Financial thoughts

The number of people who signed contracts to buy homes rose in November, the fourth increase since hitting a low in June. Even with the gains, this year is shaping up to be the worst for home sales in 13 years.

The National Association of Realtors says its index of sales agreements for previously occupied homes increased 3.5 percent last month from a downwardly revised reading in October. Contract signings were up in the West and Northeast, but down in the South and Midwest.

Signings are 22.1 percent above June’s index reading, which was the lowest level since the private group began tracking the data in 2001. But signings are 5 percent lower than November 2009 when buyers were scrambling to close purchases to qualify for the first federal tax credit.

Completed home sales _ which the Realtors group measures in a separate report _ are expected to total about 4.8 million units this year. That’s much lower than the 6 million units that analysts consider a healthy pace. The last time sales were lower was 1997 when sales totaled 4.4 million units.

A third of the pending sales likely will be foreclosures or short sales, where a homeowner sells a house for less than what is owed on it, the NAR spokesman Walter Molony said. That tracks with the average for the year. These distressed sales go for discounts of up to 50 percent in some of the hardest-hit areas and will continue to weigh down home prices.

Many economists expect home prices to drop another 5 percent to 10 percent in the next six months before stabilizing. Prices fell in 20 of America’s largest cities in October, according to the Standard & Poor’s/Case-Shiller home price index released Tuesday.

There are several challenges facing the housing market aside from foreclosures. Potential buyers are worried about their jobs or are unable to qualify for a mortgage because lenders have tightened standards. And now mortgage rates are on the rise, gaining about two-thirds of a percentage point in the last month.

This week, the average rate on 30-year home loans rose to 4.86 percent from 4.81 percent, mortgage giant Freddie Mac said Thursday. That’s the highest level in seven months. It hit its lowest level in 40 years in November at 4.17 percent. The rate on the 15-year mortgage, a popular refinance option, also is rising.

The report on contract signings from the Realtors showed that signings jumped 18.2 percent in the West and edged up 1.8 percent in the Northeast. The Midwest region saw a 4.2 percent drop in signings in October and the South posted a 1.8-percent dip.

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The U.S. trade deficit was probably little changed in October as gains in exports, reflecting a weaker dollar and growing economies overseas, kept pace with rising imports, analysts said before a report today.

The projected $43.8 billion gap would follow a $44 billion shortfall in September, according to the median estimate of 78 economists surveyed by Bloomberg News. Other reports may show consumer confidence climbed this month and the cost of imported goods rose in November.

3M Co. and General Dynamics Corp. are among companies that will probably benefit from growing demand in markets like China, Brazil and Singapore, which this year are among the top-10 buyers of American-made goods. Accelerating growth in the world’s largest economy may also lift imports, indicating the trade gap will stabilize near current levels.

“We’re looking for exports to be a big plus as our major trading partners are doing well,” said Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado. “We don’t see much improvement in the trade deficit next year” as imports also climb.

The Commerce Department trade figures are due at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from deficits of $39.5 billion to $46.5 billion.

Also at 8:30 a.m., a Labor Department report may show the import-price index rose 0.8 percent last month, reflecting higher costs for crude oil and metals, according to the Bloomberg survey median. Estimates ranged from gains of 0.3 percent to 1.6 percent.

Sentiment Improving

The Thomson Reuters/University of Michigan’s preliminary household sentiment index rose to 72.5 this month, the highest level since June, according to the Bloomberg survey median. The gauge averaged 89 in the five years leading up to the recession that began in December 2007. The report is due at 9:55 a.m.

Since reaching a one-year high on June 7, the dollar has fallen 6.6 percent against a trade-weighted basket of currencies. The drop makes American goods cheaper to buyers abroad and will keep spurring manufacturing, which expanded for a 16th consecutive month in November.

Growing overseas economies are also contributing to demand for U.S. goods. China, set to become the world’s second-largest economy this year, had a 9.6 percent gain in third-quarter gross domestic product from a year ago. Singapore, in the running to be the world’s fastest-growing economy this year, expanded 10.6 percent while Brazil, South America’s biggest economy, grew 6.7 percent.

