearly some cases of abuse by people who claim food stamps but don't really need them, for many Americans like Saucedo there is little current alternative if they are to put food on the table while paying rent and utility bills.
"It's kind of sad that even though I'm working that I need to have government assistance. I have asked them to please put me on full-time so I can have benefits," said the 32-year-old.
She's worked at Wal-Mart for nine months, and applied for food stamps as soon as her probation ended. She said plenty of her colleagues are in the same situation.
So are her customers. Bill Simon, head of Wal-Mart's U.S. operations, told a conference call last Tuesday that the company had seen an increase in the number of shoppers relying on government assistance for food.
About forty percent of food stamp recipients are, like Saucedo, in households in which at least one member of the family earns wages. Many more could be eligible: the government estimates one in three who could be on the program are not.
"If they're working, they often think they can't get help. But people can't support their families on $10, $11, $12 an hour jobs, especially when you add transport, clothes, rent." said Carolyn McLaughlin, executive director of BronxWorks, a social services organization in New York.
The maximum amount a family of four can receive in food stamps is $668 a month. They can only be used to buy food -- though not hot food -- and for plants and seeds to grow food.
Presidents Bill Clinton, George W. Bush and Barack Obama all made efforts to raise awareness about the program and remove the stigma associated with it.
In 2004, paper coupons were replaced with cards similar to debit cards onto which benefits can be loaded. In 2008 they were renamed Supplemental Nutritional Assistance Program (SNAP) benefits though most people still call them food stamps.
Despite the bipartisan support for the program in the past, some of the recent political rhetoric has food stamp advocates worried.
Presidential hopeful Newt Gingrich last year derided Democrats as "the party of food stamps". And Republican leaders in the House of Representatives propose changing the program so that the funding is through a "block grant" to the states, rather than allowing it to grow automatically when needed due to an emergency, such as a natural disaster or economic crisis.
In some parts of the country, shoppers using food stamps have almost become the norm. In May 2011, a third of all people in Alabama were on food stamps -- though part of that was because of emergency assistance after communities were destroyed by a series of destructive tornadoes. Washington D.C., Mississippi, New Mexico, Oregon and Tennessee all had about a fifth of their population on food stamps that month.
"Food stamps have traditionally been insulated from politics," said Parke Wilde, professor of U.S. food policy at Tufts University. "But as you look over the current fiscally conservative proposals, the question is, has something fundamentally changed?"
A LOW WAGE SUPPORT PROGRAM
Over the past 20 years, the characteristics of the program's recipients have changed. In 1989, a higher percentage were on benefits than working, but as of 2009 a higher percentage had earned income.
"SNAP is increasingly work support," said Ed Bolen, an analyst at the Center on Budget and Policy Priorities.
And that's only likely to get worse: So far in the recovery, jobs growth has been concentrated in lower-wage occupations, with minimal growth in middle-income wages as many higher-paid blue collar jobs have disappeared.
And 6 percent of the 72.9 million Americans paid by the hour received wages at or below the federal minimum wage of $7.25 an hour in 2010. That's up from 4.9 percent in 2009, and 3 percent in 2002, according to government data.
Bolen said just based on income, minimum wage single parents are almost always eligible for food stamps.
"This becomes an implicit subsidy for low-wage jobs and in terms of incentives for higher wage job creation that really is not a good thing," said Arindrajit Dube, an economics professor at the University of Massachusetts Amherst, whose research shows raising the minimum wage would spur economic activity.
Until a couple of weeks ago Tashawna Green, 21, from Queens Village, New York, worked 25 hours a week at an $8.08 hourly rate at retailer Target. She is on food stamps, and says a good number of her former colleagues are too.
"It's a good thing that the government helps, but if employers paid enough and gave enough hours, then we wouldn't need to be on food stamps," said Green, who has a six-year-old daughter.
Of course, with an unemployment rate over 9 percent, some argue that those with any job at all are lucky.
Millions of Americans whose unemployment benefits have expired have to exist only on food stamps and other government aid, such as Medicaid healthcare support. [nN1E7660K4]
And even with unemployment benefits, said Jessica King, 25, from Portland, Oregon, her family juggles bills to ensure the electricity stays on. They are also selling some belongings on Craigslist to raise funds.
King's husband Stephen, 30, an electronics assembly worker, lost his job two months ago when she was seven months pregnant with their second child. It was the third time he has been laid off since 2008.
She said she was reluctant, initially, to go on food stamps.
"I felt the way our national debt was going I didn't want to be part of the problem," said King, who used to work as a cook at a faith-based non-profit organization.
"But I didn't know what else to do and I got to a point where I swallowed my pride and decided to do what was best for my daughter."

