G.M. Plans to Close Saab After Sales Talks Collapse

This article discusses how GM has been struggling to find a buyer for Saab.  The company is trying to find a good buyer that can serve the needs of Saabs loyal customers as well as increase the economies of scale.  I wonder how this will effect Saab owners service costs and parts replacement

Crash and Carry

This article discusses new research regarding the possibility to make steady profits from "carry trade." Carry trade describes a certain foreign exchange trading scheme where borrowing cheaply in a “funding” currency can exploit high interest rates in a “target” currency. This is pertinent because the U.S. dollar has recently become a prime currency for carry trade (due to the recession and America's near-zero rates).

Debtor's Dilemma

With the value of most home mortgages being greater the actual value of their homes, homeowners are deciding on an option to stick with the mortgage payments, or declare a foreclosure. Could mortgages be linked to unemployment? The continual decrease in value of homes and their mortgage holding a higher value then their home is related to homeowners inability to move. Homeowners often move due to job opportunities that have become available. With their inability to move, this affects their ability to choice. Would declaring a foreclosure have more benefits then the long-term costs?

Banking in Venezuela: Fall of the Boligarchs

Hugo Chavez is looking for people to blame as Venezuela declines into a further economic recession. He has jailed several big bankers in an attempt to solve the dilema, however just that was is unknown. If Chavez continues on this path of attacking private banks, he will scare off investment in the future and worsen the economic situation. In addition, his repressive techniques make for an unstable and often violent environment, which studies have shown do not promote growth.

Introducing a Twitter for Credit Card Purchases

Not really sure how this is going to make money and I think it's a little strange that people want to share their credit card purchases.  I wonder how the company insures privacy

Stocks, Oil Advance as Dollar Weakens Before Fed Sets Policy

On December 16th, US and European stocks rose on speculation that the Federal Reserve will announce its plans to sustain a record low interest rates for an extended period. The S&P 500 index went up by 0.6 percent, the European Dow Jones Stoxx 600 index gained for a fifth straight day, Russia’s Micex index jumped 4.2 percent, oil surged above $73 in New York, and copper and gold rose as well. It is very likely that the Fed will keep interest rates low for the next few quarters. It will be known soon whether this will be the Fed’s strategy or not.

Fighting Poverty in Emerging Markets

The article talks about combating poverty in China, India, and Brazil. The author states that in 1981, 84% of China’s population was below the poverty line; while in 2005 the share was just 16%. India did least well, cutting the share below the poverty line from 60% to 42% between 1981 and 2005. This implies an annual reduction of 1.5% a year. Although the three countries did very well in fighting poverty, now they face certain problems. According to the author, India and China now see growing inequality. In India, this is especially affected by the legacy of the caste system. I think that for China now it is natural to see more inequality as it is transitioning to a market economy, which implies a certain level of inequality that may be even called a market failure. However, since the transition is gradual, the negative effects are greatly reduced.

Poll Reveals Trauma of Joblessness in U.S.

This article puts faces to the unemployment numbers that continuously come up on this blog.  The article examines the psychological effects of unemployment on families.

Rusal, an Aluminum Maker, Strikes Restructuring Deal With Creditors

This article by Andrew Kramer talks about the restructuring of the debt of the Russia's aluminium giant - Rusal, which is the remains of the Chernoy's aluminium monopoly. Rusal is the largest aluminum producer in the world, which is struggling under $16.7 billion in debt. Now it has agreed with about 70 banks to restructure its loans and begin repayments when earnings improve. "The deal, apparently on lenient terms for Rusal and its owner, the Russian oligarch Oleg V. Deripaska, also clears the way for Rusal to take the next step back from the brink of bankruptcy: selling 10 percent of the company in an initial public offering this month." The unavoidable question is, whether this initial public offering is going to really improve the situation since from the Russian experience it is unclear, who is going to own these 10 percent?

The article also displays the struggle of the Russian industry, which, as a legacy to the Soviet Union, is extremely inefficient and corrupted. Most of the Russian industrial giants are currently undergoing the same problems, which mostly lie in the systematic deficiencies of the Russian economy.

Obama tells US banks to lend more and not oppose reform

President Obama is telling bankers to lend loans to small and medium sized businesses. Obama also criticized the lobbyist during his meeting that they are trying to stall down his administrations financial services sector's reform and stop trying to block his moves for regulatory reform.

British Airway crews vote to strike

British Airways holiday travelers face the prospect of some holiday season chaos after cabin crew members voted to strike for almost two weeks over Christmas and New Years. This is in response to British Airways introducing cost-cutting measures including a two-year pay freeze and reducing number of crew members on long-haul flights. If this problem isn't resolved in time it will have a huge detrimental affect upon British Airways and it would disrupt many passengers who have already made flight arrangements with British Airways or have connections that must be made. Furthermore, the holiday season is usually a time when airlines are the busiest and there will be huge fiscal implications if British Airways misses out. So to all of you British Airways holiday fliers out there... sucks to be you.

Summers Predicts Job Growth by Spring

President Barack Obama’s top economic advisor, Lawrence Summers, predicted that jobs will start growing again in spring 2010. According to the most recent statistics, there are 15.4 million people who are looking for jobs now. Mr. Summers said that “everyone agrees that the recession is over.” However, everyone believes that the recession is going to be over only when the unemployment rate will return back to its normal level. In addition, President Obama will meet with bank executives this week to encourage them to start lending to consumers. President Obama pointed out that the government bailed out banks to keep them moving and lending money to people. It is time for banks to force themselves to lend money again.

Citigroup Nears Deal to Return Billions in Bailout Funds

Citigroup is the last of the Wall Street banks to exit the government's bailout program. President Obama is meeting with bank executives to speed up the process, in hopes to stimulate lending to small businesses and homeowners. Obama will also address the size and salaries of bank executives (for all banks), an ongoing issue throughout the crisis. Obama's goal is job creation. If big banks begin lending again, small business can fuel our recovery by hiring and rehiring employees. Though Citigroup is close to repayment, the company hasn't posted profits in seven quarters and it is unlikely to happen in 2010 as well.

Abu Dhabi gives Dubai $10bn to help meet pay debts

Abu Dhabi has given the Dubai government $10 bn to bail out the government owned company of Dubai World. The money was needed in Islamic bonds to pay to its investors and the money will help Dubai to meet short term financial commitments. This news will bring all finance markets on track in Dubai as they were negatively affected when the news of Dubai unable to pay back debt was revealed.

Islamic Finance in France

This article is very interesting because it talks about the adoption of Islamic finance principles in the European countries. The reasons for that lie mostly in the opportunity to make profit rather than in cultural motives. For instance, the author states that since the recession started the Islamic finance started to look like an "attractive business," with "worldwide sharia-compliant assets increased by 29% over the past year to $822 billion." However, the introduction of Islamic finance rules in France led to a hot debate in the government, which opposes the whole idea.

Summers Predicts Job Growth by Spring

This is an interesting article for the seniors found in the New York Times! Hopefully by the time we graduate, Mr. Summers' prediction will help us out.

Mr. Summers said that President Obama will be encouraging banks to expand the flow of credit to small businesses, which, in his opinion, is very easy to do. If that plan works, then many people will either be getting their jobs back or new jobs will be opening up. However, on OUR end of things, seniors, we will be fresh out of college with the skills needed to perform the jobs that are open.

Summers said that they are planning to create more jobs by having "every bill passed be a job bill." Obama is planning on spending $50 billion to repair the United States infrastructure.

Although republicans and centrist senators are skeptical about the plan, the Obama office seems upbeat and confident that it will work. Hopefully, for our sake, his plan works and more jobs will be created just in time for graduation!

Military use of consumer technology: War games

This article discusses the use of video games in the military. As of recently, video games are becoming very realistic. The military has used this to their advantage when they are recruiting people. More specifically, the military is going to use video-game consoles to build a supercomputer that works as an operating system. This can be used for research and development purposes. Soldiers are also using Apple’s iPod and iPhone applications to
view intelligence information. An iPhone app called Bullet Flight lets snipers calculate range and trajectory for their shots. I am glad that these materialistic things can bring some help to our troops. It is amazing to think of all of these new apps for the iPhone and the future of technology.

Paul Volcker: Think More Boldly

Does financial innovation contribute to economic growth?

That became a hot debate at the Future of Finance Initiative after former Federal Reserve Board Chairman Paul Volcker chastised the largely private-sector group for the timidity of its proposals, and said the ATM was the only financial innovation he can think of that has improved society.

Fixing the Global Financial System

More than a year has passed since an unprecedented crisis pushed the world financial system to the brink.

Yet plans to rebuild that system on more stable footing remain embryonic. Differences among regulators, businesses and governments have slowed reform plans. And hefty bank profits, fed by easy credit and government aid, have drained the sense of urgency.

Which Globalization Will Survive?

Although this article was written last April, it is relevant to the European Union's current environmental discussions in Copenhagen.  Joseph Nye actually came to speak at Ohio Wesleyan last year.