International Orders

General Dynamics, based in Falls Church, Virginia, is seeing “strong international order activity and interest, particularly in the emerging markets,” Chief Executive Officer Jay Johnson said in a Dec. 2 industry conference presentation.

St. Paul, Minnesota-based 3M, the maker of Scotch tape and films to brighten television screens, is expanding in emerging markets, which make up one-third of its sales and may climb to as much as 45 percent by 2015, according to company estimates.

“These opportunities continue to grow,” George W. Buckley, chief executive officer, said in a Dec. 7 conference call. Overseas sales will benefit from “India and Latin America, gathering momentum in sort of China-like style.”

President Barack Obama is seeking to double American exports over the next five years. The Commerce Department has asked industry groups to review its proposal to relax export controls for technology items with military uses, covering sales to 37 allies including Germany, Japan and Canada.

China’s Surplus

China’s trade surplus with the U.S. remains a thorny issue as some members of Congress accuse the Asian nation of keeping its currency too low in order to boost sales overseas. The renminbi’s advance against the dollar of 0.1 percent last month and 0.3 percent in October fell short of the 1.7 percent climb in September that Treasury Secretary Timothy F. Geithner signaled was appropriate.

Improving U.S. demand and the need to restock inventories led to gains in imports that swamped the rise in exports over the past two quarters. A widening deficit subtracted 1.76 percentage points from GDP in the third quarter as the economy expanded at a 2.5 percent annual rate.

Imports will probably grow at a slower pace as inventories are now better aligned with sales, indicating the deficit will stabilize and trade will no longer be an obstacle to GDP.