Is this where USA is headed?

Special report: Is Israel Inc. too powerful?
By Tova Cohen and Ari Rabinovitch | Reuters

TEL AVIV (Reuters) - It took a two week-long cottage cheese rebellion to get Israelis to question the power of the country's tycoons.
Angry about high prices, consumers boycotted the beloved dairy product last month. As containers of cheese piled up on supermarket shelves, the country's richest people became the focus of the sort of media attention normally given to politics and homeland security.
Newspapers and television stations, which civic groups have long criticized for ignoring the massive concentration of corporate power in a small group of Israeli business groups and families, made the boycott a top story for days.
"I woke up this morning smeared in cottage cheese," Muzi Wertheim, a business magnate who controls one of the country's largest dairy producers, said during a speech at a Tel Aviv university at the peak of the protest.
Cottage cheese might be just the beginning. Last October the Israeli government set up a committee to explore the level of competition in the economy. The committee is expected to present its findings in several weeks.
The Bank of Israel already says the country has one of the highest concentrations of corporate power in the developed world. A scathing parliamentary report from June last year found that 10 large business groups control 30 percent of the market value of public companies, while 16 control half the money in the entire country.
That's far more than in western economies such as the UK, Spain or Germany. The Organisation for Economic Cooperation and Development, which last year admitted Israel as a member, said Israel's level of corporate concentration is problematic.
If the government committee agrees with those assessments it could recommend breaking up the biggest oligopolies and opening Israel's market to new competition and investment, both foreign and local. Though nothing has been decided, change looks increasingly likely.
"These large business groups may have helped Israel's economy when it was younger, but it's now a developed market, and it will be hard to keep up the current rate of growth in this situation," said one official familiar with the deliberations. "The committee members are aware of this. Breaking them up will help competition and growth."
Such a move would have huge implications for tycoons such as Wertheim, whose dairy business is just one part of an empire that includes the country's fourth-largest bank, Coca Cola bottling company and a primary share in one of its largest real estate firms. Like many of Israel's other magnates Wertheim also owns a large stake in a popular media organization.
A number of the larger holding companies have fought back, arguing to the commission, Reuters has learned, that regulations are already so strict that they have forced Israel Inc. to invest abroad rather than locally.
In a rare public comment Nochi Dankner, chairman and controlling shareholder of IDB Holding which owns everything from a mobile phone operator to an insurance firm, told Reuters that Israel's "robust financial system" was a result of "clever and strict" regulation.
"I cannot find any rationale to shake it," Dankner said in his emailed comments. "The most important mission of the regulation is to keep and augment the stability, beyond any other consideration. Separation of financial holdings and real holdings definitely rocks the financial system, not stabilizes it."
ISRAEL'S PYRAMIDS
Concentration in Hebrew is often called "hon v'shilton", which means "fortune and governance", but refers more to the close relationship between the two.
"We see the 'fortune' walking through the halls of parliament," parliamentary speaker Reuben Rivlin said in a radio interview last month. "'Fortune' is more and more taking control of the judgment of the people sent by the public to safeguard the state of Israel and its interests."
One of the problems, according to the OECD, is that Israel's big business houses exert control through "cascading ownerships, pyramidal structures and cross-holdings".
In a pyramid structure, a holding company controls a subsidiary, which then controls its own subsidiaries, and so on until the top of the pyramid can technically control a company at the bottom with less than 10 percent of the capital.
Dankner's IDB is a classic pyramid, though he and his partners have stakes of at least 30 percent in all of the company's major holdings. At the top sits IDB Holding which controls IDB Development which in turn controls several other holding companies. Consumers may not know it but they come into contact with the bottom of the pyramid when they do something as simple as walking into a shopping mall. They might visit Super-Sol, Israel's largest supermarket chain, shop at Golf and Co., one of the biggest fashion and homeware chains, or buy a mobile phone from Cellcom, Israel's largest mobile operator.
After that, they might visit an Internet cafe and go online using one of Israel's top Internet providers Netvision, or stop by a branch of travel agency Diesenhaus to book a flight on Israir. The floor they walk on is likely to be built with cement from Nesher, Israel's only cement producer.
Every one of those companies and products are ultimately controlled by IDB.
And IDB is not the only such company. The Delek Group, controlled by billionaire Yitzhak Tshuva, boasts an impressive array of assets from several giant natural gas fields to automotive, cable TV, biochemical and insurance companies.
Israel's richest family, the Ofers, control through their holding firm Israel Corp the world's sixth-largest potash firm, Israel's largest shipping company and oil refinery. They are also the biggest investor in the Better Place electric car venture.
Israel's richest woman, Shari Arison, through the Arison group controls the country's second largest bank and largest construction company, which is in talks to buy geothermal energy producer Ormat Industries.
Besides IDB's Dankner, none of these groups agreed to talk to Reuters.
"PEOPLE MAKE MISTAKES"
Last year's parliamentary report pointed out that most of Israel's banks are also controlled by such groups, offering the conglomerates access to easy credit, often at the expense of smaller businesses. This is a recipe for risky decision-making, the Bank of Israel said in its 2009 annual report, and because it is difficult to regulate these powerful groups with their complex structures, they pose a systemic risk.
