Bernanke defends new Fed plan to boost economy

Ben Bernake defended the FED's move for its new 600 billion dollar program to help boost the economy. The market response however, was not particularly positive as markets remained relatively unchanged as they closed on Friday. Worries of inflation are particularly high and investors fear that more injected money into the system will cause artificial prices in the markets especially in commodities. The FED is buying 600 billion dollars in government funds in order to help encourage lending and spending by consumers.

"The economy hasn't been growing fast enough to reduce unemployment, which has been stuck at a high of 9.6 percent for three straight months. The Fed worries that high unemployment, lackluster wage gains and still-weak home values will weigh on consumer spending, a major drive of overall economic activity"

Do you think the FED's reasons are just? Would you expect inflation to increase to higher than ever levels?

In India, Obama Pushes US Jobs

President Obama has unveiled a $10 billion plan to create new contacts for US exports to India. Obama claimed that India was the market of the future and this move was a "job strategy". This is an especially difficult move with the hug number of unemployed in the US. Obama ensure that this is the best move for the American and Indian people. The new contracts will create jobs and increase the standard of living for both nations. Republicans are in support but are skeptical of the Presidents actions due to failed plans to increase trade with South Korea, Columbia, and Panama.Can we really "Export Our Way to Stability" as Obama suggests in his New York Times Op-Ed?

I spent a gazillion dollars and still lost the race

This article talks about how former CEO and California governor nominee, Meg Whitman, spent more in her campaign than any other governor candidate in history. Her total spending amounted to nearly $50 per vote, and yet she still did not win. I found this article to be eye opening as to how much candidates are spending in their campaigns. It seems today that the more you spend on your campaign, the better chance you have of winning, which should not be the case. Hopefully the example in this article will help show others that nominees need more than just money to get elected.

China’s exchange rate has risen faster than you think

China has been the subject of criticism from many countries, especially the U.S because of the country's attempt to peg the yuan so it could gain some competitive edges. This year, the Fed has persistently demanded China to let its currency float freely, but the result hasn't been what they expect. However, in this article the author argues that the real yuan-dollar exchange rate has risen more than we think. "A real exchange rate takes account of price movements in each country. If prices rise faster in China than in America, China’s real exchange rate goes up, even if its nominal exchange rate stays the same. That’s because higher prices at home make China’s firms less competitive abroad, just as if their currency had gone up."
So it is probably not too bad after all?

October jobs report: Hiring picks up

The United States still is struggling to get back on its feet as unemployment is still high. However, there might be a turn around for those who have been recently laid off as the CNN article mentions how the labor market had just added jobs this past month (October, 2010). This is great news for many as, "The economy added 151,000 jobs in October, the Labor Department reported Friday, an improvement over September, when the economy lost 41,000 jobs. That was much better than the 68,000 gain that economistssurveyed by CNNMoney.com were expecting, and the best overall number since May." Some people are not getting their hopes up as this gain of jobs seems rather insignificant when the unemployment when the national unemployment rate remained at 9.6%. there are still 1.2 million workers who have been unemployed and have been discouraged from finding a job. So even in this small light showing at the end of the tunnel, can some of the people who have been unemployed over six or more months survive until then, and when is then exactly?

UNDP releases 2010 Human Development Report

Today the United Nations Development Programme launched the 2010 Human Development Report including the 2010 Human Development Index. This report, and those before it, are meant to emphasize that "development is primarily and fundamentally about people". The 2010 report states that many people today are healthier, live longer, are better educated and have better access to goods and services, even in countries facing adverse economic conditions. However, there is still growing inequality and unsustainable patterns of production and consumption and several regions of the world have regressed in areas such as health. This report issues three new measures to the Human Development Index: the Inequality-adjusted HDI; the Gender Inequality Index; and the Multidimensional Poverty Index. These are designed to stimulate public debate beyond the traditional discussions of aggregates. Once again countries such as Norway, Australia and the US top the list while African countries such as Zimbabwe, Congo and Niger are at the bottom. How much do these rankings reflect the economic systems and policies of each country? Do you feel that these factors play a large role in something such as human development?

Oil slicks and slick lawyers

The article lists the aftermath, but yet still going on, of the BP oil spill in the gulf. The list of costs BP has to face seems to pile up endlessly as, BP had taken a charge of $32.2 billion to cover the $20 billion it was paying into an escrow account to deal with claims against it, and to account for costs associated with shutting down the well, cleaning up after it and making some forms of recompense. This quarter the company took another $7.7 billion charge, bringing the total to about $40 billion." In addition to that BP as also violated the Clean Water Act which will lead to even more fines for BP in the future. Of course, BP is trying to only take some of the responsibility of the accident as they, "[believe] that they are liable for 35% of the costs of the accident."