Paul A. Samuelson, Groundbreaking Economist, Dies at 94

This article outlines the many contributions that Paul Samuelson made to the study of economics.  Some of his contributions include being the first American Nobel Laureate in economics, improving the Massachusetts Institute of Technology graduate programs, and explaining Keynesian economics to President Kennedy.  The article is a nice obituary to a renowned economist.

China's President Hu Jintao opens Kazakh gas pipeline

China and Kazakhstan open a gas pipeline and a new relationship with each other. It is an attempt by China to make its resources more secure. It is a 4,3000 miles long natural gas pipeline which does not go through Russia. It cost around $6 bn and completed in two years. This pipeline will help the Asian countries by being less dependant on Russia buying up their supplies.

Secret sauce

This article discusses the source of China's impressive growth and attributes it not just to intensive capital investment, but also tremendous productivity gains. Many believe that China's growth has been due to investment, but research shows that the growth has also been due to more efficient uses of labor and capital.

Productivity was measured using "total factor productivity", which takes into account both labor and capital productivity. From 1990 to 2008, China's productivity grew ~4% annually, while OECD countries (US, Japan, etc) grew about 1%. The main reason for such improvement is China's rapid adoption of technology. Not only is China starting from a very low technological base, but it also strongly encourages foreign investment that brings new technology into the country.

China provides good contrast to the USSR, where despite heavy investment, the economy still collapsed because it did not result in productivity gains.

2.8% drop in lending is largest since 1984

It seems like the monetary policy in theory does not work in real life. Even though the policy rates are historically low, banks reduced the amount of money extended to their customers by $210.4 billion (2.8%) between July and September, cutting back in almost every category and this is the largest drop at least since 1984. "We need to see banks making more loans to their business customers," FDIC Chairman Sheila C. Bair said Tuesday. The government has been trying to impose number of programs, but so far has resisted calls to proceed. The FDIC said that just three new banks were created during the third quarter, the smallest number since World War II.

China's Output Beats Estimates as Export Slide Slows

This article talks about how China will serve as the leader to global recovery. China's production grew more than estimated in November. Consumer prices rose .6 percent, the first increase in 10 months. As more and more countries and companies rely on Chinese production, the global economy grows smaller. China will be the first to recover and will dictate the pace for subsequent countries.

How Many Ways Can You Tax the Rich?

Democrats are looking at different strategies on how to tax rich to pay off the most of the deficit. According to Mr. Obama’s campaign, taxes should be raised on everyone whose income exceeds $200,000. IRS reported that they collected $610 billion in tax revenues from people who made more than $200,000. It is 44 percent of total tax revenue. However, some experts say that it will be not enough, and less rich people should also pay more in taxes. There was a proposition to raise marginal rate to about 55 percent in high-tax states. This level was not seen since the pre-Reagan era. On the other hand, this tax strategy can backfire by offering their rivals a political opening ahead of next year’s midterm elections.

US House of Representatives backs financial reform bill

President Obama makes financial reform one of his main goals. The bill will be focusing on creating new monitor consumer banking transactions that will give the govt. authority to stop economically threatening companies. it will pull down the companies which ensures shareholders and unsecured creditors and not taxpayers preventing from losses. President Obama is blaming the Wall Street and govt failures for financial crisis. Senate have to pass the bill before the President signs it.

Iraq oil development rights contracts awarded

UK's Shell and Malaysia' s Petronas won the bid to have the right to develop Iraqi oil field Majnoon. Majnoon reserves has 13 billion barrels of oil but currently they are producing just 46,000 barrels per day. Shell and Petronas pledge to increase the output by 1.8 million barrels per day. There are potential benefits for Iraq as it daily output is about 2.4 million barrells but it may triple over the next couple of years. This will also help Iraq in improving their economy.

EU agrees climate pledge that may boost Copenhagen

EU leaders agree on paying $10 bn to help developing countries in adjusting to climate change policies over the next 3 years. The EU members have promised to reduce their greenhouse gas emission up to 20% and are willing to reduce upto 30% if other nations are willing to do so. Financial matters are being discussed as well in the meeting. EU leaders is suggesting the IMF to implement a global tax on financial transactions so the banks do not take excessive risks that could lead to another financial crisis called a "Tobin tax". More EU countries like France and the UK are pushing it than the U.S.

Losing its shine

IT IS not unusual in Japan for corporate leaders to make semi-ritualised displays of humility. But when Akio Toyoda, president of Toyota Motor Corporation since June and grandson of the firm’s founder, addressed an audience of Japanese journalists in October his words shocked the world’s car industry. Mr Toyoda had been reading “How the Mighty Fall”, a book by Jim Collins, an American management guru. In it, Mr Collins (best known for an earlier, more upbeat work, “Good to Great”) describes the five stages through which a proud and thriving company passes on its way to becoming a basket-case. First comes hubris born of success; second, the undisciplined pursuit of more; third, denial of risk and peril; fourth, grasping for salvation; and last, capitulation to irrelevance or death.

Recession's latest victim: U.S. innovation

U.S. innovation slowed this year for the first time in 13 years as the recession cut into budgets, and costs to protect inventions rose. The number of patent filings in the United States fell 2.3% in 2009 to 485,500 from 496,886 last year, according to a preliminary estimate by the U.S. Patent and Trademark Office. That makes 2009 the first year since 1996 in which businesses and inventors filed fewer patents year over year. At the same time, U.S. patents issued to inventors and businesses in foreign nations jumped 6.3% for the year. This should be a large concern for us considering that part of the demise of most of the failed economic systems we have learned was a lack of innovation and technological advancements.

Hard Times

This article discusses how Irish finance minister, Brian Lenihan, in effect cut the pay of public-sector workers earlier this year by introducing a special 7% pension levy. To add to this, his 2010 budget will inflict even more pain by imposing steep pay cuts on public employees. These pay cuts came as a result of a sharp economic contraction in Ireland. GDP is projected to decline by 7.5% in 2009 and a further 1.3% in 2010.

Is a bonus tax in our future?

The United Kingdom this week slapped a 50% tax on bankers' bonuses above about $40,000. The one-time tax will be paid by all banks with employees in the country. France pledged it would adopt the same policy, while Germany's chancellor called the idea "charming". Still, the bonus tax seems like a long shot on this side of the Atlantic, where bankers wield immense power. But when Wall Street starts handing out giant year-end paychecks at a time of 10% unemployment, all the campaign donations in the world may not keep legislators facing tough re-election fights from turning on their banker chums. It is an interesting proposition after Goldman Sachs announced that their top 30 executives will not be receiving cash bonuses, but if foreclosures and unemployment remain uncomfortably high, ideas like a bonus tax could gain steam.

Goldman Sachs’s Top Managers to Get All-Stock Bonuses

Goldman Sachs’s top 30 executives will receive year-end bonuses in stock they cannot sell for five years. I wish that every company followed Goldman Sachs’s salary policy this year. However, GS is not known for paying reasonable salaries to its employees. GS was criticized a lot at the beginning of this year for paying excessively high salaries to its top executives after benefiting from government support. On the other hand, many state that Goldman had a right to do so, because it was the first one to repay bailout and generate a positive profit when most of the businesses were running out of business. In 2007, there was a lot of discontent around Goldman too, because they paid out $20.2 billion in salaries to its 31,700 employees. CEO was awarded a $67.9 million bonus that year.

American Dream 2: Default, Then Rent

This article in the Wall Street Journal points out the blessing in disguise that this mortgage crisis has brought about. From the dream of owning their houses, Americans have moved on to another alternative, renting houses, which makes more of an economical sense but at the same time providing them with more luxury and money to spend.

As pointed out by some analysts, this is a good thing for the American economy as renting apartments and houses leaves the Americans with more discretionary income to fuel consumer spending which is the backbone of American economy. Money that was used to pay off mortgage debts is now going to be used to pay rents for even more luxurious houses leaving enough to invest, save or spend. The latter seems the most attractive to people who wish for the economy to come back as soon as possible.

Fort many American families, the American dream is now a rental, a luxurious one.

China’s Economic Power Unsettles the Neighbors

This article published today in the NewYork Times talks about the inevitability of China's super power status in the near future. I am talking at least in terms of the economic clout it enjoys over its trading partners, which technically speaking is the whole industrialized and developing world.

The article talks about how Indonesian factories have not been able to compete with their Chinese counterparts despite keeping up with the Japanese and Koreans in the past. China, as pointed out in the article is no longer just a regular developing nation. Instead, its economic strength and potential is matched by none. Its Asean trading partners run billions of dollars of debt each year and have to live under China's clout concerning all their trade and foreign policy decisions. However, China is becoming more notorious by the day and it is finding it harder to cast itself as a friendly alternative to an imperious American superpower.

Many Asian nations are finding it hard to compete with the Chinese economy. Vietnam and India have devalued their currencies to keep up. However, the most important point to understand is that there is no way to control China since it dominates the world trade and many nations run trade deficits with China. It is an inevitability that all nations need to deal with, rather than pointing fingers at China.