A survey by the Calcalist financial news website showed that 10 of the biggest tycoons will have to pay back bondholders 24 billion shekels ($6.9 billion) in the next two years, raising concern that they may not be able to meet all of their obligations.
"People make mistakes, and if you don't create a distribution of power and you allow one person to make mistakes for all of us, the likelihood is that when a mistake occurs it will be huge and very costly," said Daniel Doron, founder of the Israel Center for Social and Economic Progress (ICSEP).
That could now change. According to one source with knowledge of the competition committee's deliberations, the committee is likely to take aim at both the pyramid structures as well as the close links between financial institutions -- banks and insurance companies -- and "real" businesses such as supermarkets or refineries.
INDEPENDENT MEDIA?
Israel is well known for its raucous free press. Its newspapers and news broadcasts swing freely and mercilessly at politicians, and no one, not even the prime minister, is spared. But in the past decade newspapers and television news channels have become a popular investment for the country's business elite, despite, or perhaps because of, the media industry's financial woes.
Most Israeli media companies are now controlled on some level by one of the large business houses. Has that stifled debate about the concentration of power in the Israeli economy?
In a rare interview last September, Dankner dismissed the issue as part of the "populist agenda". Asked by newspaper Yedioth Ahronoth whether he, as head of one of Israel's largest holding companies, had too much power, Dankner replied: "Unequivocally no. There are dozens of other people in Israel with more power."
Nine months later, Dankner bought one of Israel's largest-circulating newspapers, Maariv. To assuage concerns about potential conflicts of interest in coverage, he wrote a letter to the paper's staff urging them to, "please maintain your integrity, professionalism, independence and freedom of expression -- including critical coverage of the IDB group, its subsidiaries and its managers, including myself."
Just a few weeks after that, Russian oil tycoon Leonid Nevzlin bought a 20 percent stake in Haaretz, another leading newspaper. The two new media magnates joined Eliezer Fishman, who made his fortune in real estate and runs the financial newspaper Globes, and American casino mogul Sheldon Adelson, who founded the popular, free daily Yisrael Hayom.
Some of Israel's main television stations are also controlled in one form or other by the business elite. Yossi Maimon, primary shareholder of energy companies Ampal and Merhav, is chairman of Channel 10 television. Its main competitor Channel 2 is partly owned by dairy king Wertheim, the Tshuva family, and the Ofers. Israel's Russian-language TV station is run by billionaire Lev Leviev, owner of holding company Africa Israel Investments.
While it is not unusual in other parts of the world for media companies to be part of much bigger conglomerates, critics in Israel say the tremendous influence wielded by a handful of business groups has weakened the country's media in recent years.
"Israel needs today, more than ever, an independent, professional press that will protect the free market and meritocracy, and will not bow to the interests of a handful of groups," said Guy Rolnik, founder and editor in chief of TheMarker, one of Israel's most influential financial newspapers, and a leading critic of the concentration of economic power. "Without an independent press, Israel will become a sad version of the crony-capitalism that we see in many lagging countries in the world."
Well-known Israeli reporter Micky Rosenthal said he faced intimidation and harassment while working on a 2008 documentary "The Shakshuka System" that investigated the connection between money, governance and media in Israel.
"The commercial television stations, which are controlled by the business magnates, refused to broadcast the movie," the filmmakers wrote on their website. The documentary was eventually aired on a less popular state-run channel.
The major newspapers and television stations all argue that their news operations are unaffected by corporate stakeholders, old or new. Maariv said its editorial staff is "independent and enjoys total journalistic freedom". Haaretz, Channel 2 and Channel 10 offered similar comments.
PUSH BACK
Not every Israeli company is part of a pyramid or conglomerate, of course. Pharmaceutical giant Teva, Israel's most actively traded company, has no controlling shareholder and is not connected to any holding company. Much of Israel's fast-growing high-tech and biotech sectors are backed by foreign and Israeli venture capital rather than local tycoons.
And some see benefits in Israel's top-heavy economy. Colin Mayer, a professor at Said Business School at the University of Oxford, says that a concentration of power in a few holding companies can lead to poor corporate governance. But he also believes that such groups emphasize long-term goals and encourage economic stability, in contrast to the focus on short-term gains in places such as the United States and Britain.
For their part, Israel's big holding companies argue that regulations already discourage investment in the country and hope any reform is minimal.
Dankner told Reuters that the government should "look abroad" before it breaks up Israel's holding companies. "There is no such separation in Europe, and also the U.S. leading business groups -- such as Berkshire Hathaway and GE -- hold financial and real holdings side by side," he said.
The government has hinted that it will take such facts into account. Finance Minister Yuval Steinitz told Reuters earlier this month that while the government wants to increase competition, "we have to be very careful, very calculated, in order not to cause any damage in this process. Not every proposal that seems rational at the outset is really positive."
If there is a move to break up some companies, there could be opportunities for foreign investors wary of the complex structure of holding companies, according to Deutsche Bank analyst Richard Gussow.
And if not, expect more consumer boycotts. In late June, aware that public opinion was moving against them, Israel's three big dairy companies simultaneously dropped the price of cottage cheese. But rather than appease consumers, the move fueled public distrust that the prices had been bloated.
A popular public advocacy group called the Civic Action Forum is now running a campaign against concentration in the economy. It's slogan: "It's not the cheese, it's the system!"
($1=3.47 shekels)