Bloomberg Survey ================================================================ Trade Import U of Mich Federal Balance Prices Conf. Budget $ Blns MOM% Index $ Blns ================================================================ Date of Release 12/10 12/10 12/10 12/10 Observation Period Oct. Nov. Dec. P Nov. —————————————————————- Median -43.8 0.8% 72.5 -138.0 Average -43.7 0.8% 72.6 -135.0 High Forecast -39.5 1.6% 76.5 -110.0 Low Forecast -46.5 0.3% 69.0 -145.0 Number of Participants 78 53 67 25 Previous -44.0 0.9% 71.6 -120.3 —————————————————————- 4CAST Ltd. -45.0 0.5% 73.5 — ABN Amro Inc. -43.0 — 73.0 — Action Economics -45.0 0.7% 71.0 -142.0 Aletti Gestielle SGR -45.4 — 71.5 — Ameriprise Financial -42.5 0.7% 73.0 — Banesto -43.9 0.8% 70.7 — Bank of Tokyo- Mitsubishi -43.4 0.7% 69.0 -142.0 Barclays Capital -44.0 0.7% 72.0 -142.0 BBVA -42.8 0.7% 72.0 -115.0 BMO Capital Markets -43.0 — — — BNP Paribas — 0.8% 75.0 -130.0 BofA Merrill Lynch Research -45.0 — 71.0 -145.0 Briefing.com -43.0 — 72.5 -142.0 Capital Economics -40.0 — 75.0 — CIBC World Markets -45.5 — — — Citi -45.0 1.0% 72.0 -125.0 ClearView Economics -45.5 0.8% 70.5 — Commerzbank AG -44.0 — 75.0 — Credit Agricole CIB -45.0 — 72.1 — Credit Suisse -42.0 1.0% 74.0 — Daiwa Securities America -45.0 — 72.0 -140.0 DekaBank -44.0 0.8% 73.0 — Deutsche Bank Securities -44.5 1.0% 72.0 — Deutsche Postbank AG -45.0 0.9% 72.5 — DZ Bank -42.0 0.7% 73.5 — Exane -43.0 — 73.0 — First Trust Advisors -43.6 1.0% 72.0 — FTN Financial -43.0 — 73.0 — Goldman, Sachs & Co. -40.5 — — — Helaba -43.5 — 74.0 — High Frequency Economics -40.0 1.5% 74.0 -110.0 Horizon Investments -45.5 1.0% 73.0 — HSBC Markets -44.0 1.2% 73.0 — Hugh Johnson Advisors -43.0 0.6% 70.0 — Ibersecurities -43.8 — — — IDEAglobal -43.5 0.7% 72.5 -135.0 IHS Global Insight -40.5 — 72.7 — Informa Global Markets -44.4 1.0% 70.4 — ING Financial Markets -43.5 0.9% 72.3 -137.0 Insight Economics -44.5 1.0% 72.5 — Intesa-SanPaulo -45.0 0.6% 72.5 — J.P. Morgan Chase -42.2 0.6% 73.0 -138.0 Janney Montgomery Scott -45.5 0.7% — — Jefferies & Co. -46.5 0.8% 73.0 -140.0 Landesbank Berlin -39.5 1.0% 73.5 — Landesbank BW -43.0 0.7% 73.5 — Maria Fiorini Ramirez — — — -142.0 MF Global -43.0 0.6% 74.0 -130.0 MFC Global Investment -44.5 1.0% 72.0 — Mizuho Securities -45.0 0.6% 72.0 — Moody’s Analytics -41.3 0.8% 74.0 — Morgan Keegan & Co. -44.8 0.6% — — Morgan Stanley & Co. -43.5 — — -137.0 National Bank Financial -43.5 — 72.5 — Natixis -43.8 0.5% 72.0 — Nomura Securities Intl. -43.1 0.8% 71.6 -130.0 Nord/LB -42.5 0.8% 71.5 — Pierian Capital -42.0 — — — Pierpont Securities LLC -44.5 — 73.0 -139.0 PineBridge Investments -42.0 1.2% 74.0 — PNC Bank -45.0 — — — Raiffeisen Zentralbank -44.0 0.8% — — Raymond James -45.3 — 72.2 — RBC Capital Markets -44.4 — 72.0 — RBS Securities Inc. -43.7 — 73.5 — Scotia Capital -43.6 — — — Societe Generale -45.7 1.6% 76.5 — Standard Chartered -43.7 0.8% 72.0 — State Street Global Markets -43.5 0.9% 72.0 -137.0 Stone & McCarthy Research -44.0 0.9% 71.0 -145.0 TD Securities -43.0 0.5% 73.0 — Thomson Reuters/IFR -45.2 0.8% 72.2 -142.0 Tullett Prebon -43.5 0.8% 72.5 -132.0 UBS -45.0 0.7% 75.0 — Union Investment -44.0 — 72.6 — University of Maryland -42.4 0.3% 71.6 -138.0 Wells Fargo & Co. -41.2 0.8% — — WestLB AG -45.0 0.8% 72.0 -120.0 Westpac Banking Co. -44.4 0.6% 72.5 — Wrightson ICAP -44.0 1.2% 71.0 — ================================================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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General Motors Co. says its sales in China climbed 11 percent in November from a year earlier, on strong demand for its Buick and Chevrolet models.

GM said Thursday that the 196,990 vehicles sold by GM and its ventures in China set a monthly record, as the company’s 2010 sales in the world’s biggest vehicle market shot past the 2 million mark personal business card.

GM’s China sales rose 32.7 percent in January-November, a bit lower than the overall growth in China’s passenger car sales so far this year.

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An aviation regulator tells The Associated Press that Rolls-Royce will temporarily replace entire engines suffering from oil leaks on the world’s largest jetliner.

The official says the British engine-maker will take off faulty engines and replace them with new ones. It will then fix the leaking part and swap the engine back again.

The official, who has been briefed by Rolls-Royce and some of the affected airlines, spoke on condition of anonymity because of the sensitivity of the matter. Rolls-Royce declined to comment.

Leaking oil caught fire on Nov. 4 in one of a Qantas A380’s four engines, sending chunks of metal into vital systems in the wing before it landed safely. Qantas has said checks revealed leaks in at least three other engines.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

SYDNEY (AP) _ An electrical fault sent smoke into the cockpit of a Qantas Boeing 747 and forced pilots to turn back Monday in the latest in a string of problems for the airline since an engine explosion on a superjumbo prompted a global safety scare.