Bernanke cautious on 2010's economic growth

Federal Reserve Chairman Ben Bernanke warned that there is no certainty that the economy is on its long-lasting recovery. Even though we have seen some improvement and stabilization in economic activity, there is still a lot of work to do before we can be assured that “the recovery will be self-sustaining.” Ben Bernanke also encouraged stronger demand for homes and consumer goods and services, because it might be the key for future recovery and economic growth.

Exports to grow by 15% in 2010-11

India the next economic superpower has just announced an increase in the countries exports by an enormous 15% for the 2010-2011 fiscal year.

This news is a welcome statement to Indian firms wanting to export goods to other countries, as since October 2008, India's exports have been on a declining route due to the global economic recession.

In May 2009, India's merchandise exports saw a mammoth decline of 38.9%. However, the good news is that the country has made steps on arresting the downturn, and in October 2009 it stated that the decline had been reduced to just about 6.6%.

The country's positive steps to improvement might see India considerably growing its exports next year and might finally make a massive impression on the global economy.

Health-Bill Amendment Restricting Abortion Is Introduced

The highly controversial issue over abortion and whether it should be funded by the government in the new health care bill is discussed in this article. As it stands now, "the Senate health bill would include abortion coverage in the new public plan and would allow women who receive government tax credits for insurance to enroll in a plan that covers the procedure. The tax credit would be segregated so none of it could go toward funding abortion." But many antiabortion advocates are not having it and want an amendment that ensures that no federal funding goes toward abortions unless it is due to rape, mother's health or incest. On the other side of the abortion issue, supporters just want to see a compromise. 

Politicians can't believe that the entire health care bill has come down to abortion. It will be interesting to see the outcome and how it will affect politicians' decisions about the health care bill since no matter the final decision we will all be affected.   

U.S. Retail Hiring in November Rose to Highest Level in 2009

In November, U.S. discount, grocery, restaurant, and specialty chains hired the largest number of people in 2009. It signals that retailers may be anticipating a gradual recovery in consumer spending. Last month, 3.87 percent of applications resulted in job offers, which is the highest level this year after adjusting it for seasonality. “While these are classic signs of a gradual, post-recession recovery, last month’s hiring increase might be a ‘spill over’ from October, as retailers delayed the peak season for taking on employees.”

End to stimulus moves threatens more job losses

This article discusses the potential for an increase in unemployment if the stimulus strategies end. According to the International Labor Organization, further measures must be taken in order to create jobs. Without the stimulus and these efforts, employment is not predicted to ever make a full recovery until 2013. Job losses may have been less than predicted, but this in large part due to the tendency for companies to give employees less hours, with government support, than to fire them. Therefore, the ILO argues that it is essential that we do not end the stimulus prematurely.

Concerns about Comcast-NBC

This is an article on the proposed takeover of cable network giants NBC, by cable providing giants Comcast.

It is believed that Comcast's takeover of NBC could prove to be highly taxing for ad agencies and also for those linked directly to NBC. There are rising concerns over Comcast's intentions on barring rival cable providers access of NBC networks.

Even though GE has officially stated that Comcast is ready for the takeover, consumers are overly concerned with Comcast's plans to set higher fees for its customers.

A fascinating piece of news which will be even more interesting to follow as newer developments are reached.

U.S. Forecasts Smaller Loss From Bailout of Banks

As the world and the US economy begin its long but slow journey to recovery, this article in the New York Times aims to settle some nerves down concerning the use of the bailout money for financial institutions. News in the past two years or so of the money being lent to banks and other similar institutions had been floating around for a while especially with negative publicity concerning the use of that money to reward high level officials with huge bonuses.
This article portrays greener pastures relating to the use of that bailout money worth $700 billion. Recent estimates show that the Treasury Department expects to recover all but $42 billion that has already been loaned out. At an extreme level, the government is expected to lose not more than $100 billion out of the total of $700 billion planned. These new estimates are good news for the administration as it is expected to lower the administration's deficit from $1.5 trillion to $1.3 trillion. This is good news for the country, both politically and economically as it will tend to bring a level of stability to the administration which has been taking the hammer for the financial woes of the superpower.

Banks and Information Technology: Silo but Deadly

Information Technology (IT) is incredibly important in any modern industry. It is especially important in financial services, which is responsible for more than a fifth of the world's total IT expenditure.

However, all that spending isn't necessarily paying off. Because banks were among the first to adopt computers, old technology is still in place. Switches to new systems become more and more complex as banks grow, so employees may be left with different numbers from different systems and things that just don't add up.

Was this a factor in the current financial crisis? Possibly. It was very difficult for banks to determine risk. Whether managers would have paid attention even if they had known the true risk will never be known, but it is clear that banks need to spend the money to develop integrated systems in the very near future.

Redefining 'emerging markets'

Due to the news that Dubai World, an investment company that manages projects for the government of Dubai, might default on $60 billion in loans brought back concerns emerging markets. However, it is now thought that certain countries in Latin America and East Asia are in their own separate class, called advanced emerging markets. These countries have shown resilience in the recession. The list includes Brazil, Hungary, Mexico, Poland, South Africa, and Taiwan. Investment abroad is expected to increase. Hopefully, this will bring these countries "ahead of the curve" and towards greater stability.

Luxury Makes a Comeback

Throughout the economic downturn, many people have sacrificed the more luxury items. Before the economic downturn, companies tried to get upper middle class people to buy their products - things that they couldn't really afford, but they bought to live the lifestyle they wanted. Now, the companies are going a different route to get new business in this time - and it's working. Sales are going up for many of these companies. They are increasing quality, and increasing price as well, but counting on the idea that people will spend more to get more. However, overall, sales are still expected to go down for the year.

Taxes, Taxes, Everywhere

This article discusses the measures taken by various states to increase their revenue. Many are facing extreme budget shortages, and are looking for solutions. Taxes are the first measure used, and they are seen in many ways - speeding tickets, horse racing, etc. The other form of taxes has to do with income taxes. They are increasing for those with high incomes. It will be interesting to see if budget deficits are improved by these measures.

Why Treasury Needs a Plan B for Mortgages

In this New York Times article, the failing job of the Treasury's plan to help homeowners change their mortgage terms is discussed. The Home Affordable Modification Program put in place ten months ago has done nothing that it is supposed to do and the Treasury points a finger at big institutions who are failing to do what they are supposed. The program is not working to help ailing homeowners with their mortgages and need to come up with a plan that is actually effective. According to a senior managing director and head of mortgage strategy at Amherst Securities Group,

"The Treasury program has decided to tackle the delinquent mortgage problem by reducing the interest rate on eligible borrowers’ loans to a level that makes monthly payments affordable. Her research shows, for instance, that 70 percent of modifications involving only interest rate cuts, rather than reductions in the principal borrowers owe, have failed after 12 months." People are just falling right back into default because the plan is ineffective. Something needs to be done or else homeowners will continue to foreclose and the real estate market will continue to suffer. 

India's recovering economy: Vroom, Vroom

India has recovered successfully after a devastating summer monsoon. Although it has left a mark of inflation especially in food prices as agriculture was tremendously hurt by the lack of rain, the Indian economy is very strong. They will need to get their high inflation under control before it becomes a factor which inhibits growth.

The Copenhagen Summit Stopping Climate Change

As the world leaders converge on Copenhagen yet again, what will the economic impact be of improved climate change policies? This article highlights some of the possible impacts.

Italy's Troubled Prime Minister Under Attack From All Sides

This article shows the inter-workings of Italy's government. Italy's governmental structure is closely mixed with business, some similarities to Russia. If the people of Italy get their way they will be celebrating a new prime minister very soon.

Obama boosts hopes for deal at Copenhagen

President Barack Obama agreed to attend the final negotiating stages of the Copenhagen summit to raise the prospects of a global deal on climate change. All of the world’s big economies have set objectives for cutting their greenhouse gas emissions. The fact that China and India participate in that mission is putting a lot of pressure on Mr. Obama. It will be much easier to accomplish these goals if the US agrees to participate in the program.

The Restructuring of Rusal Saving the Oligarchs

This article discusses Putin's relationship with the Oligarchs of Rusal, a large aluminum company. The relationship has recently changes and now the Oligarchs are working with Putin and the relationship is much less adversarial then it was a few years ago.

In Speech, Obama Calls Jobs Report a ‘Hopeful Sign’

President Obama said that the American economy had lost only 11,000 jobs in November, less than expected. However, Mr. Obama warned everyone saying that “we have a lot more work to do before we can celebrate.” The author of this article also mentioned that Mr. Obama is under pressure from Democrats who push him to take new steps to promote job creation. “The White House says he will address the issue in detail on Tuesday, and in speech at Lehigh Carbon Community College here on Friday, the president made no specific promises.” In addition, Mr. Obama noted that even though the economy is growing, many companies are still reluctant to hire.

