Group of 20 vows to avoid currency devaluations

This article is about G-20 finance ministers and central bank governors met in South Korea to discuss issues on how to avoid potentially debilitating currency devaluations and reduce trade and account imbalances. There are fears that countries like Aisa and other fast developing economies try to stem strengths in their currencies amid sustained weaknesses of the USD. This is causing a fear that exporting goods will become less competitive.

"Asia relying less on exports for growth is seen as one of the adjustments that nations should make to ensure more stability in the global economy and markets. Stronger currencies, meanwhile, would make imported goods cheaper and boost local spending as a contributor to economic growth."

These adjustments and imbalances need to be changed before there is another financial crisis and economic downturn.

A World Upside Down for Greeks

The Greek government increased taxes and cut public salaries in light of the financial crisis. In return they received 110 billion Euros in rescue packages from the euro-zone partners and the IMF. However, small business continue to suffer. A small business in Greece is defined as less than 10 employees and makes up for 96% of all enterprises. Small businesses employ 2 million of the 5 million person work force in Greece. The government has pledged 5 million euros in subsidies to support the small businesses for the next year and 25 billion in bank guarantees to issue more loans to small businesses. Still, small businesses are suffering from higher operating costs and fewer sales. Retailers have seen their revenue drops on average by 35%.

Corn prices: As high as an elephant's eye

On October 8th, the USDA reported that United States corn production will be down 4% in 2010. Prices immediately surged 6% and trading at the Chicago Board of Trade stopped. The decreased production is due to flooding and scorching heat/sunlight throughout the summer and fall. This news was unexpected and it strongly impacts the U.S. economy - the source of 60% of global corn exports. Corn production is so prevalent in the U.S. because of government subsidies for corn production. This is part of the reason why so many U.S. products contain high fructose corn syrup.

The apology of Sócrates

Following the Greek debt crisis, Spain was quick to react by cutting government spending. Portugal's PM Sócrates however decided to limit wage cuts to senior politicians, increase value-added tax and postpone infrastructure projects. Portugal is now facing debt problems because of these decisions. PM Sócrates has agreed to meet the target 2011 deficit cuts by further increasing value-added tax, freezing pensions and cutting public sector wages. These proposals have stirred irritation among the labor unions who are planning to take to the streets in protest in November. The opposition party is pushing for fewer tax increases and more cuts on government spending. Even though the plans are to tighten fiscal policy PM Sócrates is confident that Portugal will maintain economic growth.

China: "You started it, America"!

It has been for some periods that the world has tried to push China in raising its currency. Last month, the US imposed tariffs on Chinese tires. China, in response, announced tariffs on the US chickens. Now, there are increasing indications that China will be cutting off supplies of 17 rare earth minerals to the western countries. While these minerals are crucial to many high-tech products, including aircraft, wind turbines, and electronic cars, the more threatening concern is that China produced 97% of them. Although the US has reserves to supply the global needs for a century at current demand levels, it is interesting to see how the trade war would proceed in the future.

Global economy and the currency issue

Countries are taking steps to gain in the short term, by trying to appreciate their currency. In the long run, this is unsustainable for the world economy. The G-20 are in South Korea trying to figure out ways to stroke their economies. Working together can benefit everyone, while everyone working separately and selfishly will likely hurt the global economy.

Infrastructure Spending

An earlier post also mentioned infrastructure spending, which this article reminded me of. The stimulus package is criticized as having mediocre results. Many projects are not as efficient as desired/expected and in the rush to stimulate many bad plans went through. Obama wants to propose another infrastructure plan for $50 billion which includes fast rail transportation across the country. However there is doubt that this proposal will see much support. Reasons for probable lack of support are that most people believe that the first stimulus package took care of this (when really only $64 billion was for infrastructure development), mid term elections are close and Americans are weary of spending.

Will the stock market slow up?

It doesn't look like it anytime soon. The stock market has been continuously on the rise over the last several periods, and experts say they don't see much in the way of slowing in the future. But you have to ask yourself, how sustainable is this upward trend? If it seems to good to be true, it probably is and you would think a slowdown and leveling off is in the future.