The latest incident was unrelated to the superjumbo drama, but it was the third time Qantas jetliners have aborted flights because of faults since the Nov. 4 explosion on the Airbus A380, which raised concerns about the world’s largest passenger plane.

The Airbus incident has prompted extra attention on Qantas, which prides itself on its safety record. Qantas says the three faults since Nov. 4 were far less serious than problems with the A380 and that the turnarounds were precautionary.

The airline said a Boeing 747 carrying 221 passengers and crew was an hour into a flight from Sydney for Buenos Aires, Argentina, when smoke started coming from an instrument panel in the cockpit. Pilots donned oxygen masks and turned the plane around, dumping fuel over the Pacific Ocean before making a “priority landing” in Sydney.

“This is absolutely in line with procedure to ensure that they can safely arrive, which they did,” Qantas spokeswoman Olivia Wirth told reporters.

Passengers said the pilot informed them that there had been a problem with an instrument panel in the cockpit and the plane would return to Sydney.

“We couldn’t smell or hear anything,” passenger Samantha Gash told Nine Network television. “All we noticed, because we were next to the wing, is when the fuel was let out. Everyone was very quiet and calm. It was probably when we landed back in Sydney and there were four or five fire engine trucks behind us that people began to start to feel a bit uneasy.”

Television footage showed fire trucks tailing the plane as it taxied to the terminal, though they were not put to use. Qantas said the passengers would be put on other flights, and repairing the plane was not expected to take long.

Wirth said the problem was a “minor electrical fault” that caused a “minimal” amount of smoke in the cockpit. No smoke entered the passenger cabin.

On Friday, a Qantas Boeing 767 turned back on a domestic flight in Australia after pilots detected abnormal vibrations in one of its two General Electric engines. A week earlier, a Sydney-bound Qantas Boeing 747 landed safely in Singapore after an engine caught fire minutes after takeoff.

Both 747 planes were fitted with Rolls-Royce RB211 engines.

The A380 scare is being blamed on a fault in the Rolls-Royce Trent 900 engine. Leaking oil caught fire in one of the Qantas A380’s four massive engines, heating metal parts and causing the motor’s disintegration over Indonesia before the jetliner returned safely to Singapore. Experts say chunks of flying metal damaged vital systems in the wing of the Sydney-bound plane, causing the pilots to lose control of the second engine and half of the brake flaps on the damaged wing in a situation far more serious than originally portrayed by the airline.

Qantas grounded its six A380s within hours and said four days later that checks had revealed suspicious oil leaks in three engines on three different grounded A380s. Singapore Airlines and Lufthansa, which both use A380s with Trent 900 engines, have conducted checks on their superjumbos and all but one have returned to service, the airlines say.

Qantas’ six superjumbos _ the backbone of its longest and most lucrative international routes between Australia and Los Angeles, Singapore and London _ remain grounded despite what experts say is financial pressure to fly them again.

“We are taking our normal and extremely conservative approach to safety and will not operate our A380 fleet until we are completely confident that it is safe to do so,” Simon Rushton, a Qantas spokesman, said Monday.

Qantas was still hopeful of returning the A380s to service “in days, not weeks,” Rushton said.

Britain’s Rolls-Royce Group PLC, the world’s second-largest engine maker, said Friday that it would be replacing an unspecified module, or collection of linked parts, on the Trent 900. Airbus said Rolls-Royce would also be equipping the engines with software to shut them down before an oil leak could cause an engine to disintegrate.

Rushton said three engines had been removed from Qantas A380s as part of a detailed inspection program ordered by Europe’s air safety regulator and recommendations by Rolls-Royce. He declined to comment on an unsourced newspaper report that Rolls-Royce had advised Qantas that seven more engines may have to be removed, something that would cause longer delays and potential revenue losses.

Singapore Airlines, which grounded three of its 11 A380s after checks found oil leaks in three Trent 900s, said Monday that two were back in service after engine changes and that work was continuing on the third.

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Two directors of Agoracom will pay a total of $150,000 and face trading and employment restrictions under a settlement agreement that was approved Friday by Ontario’s securities regulator.