Management Shake-Up Continues at GM

As we have talked about in class, General Motors continues to struggle to become profitable again, even after receiving government bailout money. Fritz Henderson, GM's chief executive, was ousted on Tuesday, and other shakeups followed. New presidents have been appointed to various regions, and the marketing and sales divisions are being recombined.

Last month, GM reported a loss of $1.2 billion but positive cash flows for the third quarter. A public stock offering is planned for 2010 or 2011.

The swiftness of changes within GM is surprising, given the traditional sluggish response that has characterized the automaker. Will it be enough to get GM on the path to profitability again, though?

Iran seeks to boost gasoline production capacity

Iran is the world 5th largest oil exporter and it is issuing bonds worth $250 million to help in financing the production of gasoline. There will be an annual interest of 15.5 percent. The issue of bond will help them in their imports like import of natural gas. as there have been sanctions on Iran by the U.S. The Iranian government approved a plan to issue bonds worth $2.2 million to help finance priority development projects.

Putin talks of possible return to presidency

Prime Minister Vladimir Putin sent his strongest signal yet Thursday that he plans to return to Russia's presidency in 2012. Although his words were short of an outright declaration, the fact that he would admit to considering a run underlined his steely ambition. There is almost no doubt Putin would win because of his genuine popularity and the overwhelming political dominance of his United Russia party. Putin said Russia has "overcome the peak of the economic crisis" and claimed credit for softening its impact. He added the government will have to spend more money to support the economy in the meantime as Russia continues to weather its worst economic downturn in a decade as commodities prices collapsed late last year. But it emerged from the recession in the third quarter, its GDP rising by a seasonally adjusted 0.6 percent.his industrialization drive and World War II victory, but he denounced the massive repression of that era. He accused former billionaire oil tycoon Mikhail Khodorkovsky and other top shareholders in the Yukos oil company of ordering the killings of opponents and commercial rivals. Khodorkovsky, once Russia's richest man, is serving an eight-year sentence on fraud and tax evasion charges widely seen as a punishment for challenging Putin. Putin also accused Washington of hampering Russia's accession into the World Trade Organization

Indian Shares End Up on Strong GDP Data

This article discusses some of the current trends in India's economy. Economic growth has been stronger than expected. Due to this, confidence has grown, and shares have risen. In fact, GDP in India has grew 7.9% in the last year, due to an increase in manufacturing. A large part of this manufacturing has been in the metals industry. Markets for metals such as aluminum and steel are significantly gaining. Many other indicating factors, such as the number of cellphone subscribers and the strength of banks have also been appreciating. I think this article can help shed light on what is currently happening in India while we are studying the country's economic system.

Facebook Must Woo Investors Before Any IPO

This article discusses how social networking leader, Facebook, has created a dual-class stock structure as they move closer to completing the company's plan to sell shares to the public. However, many investors have concerns because there is no sustainable model that looks great for social networking. Previous leaders, MySpace and Friendster, have almost completely lost their allure. So will Facebook follow the pattern or will they somehow continue their superiority? Nonetheless, in September the company announced it was cash-flow positive and on track to generate $500 million in revenue in 2009. These revelations did subside concerns that Facebook lacks a business model. Just think, one day you may own shares to the site that is solely responsible for many hours of procrastinating....

Comcast Aims to Reshape Entertainment with NBC

Comcast recently announced plans to buy a majority of the NBC stock, giving them control over NBC company and the television stations and movie studios that it owns. While there may be some initial benefits in this for consumers, like quicker releases of movies to TV or faster TV on cell phones, many worry that Comcast is gaining too much power and is becoming a media conglomerate. Consumers could see higher prices and fewer choices with media becoming further concentrated due to this Comcast purchase.

GE, Comcast Announce Joint Deal

This article describes what will be the new ownership of the media company NBC Universal. General Electric is purchasing the shares in the company previously held by Viviendi, and it will lead to the company being owned 51% by Comcast, and 49% by General Electric. The deal will make NBC Universal much more valuable after its completion, because they will be combining their cable networks with Comcast. Since NBC Universal has been on a downward spiral in the last few years after a profitable decade in the 1990s, they are hoping this may turn things around.

Venezuela's Anti-Capitalist Cars: Wheels of Revolution

President Hugo Chavez of Venezuela has proclaimed that the Venezuelan workers are now free of the 'yoke of capitalism.' This comes from the joint venture of automobile manufacturing between Iran and Venezuela. President Chavez intends for this venture to be an example of socialist production principles. The only claims that support this anti-capitalist sentiment is the fact the autos are priced around 50 percent less than rivals. There is also no dealership facilities or credit facilities for citizens of Venezuela to go and purchase these automobiles. The only way to get one is if President Chavez orders them for public employees.

US gold hits record $1,218.40 on investment demand

Yet again gold prices have hit an all time high of $1,218.40 per ounce, as a result of an increase in demand for a currency hedge.

The result of the growth in gold prices could be blamed upon the strength of the US dollar, as well as on heavy buying by hedge funds and other gold investment products.

The range of gold prices between the last price and today's price is: $1,196.50 to $1,218.40.

The price of Silver increased too. The range is between: $19.10 to $19.47

Platinum was another metal that rose to all time high of $1,510.50 per ounce.

Another metal that rose was Palladium. It is currently worth $393.05 per ounce.

Its amazing to see the price fluctuations in global markets as well as the continuous flickering of gold and other precious metal prices.

I have been using a site to further see these fluctuations in greater detail. If anyone is interested, check out: www.netdania.com

Are You Too Late for the Junk-Bond Party?

Every once in a while, people don't just invest in an asset; they swarm it.

That's what has been happening to junk bonds. Goaded by the monstrous returns on junk—53% this year—and the miserable yields on cash, investors have put well over $20 billion into high-yield bond funds in 2009.

"The inflow of funds has been phenomenal," says Daniel Fuss, manager of the $18.5 billion Loomis Sayles Bond Fund. "I have not seen a rally like this, ever, in the high-yield market." Mr. Fuss bought his first junk bonds more than 40 years ago.

As they so often do, investors are piling in even as the party may be starting to wind down.

There have been plenty of reasons to party. A year ago, in the depths of the financial crisis, the bonds of below-investment-grade companies traded at an average of only 61 cents on the dollar, about as cheap as they have ever been

Stocks slip on concerns about holiday spending

NEW YORK (Reuters) - U.S. stocks declined moderately on Monday as weak data on holiday retail sales prompted questions about the consumer's ability to spend. The S&P Retail index (Chicago Options:^RLX - News) fell 1.3 percent after the National Retail Federation said that total Black Friday holiday spending was down from last year, suggesting that consumers were still reluctant to spend. "So far, the numbers don't look very strong," said Bruce Bittles, chief investment strategist at Robert W. Baird & Co in Nashville.

Wall St. Wanders as It Tries to Gauge Dubai Fallout

Wall Street shares fluctuated on Monday as investors gauged the fallout from Dubai’s debt crisis and weighed results from the first weekend of holiday shopping. The sales on the weekend after Thanksgiving provided a first snapshot of consumer spending for the holidays. Some 195 million people visited stores and shopped online over the weekend, up from 172 million last year, the National Retail Federation reported on Sunday. But total spending was virtually unchanged at $41.2 billion, and the average shopper spending fell to $343.31 a person, from $372.57 a year ago.

The Chinese Disconnect

The value of Chinese currency is not determined by supply and demand. The government controls the value by buying or selling Chinese currencies in the foreign exchange market. By keeping a fixed exchange rate with the dollar, China is able to maintain a huge trade surplus. This is not a good policy during the depression now. Because Chinese goods become so cheap that other countries have difficulties in competing with China. In other word, Chinese currency policy hammers growth in other countries.

Upstart Chinese Telecom Company Rattles Industry as It Rises to No. 2

In this article, Kevin O'Brien talks about Chinese telecom company winning an important contract in Scandinavia, battling such competitors as Ericsson and Nokia. According to O'Brien, the company has won acclaims for its innovation, competence, and low cost structure. As a result, currently it has one of the highest sales in the industry and continues to gain market share.

This article is very interesting since it shows how innovation is possible in an economy, which is not fully market-based. It also shows how China successfully goes through transition allowing for enough freedom for companies to innovate.

Down in the dumps

This article talks about general problems in the ex-communist economies . The author states that almost half of the citizens in those countries still feel that they had been better off in 1989 than now. In addition, according to the author "east Europeans face higher taxes, bigger debts, less public spending, lower pay and fewer jobs"; in the meantime, they do not have the same shock-absorbers as in the west.

Debate on Creating Jobs, Without Raising Deficit

President Obama has decided to shift his focus from health care to the growing unemployment problem the United States is currently facing. The Obama Administration is under increasing pressure from lobbyists to increase stimulus funding for those unemployed. However they are also facing pressure from government organizations to cut spending and get the federal budget under control. More and more people, including Republican representatives, are asking 'where are the jobs?' It will be interesting to see if the Obama Administration will be able to create jobs for the unemployed while curtailing government spending.