Help differentiating interest rates from APY

Understanding Interest Rate and APY
by Debbie Dragon

Understanding the different terms used to describe interest rates can be confusing at first. Generally you will see the term interest rate mentioned, along with APR or APY, so what’s the difference? Using APR and APY calculations to compare various investments and the real cost of a purchase requires that you understand what each of these terms mean, and how interest is calculated and compounded.

Interest rate
The “interest rate” is the simplest term to understand. It simply means the amount of interest that will be paid on an investment you make; or the amount charged on a loan per year. It may seem that this is all you need to know and when looking at deposit products that pay simple interest, it pretty much is. Interest rates get slightly more confusing to calculate and make sense of when there is compounding involved.

Simple Interest
Simple interest is just that and is typically used with savings bonds. It means if you invest $1,000 at 5% interest, at the end of the year you will receive a $50 check. At the end of next year you will receive another $50 check. This will happen every year for the length savings bond term. Simple.

Compounding Interest
The problem is most of us don’t want to receive a small check in the mail each year for the interest we earn. Instead, we want to leave the interest earned in the account and let it grow over time. When the interest earnings are left in the account, the balance of your money grows and the interest is calculated on that total balance.

In this scenario, during the second year you really should earn more than $50 in interest since the bank has $1,050 of your money, instead of just the original $1,000. This act of receiving a larger amount each year due to being paid interest on the prior year’s interest is known as compounding. Here’s a table that shows how your original $1,000 investment would grow over 10 years.

Year Starting Balance Interest Ending Balance
1 $1,000 $50.00 $1,050.00
2 $1,050.00 $52.50 $1,102.50
3 $1,102.50 $55.13 $1,157.63
4 $1,157.63 $57.88 $1,215.51
5 $1,215.51 $60.78 $1,276.29
6 $1,276.29 $63.81 $1,340.10
7 $1,340.10 $67.01 $1,407.11
8 $1,407.11 $70.36 $1,477.47
9 $1,477.47 $73.87 $1,551.34
10 $1,551.34 $77.57 $1,628.91
By year 10 in this example, you are earning $77.57 in interest compared to $50 in the first year. The growth is very gradual at 5%, but with higher returns and longer investment periods the compounding effect is much more dramatic. A retirement account funded with a single $1,000 initial investment, that averages 12% return for 40 years, will earn $9,969.75 in the 40th year alone thanks to compounding interest.

Compounding Period
In the previous example, interest was paid on the investment once per year, which means it has an annual compounding period. In this case the APY and interest rate paid on the investment are identical. However, most banks offer more frequent compounding periods. Common values are quarterly, monthly, weekly or even daily. In these situations, you will be paid 1/4th of the 5% each quarter, 1/12th of it each month or 1/365th of it each day. So what’s the difference? Isn’t it still 5% a year no matter how you slice it?

