National / International News

Patience plea over Stonehenge centre

BBC - Tue, 2014-01-14 02:58
English Heritage asks people to "be patient" while it "irons out" issues with the new £27m visitor centre at Stonehenge.

Supreme Court to decide: Is severance pay taxed?

Marketplace - American Public Media - Tue, 2014-01-14 02:50

Today, the Supreme Court hears arguments in the United States v. Quality Stores. The respondent is a company that declared bankruptcy in 2001. At issue is whether severance payments are subject to payroll taxes.

Severance is considered compensation, so it is subject to income tax. This case deals with about a million dollars worth of payroll taxes -- what are called FICA taxes.

"It is the taxes that the federal government imposes to fund Social Security and Medicare," explains Sean Anderson, a lecturer at the University of Illinois.

So are severance payments wages? Alan Viard, a fellow at the American Enterprise Institute, says that is at the heart of this case: "A vagueness, I guess, that is built into the definition of what it means for something to be remuneration for employment."

Quality Stores says severance payments don’t amount to wages, because the recipient has been let go. The Obama administration disagrees, noting that, if it loses, the government would owe money to employees and companies beyond Quality Stores to the tune of $1 billion.

"A billion dollars, of course, sounds like a lot of money, and it is a lot of money," says Bill Gale, a fellow at The Brookings Institution. "But not in the context of the federal budget."

This is another ambiguity in a tax code that is now more than 70,000 pages long.

VIDEO: UK inflation rate falls to 2%

BBC - Tue, 2014-01-14 02:44
The UK's inflation rate, as measured by the Consumer Prices Index, falls to 2% for the first time in four years.

Families to foster elderly people

BBC - Tue, 2014-01-14 02:42
A fostering scheme where families will be paid to take elderly people into their homes is to be tried in Leicester.

HS2 rail scheme 'to have FE college'

BBC - Tue, 2014-01-14 02:40
The HS2 high-speed rail project is to have a dedicated further education college to train engineering staff, ministers have announced.

England win but Cook fails again

BBC - Tue, 2014-01-14 02:36
England beat a Prime Minister's XI for a first win in Australia for two months, but Alastair Cook again fails with the bat.

Iconic fossil's rear parts described

BBC - Tue, 2014-01-14 02:33
Scientists finally get to describe the back end of Tiktaalik, a keystone fossil that illustrates the transition of animal life from water to land more than 350 million years ago.

Christie inquiry over Sandy funds

BBC - Tue, 2014-01-14 02:32
The governor of the US state of New Jersey, Chris Christie, is investigated over the use of Superstorm Sandy relief funds to finance an ad campaign.

VIDEO: Cricket team swap whites for bubbles

BBC - Tue, 2014-01-14 02:30
Cricket players try 'zorb football' to vary their winter training.

Groundhog Day set for stage

BBC - Tue, 2014-01-14 02:16
Comedian Tim Minchin announces he is to adapt hit comedy Groundhog Day for the stage.

Stock markets take time to reflect on 2013

Marketplace - American Public Media - Tue, 2014-01-14 02:14

European markets took a dive this morning. And our own Wall Street wasn't looking too good yesterday either. 

James Knightley, senior international economist at ING in London, joins Marketplace Morning Report host David Brancaccio to discuss to reasons behind the plummeting numbers. 

Man shot dead in cinema texting row

BBC - Tue, 2014-01-14 02:11
A retired police officer shot dead a fellow cinemagoer in an argument over texting, according to officials in Florida.

VIDEO: William Roache arrives for trial

BBC - Tue, 2014-01-14 02:09
Coronation Street star William Roache has arrived at Preston Crown court to face rape and indecent assault charges dating back to the 1960s.

Going to Plan B when jobless benefits get cut off

Marketplace - American Public Media - Tue, 2014-01-14 01:59

On Dec. 28, 1.3 million people lost their unemployment benefits because Congress can't agree on an extension. If the extension is not renewed, the number of long-term unemployed losing benefits will grow to five million by the end of the year.

Michelle Noriega is one of the 1.3 million whose benefits expired. On a recent Tuesday night, she was at The Other Door, a bar in North Hollywood. It was close to midnight when the moment she had been waiting for finally happened. Her name was pulled out of a bucket and she was invited up to the stage to perform.

Tuesday is open mic night for aspiring stand-up comedians. Michelle opened with a joke about getting older -- she's about to turn 39 -- and then moved on to a bit about sharing her last name with the former Panama dictator. No relation. Standup is new to Noriega.

"It's kind of a new passion of mine and it's helped me cope with not having a job," she said.

Noriega's last job was project manager at a nonprofit that promotes green building innovations. She was laid off at the end of 2012, and since then she's received $450 a week in unemployment benefits. That's not enough to cover her living expenses, but enough to allow her to apply only for jobs in her field. And she came close landing a few, including one that would have paid six figures.

"A job like that is really everything I want out of my next step career-wise," she said. "But if I don't have it that's just my reality."

Now that her benefits are gone, she's expanded her job search to places like Starbucks.

"I'm not above that," she said. "I would be very grateful to have a job like that, especially if I don't have unemployment benefits."

Before she graduated from college, she promised herself that she would never move back in with her parents, no matter how broke she was.

"I also promised that I would not pull money from my pension plan, but I've gone through all the other financial resources I have," said Noriega. She pulled money from her pension.

Right now she's waiting to hear back from three potential jobs, one good one, one entry-level office job, and one with Starbucks. If she doesn't have an offer by the end of this month, she will move back to Texas to live with her parents.

Labor economist Heidi Shierholz says Noriega and the other one million plus who lost benefits represent a cross section of the labor market.