Austerity has helped Hungary to survive the recession—so far

For those who have read "Globalization and Its Discontents," this article would be a very good example of the IMF policies. In summary, it talks about cutting the government spending as a measure of combating recession in Hungary. Such an approach, contractionary in its nature, may seem very controversial. However, everything becomes clear, when the author mentions the IMF loan and the IMF requirement to keep budget deficit within 3.8% of GDP.

In reality, this IMF policy is not aimed to help out the Hungarian economy, but to support foreign-owned banks and the financial sector in general. Meanwhile, cutting government spending may have dire effects on the economy in the long run and can cost quite a few jobs.

Deflation in Japan: The Curse of Defeatism

Japan along with the rest of the world is facing an economic downturn. They are experiencing a severe deflationary problem. The new government, as well as the Bank of Japan seem to not be concerned with tackling this problem. Prices are falling and according to the Bank of Japan, may continue to fall for the next two years. This will cause the burden of Japan's debt to increase as well as cause firms and households to reduce spending. Japan also has high interest rates which does not help this situation out. The article concludes with guidelines for Japan to get out of this spiral.

Pigou Gets His Recognition

This article give history and discusses the importance of economist Arthur Cecil Pigou. His views are very applicable in today's economy. Pigou was the premier economist to consider social costs (today termed 'externalities') and how they should be considered in weighing the costs and benefits of a project. Pigou introduced the idea of marginal external cost which in tern founded the idea of a "Pigouvian Tax." Pigouvian taxes are being used in different forms today such as taxes on emissions from businesses.

Current day economist, Greg Mankiw, is a fan of Pigou and even started an informal Pigouvian Club. The article also briefly discusses how Obama is a Pigouvian whether he knows it or not.

Reading this article will give you a good picture of the pivotal economists in the last 100 years.

The Gloves Go On

This article gives an overview of the poverty, inequality, and growth numbers in China, India, and Brazil. China appears to be the best in terms of reducing poverty rates. For example, in 1981, 84 percent of Chinese population lived below the poverty line. In 2005, only 16 percent lived below this line. Even though the number is still very high, the progress made by China is very impressive.

India did relatively good job in reducing poverty. It also achieved high rates of economic growth and a better equality. The Gini coefficient decreased from 35.1 to 33.4 in 14 years (lower number indicates a more equal distribution). Brazil was not successful at all. The Gini coefficient remained high, the poverty rate decreased, but to a much smaller extent, and the average growth rate was relatively low. The author stresses out that both Asian countries should learn some lessons from Brazil.

Dubai banks given extra liquidity

A follow up with whats going on in Dubai with the debt extension. The central bank of the UAE is willing to provide liquidity to UAE banks and foreign banks operating in Dubai. Take a look at the article

A Grim Outlook on Benefit Taxes

Medicare and social security will eventually go bankrupt and leave all those who paid in without benefits. There has been recent talk especially by Senator Harry Reid of putting a surcharge on Medicare payroll taxes for those who make over $200,000. This in effect would increase taxes for the wealthy even more with them paying like 12 or 13 times more than lower-income workers. This would hurt the economy and decrease productivity because of the reduced incentive to make money since it will just be taxed away. 

The author make a very interesting point about the long term effects of increasing taxes: "For high-income workers (earning the equivalent of $500,000 in today's dollars) the combined Medicare and Social Security tax has been growing at about 6% per year for 33 years. Another 50 years of such growth in entitlement taxes versus, say, 3% per year growth in income, means that two-thirds of a high-income earner's pay will go toward Medicare and Social Security. Assuming federal and state tax rates stay "reasonable" at 45% or so of income, the rich will have to borrow money in order to meet their total tax burden." 

U.S. IPOs Have Little International Flair

This wall street journal article discusses the recent increase in the issuance of United States IPOs along with the fact that other foreign companies have gone public but are not listing in America. Big foreign companies are going public and only a slight few are choosing to list in America. Just this year almost a 140 Chinese companies went public but only 10 went to list on American exchanges.  It has been a long time since the United States have led in the world of IPOs. Other countries are developing with growing economies and do not need America like they once did. 

South Africa moves out of recession

South Africa has moved out of recession with its .9% growth of its economy. It is the end of the negative growth in the last 17 years. S. Africa has suffered from economic contractions for the last nine months. South African dependency on global demand, job losses and South African firms failure would be prevented from a sharp recovery.

Abu Dhabi to 'assist' Dubai World

Dubai is going through debt problems. Dubai World is $59bn in debt has started to disappoint many investors in Dubai. Asian and European banks has quickly distanced themselves from Dubai. Shares on the Hang Seng Index in Hong Kong dropped steady to 3.45 percent after the morning session and down 765.28 points to 21,445.13 due to panic. Dubai will have to suffer a lot because of a lot of panic after the news and due to others reaction to the news.

Honduran economy faces challenges

The economy of Honduras has been suffering for a while and now they hoping for some change after upcoming elections. People are hoping that the new government can help fix the long done damage to the Honduran economy whereas Manuel Zelaya is boycotting the upcoming elections repeatedly.

European Confidence Improves to Highest in 14 Months

This article mainly states that European confidence improved in November to its highest level since the collapse of Lehman Brothers. It suggests that the recovery of the EU is moving forward. Consumer sentiment index rose from 86.1 to 88.8 in November. The author points out that the euro-area economy slowly recovers from its worst recession in 60 years mostly due to numerous bailouts and decreased interest rates.

Dmitry Medvedev's Building Project

The article discusses attempts by the Russian government to modernize the economy. The Russian president expressed recently his concern with strong dependence on natural resources, corruption, and rent-seeking. Now, he is planning on putting resources into various nanotechnology projects.

Even though the idea seems to be right, it is highly unlikely that Russia is going to reach desirable results any time soon. The author believes that unless the political system is reformed, there simply won't be incentives for the government to modernize the economy because it would definitely cut into politicians own profits.

I believe that the situation as we observe it now is not only the result of corrupt actions of the government, but also the result of incompetent transition to a market economy. The infamous "shock therapy" and rapid privatization created the severest inequality in the country, which resulted into concentration of monopoly power, corruption, and more importantly into the draining of human capital. Consequently, the level of innovation in Russia is very low, and the government does not provide any incentives for companies to innovate.

Unfortunately, I don't think that there is a quick remedy that would improve the situation somehow. The country needs reforms both in political and economic systems that if done right require a great amount of time. Still, I agree with the author that the political and, to say more precisely, judicial system should be reformed first to provide basis of institutions on which a market economy could be built.

Bernanke Warns of Risks in Push to Revamp Fed

This article discusses how Chairman of the Fed Ben Bernanke is warning politicians to take a step back from bank regulations and allow the central bank to do its job.  Does the Fed function as a political entity or a bank trying to make a profit?

Beijing Plans to Continue Its Stimulus Next Year

In this Wall Street Journal article China's plan to continue its stimulus into 2010 is discussed. Despite issues or concerns about the plan on the economy, the Chinese government will continue with their same stimulus. Accordingly, "the Politburo of China's Communist Party met Friday to discuss economic policy for next year, and decided it will 'maintain the continuity and stability of economic policies, and continue to implement the proactive fiscal policy and loose monetary policy.'" The Politburo promises for more economic growth and efficiency by leaving room for a few changes within the next year. But the real issue is that there has been nothing done for long term sustainable growth, only short term. A few Chinese economists are also voicing concerns about this plan wasting investment money. There are is much that needs to be done in order for China to prosper in future years. 

An Economist's Invisible Hand

At the Heavenly Models home for deceased economists, an award is being presented to the resident whose work best explains financial crises, global warming, and other pressing issues of today. The favored candidates include John Maynard Keynes, the patron saint of stimulus programs; Hyman Minsky, an American disciple of Mr. Keynes who warned about the dangers of financial deregulation; and Milton Friedman, the late Chicago economist. (Mr. Friedman's free market principles are out of vogue, but Federal Reserve Chairman Ben Bernanke recently took his advice on how to prevent depressions by pumping money into the economy.)

Obama should dine with Singh more often

Why are US-India relations important for many years to come?

This article was published in the NewYork Times on the eve of the Obama's state dinner with the Indian Prime Minister- Manmohan Singh. The article talks about the importance of US's relations with India especially in comparison to the US-China relations.
The US-China trading relationship is gigantic but very one-sided. America's imports from China are 4.5 times its exports to China. On the other hand, America's trade with India is small but growing. However it is more balanced than not when compared to that of China. Indian exports to USA are only 25 percent larger than U.S exports to India. Moreover, India is more open to FDI than it was before which is a postive sign for the near future.
What America's partnership with India does is to balance out the politics and trade in the Asian region. India is indeed the largest democracy in the world. However, America cannot afford to ruin its relations with China. The only way to tackle its one-sided trade affair with China is to look for alternatives, and India provides a perfect one.