Agoracom, which runs a website that does investor relations for public companies listed on the Toronto Stock Exchange and TSX Venture Exchange, will also post a notice about the settlement on www.Agoracom.com.

Agoracom founder George Tsiolis and dealer Apostolis (Paul) Kondakos acknowledged they required Agoracom staff to use hundreds of fake names and pose as investors in thousands of messages on the firm’s public online forums.

Kondakos, the firm’s chief compliance officer, also intercepted private messages between public users of the forum from July 2008 to February 2009 to gather information about companies in which he was invested cash advance companies.

Under the settlement agreement, the Ontario Securities Commission has suspended the two men’s registrations as investment professionals for 10 years.

They are also permanently prohibited from being a director or officer of any client of Agoracom or its affiliates and prohibited from being a director or officer of any public company, registrant or investment fund manager for five years.

They also aren’t allowed to trade or invest in any client of Agoracom.

The two men will pay a total of $25,000 towards the costs of the OSC investigation and $125,000 to a fund administered by the commission.

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Social Security beneficiaries will see no increase in their benefit checks next year, the federal government said on Friday.

For more than 58 million seniors and other Social Security beneficiaries, 2011 will mark the second year in a row without an inflation adjustment.

Inflation has been low in the past two years because of the recession. The Bureau of Labor Statistics on Friday morning reported prices were up only slightly over last year.

The last Social Security inflation adjustment was in 2009: Beneficiaries got a higher-than-normal 5.8% increase because of a temporary spike in energy prices in the third quarter of 2008.

Soon after, however, energy prices plummeted. Then the bottom fell out of the economy and by the third quarter of 2009 overall price levels had fallen 2.1% from the same period a year earlier. That meant no increase in 2010 Social Security benefit checks.

This year, while there has been some inflation, prices remain lower than they were in the third quarter of 2008 — and that’s the quarter that counts.

By law, the Social Security Administration is required to track inflation using the most recent third quarter that led to an adjustment. So the 2011 decision is based on the change in inflation between the third quarter of 2008 and the third quarter of 2010. (’What deflation — prices are rising!’)

The finance and economics blog Calculated Risk noted recently that even though retirees will go two years without an increase, "those receiving benefits are still ahead because of the huge increase [they got in 2009]."

Out-of-pocket health costs rising: Even if that is correct mathematically, the idea of another year without a pay hike isn’t likely to be popular with the people who receive Social Security retirement, disability or supplemental income benefits.

"[T]he average senior can still expect to see 27% of his/her Social Security check eaten away by Medicare premiums and out-of-pocket costs next year," said Barbara Kennelly, president of the National Committee to Preserve Social Security and Medicare.

There is, however, a "hold harmless" provision that protects more than 70% of beneficiaries from having to pay higher Part B Medicare premiums, should they increase, the Social Security Administration said. (Social Security: Take the quiz)

Push for extra help: The Obama administration made a failed push last year to offer $250 payments to Social Security recipients to compensate for the lack of a COLA and to serve as economic stimulus. Such a move would have cost roughly $14 billion.

This week, House Democrats said they will try to push a similar measure when Congress reconvenes after the mid-term elections in November. And on Friday morning the White House said President Obama would renew his call for the extra $250 payment.

Critics of the idea have pointed out that Social Security benefits are intended to maintain purchasing power — which by the inflation measures used they have. And, they noted, benefits don’t decline when prices decline, which happened in 2009.

For high-income Americans still in the labor force, there’s a bit of bright news: Since there is no COLA for 2011, there will also be no increase in the amount of earnings subject to the Social Security tax, which is currently assessed on the first $106,800 of a person’s wages. 

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After days of mixed results, Hawaii stocks finally followed the overall stock market as it went higher in Monday trading.

The Dow Jones Industrial Average closed at 10,544.13, up 81.36 for the day, while the Nasdaq was up 43.23 to close at 2,285.71.

An international banking agreement signed over the weekend in Basel, Switzerland, was getting much of the credit for pushing markets higher. In fact, the six largest banking companies in the United States each were up more than 2 percent. Bank of Hawaii and Central Pacific Financial Corp. were among the Hawaii-based companies trading higher.