No, it’s not. The reason is the same compounding effect that happened each year in the previous example, also starts to happen on a much smaller scale with more frequent compounding periods, which results in better returns. Where earning 5% once per year earned $50 in the previous example, earning 1/12th of 5%, or 0.417% each month will yield you $51.20 thanks to the compounding interest effect taking place on a monthly basis. It may seem like a small difference but this adds up over time.

APY
What if one bank is offering 5.1% interest compounded annually and another is paying 5.0% interest compounded daily. How do you know which one is better? Without doing a bunch of math every time you want to compare another offer, you really can’t tell. This is where the APY comes in handy.

APY stands for annual percentage yield. It takes into account the interest rate and compounding period to give you a single number that represents how much you will earn from that investment in one year. In the example in the previous section where you earned $51.20 thanks to your account compounding monthly, that account would have an APY of 5.12%, even though the interest rate on it was 5.00%. This gives you a single number that allows you to easily compare one bank’s offerings to another.

APY is similar to APR or Annual Percentage Rate. The difference is APY is used with deposit accounts where you are earning the interest and APR is used to describe the rate you pay on loans. APR also factors in loan fees that must be paid, which is not applicable in APY calculations for deposit accounts.

Calculating APY
Most banks publish the APY for their accounts just as prominently as the interest rate so it’s rare that you would ever need to calculate it, but I know there are some math junkies out there who want a simpler way than putting together an Excel spreadsheet with a repeating formula. Here’s how you do it.

APY = (1 + InterestRate / CompoundingCycles)CompoundingCycles - 1

To give you an example, with the 5% interest rate, compounding 12 times per year the formula would be:

APY = (1 + 0.05 / 12)^12 - 1
APY = 0.05116
APY = 5.12%

Blended APY
Some accounts pay different rates based on how much you have invested, known as tiered rates. For example, you may earn 3% on balances under $10,000 and 4% on balances over $10,000. In most cases if you deposit more than $10,000 you will receive the 4% on the entire balance, but in some cases you will only receive the 4% on the portion of the balanced. This is known as a blended APY.

Banks that offer blended APYs are required to list the rate for the higher tier as a range. Instead of just showing 4% in this example, the APY will show 3%-4% because the APY you receive on the entire balance will vary based on how much you deposit. This can make it difficult to compare rates between banks. Is this account better or worse than one that pays 3.5% on your entire balance?

It depends on how much you have invested. If you have $15,000 invested, the first $10,000 will earn 3% and the remaining $5,000 will earn 4% for a average return, or blended APY of 3.33% making the 3.55 flat rate a better deal, but if you plan to invest $50,000, the blended APY jumps to 3.80%. To calculate the blended APY you use the formula.

Blended Apy = (Amount1 * Rate1 + Amount2 * Rate2) / Total Amount

For the $15,000 example it would be:

Blended Apy = ($10,000 * 0.03 + $5,000 * 0.04) / $15,000
Blended Apy = ($300 + $200) / $15,000
Blended Apy = 3.33%