The Lehman Crisis: An Unhappy Anniversary

One year after the collapse of the Lehman Brothers, many are still discussing the causes and impact of the financial crisis that has crippled our economy. The roots of the crisis, lay in the real-estate debacle, where CEOs of major financial institutions failed to control risk and over-leveraging in real estate and real-estate related assets. As a result there was a huge exodus from private capital to safe Treasury securities, paralyzing capital markets, freezing lending, and send risk premiums on corporate and personal debt to record highs. The Feds definitely shoulder some of the blame for not anticipating the crisis, however they should receive some credit for their immediate response. There is dire need for a reform to establish procedures for winding down and liquidating large, troubled nonbank financial institutions. It is critical that we learn from our mistakes and prevent such an event from occurring in the future.

O.E.C.D. Cautious in Economic Forecast

This article discusses a particular role China has had in the recession. China has helped pull many OECD countries out of a recession, mostly due to easy bank lending and their large stimulus package. These things have allowed China's economy to expand rapidly. However, it will still be a difficult journey toward sustained growth. Growth is expected to be stuck at a low level for a while due to high debt levels. Still, hopefully this growth trend in China will contribute to an eventual full recovery.

Dealing with America's fiscal hole

The deficit problem of the United States seems a big problem which do not have clear answers. The article explains that the United States held federal debt for 41% of GDP last year and it will double in the next decade. Even though a sudden crisis is unlikely from the case of Japan and Italy which holds much more debts, the US should think about tight monetary policy especially when inflation threatens private investment (crowding out effect). America's deficit problem is in essence a spending problem. However, American citizens seem to prefer bigger government and more help for health care as well. The author suggests the possibility of tax revenue reforms and explains some examples.

From the book (The Birth of Plenty) that I have read last week, I learned that the government should ensure property rights, scientific rationalism, capital market, and transportation and communication. I feel that the US already covers these four factors and government size is now becoming very big. The government might better off by giving out some of the roles to private firms. However, it might not be "now" since people are still suffering and need some help. I hope the gilemma will be solved in a few years.

Green With Envy

This article discusses the fundamental tension throughout the world between the effectiveness of carbon reducing policies and commitment to free trade. There is an urgency to deal with global climate change right now so naturally nations are drawing up policies to limit emissions. However, in the globalised world that we live in today, trade outside of a countries borders could have a problem with emission limits. Different countries will likely have different carbon emission, which could lead to political problems.

Should Government Policies Favor Owners Over Renters?

The author of this article argues that the tax credit given to those who purchase new homes is very inefficient. He says that those that who will receive the tax credit would have bought a house without it anyways. In addition, the sales spurred by the credit, will shift renters into owners, which does not absorb the excess supply of houses. He also notes that besides the inefficiencies, 70 percent of all the dollar benefits, "accrue to households with adjusted gross income greater than $100,000. The tax credit may unintentionally be weakening the rental market.

Government and poverty

An interesting piece on the role of government in providing an environment where prosperity is not reserved for only a few.

Thanks to prof. Gitter for pointing out the article.

Mixed Forecasts for Holiday Spending

This article discusses the difficulties in predicting the holiday shopping season this year. There is an odd mixture of positives and negatives that are making it significantly less simple to forecast how well retail sales will do. The overall consensus seems to be that sales will drop no more than 1%, and will increase no more than 2.4% during the period of November and December. Despite this relative agreement however, there are still many disagreements existing on how exactly retail sales will perform and which areas will or will not sell well.

State Unemployment Rates Rise in 29 States

Unemployment rates are unfortunately not going down as before in many states according to this article. There was a report of an increase in unemployment in 29 states in October - up to 15.1% in Michigan. However, there is good news that rates fell in 13 states in the same period. Despite the dismal title of the article, there are encouraging statistics later, describing the number of jobs added in several states recently.

Chocolate giants ponder Cadbury bid

Hershey and Ferrero are competing with Kraft's to buy Cadbury. Cadbury has rejected the Krafts bid of $16.4 bn. Shares in Cadbury rallied 1.21 per cent on Wednesday to close at 797.50 pence in London. According to Wall Street Journal Hershey is getting aggressive about getting Cadbury. But it will be for Hershey to come up with a higher bid than Kraft. Hershey owned $119 million in cash and $1.5bn in long-term debt. 85 to 90 % of Hershey's sales are in the relatively slow-growth market of the U.S.

10 biggest job interview blunders

This article is not directly related to class materials but it is still a good read for all of the seniors seeking employment after graduation.

$4.8 trillion - Interest on U.S. debt

This article highlights the high debt, mainly interest, that the government has incurred this year. What does this mean for the role of the government in economic systems, as well as what are the implication of interest on future government involvement.

Obama Trip Shows Gaps on Issues as Role of China Grows

The meeting between President Obama and Chinese President Hu Jinato was indicative of China's growing role on the world stage and the different approaches of the two. The two presidents discussed trade issues, and climate change as well as the threat of Iran and North Korean's nuclear programs.

Both presidents told reporters that the United States and China agreed to work togther resolve the conflicts between the two countries.  The article notes that they both used very general terms and consequently raised many doubts about how well the two will work together.

The rest of the article outlines the growing conflicts between the United States and China.

End protectionism, China tells US

The Chinese President has said that protectionism should be shunned between China and the U.S. during the recent visit of Obama in China and also they should work on their trade economic policies. They both agreed on working together side by side to make the current global economic crisis better.

1 in 6 Americans goes hungry

The Department of Agriculture report, which has been released annually since 1995, said the number of Americans that were hungry rose to 14.6%. In 2007, 13 million households or 11.1% of Americans had trouble getting enough food. The one-year jump is all the more significant, given the number of hungry Americans had never been higher than 11.9% since these surveys began. Obama is now urging Congress to pass a "strong" child nutrition bill to help ensure that American children don't go hungry. To combat the nation's rapidly growing hunger problem, the Recovery Act is allocating $20 billion to the nation's food stamp program, and hundreds of millions of dollars to food banks and school lunch programs, including the USDA's Emergency Food Assistance Program, which was allocated an additional $150 million from the $787 billion economic stimulus plan.

US gold hits record;dollar drop boosts sentiment

Whats happening right now within the gold market is fascinating and unheard of! Gold has hit an unimaginable record of $1,134/ounce within the United States market, as markets opened Monday morning. This is a direct result of a weakening US dollar, and has led to widespread reactions from people around the world.

The massive rise in gold prices have been good news for some and bad news for others. For my family back in India, the enormous growth in gold is a major disadvantage, as our business revolves around 'the manufacturing of gold and diamond jewelry.' As prices keep increasing as world markets open, its getting harder for jewelers to buy gold, since people are reluctant to buy jewelry in this depleting economy!

This article also refers to an increase in the prices of Silver, Platinum, and Palladium, as a result in the surge of gold prices.

Market insiders predict a further rise in gold prices with no immediate signs of a decrease in the metals growth.

Its a great time to have gold and sell within the near future!

Sinking Dollar Aids Exports, but Trade Gap Grows

The dollar's recent weakness is helping boost the sale of U.S. goods abroad, but it isn't yet narrowing the nation's trade deficit.

While exports of goods and services rose by a seasonally adjusted $3.7 billion in September, higher fuel prices and strong demand for imported autos more than offset the gain, pushing the trade deficit to its widest point since January and highlighting a dilemma for policy makers: As the economic recession winds down, the trade deficit is quickly expanding.

Obama’s Free-Trade Credentials Draw China, APEC Scrutiny

Among the many issues discussed at the Asia Pacific Economic Cooperation Conference in Singapore, free trade and the Yuan's value created friction between the US and China. Basically, the US was calling on China to loosen its managed floating exchange rate regime to reflect a higher valuation of the Yuan. The US argues that the Yuan has been kept unreasonably undervalued to make exports competitive, contributing to the US' trade deficit with China. China hit back at the US, accusing it hypocrisy in imposing trade barriers by levying tariffs on Chinese steel and tire imports, while pressuring China to liberalize the Yuan.

The outcome of this dispute will be interesting. With China's rising economic influence, the US will have less and less control over global economic issues. With this dispute, another issue arises - How much has the US lived up to its mantra of free market capitalism that it has championed since the cold war?

Oil rise 'could derail recovery'

There has been an increase in oil prices this year and it is being traded at the price of $77 a barrel. The price of oil fell $2.43 to $76.85 a barrel on Thursday after rise in US oil supplies. According to IEA the real economy suffering from recovering as compared to the financial one that is without stimulus spending the progress of the economy will die. There will be an increase demand for oil in the near future as there was an increase in oil demand in 2009 by 210,000 barrels to 84.8 million barrels a day.

Gloomy Jamaica: Unfixable?

This article discusses the massive debt of Jamaica. With the global financial crisis, Jamaica's exports have been hurt and their deficit has grown substantially. Discussions for debt relief are taking place with the IMF, but the economic situation remains grim. Corruption and gang presence, as well as violence, is still high. The government needs to eliminate high crime rates before they can create economic growth and pay back their debt.