Gainers were:

Hawaiian Electric Industries Inc. (NYSE: HE), which closed at $23.16, up 7 cents.

Alexander & Baldwin Inc. (NYSE: ALEX), which closed at $35.11, up 32 cents.

Hawaiian Holdings Inc. (Nasdaq: HA), which closed at $5 fast cash.07, up 13 cents.

Bank of Hawaii Corp. (NYSE: BOH), which closed at $47.38, up 63 cents.

Central Pacific Financial Corp. (NYSE: CPF), which closed at $1.59, up 1 cent.

Maui Land & Pineapple Co. (NYSE: MLP), which closed at $4.54, up 44 cents.

ML Macadamia Orchards (Other OTC: NNUT), which closed at $2.57, up 7 cents.

Hoku Corp. (Nasdaq: HOKU), which closed at $2.50, up 10 cents.

The two companies that lost ground on Monday were:

Barnwell Industries, Inc. (AMEX: BRN), which closed at $2.88, down 1 cent.

Cyanotech Corp. (Nasdaq: CYAN), which closed at $2.55, down 9 cents.

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Graphic Packaging International Inc. plans to close its beverage-packaging plant in Golden at the end of October.

The plant at 4455 Table Mountain Drive employs about 150 workers. Most are in manufacturing jobs, and Graphic Packaging hopes to be able to move them to its other facilities around the country, said company spokeswoman Cindy Baerman. About 12 research-and-development employees will remain in Golden, she said.

In a statement, Graphic Packaging said the Golden shutdown “reflects the company’s ongoing efforts to align its manufacturing footprint to the changing needs of its beverage customers and improve its cost structure and margins to better position it for future growth.” It said the plant’s business and equipment will be moved to the company’s other U.S. locations.

“While closing the Golden facility is a difficult decision, it is necessary to ensure that we are able to consistently serve our customers and meet their changing needs from a solid network of efficient, low-cost manufacturing facilities, even in the face of the ongoing economic challenges of today’s marketplace,” David Scheible, the company’s president and CEO, said in the statement.

Graphic Packaging International is a unit of Graphic Packaging Holding Co. (NYSE: GPK), of Marietta, Ga. The company, which has about 15,000 workers worldwide, makes paperboard packaging for food, beverages and other consumer products and is a major producer of folding cartons, coated-recycled boxboard and specialty bag packaging.

The company is a descendant of Coors Paper Packaging, a packaging arm of Coors Brewing Co. that was launched in the 1970s.

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Google moved quickly over the weekend to try to contain mounting criticism of Buzz, its social network, apologizing to users for features widely seen as endangering privacy while announcing product changes to address those concerns.

Todd Jackson, product manager for Gmail and Google Buzz, wrote in a blog post on Saturday that Google had decided to alter one of the most-criticized features in Buzz: the ready-made circle of friends the service provided to new users based on their most frequent e-mail and chat contacts in Gmail. Instead of automatically connecting people, Buzz will in the future merely suggest to new users a group of people they may want to follow or be followed by, he said.

Jackson, who said that the auto-follow feature had been designed to make it easy for people to get started on Buzz, acknowledged the criticism that was heaped on Google in the last few days.

“We’re very sorry for the concern we’ve caused and have been working hard ever since to improve things based on your feedback,” Jackson wrote. “We’ll continue to do so.”

The startup for Buzz, which Google introduced Tuesday as its answer to Facebook and Twitter, drew angry responses on technology blogs and beyond, as users feared that the names of their e-mail correspondents would be publicly exposed. A set of changes that Google announced Thursday failed to quell the uproar.

Some critics said the latest modifications to Buzz, which is tightly coupled with Gmail, appeared to have addressed the most serious privacy concern.

“Turning off the auto-follow was a huge improvement,” Danny Sullivan, a longtime Google analyst and the editor of SearchEngineLand, said in an e-mail message.

Marc Rotenberg, executive director of the Electronic Privacy Information Center, said his organization was still intending to file a complaint with the Federal Trade Commission this week pending its review of Google’s changes.