Evil Incarnate

513 Migrants in Two Trucks: X-Ray View of Human Smuggling

By IOAN GRILLO / MEXICO CITY

From the road, the two tractor-trailers looked like thousands of others that drive daily through southern Mexico lugging cement, bananas and other Central American goods. But when Mexican police officers shined an X-ray on the trucks, they saw an alarming cargo. Hundreds of men and women were crammed like sardines in a tin, squatting on the floor or grasping ropes to avoid getting crushed. There were seven people for every square yard (0.83 sq m), a stunning 513 migrants in total in the two trucks, traveling in near suffocating temperatures of over 105°F (40°C). It was the biggest human-smuggling bust in Mexico's recent history. The passengers had each paid $7,000 to try and sneak through Mexico into the U.S. The people in the trailers will now be sent, penniless, back to their homelands, mostly Guatemala or El Salvador but some as far afield as India and Nepal.
The megabust once again focuses attention on the perilous conditions of migrants in Mexico and the government's efforts to police them. Every year an estimated 300,000 undocumented travelers pour through Mexico and over the Rio Grande in search of the American Dream. Under pressure from Washington, Mexican security forces have been rounding them up in ever greater numbers. But amid the drug war, Mexico's southern border has become increasingly lawless, with cartel paramilitaries carrying out brutal massacres to control smuggling routes. The same cartels also prey on the migrants, carrying out mass kidnappings in exchange for ransom. In the face of such terror, migrants have resorted to more desperate ways to go north, as shown by the tractor-trailers.
The issue has divided Mexico and its traditional Central American friends. The governments of Guatemala, Honduras and El Salvador have all condemned criminal violence against their citizens in Mexico, especially the massacre of 72 migrants by cartel gunmen in August. Meanwhile, some activists in Mexico ask why their government should play the migrant cop of the U.S. when hundreds of thousands of its own citizens also sneak over the Rio Grande looking for jobs. One of the most vocal activists, Catholic priest Alejandro Solalinde, has proposed that Mexico give the migrants passes to travel legally, free of the harassment of police officers or gangsters. "If they don't change this law soon, then more people are going to suffer and more are going to die," Solalinde said as he joined a protest against drug violence in Mexico City earlier this month.
In a recent visit by TIME to a shelter run by Solalinde in the southern Mexican town of Ixtepec, migrants told of a terrifying journey north. A Honduran named Edwin described running into 15 gunmen from the dreaded Zetas criminal army when he was jumping freight trains. The gangsters held Edwin half starved for four months until his family wired a ransom of $1,400 for his release. "The only thing that goes through your head is that you are going to die. You think they are going take to you someplace and it is all going to end," said Edwin, who asked that his full name not be used, for fear of repercussion. The abductions have helped gangsters earn tens of millions of dollars. Mexico's National Human Rights Commissions documented 20,000 such migrant kidnappings in 2010.
The cartels have a more direct way of making money off migrants: by taxing the human smugglers. The gang that operated the two busted tractor-trailers would have made some $3.5 million in total from the trip - and would have typically paid 20% of that to a cartel for protection. A Salvadoran migrant in the shelter said that some smugglers boast that they are working with the Zetas - because paying the gangsters ahead of time is the only way to avoid getting their passengers kidnapped by the fearsome thugs. Migrants said the gangsters now tax anyone making the final crossing over the Rio Grande into the U.S. - with the travelers either paying as individuals or through migrant smugglers. Human smuggling has thus become entwined with the drug cartels in a number of ways.
Even as Mexican security tackles the issue by sending back migrants and going after gangsters, there are charges that government officials are in cahoots with human-smuggling rackets. Mexico's National Immigration Institute announced this week that it plans to clean house and fire some 350 officials following accusations of corruption, including moonlighting with drug gangs. On May 17, police arrested two immigration officials in the southern state of Chiapas for pimping out Central American women as prostitutes. Solalinde says these charges are only the tip of the iceberg and Mexican police and officials have been profiting from the abuse of migrants on an enormous scale.
However, President Felipe CalderÓn's government argues that busts similar to the Chiapas one show how it clearly is dealing with the abuse of migrants. In recent weeks, soldiers have also rescued hundreds of migrants who were kidnapped and held in various Zeta safe houses. Interior Secretary Francisco Blake Mora flew over the southern Mexican border in a helicopter on May 18 and promised that the government will fortify the area against organized crime. "CalderÓn has instructed us to give priority attention to this region," Mora said. He also offered solidarity with the Guatemalan government over a massacre of 29 people there by alleged Zetas on May 15. "This shameful action shows the savageness and the barbarism of these criminals," he said.
Despite the double risk of police and gangsters, there is no sign of the migrant tide through Mexico abating. Most Central American nations suffer poor economic growth, high unemployment and rock-bottom wages - and the U.S. is still an attractive destination, with Mexico as the transit zone. The Honduran migrant Edwin says he would love to stay in his homeland but sees no future there. "In my country, things are very difficult, and I have no option but to risk a journey through here," he said in Mexico before boarding a freight train that was headed north. "I hope to God it will be all right."

Incredible! What a feat!

Diver plunges 100 meters, unassisted on one breath, to set world record
By: Pete Thomas, GrindTV.com

William Trubridge on Monday accomplished what had long been regarded as an impossible feat: swimming to a depth of 100 meters, or 328 feet, on a single breath and with only hands and feet for propulsion.

The New Zealander did not use swim fins; he wore no weights and required no heavy sled during the descent. Nor did he use an inflatable airbag to swiftly reach the surface after his dive.

Rather, he set a new unassisted freediving record and achieved the historic 100-meter mark -- previously attained only in an assisted manner, with weighted sleds and airbags -- while wearing only a thin wetsuit and displaying remarkable power of mind over body.

"It's different than when you use sleds and airbags," Trubridge said of a his dive, made at Dean's Blue Hole in the Bahamas. "Because when you turn around at 100 meters and start swimming back to the surface with just your hands and feet, it can be a little bit daunting because of how much water you have over your head."

A diver cannot always see the surface at 328 feet. It's more than three times deeper than what's considered safe for recreational scuba divers, who must ascend from any significant depth at a painstakingly slow pace to avoid developing embolisms in the bloodstream, associated with breathing compressed air.

