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.