Telecoms: The Power of Mobile Money

This article describes the effect that a new technology and innovation is having in developing countries. A new company called M-PESA has made it easier, faster, and safer to move funds in Kenya by allowing the mobility of funds via text messaging. As strange and unreliable as it sounds, it has proved the best solution for saving for poor, rural, and isolated populations in Kenya. This has provided a reliable way to save, as opposed to other alternatives (storing wealth as gold, cattle, or currency) in addition to a time-saving mechanism as a person in a rural community does not have to spend all day going into the city to a bank. This small innovation could have serious implications for growth with an increase in saving, and has caused a huge change in institutions. This idea is spreading to other developing nations and could be one of the serious improvements in institutions needed to get developing nations on track to positive growth.

G-20 agrees on time table for reforms

As the G-20 Summit closes. It will be interesting to see if these new guidelines on debt, executive compensation, and loaning will make a difference in preventing the economy returning to "the brink".

Leaders Face Dilemma on When to Unwind

The global economy appears to be growing, after weathering the worst world-wide recession since the 1930s. But the severity and scope of the crisis and the downturn it provoked make the recovery's pace highly uncertain -- posing a dilemma for leaders at the Group of 20 summit.

The stimulus efforts and other programs governments have put in place to revive their economies are incredibly costly, saddling countries around the world with budget deficits that could weigh on future growth. The International Monetary Fund forecasts that in the next few years debt levels for the Group of 20 leading and developing nations will average more than 100% of gross domestic product -- the value of all goods and services produced by an economy.

Revivatlizing Diesel

Just when everyone is talking about Hyundai's incredible surge in the car industry and the high demand for hybrids, diesel is attempting to make a comeback. This article discusses how "European automakers are coming out with with series of of incentive and ad campaigns designed to improve perception, promoting the fact that new diesels' emissions are on par with their gasoline-powered counterparts, get up to 30 percent better mileage, and are in some ways greener than hybrids, which suffer from problematic battery-dispoal issues". It should be interesting to see how the European market responds to these new product lines. With both American and Japanese automakers shelving plans to bring more diesels to the United States, this may present a good opportunity for European automakers to make a run for the market. It should be interesting to see how Mercedes-Benz, BMW, Volkswagen and other European automakers perform in the near future with their diesel vehicles.

Snail's pace

Analysis released Tuesday by the IMF offers some less than positive insight into the recovery from the current recession, suggesting that effects of the downturn will be felt long after it is technically over. For example, output per head following a crisis is typically 10% lower than it would have been without a crash seven years after the crisis has ended. The IMF also found that recessions associated with banking crises lead to output declines that are three times as large as those that follow currency crises.

Even during recovery, many jobs are lost and many people drop out of the labor force. The number of discouraged workers was 758,000 in August, nearly double what it was a year earlier.

However, not all of the findings are cause for gloom. The IMF found that big increases in government spending help to limit damage, in spite of increases in government debt. But even if the US has made the right decisions so far, we must now decide when to end fiscal and monetary stimulus so that improvements are not stalled but debt is not increased more than necessary.

Much ado about multipliers

Why are economists so divided about the effectiveness of fiscal stimulus? As it turns out, the issue isn't as simple as it may seem. The fiscal multiplier is a critical component of the success of tax cuts or increases in government spending. The size of the multiplier is determined by many factors, including economic conditions, type of fiscal action, and how people react to higher government borrowing.

The Obama administration expects a multiplier of 1.6 for government purchases and 1.0 for tax cuts from the current fiscal stimulus. This is based on the assumption that the federal funds rate will remain constant for a 4-year period. Others estimate the stimulus will boost GDP by only one-sixth as much as the Obama team expects, using the assumption of a rise in interest rates and taxes in response to higher public borrowing.

It is very difficult to isolate the impact of changes in fiscal policy, so looking at historical data offers little help. To make things even more confusing, the current situation is different from the past because previous fiscal stimulus was focused on military spending. The conclusion? Economists can't predict the effect of the current fiscal stimulus with much certainty at all.

Tax Friendly Places to Retire

While this article may no directly apply to the students of this class, it is still a very interesting concept to read about. Most people never consider the taxes in a area in which they plan to relocate. Therefore, part of this article does apply to the our class, in which many of the students will graduate this year and possibly relocate for graduate school or other reasons.

The article outlines the different tax guidelines to many states. There is a discussion of sales tax, property tax, etc. One interesting concept was also that many states do not charge tax on Social Security - something very valuable for potential retirees to look at. Overall, this just shows how much there truly is to consider for all who decide to relocate, for whatever reason.