Trubridge held his breath for 4 minutes, 10 seconds, from start to finish. In reaching 100 meters he matched a depth first attained by a freediver in 1976, when Jacques Mayol completed his dive using a weighted sled and inflatable airbag. Mayol's exploits were legendary. The Frenchman was portrayed in the 1988 adventure movie "The Big Blue," which delved into the obscure sport of freediving.

Trubidge's accomplishment, however, reveals how far breath-hold diving has evolved, and to what extreme the human body and mind are capable of coping. At 100 meters, lungs fill with blood as a natural means of preventing their collapse. The heart rate slows to the point where a diver can become disoriented, feeling either sleepy or euphoric.

"So you need to stay focused with all of those things going on," said Trubridge, who has dominated the unassisted category of breath-hold diving since achieving 80 meters for a then-record in 2007.

Trubridge, an instructor at the Vertical Blue Apnea Academy in the Bahamas, named his long-planned endeavor Project Hector and was trying to raise awareness for Hector's Dolphins, diminutive mammals that are endemic to New Zealand and face the threat of extinction, largely because of indiscriminate fishing methods and pollution.

The freediver requests that anyone interested in learning more about the dolphins visit the New Zealand Whale and Dolphin Trust website.

Good story about building a franchise

Kraft parlays parking lots into thriving franchise

By Les Carpenter, Yahoo! Sports
Nov 24, 2:38 pm EST

FOXBOROUGH, Mass. – On a set of muddy, undulating parking lots along the road to Providence, R.I., Robert Kraft saw an empire. Where an old stadium and a dilapidated race track and a mobile home park met the woods, a Boston businessman could imagine a gleaming new sports palace and a shopping center and people flocking day after day after day.

This was 25 years ago and Kraft was about to make the first of three strategic moves that eventually landed him the New England Patriots. The purchase has propelled him to being perhaps the most influential owner in the NFL with a franchise that Forbes values as third best in the league, at $1.37 billion, while possessing three Super Bowl titles and a coach and quarterback widely considered to be the best in the sport.

“I see the young players today coming from the parking lots to the practice field, they have no idea of this,” the 69-year-old Kraft said one day just before the start of this season as he gazed out the window of his Gillette Stadium office toward the shopping plaza he ultimately built. “When I bought the team our players had to get into their unis and drive five miles, like Pop Warner, to a practice field that was part of a mental health grounds that the City of Foxborough leased to the Patriots.”

In 1985, the Patriots and their stadium were owned by a businessman and promoter named Billy Sullivan who was beginning to struggle financially. At that time, an option to buy the 300 acres of parking lots outside the stadium was offered by the group of businessmen who owned them. Kraft, who operated a packing-supply business and long harbored a desire to own the Patriots, saw his chance. If he could get control of the parking lots, then maybe he could find a way to control the stadium. And if he could be in charge of both the lots and the stadium, then maybe he could get the team, too.

Kraft and a partner won the bid for the lots, paying $1 million a year rent for 10 years before buying them for $18 million. Today he figures the same land would cost about $40 million or $50 million.

“In any business I’m in I’m trying to think ahead of where I was going,” Kraft says. “I know some financial advisor thought I was nuts because we paid an option for the land that exceeded the revenue from football parking.

“The cost of the right to maintain the option was a million a year,” Kraft continues. “The costs of parking for football would never cover that. But that was the first step in a three-legged stool to try and own the team one day. So I know whoever would wind up owning the team would have to come to me at some point because they couldn’t play games in the stadium because they didn’t have the rights to the parking or if they wanted to put on concerts.”

Kraft didn’t attempt to buy the team when it was sold in 1988 to Victor Kiam, the owner of Remington Products, in part because the stadium wasn’t included in the deal. He could see the debt the Sullivan family was building up after Billy’s son, Chuck, lost millions as a promoter on The Jacksons Victory Tour. The stadium fell into bankruptcy. When a bankruptcy court convened to sort out the sale, Kiam bid low, just below $20 million. Kraft bid $25 million. The difference was large enough for the judge to give the stadium to Kraft.

“If [the bids] had been close the bankruptcy judge would have given the stadium to Kiam, but we got awarded the stadium,” Kraft said. “So what did that mean? By then an unknown financial advisor told me ‘You’re crazy, that stadium is a white elephant.’ If that team moves you’re going to be stuck with a single-purpose stadium. But for me it meant I now controlled all the revenues of the team except for tickets. So all the signage, all the concessions, all the parking – whenever there was an event at the stadium I had all the revenue streams.”