Wall Street Makes It Hard to Earn Legal Living

This article makes an argument that it is very hard to make a living legally on Wall Street. Even though there are many honest and decent people on Wall Street, they work in such an environment that constantly compromises their ethics. “The goal of investing is to get an edge, whereas the securities laws presume all investors should have the same information at once. If ever there was a recipe for a system rife with abuse, this is it. The harder that money managers, traders and analysts must work to get information that gives them that edge, the more likely some are to cross a legal line.”

The Cult of the Faceless Boss

Is it better to be unforgettable or to blend in? This article discusses the trend for executives to be bland and boring rather than noticeable. Perhaps the trend for faceless CEOs is a reaction to yesterday's vivid bosses, or maybe it is a just a strategy for trying not to get fired in such a turbulent economic climate.

Yet it is possible to take things too far. The people who have revolutionized their businesses have been interesting, memorable people--think Henry Ford, Thomas Watson, and Bill Gates. The point of this article is clear: an unusual degree of turbulence requires unusual bosses, not identikit ones.

US Trade Gap Widens Unexpectedly

Recently released figures indicate the trade gap, the difference between imports and exports, grew 18.2% to $36.5 billion from August. The reason why we have seen such a huge trade gap is due to the deep recession that has crippled the US economy and plummet the value of the dollar. Furthermore, US imports from OPEC rose to $11.9 billion in September. We are heavily relying upon OPEC for our supply of oil and this can cause huge implications. However, imports have increased 5.8%, which is a strong indication the consumer spending and confidence is slowly recovering. If this trend continues it will be beneficial for the economic welfare of the US.

Obama vows renewed ties with Asia

This article highlights President Obama's attempts at renewing interaction with Asia. He mentions that the happens of Asia have a "direct impact" on the United States economy. What will renewed ties with Asia mean for the global economy?

Boom Times

Raising prices during a recession usually isn't a great idea. For America's colleges, however, it has been a successful strategy. College enrollment rates are at an all-time high across the country. In October, 41% of 18-24 year olds were enrolled, up from 39% a year ago. This is in spite of tuition fees that have risen 4-7%.

The economy seems the most likely culprit, as unemployment hit 10.2% in October. It was an even higher 19.1% for 16-24 year olds. Other possible reasons are the college premium and the fact that the pool of potential college-goers has grown.

Subcrime

"Wall Street 1, US 0." That was the headline after Ralph Cioffi and Matthew Tannin were acquitted of lying to investors about the state of subprime hedge funds at Bear Stearns.

Prosecutors tried to prove that emails between the two showed them panicking behind the scenes as they reassured the public. However, the jury decided that the emails had been taken out of context, even praising them for working so hard so save their funds. They decided that the losses of $1.6 billion resulted from poor judgment, but nothing illegal.

The trials likely aren't over, though; prosecutors are working on building cases against former bosses at Lehman Brothers and AIG, among others.

US trade gap widens unexpectedly

The US trade deficit gap widened in Sept. The difference between imports and exports grew by 18.2% to $36 bn from August. Import rose biggest since 5.8%. The trade gap with China has narrowed by 15.9%. US imports from the oil cartel Opec rose to $11.9bn highest since Nov 08.

Swiss Privacy Agency to Sue Google Over Street View

This article talks about the recent action Swiss officials have taken in to sue Google to get them to tighten privacy safeguards on its Street View online service. Street View shows a panoramic view of streets all across the world. Google blurs out faces and license plates that might show up and users of the service can also request that images of their homes can be removed or blurred. Initially, the Swiss had been accepting of Street Views but now are going back on their offer. The complaining agency said that Google was not clear with their intentions and they thought it would just be in busy areas. Google has gone into more secluded neighborhoods where people can be identified even if their faces are blurred. This is yet another case of Google being a large influence on technology and innovation. The courts have not yet made a ruling, but it will be interesting to see what happens in the future.

Arby's Slipping Down the Food Chain

This outlines the problems experienced by fast food restaurants hardest hit actor - Arby's. In the recession, McDonald's is said to be the overall "winner" and it's counterpart is Arby's - the "loser." This is partly because in consumer spending, the article says, it is a zero-sum game. Statistics have been low for the restaurant the last seven quarters it was measured. This year, the numbers have fallen even more dismally.

It then discusses possible reasons behind this issue - especially focusing on Arby's lack of options for healthy choices and lowering prices on items while selling less as well.

New Fed rules require customer consent on many overdraft fees

Financial institutions will soon be banned on charging overdraft fees to their customers without giving them consent. This is an effort by the Federal Reserve to protect consumers who are being hit hard from the recession.

Geithner Affirms Strong Dollar Policy

TOKYO -- U.S. Treasury Secretary Timothy Geithner said Wednesday that maintaining a strong dollar is "very important" for the country's economy, sticking to his mantra on foreign-exchange policy as the U.S. currency continues its broad downtrend.

"I believe deeply that it's very important for the U.S. and the economic health of the U.S. that we maintain a strong dollar," he said at a roundtable discussion with Japanese reporters. "We bear special responsibility for trying to make sure that we are implementing policy in the U.S. that will sustain confidence not just among American investors and .. savers but investors around the world" that the U.S. will fix its budgetary problems as its economy improves.

Lack of major changes in his tone indicates that, while he doesn't want any dollar freefall to shake the recovery in the U.S. economy, he may find it comfortable as long as the currency declines at a manageable pace. A weaker dollar could boost U.S. exports by making them less expensive abroad, lifting the nation's growth and cutting its trade deficit.

Job openings remain close to record-lows

WASHINGTON (AP) -- Job openings are at rock-bottom levels, according to government and private surveys released Tuesday, a trend that could keep the unemployment rate high even as layoffs slow. Small businesses in particular are reluctant to add workers as they struggle to obtain credit. Many are pushing their current employees to produce more. Economists say small businesses account for about 60 percent of new jobs.

U.S. Says Mortgage Help Is Reaching More Homeowners

WASHINGTON (AP) — After a slow start, the Obama administration’s mortgage relief program has reached one in five eligible homeowners, a government report said Tuesday.

Energy agency warns of falling investment

The global financial crisis has led to a dangerous drop in energy investment around the world which could choke off the nascent economic recovery, the International Energy Agency said Tuesday.

The EU has said that there should be a euro100 billion ($150 billion) annual package of public and private finance by 2020 to help poorer nations develop green industries and adapt to climate change.

The IEA, a policy adviser to 28 mostly industrialized oil-consuming nations, estimates that the financial and economic crisis is responsible for a $90 billion drop in global oil and gas investment this year, a 19 percent cut from 2008. The resulting drop in oil and electricity supplies could "undermine the sustainability of the economic recovery," the IEA warned.

Meanwhile, oil demand is set to continue rising over the next two decades, with a drop in developed countries oil use more than offset by increases in the developing world, mainly China and India, the IEA said.

It seems as if people's marginal utility for spending on "green" energy for the environment has decreased, which will not only result in the negative externality of further pollution, but could also lead to higher oil prices in the short term during the current crisis.

Health insurance tax = higher wages?

Many economists are beginning to assume that wages actually might rise over time if lawmakers end up taxing the most expensive health plans offered by employers. The tax is the leading proposal in the Senate to pay for the expansion of health insurance coverage to the roughly 46 million Americans who are uninsured. It would apply to high-cost health plans offered by employers, which typically include health, vision and dental insurance, among other health-related benefits. The proposal would raise an estimated $201 billion over 10 years, according to the Joint Committee on Taxation (JCT). But it could raise a lot more beyond 10 years, since the thresholds would rise on a formula based on inflation, and health care costs increase far faster than inflation. Translation: As health care costs rise, more and more plans will exceed the threshold.

Stock volatility is back, a sign of an aging bull?

This article points out that stock market volatility is back, which is a sign that the powerful rally that started in early March may be coming to an end. The Dow Jones rose and fell more than 100 points in seven of the past 12 days. The reason for this volatility is simple. Investor anticipation of an economic recovery played a large role in the stock market's advance over the last eight months, but recent economic indicators have been sending mixed signals, leading some economists to predict a double-dip recession and others to forecast a recovery as steep as the decline.

As Dan Deming, a trader with Stutland Equities, says, “it is a psychology that drives a big chunk of the market. This is not a typical year, and we've seen huge gains. People are looking to take risk off the table, and looking to get out of the market.”

Too Little Of A Good Thing

This article discusses the effects of Obama's stimulus plan. The author Paul Krugman explains that, as macroeconomists had predicted, the stimulus is far too small given the scale of our economic problems. Additionally, unless something changes drastically, we’re looking at many years of high unemployment. However, Krugman does go on to complement the Obama stimulus plan on its ability to do enough to break the vicious circle of economic decline. Aid to the unemployed and help for state and local governments were probably the most important factors. Overall, the most important thing is that the US continue with the stimulus plans, but to increase them much more.

Pay For Delay

This article discusses country's abilities to help domestic unemployment during these recessionary times. The US may lead the rich world in periods of prosperity, but Europe has shown a greater talent for dealing with recession. Unemployment in theEurope has risen by 30% from its pre-crisis levels. America’s jobless rate has more than doubled. Wage subsidies and fatter jobless benefits have softened the impact of the recession but may yet hurt recovery.