The MBA curriculum: Steering a new course | The Economist

The MBA curriculum: Steering a new course | The Economist

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I found this article extremely interesting, considering most of us are seniors trying to figure out what we are going to do after we graduate college. The article discusses how business schools are adjusting their curriculum a year after the collapse of Lehman Brothers. Many prestigious business schools are facing heavy criticism because many of their alumni were involved in the collapse. A few of the schools are trying to transform their institutions into progressive institutions that are leaders of the economic world rather than the teachers of the actors.

Health insurer tax not what it seems

Insurers that offer very expensive health insurance policies will have to pay a 35% tax and the revenue raised will help pay for health reform and possibly lower health care costs. However, it's a cost that ultimately will not only be a burden for insurers, but also by employees through reduced benefits, a higher share of costs in their employer-sponsored plans or both. Health policy experts applauded the idea of capping the exclusion because it would encourage workers to buy less comprehensive plans to avoid paying tax on some of their employer's contribution. That would both reduce the burden on the federal budget and reduce health spending overall. The ultimate conflict is that with an insurer tax, the expectation is that the insurer will pass the cost onto the employer. The employer, in turn, will either pass the additional cost on to workers or opt for a less expensive package. It's an ongoing debate that even President Obama disagrees with because of the consequence it may have on employee benefits.

The Substance of Style

The world’s biggest luxury-goods group is benefiting from a flight to quality, but the recession is also prompting questions about the company’s breadth and balance. “THERE are four main elements to our business model—product, distribution, communication and price,” explains an executive at LVMH, the world’s largest luxury-goods group. “Our job is to do such a fantastic job on the first three that people forget all about the fourth.” For decades LVMH’s formula has worked like a spell: seduced by beautiful status-symbols, perfect shops and clever advertising, millions of people have swooned forgetfully towards the firm’s cash registers. At Louis Vuitton, LVMH’s star company, the model’s pricing power has yielded consistent profit margins of around 40-45%, the highest of any luxury-goods brand.

With Low Prices, Hyundai Builds Market Share

DETROIT — It was not exactly a planned strategy, but the recession, particularly in the United States, has been very good for Hyundai, the South Korean automaker.
After years of struggling to prove to consumers than it was more than a second-tier brand, Hyundai Motor America and its affiliate, Kia Motor America, accounted for 8 percent of the new-vehicle market in the United States in August, more than Chrysler’s 7.4 percent. The company sold more than 60,000 vehicles last month as buyers rushed to take advantage of the government’s cash-for-clunkers program before its end.

The U.N. Is Urging Drastic Cuts In Greenhouse Gas Emissions: Prince Charles Is Helping the Cause

The U.N. is having serious discussions about global decreases in greenhouse gas emissions. The U.N. is meeting in Copenhagen in December to discuss these drastic changes. Statements have arisen stating that a failure to agree on a deal regarding cuts in emissions will seriously harm global economic development.

Prince Charles is involved as an environmental campaigner for the Corporate Leaders Group on Climate Change.

Japan Gets A New Government

After 54 years of ruling Japan, the Liberal Democratic Party have been expelled and the Democratic Party of Japan have been ushered in. This articles discusses the many challenges the DPJ face and one of the more daunting challenges is their ability to pull Japan's economy out of deep recession. As mentioned in class, Japan fell into a recession in 1990 and has struggling since then to recuperate. Japan is renowned for its low unemployment, 1-2.5%, however, unemployment has reached a postwar record of 5.7% in July. Nonetheless, the new government is confident they will be able to pull Japan out of their current slump. It is just a matter of time whether we see if the Japanese economy will rebound with a new government leading it.

Toyota plans $1 billion marketing blitz in U.S.

Not only GM and Chrysler, Japanese auto companies has also been suffering and TOYOTA made its first-ever loss in the fiscal year of 2008 and probably in 2009 as well. The automaker has responded to the market with more fuel-efficient cars such as the Prius hybrid and Corolla. Also, Toyota rolls out new blitz in November and they are going to spend $1 billion in the US. However, the competition between US auto industry and growing Chinese auto industry suggests that car market has already matured. The auto industry is very close to the perfect competition, therefore it is very difficult for firms to make more than normal profits.

Now Pay Up

The article is about the trend of newspapers to stop providing free online- news. Their "simplest approach" is to set up pay walls, which makes readers pay to read the full articles. However, a newspaper, by doing so, compromises a significant portion of its revenue coming from online advertising. Dealing with this arising problem, some publications have come up with more flexible methods to make readers pay. The Financial Times, for example, only starts charging readers after they view a certain number of articles.