More importantly, he had the stadium’s operating covenant which was essentially a lease that said the Patriots had to stay in the stadium until 2001. This meant that Kiam, who had talked about moving the team elsewhere, or any other potential buyer had to come to Kraft. And soon enough, that’s exactly what happened.

As Kiam struggled financially, control of the team fell to one of his creditors, James Orthwein, in 1993. A St. Louis businessman, Orthwein was determined to move the team to Missouri. He put the team up for sale hoping Fran Murray – a man he partnered with to bring the team to St. Louis – would buy it.

The sale was handled by Goldman Sachs and from the beginning, it seemed everyone had conspired to keep the Krafts from buying the team. Namely the Krafts weren’t allowed to see any of the club’s financial information unless they agreed to put a value on operating covenant. But pricing the covenant would make the team easier to sell, so Kraft simply said the covenant had no value. This infuriated the people who ran the sale and as a result Kraft was the one prospective buyer out of 15 who wasn’t allowed into Goldman Sachs data room to study the Patriots’ books.

One morning Kraft met some Goldman Sachs executives for breakfast at the Pierre Hotel in New York. Jonathan Kraft, Robert’s son and now the team’s president, remembers the Goldman Sachs people demanding a value on the covenant. Eventually Robert Kraft threw down his napkin and said “I’m not putting a value on the lease, either you let me in the data room or not.” Then he stormed out of the room, followed by Jonathan.

The ploy worked; the Krafts got four hours in a data room. But unlike the spacious, comfortable suites with conference tables and a sprawling view of the Statue of Liberty like most Wall Street data rooms, the Krafts were set up in a small, windowless room that appeared to Jonathan Kraft to be a storage closet. They could only read the documents; no photocopies, no notes. And so Jonathan Kraft, two attorneys and a tax advisor sat on metal credenzas dictating key points over telephones to their office voice mails.

“The right number to buy the team was 116 [million dollars] and I was willing to go to 125 million because it was clear they were going to move the team to St. Louis and we had injunctions ready to go. It would have been a mess. Anyway, we went to St. Louis [in January 1994] and I met with that Orthwein and we agreed to pay 172. It shows you the craziest thing I ever did. That price in 1994 was the highest price paid for any sports franchise in the world in any sport.”

Yet even after the deal was agreed upon and Kraft said he would pay far more than he thought the Patriots were worth, there came on the eve of the announcement one last attempt to get the Patriots and move them to St. Louis. Kraft remembers getting a call and being offered $75 million to get out of the stadium lease.

Kraft put down the phone.

“I can’t believe they are trying to bribe us,” he says he told Jonathan.

Only his wife Myra thought it was a good idea.

“You paid $25 million for an old stadium and you’re going to get $75 million,” he recalls her saying. “We can give more money to charity and you will get a new team, another team.”

She was right. It was a great offer. Still Kraft couldn’t bring himself to do it.

“I went back to the early ’50s,” he says. “My team was the Boston Braves. When I was a kid we never got to see Hank Aaron. This wasn’t about money. Certain things in life are what you are passionate about. This was my chance to step up. I went way beyond what was appropriate but I knew I would never have another chance. And I had the confidence of sitting in those stands that there was tremendous brand equity in that region that could be tapped if we ran a respectable operation.”

In the end, that is what it became. He leveraged the threat of the team moving to another part of New England to get $70 million in infrastructure loans from the Massachusetts legislature and a low-interest loan from the NFL to build Gillette Stadium, which opened in 2002. The shopping center came five years later. Now it is a sprawling megaplex on the side of Route 1.

“It struck us then [Robert and Jonathan] were the smartest people in the room,” says Marc Ganis, a sports business consultant who was working with a rival bidding group that included Tom Clancy, Paul Newman, Tom Selleck and Walter Payton. “I was blown away and we had lost. I knew then from seeing how it worked, that we were seeing someone who would be a great owner in the NFL.”

Of course it has not come without dispute. Kraft infuriated Connecticut leaders in the late 1990s when he agreed to move the team to Hartford in exchange for a publicly-built stadium, then pulled out of the deal to stay in Foxborough. Many in the league also question the Patriots success after they were caught taping other team’s signals in 2007 in a celebrated case that later came to be known as Spygate. Suspicions were further raised when the league office destroyed the tapes it confiscated from the Patriots, in a sense destroying the evidence – some allege to protect a powerful owner.

But to imagine what Foxborough was and what it has become is remarkable. Especially in just 25 years.

“I was always trying to figure out how I could buy the team,” Kraft says. “For me life is about execution. If you want to make something happen you have to find a way to execute your wishes.”