Medical Industry Grumbles, but It stands to gain from Overhaul

The Health Care issue still stands. The businesses in the United States are still unhappy and complaining about the House bill that will make huge changes in the health care system by providing insurance to millions more of Americans. The new bill is going to make a government-run insurance program, which upsets insurance companies. Also it is going to cause drug makers to give the government back billions of dollars of rebates over 10 years. On top of that it will cause providers of artificial hips, heart defibrillators, and other medical devices to put a 2.5% tax on their products, which upsets them. Large and small business employers are complaining because health care as been a long-time benefit for many of them, and will now be a "federally mandated obligation."

However, Steven D. Findlay, a senior health policy analyst, says that the new bill will not hurt any industries, but rather will help all of them. He said that as many more Americans receive health coverage, the businesses will receive revenue streams that they did not have before.

Although the analysts are making this bill sound like it will be a gain for all businesses, it will actually only be a gain for those businesses in the health product industry. For those businesses who are just providing health care coverage, the new bill is not something they are going to be happy about.

Twin deficits will help gauge economic health

Economist believe that more economic damage is ahead of us do to the fact that the United States is importing a lot more than we are exporting, thus causing a trade deficit. As well as deep budget deficit because the government is spending more money that it’s bringing in. In October it is set that the federal government spent $150 billion dollars more than it brought in.

Haute Couture, Available Through the Netflix Model

This article discusses how the fashion industry is taking advantage of the Netflix business model by renting out high end dresses.

China Pledges $10 Billion to Africa

China has recently offered a multibillion dollar package of assistance to African governments. They has also agreed to forgive remaining debt with Africa. This deal will include greater access to oil and minerals, which is important because Africa is very resource rich. The Prime Minister of China reported that this plan "represents a new stage of development in relations with Africa." However, China's clear focus on extracting Africa's resources has many Africans questioning the deal. In addition, reduced trade barriers will bring new Chinese goods into Africa, which might crowd out consumption of locally made goods.

As Downturn Eases, India's Leader Forecasts Growth

This article talks about India's incredible recovery from the global recession and its pledge on spending more on health care and education in the coming year.

India's Prime Minister, Dr. Manmohan Singh also promises to make his country more attractive in order to attract an increased amount of foreign investment, in the country's already massive $1.2 trillion economy.

At the recent World Economic Forum, he said India's growth in 2009 stood at 6.5%, and he further predicted that 2010's growth would be at a staggering 7%!

India's move away from recession was summed up in Dr. Singh's words that stated, 'the worst is behind us!'

Wal-Mart's New India Push

Wal-Mart is looking to take advantage of opportunities in growing economies. India is the second-fastest growing economy after China. The company's influence in America is substantial, but the opportunities for growth here may be exhausted. Their future strategy is focused on international expansion. The company has over 8,000 retail units under 53 different banners in 15 countries and sees emerging markets as a significant source for growth. Currently though, " Indian laws don't allow foreign retailers to open multi-brand stores. Foreign investment is allowed only in single-brand retail to the extent of 51%." Wal-Mart is making the case for job creation in India's economy and how it will aid farmers and small and medium size enterprises.

The Wall and the End of History

This article highlights the changes that have occurred in the past 20 years since the fall of the Berlin Wall.

Jobs gloom, with glimmers

This article is about the recent hike in the unemployment rate. This is some what of a surprise with the recession being apparently over. Luckily the job market is set to rebound in the near future.

Bank pumps $41B more into UK economy

The Bank of England's monetary policy committee voted Thursday to pump $41 billion in cash into the UK economy. The recession we feel here in the U.S is mirrored in the United Kingdom. The goal of the money is to induce spending, known as "quantitative easing." One major goal of the program is to instill confidence in consumers, that the bank still has ammunition to attack the recession. Speculation remains on the effectiveness of the quantitative easing program. Quantitative easing is a new program and its effects are not clearly understood yet. The third quarter registered continued contraction in the UK economy. One critical factor delaying Britain's exit from recession is the difficulty smaller firms face obtaining adequate finance.

German Reunification: From Rejection to Inevitability

This article appearing in The New York Times makes reference to the reunification of Germany after the collapse of the Berlin Wall and what is going on today. The author notes that Germany still "functions with an intensifying sense of self-interest and irritated discomfort in the face of responsibility" and many have said Germany has been financially selfish not worrying how their actions affect the rest of Europe. The article discusses the different people that rejected the reunification of Germany, Margaret Thatcher being one of them. As we learned in class, East Germany diminished as a state, and fell behind in matching West Germany’s "immediate promise of freedom and economic well-being for all Germans", making reunification seemed inevitable.

House Passes Health-Care Bill in Historic Vote

As of yesterday, the health care bill just barely passed in the House and will now be awaiting the results in the Senate. However, the author of this article brings up a good point in that "The narrow passage in the House, where the Democrats have a large majority, underscores the divisiveness of the legislation. It faces a tougher fight in the Senate where Republicans and some Democrats argue that the bill is too costly and won't achieve its goals." 

I think that Representative Paul Ryan makes a very vital point for this $1.2 trillion bill: "Does this bill mean the government will take over running health care? Yes. "But what's worse, this bill replaces the American idea with a European-style social welfare state." 

The bill is face tougher competition in the Senate vote and go through lots of modification before it even comes close to being passed there. 

Interesting to note is that "To pay for expanding insurance coverage, the bill calls for hundreds of billions of dollars in cuts to Medicare aimed at eliminating its wasteful spending. It levies a 5.4% tax on the wealthy that targets individuals earning more than $500,000 a year and couples earning more than $1 million a year. All but the smallest employers would be required to provide insurance and pay for most of the premium, or they would face a fine of up to 8% of their payroll." 

The World After 1989: Walls in the Mind

This article discusses the climate of the ex-Communist, Central European countries after the fall of the Berlin Wall. After the fall, capitalism began to grab hold. Entrepreneurs came from all over to take advantage of the low costs, and entrance into the EU, promised billions of euros for modernization. The graph in the article shows that these countries still have a long way to go to be considered economic powers. The highest GDP per person is in Slovenia where GDP per capita is $24,180. While the fall of communism proved good for these countries in all aspects, they still need to truly show that they can grow their economies.

Rebuilding Haiti: A Step Backward

Haiti is in a fragile political, social, and economic state. Modest gains that had been made in political stability were undermined by the overthrow of the prime minister after a year in office, for reasons that seem insufficient. Luckily bloodshed did not ensue after the overthrow, however the impact of this move could affect donor aid to the much in-need people of Haiti. This article gives a snapshot of life in the poorest country in the Western hemisphere, and the importance of aid for economic growth there. Weak institutions, high levels of corruption, and geographic location among many other factors, have historically held Haiti back from growth and even created negative growth in recent decades. A significant change in institutions and stability will need to occur before significant growth and poverty alleviation will become apparent in Haiti, and setbacks such as the recent overthrow of a political figures are hopefully on the decline.

The Dark Side of the Productivity Surge

According to the Bureau of Labor Statistics, even though the economy is declining in the US, non-farm sector's productivity grew at 9.5% annual rate in the July-September Quarter followed by 6.9% in the second quarter. Is this a good thing for economy? The author says it wasn't because of clever efficiency measures or the purchase of wonderful tools that help people get their jobs done faster. Such improvements take years, not mere months. Rather, it was because companies cut jobs and work hours drastically. Work hours fell at a 5% annual rate even as output increased at a 4% rate, the government said. So people working shorter hours had to do the same amount of work as before, or more. People who kept their jobs had to pick up the work of ex-colleagues. Many workers probably put in extra hours that weren't counted in the statistics in order to get all their work done. That would exaggerate the output-per-hour gain. I think this phenomenon can explain the current situation why GDP is recovering in recent months, but unemployment rate is still rising in the United States.

A Globe Redrawn

The following article talk about Russia after the Soviet collapse. The author points out to the huge inflation, the result of the repressed inflation of the central planning era. Additionally, he describes how wrong incentives aimed at continuous industrialization led producers to make tonnes of steel or cement, or tanks and rockets that no one wanted, "while shops were empty of the things they craved." The author states that "producing goods worth less in real terms than the materials used to make them could not go on for ever." "Meanwhile, shortages created a crime-ridden black economy that, by some estimates, was worth as much as 30% of the real one, perhaps more." Thus,when the Soviet Union collapsed, and the government chose to opt for the "shock therapy" in the transition to a free market economy, there was no mechanism in place to support it.

House Moves Toward Vote on Health Bill

In this Wall Street Journal article, the health bill and its progress is discussed. This is an interesting article that describes what is happening with the bill and how it is expected to turn out in the different political houses. Although it seems that total amount of money going to be dished out for this bill increases daily, the total as of today is $1.055 trillion. According to the article, "The bill would extend insurance coverage to 96% of nonelderly Americans, setting up exchanges where they could choose between private plans and a government-run insurance option. Funding would come in part from a new surtax on wealthy Americans."