"There's not something strange or uniquely unemployable, or uniquely inflexible about today's long term unemployed," said Shierholz.

What is unique about this extension cutoff is the timing.

"It has never been even close to this bad when extensions were allowed to expire in any prior recession," added Shierholz.

Right now, 2.6 percent of the labor force has been unemployed for longer than six months, which, Shierholz said, "is twice as high as it was any time Congress ever allowed the extensions to expire following prior recessions."

AUDIO: Johnny Cash’s lost album 'work of art'

BBC - Tue, 2014-01-14 01:25
The BBC’s Rebecca Jones speaks to Johnny Cash's son, John Carter Cash, about the singer's fourth posthumous album.

Thai protesters continue 'shutdown'

BBC - Tue, 2014-01-14 01:23
Thai protesters march on several government buildings on the second day of what they are calling a shutdown of the capital, Bangkok.

VIDEO: 42C heat causes havoc in Melbourne

BBC - Tue, 2014-01-14 01:18
BBC Sport's Alex South reports from Melbourne, where searing heat reaching 42C has been causing havoc for players and fans at the 2014 Australian Open.

Sharp rise in A&E locum doctor spend

BBC - Tue, 2014-01-14 01:14
Spending on locum doctors to plug the gaps in A&E units in England has risen by 60% in three years, figures obtained by Labour show.

A Fed explainer: What's Reverse Repo?

Marketplace - American Public Media - Tue, 2014-01-14 01:12

The Federal Reserve, you may have heard, has an enormous balance sheet. It has paid banks trillions of dollars for securities and bonds. That has some people concerned about inflation down the road.

But, as we've talked about before, the Fed is developing tools it can use to raise interest rates and prevent inflation should the economy heat up.

One of those tools is a special kind of interest the Fed pays to banks. The Fed can control it, moving it up or down, to influence other interest rates in the economy.

But there's a problem. Only certain banks are directly affected by that interest rate control. A significant part of our financial system isn't banks -- it's other things, like hedge funds or money market mutual funds. For them, the Fed needs a different tool to set interest rates.

It's called REVERSE REPO.

It's not new, but the Fed has been testing it out and they might roll it out again down the line. On a scale of 1 to sexy, Reverse Repo sounds like a negative 10. But really, I promise, "the repo market is actually a very very critical part of money markets," as Frederic Mishkin can attest. He teaches at Columbia's Graduate School of Business.

Before we talk Reverse Repo, let's talk regular Repo. Here's how it works. When a big financial institution wants to say make a loan, but it doesn't quite have enough cash to do it, it'll basically.... go to a pawnshop to pawn off it's bonds.

It goes something like this:

BANK OF STACEY VANEK SMITH: "Hey RepoPawnShopForBanks.... listen... I need some cash to lend to my friend who wants to build a factory – she's gonna pay me back with 5 percent interest! So can I pawn these bonds? You gimme some cash for them. But keep the bonds on hand for me, cause I'm gonna want them back later. I'll buy them back for a little more than you paid and you can make a little money."

REPO PAWN SHOP FOR BANKS: "Sounds cool, here's some cash, hand over the bonds, they'll be safe with me. I'll sell them back to you when you have cash again. Good luck with your factory friend."

In reality, the pawn shop is another bank or financial institution, and they do this with one another all the time. One day one money market mutual fund is the pawn shop, another day it's the one doing the pawning.

Incidentally, the fact that the two financial institutions agree that the bonds will get repurchased is why it's called a repo agreement.

The point is: The Repo market is like a pawn shop for financial institutions and it helps them lend.

So what's Reverse Repo? It's what you do to get financial institutions like the Bank of Stacey NOT to lend so much or so generously. Perhaps you are the Fed four years in the future and you are worried about inflation because people are lending too much. Here's how you do it:

FEDERAL RESERVE: "Hey Bank of Stacey, this is the Federal Reserve Reverse Repo Pawnshop. Listen, I know you wanted to lend to your friend and get 5 percent interest back , but that's awfully low. I don't think you should be so generous. In fact, why don't you just lend that factory money to ME instead of to your friend. I'm not gonna build a factory with it. I'm gonna do NOTHING with it. Here, I'll pawn my bonds to YOU, and I'm gonna buy them back later for 10 percent more than you gave me – it'll be like you're making 10 percent interest!"

BANK OF STACEY: "What about my friend?"

FEDERAL RESERVE REVERSE REPO PAWN SHOP: "Um can she pay 10 percent interest? I don't think so. So if you could just go ahead and lend me the money. Kthxbai."

See how that worked? The Bank of Stacey isn't going to go investing in some shady factory for 5 percent when it can invest in the Fed for 10 percent. In fact, if given the option, the Bank of Stacey would still prefer investing with the Fed at 5 percent too -- because there is no risk that the Fed would ever not pay the Bank of Stacey back. The Bank of Stacey might still decide to loan money to the factory, but that factory is gonna have to sweeten the deal. It'll have to pay more than 10 percent interest. Probably a lot more.

So whatever the Fed offers to pay, everyone else in the economy has to pay that or more. Reverse Repo allows the Fed to set a floor on the interest rates in the economy. If it raises that rate, it raises all interest rates in the economy (since they are all based on the zero risk benchmark of the Fed or Treasury). If it drops that rate, all interest rates in the economy drop.

The most important difference between Reverse Repo and the Interest On Excess Reserves that we discussed yesterday is that Reverse Repo applies to many more financial institutions than just banks.

And that is Reverse Repo. It's a way of controlling interest rates for not just banks but all kinds of financial institutions.

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