“Even with these changes, there is still the concern that Gmail users are being driven into a social networking service that they didn’t sign up for,” Rotenberg said in an interview on Sunday.

The privacy concerns about Buzz, and Google’s rapid efforts to address its critics, echo incidents that have bedeviled other social networks, most notably Facebook personal business card. None of those incidents have slowed the growth of Facebook, which recently said it had reached more than 400 million users. Gmail has 176 million users, according to the research firm comScore.

“I think the privacy issues earlier this week with Buzz will blow over and not harm the product in the long term,” Sullivan said. But privacy will continue to haunt Google, he said, and many people will point to the release of Buzz as an attempt by Google to overreach and a reason that the company could not be trusted.

The change in the enrollment of new users of Buzz was the most significant of a series of modifications that Jackson announced on Saturday.

Google also said that it would create a new Buzz tab in Gmail’s settings page to allow users to hide Buzz from Gmail completely. The page gives users the option to disable Buzz, deleting their posts and removing their Google profile, which in many cases listed publicly their circle of contacts in Buzz.

The new feature could address concerns that disabling Buzz and removing a public profile was a multistep process that confused many users and that some described as a game of whack-a-mole.

Google also will no longer automatically connect public Picasa albums and items shared on Google Reader, another feature that had been widely criticized by some users and privacy advocates.

In the next two weeks, Buzz users will be directed to the new start-up to give them a “second chance to review and confirm” the people they are following, Jackson said.

The changes Google announced Saturday will be imposed in the next few days. While it is too early to gauge Buzz’s success, Google said tens of millions of people had tried the service in its first 48 hours.

Sullivan of SearchEngineLand said that the level of activity on Buzz appeared to be significant. “I suspect Google might have a minor hit on its hands already,” he said.

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Roshni Sircar racked up nearly $20,000 in credit card debt after using a number of special purpose cheques that came with her credit card.

The 75-year-old had never used her American Express card before. But when faced with a family emergency, she began using the special offers to help her grandchildren.

She didn’t know the introductory 2 per cent interest rate was just that – a short-term "teaser" rate. "We were really in a tight spot and we used the money," Sircar said.

As her interest rate began to rise, she missed some payments. Her rate eventually jumped to 25.99 per cent. At that point, Sircar realized she couldn’t pay off her bill.

After writing to the head of Amex Canada, Finance Minister Jim Flaherty and the Star, her rate was lowered to a more manageable level. But she still feels "entrapped" by the special offer.

Banks and credit card companies often argue the popularity of credit cards represents a "democratization of credit." Yet, some experts suggest the current system is fundamentally rigged against the consumer and the merchant.

"In consumer contracts highly sophisticated corporations will often exploit consumers’ behavioural biases," Oren Bar-Gill of Harvard Law School wrote in a paper entitled Seduction by Plastic. "Competition cannot cure such exploitation. On the contrary, competitive forces compel sellers to take advantage of consumers’ weaknesses."

The federal government is facing increased pressure to regulate Canada’s credit card market and has taken steps to respond to consumers’ and retailers’ complaints. Within days, the Competition Bureau is expected to rule on two key issues that could fundamentally alter the payments-industry landscape.

The first deals with a request from the Interac Association, Canada’s non-profit debit network operator, to become a for-profit company better able to compete with Visa and MasterCard as those two multinational giants enter Canada’s $168-billion a year debit market.

The second has to do with allegations that Visa and MasterCard have abused their market dominance in the credit card market, where they hold 94 per cent of market share.

And by Jan. 18, industry members are to issue comments on Flaherty’s proposed voluntary code of conduct for the credit and debit sector. The code contains provisions that would help retailers, especially smaller ones, gain some clarity and clout in dealing with their payment processing fees.

Earlier this year, Flaherty announced new regulations aimed at protecting consumers from some of the problems that may have contributed to Sircar’s situation.

Among other things, these new rules require a "summary box" on all credit-card contracts and applications clearly outlining information about interest rates, minimum payments, annual fees and other applicable costs, including penalty charges for bounced cheques.

But while initiatives like these are helpful, experts say more could be done to help low-income Canadians. They cite innovative new card products that give consumers the power to set their own spending limits, or require Ottawa to be the guarantor on the kind of secured card offered to people consider poor credit risks.