Health Care Abroad: Switzerland

To continue the health care discussion, here is a very interesting article on the state of health care in Switzerland. The Swiss system is one those recommended for the US. It is interesting for three main reasons. First, people are legally required to purchase health insurance in competitive markets. However, the government subsidizes those who have low income. Second, "the most important difference is that health insurance in Switzerland is provided by nonprofit insurers." Finally, the basic benefit package is defined by law, and maximum drug prices are regulated. As a result, Switzerland has achieved near universal coverage. What deserves special notice is that the culture itself is very risk-averse, so "you just don’t go uninsured."

Bank of England furthers steps to tackle weak growth

This article parallels recent comments from U.S. officials on the state of our economy. England is in a similar state in their economic recovery. Possible plans to cut rates commercial banks are paid for holding deposits at the Bank of England are being discussed. With less incentive to hold money in the bank above normative levels, they would convert it into other assets and lend to the private sector, reducing credit conditions in the rest of the economy. Their main focus to induce growth is to keep inflation above the target level of 2 percent.

Obama Sees Signs Economy to Grow While Unemployment Stays High

This article states that recession is very likely over, but the growth rates may not be strong enough to quickly reduce the unemployment rate. The article emphasizes that population growth also contributes to increasing unemployment. According to Barack Obama, the economy needs to create 150,000 jobs every month just to keep up with increase in population.

Requiring health insurance is not a tax increase

The debate of the healthcare reform seems to be an ongoing theme for this blog. I have read many articles describing the middle class to be taxed to pay for this reform. However, in this new article President Obama states, "we're not going to have other people carrying your burdens for you any more than the fact that right now everybody in America, just about, has to get auto insurance." Obama proposes cutting billions of dollars in government subsidies for Medicare Advantage, which is an example how it can reduce healthcare spending while expanding coverage to millions of uninsured Americans. A good article providing another view point on this ongoing debate.

Fed's Plan on Banker Pay Divides Industry

This article discusses why the banking industry with law makers is divided. Bankers and lawmakers are divided over the Federal Reserve's plan to examine the way that thousands of U.S. banks pay their star employees, and that the Federal Reserve may change that plan. The plan would give the Fed sweeping powers over executives, traders and loan officers in around 5,000 banks but the main focus would be on the top 25 US banks. "The proposal, which was first reported Friday in The Wall Street Journal, will "give [regulators] another opportunity to have someone come in and tell us how to run our business," said Edward Wehmer, chief executive of Wintrust Financial Corp., a Lake Forest, Ill., company with about $11 billion in assets and 79 branches. "It's opening Pandora's box," he said." On the opposite side of the argument, "others in the business applauded the Fed's plan, saying it wouldn't affect banks with prudent pay practices. "I like it," said Steve Steinour, chief executive of Huntington Bancshares Inc., Columbus, Ohio. "Having disciplined pay practices is good for the country long term," he said. "I do believe people should be paid with a view of how much risk they're taking.'"Regulators wouldn't set the pay for people but if necessary they could makes to salary or bonus policies to ensure negative incentives do not arise.This is an important article in regards to changes that may take place in the banking industry and the changes that might occur in the economy as a result. 

Hitting Talk Shows, Obama Defends Health Care Agenda

This New York Times article talks about President Obama's recent television appearance, mainly focusing on his "ploy" to gain support for his health care plan.  

President Obama claimed that funds for the health care will not be due to a tax increase. But Senator McConnell said the current plan would raise taxes on small businesses and individuals and impact medicare coverage. If this is true my family will be severely impacted because they own a small day care center in Ohio and cannot afford to pay more in taxes. I felt this article was important to read because it is not abstract plan that would not really affect us rather it hits close to home and people need to know as much true facts as they can to base major decisions off of, i.e. the health care plan. 

The President also discussed Afghanistan and that there is a possibility that more troops will be sent over because it is an on-going battle. 

Canadian Health Care, Even With Queues, Bests U.S.

Interested in seeing what Canada is doing? Read this. This article informed me of the main logistics behind our neighbor up north and their "success" with healthcare. I know some of you may be getting sick of reading about and seeing healthcare all over the news, but this was helpful. I think we need to be concerned with these issues today because they could have a great effect on our future. In Canada, the government uses taxpayer funds to pay claims by doctors, who mostly work in private practice or for a hospital and are paid fees for their services. The article states that in the U.S., we "overuse" technology in the medical field. It gave statistics that say "there are 67 percent more coronary-bypass procedures in the U.S. than in Canada" and "the U.S. had more than four times the number of magnetic resonance imaging units - - 26.5 for every million residents compared with 6.2 for every million in Canada -- making Americans three times more likely than Canadians to get a scan." My arguement is that we have much higher costs because we use technology, and are successful at doing it. When it comes to the practice of medicine the United States is the front-runner. In Canada, citizens have to wait for care, whereas in the U.S., citizens have to pay for it. I'd like to see what you guys think of this and your opinions not only healthcare like Canada, but do you think we "overuse" technology?