China Suprise Increase in Interest Rates May Mean Tough Times for Other Economic markets

The People's Bank of China has announced that they will increase their rates on loans and deposits by .25%. Economists believe that this increase in interest rates is the result of a precevied inflation which will curb the loan activity from other countries, namely the United States. The Chinese economy is growing at a fast rate of 10.3% with inflation also increasing well above 3%. The global market has been very pessimistic towards this economic reform because the Chinese domestic market increasing growth will effect the major economies of the United States, Japan, and the European Union. Also this unexpected change has mispreceived the world market which is very transparaent, while China's economy acts more compact with their information. The impact of this action may see the the exchange rate of major currencies such as the U.S. dollar, the euro the Japanese yen all become weaker against the Chinese yuan. Economist believe that this may effect assets and capital in other major economies. Some believe that this may lead to a decline in investment in the European and American markets. What do you think of this expansive Chinese economic reform? What do you think will be the effects on the American market? What do you believe are the implications from China over this?

The Chinese are coming the Chinese are coming

Well,they are not coming but they are buying their way...

Americans Slipping in International Wealth Gap

A year ago, the average wealth per american adult in the United States was just under $200,000, and has grown to over $230,000 in 2010. This includes all assets such as real estate, cash, etc. Despite this drastic increase in wealth for Americans, they fell from second internationally behind Switzerland to seventh behind Switzerland, Norway, Australia, Singapore, France, and Sweden. What does this slipping in the rankings mean? Are Americans becoming poorer compared to other countries, or is the country reaching more equality?

Chinese Economy to Slow Down

A surprise rate hike in Chinese lending and deposits is giving rise to speculation about the global economy. With China's economy being one of the key drivers to the global economy over the recent years, this is having repercussions around the world, and especially within the US stock market. China is doing so to slow their rapid growth, and ride the sustainability a while longer. It will be interesting to see how other economies and the world economy are effected by this in the end.

Japanese Economy "at a Standstill"

Exports in Japan are struggling due to a slowdown in global demand caused by the poor exchange rate as the yen is currently valued high compared to the dollar. Japanese officials say that a return to recession is not out of question. Globally, economies are still struggling.

Strikes in France

Workers in France are striking against the potential raise of the age of retirement. Strikes have caused petroleum shortages, slow down of transportation as well as disruption throughout schools. The pension reform bill has already passed in the lower house and will be voted on in upper house parliament this week. President Sarkozy refuses to give on the retirement age and instead has offered longer maternity leave, but protests continue. With the oil shortages, Sarkozy might just be forced to give in to workers' demands. How can France limit it's government spending while still keeping its workers happy?

Democrats Are at Odds on Relevance of Keynes

Recently there has been growing disagreements between liberal economists and elected democrats over the $787 billion stimulus plan. The economists argue that the stimulus, bases on the economic policies of Keynes, was a success while many elected officials have begun to distance themselves from this policy. Keynes' policies have been the core of democratic economic policies and "a principle of the party's identity". However, due to the growing unpopularity of the stimulus package signed into law by President Obama, many democratic officials have shifted their view on economic policy. This could have an impact well beyond the current elections as pressure increases for the Federal Reserve to "deploy monetary policy" as well as an increase in pressure to "rein in the growth of government spending, slash the budget deficit, and reduce national debt". Although many top democrats are advocating even more stimulus spending it seems unlikely that this will occur with elected democrats increasingly distancing themselves from this policy.

Marijuana in California: An altered state

Next month, California will be having something very new on their ballot, Proposition 19. this will legalize marijuana if passed. Since California has been rather relaxed about weed, this has a very good chance of passing. there has been a definite shift of favor for this as the article states, "Back in 1972 a proposition to legalise the drug was defeated almost two-to-one. These days, fully half of Californians tell pollsters they favour legalisation, and almost as many admit to having smoked marijuana themselves, which probably means that a big majority have actually done so. In parts of the state, enjoying an occasional doobie is nowadays considered little different from sipping a Pinot Noir." On the other side of the argument some people stand against the Proposition 19. To ease their concerns the statement includes a part that restricts the purchase of more than a ounce of marijuana, which is equal to 28 grams. Also the sales of weed would be taxed by the Californian government. The questions arise of will the benefits outweigh the costs? As well as other concerns of criminal activities.