The Canadian Bankers Association says "income is not a factor on who pays off their credit cards" in Canada.

But research by the Bank of Canada this year shows the bottom 20 per cent of earners carry a larger share of credit card debt in percentage terms than other income groups. Additionally, the lowest-income earners have the largest share of "unsecured" debt, which includes credit cards.

Canada’s banks say a multitude of cheaper options, such as low-rate credit cards and personal lines of credit, are available to those consumers who carry a balance.

Nancy Hughes Anthony, president and chief executive of the Canadian Bankers Association, estimates more than 60 low-interest-rate credit cards are available in Canada. The Financial Consumer Agency of Canada, however, recently told the Senate banking committee that some low-interest credit cards have disappeared.

And critics say low-income Canadians are often denied access to those low-rate cards because they lack sufficient assets. "They don’t have low-cost options at all," said Armine Yalnizyan, senior economist with the Canadian Centre for Policy Alternatives payday loans.

Banks do not release data about the number of low-rate cards they issue compared with the number of applications they receive, and the bankers association has no statistics on the number of Canadians with low-rate cards.

When asked about consumer eligibility earlier this year, Hughes Anthony said acceptance is "determined on a case-by-case basis."

Other alternatives, such as secured credit cards or prepaid credit cards, disadvantage consumers with unfavourable terms or high service charges, experts say.

"For low-income consumers who don’t have access to a conventional credit card, the costs go up much higher," said Michael De Santis, a researcher at the Public Interest Advocacy Centre.

Low-income consumers, those with spotty credit scores and new immigrants are often encouraged to get secured credit cards to build or repair their credit histories.

But many consumers lack sufficient funds to pay the required lump sum. That upfront cost is usually equivalent to or higher than the card’s credit limit. The bank collects that money as security but the funds do not earn the customer any interest, even if the sum remains tied up for years.

In addition, prepaid cards are more costly to use than regular credit cards. Not only must users load their own money on the card, but they are also on the hook for "significant fees," De Santis said.

Those can include upfront fees for the card to be issued, monthly maintenance fees, invoice charges, customer service fees, transaction fees, ATM fees, reloading fees and even cancellation fees.

"It is very expensive to have one of these prepaid cards in your pocket and they don’t offer any advantages over a conventional card other than the fact that they are more available to people who might not otherwise qualify," De Santis said, adding the product does not help build a credit history. "The less fortunate classes actually end up having to pay the greater amount than the more fortunate ones, which I think is a terrible irony."

The advocacy centre is urging the federal government to collaborate with the banking industry on creating a new financial product that could help low-income Canadians, new immigrants and aboriginals build financial credibility and make payments in an increasingly "digital marketplace."

It argues that eligibility "could be proportional to income level, so as to avoid a lower income becoming a barrier to build a level of creditworthiness."

That may involve a new type of secured card, where the federal government provides some security to the lender so the entire burden does not fall on cash-strapped consumers, De Santis said.

Others champion the idea of "self-directed" credit cards. Angela Littwin, an assistant professor at Harvard Law School, says such cards would allow consumers to cap their credit limits and even block the card’s acceptance at certain stores.

Merchants are also lobbying for change. Retailers want Ottawa to quickly set new ground rules for the debit market as Visa and MasterCard prepare to take on the non-profit Interac Association, whose low-cost flat fee model is the envy of the world.

Flaherty’s proposed voluntary code of conduct won praise from merchants when it was announced Nov. 18. But retailers and small businesses fear credit card firms will be pushing Ottawa during the current 60-day consultation period to water down certain key provisions.

One proposal, designed to give merchants more power in dealing with Visa and MasterCard debit, is at greatest risk, the retailers fear.

During the period when Visa and MasterCard are building their debit networks, the credit card companies plan to issue co-badged cards that also run on the more ubiquitous Interac system.

MasterCard says its new debit product will automatically run on its Maestro network, wherever it is present. Visa says it’s giving consumers the choice but merchants says Visa’s network will show up first on the PIN pad and then Interac.

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