A town saved by stimulus

This article is about the stimulus package and how it saved a town (Kokomo) from becoming essentially a ghost town. The city was home to the four Chrysler plants and a Delphi facility and its future was very questionable similar to the auto industry. Thanks to the stimulus package the town has gone from an unemployment rate of 20% to under 14%. Obviously the large stimulus package has greatly effected this town. Do you think upping the stimulus package could bring many other towns out of their struggles and trying times? Where do you think the balance is between putting into effect huge stimulus packages and saving cities from their destruction?

Wal-Mart to speed up U.S. store building

Wal-Mart which is the worlds largest retail store is planning on increasing the production of new stores in the up coming fiscal year. Wal-Mart does not plan on building huge stores like they have been in the past though, they will be smaller stores to appeal to more customers. Instead of having one big store near a few towns there will probably be one in every town or urban area for more convenience. This is a good sign for the economy because they estimated to build 153 stores this year and next year they estimate there will be an estimated 185-205 constructed starting the next fiscal year on February 1, 2011. Wal-Mart is obviously seeing an increase in sales to be expanding more rapidly. Even though Wal-Mart is the biggest retailer, there is still room for them to grow. They are doing well in some areas as always but they found out that there "roll back" strategy was not working, so they went back to "Everyday low prices." Wal-Mart has hurt small businesses in the past because of there massive selection of products. If they go through with the building of small stores I think the small family owned businesses will suffer even more. This will just give shoppers more of a reason to shop at Wal-Mart's because of the lower prices and the great selection they offer.

2010 Economics Nobel Reflects Mood of the Times

It is perhaps not surprising, in a time when high unemployment is on every economic-minded person's mind, that this year's Nobel Prize in Economics went to Peter A. Diamond, Dale T. Mortensen, and Christopher A. Pissarides for their "analysis of markets with search frictions." These men studied the causes of frictional unemployment, and were among the first to suggest that unemployment benefits might make the economy more efficient because not every job is for every person. They effectively brought into the labor markets of their day the issues of stretches of unemployment, job hunts, moves from job to job, and the rate at which workers were hired or fired. They also argued that policymaker could affect and to some extent choose the natural rate of unemployment. What do you think - was their selection as Nobel laureates affected by the economic conditions when the Prize was awarded?

currency battle

This article is very informative on the current exchange rate and currency battles going on in the world- especially China's undervaluing of the yuan. But economists have already shown that currency battles to increase demand are not long term solutions so what should we really be doing? Again I think Sweden has the right idea by increasing the total factor productivity through training of the low skilled population.

Business inventories up 0.6 percent in August

This article talks about how businesses inventories are on the rise over the past few months. This is a good sign because a year or so ago, companies were liquidating their stock to keep cost low since no purchases were being made. Now its a good sign for the economy that they are buying back inventory, this means people and other companies are slowly starting to purchase goods again. They said the biggest gain has been seen in the retail, and whole sale markets but other business sectors were seeing growth as well. This is a good sign and hopefully it continues.

Consumers Still Shaky on Recovery

This article is about the U.S. consumer sentiment, which unexpectedly dropped in early October to its weakest level since July, whith buying plans still on the decline. Consumers' assessment of the governments economic policies fell to the lowest levels since Obama took office. The consumer sentiment feel to 67.9, down from 68.2. Comsumer spending usually accounts for 2/3 of economic activity. How big of an effect do you think this has on the economy as a whole? Do you think the consumer confidence is a good indication that the economy is still not ready to recover? What do you think?

Inflation Rate Remains Steadily too Low

The national inflation rate remains steadily too low, around 1.1%, nationally with minimal increases expected in the coming months. This is good news for "savers" from individuals and businesses who would like to hold onto their money in the case of a double-dip recession, knowing that their money will be worth just as much now as in the future. If the economy really wants to pick-up, then inflation needs to rise faster. This is a common indication of the strength of an economy. Consumers should also expect a faster increase in future months and in that case, spending will be necessary.