BP is paying now for cutting corners and getting caught doing so. It is a lesson which should have been learned earlier as there were protocols in place that they did not follow which got them into this mess in the first place. The negative externalities are spread across the board as BP now has to pay, the environment has to pay as well as the people leaving in the areas affected. The question remains, how will BP hold up after more fines and restrictions are placed upon them until they can no longer keep up with the payments due?

QE2: Fed pulls the trigger

The Fed will be buying $600 billion, instead of the expected $500 billion, in LT Treasuries over the next 8 months through the quantitative easing policy. This will cause a higher than expected inflation which the market will rapidly adjust.
Ever since the Fed has signaled the second coming of the QE policy, the market has been under great speculation. The speculation, however, is about to come to an end, it would be interesting to see how the stock market would fair under the normal market conditions.

Dollar Slides as Fed Says it Will Buy Bonds

The dollar is sliding after the Fed announced it will buy hundreds of billions of dollars of U.S. government bonds from consumers this year in an effort to further stimulate the economy.The euro has jumped to $1.4101 from $1.4036 late Tuesday, while the British pound is rising to $1.6111 from $1.6024.The dollar has lost earlier gains against the Japanese currency, trading at 81 yen versus 80.68 yen late Tuesday, after being worth as much as 81.52 earlier Wednesday. The dollar has been under heavy selling pressure in the past two months because investors expected the Fed's move. By buying bonds, the Fed would drive down interest rates and trigger more borrowing and spending. But the prospect of lower interest rates makes a currency less attractive to investors. What kind of impact do we think this will have on U.S. trading? and Can it stimulate the economy at the same time?

Income tax on the wealthiest in Washington state?

The election is the most talked about thing on TV right now, but aside from the fighting by the candidates and parties is an initiative that could generate more than $11B in the next five years. How? By proposing an income tax (WA doesn't have an income tax now) on people earning more than $200,000 (5%) and more than $500,000 (9%). Bill Gates has come out in support of this tax, but many are against it. It will be interesting to see how the vote plays out.

Yemen on the verge of collapse?

Yemen's finance minister talks about how the country is in dire need of financial aid, all the way up to $50B. He says that the country is not inevitably failed, but that with the recent discoveries of planned bomb attacks on planes, and the knowledge that Yemen is a breeding ground for terrorism, namely al-Qaeda, he says that without jobs and in bad times (no water, food, electricity, inadequate shelter, etc.) people get upset and have a lot of time on their hands to do something about it. The question now becomes, how to help (if at all), to what extent do foreign actors aid, and where does the money come from?

India's Crisis in Micro-lending?

This article elaborates further on the micro-lending concept which was established in India to help the poor. Although, micro-lending helped millions of people out of poverty, this new report suggests that borrowers are angry with the ever increasing and fluctuating interest rates and have stopped paying back in order to retaliate, despite having the money to payback. The major complain is that lenders have been changing interest rates constantly which makes it very difficult for borrowers.

Mexico's Economy

Mexican exports to the United States have been steadily increasing since the global recession hit. NAFTA allows Mexican exports to compete with China. Tariffs and the increase in the labor price in China makes its goods more expensive in the United States. The problem for Mexico lies in its ability to capitalize on the export dollar. The article says that this is due to "inefficient oligopolies" and recommends that Mexican government do a better job creating competition by enforcing competition regulations, attracting foreign suppliers, and increasing lending to domestic suppliers that are up and coming. However, I think the article might understate some of the problems that Mexico is facing as far as instability, especially after being hit by the recession.

How Immigrants Create More Jobs

This article talks about a study arguing that the easier it is to find cheap labor domestically, the less likely the jobs will be sent offshore. Immigrants, therefore, may be competing more will offshore workers than other workers in the U.S.
The study also argues that there may be a trend called in-shoring, where goods produced overseas, like Apple computers, help American businesses expand.
Overall, the authors of the study find no viable evidence of a connection between offshoring and the net creation of American jobs, and find that the problems with unemployment are "usually rooted in macroeconomic conditions, not in immigration or offshoring."
This article's author says that immigration not only increases jobs, but increases tax revenue, helps finance Social Security, and increases home owners and improves the business environment.

Consumer Spending Up, but Can Fast Growth Last?

In this article it talks about how economic output grew 2 percent in the third quarter largely due to consumer spending. This can be looked at as rather good news that consumers are feeling more confident in the market. It was the fastest consumption growth rate since the 4th quarter of 2006. However with Americans having trouble finding jobs; this growth is likely to be short since consumption depends on people's income. Job growth has been weak to nonexistent in the past few months and consumers are still buried in debt. Do you think this fast growth in consumption will continue or will we be likely to see it decrease over the next quarter?

Entitlement Nation: More are living off tax revenues, and fewer are providing them

"Near half of all Americans live in a household in which someone receives government benefits." This number is at a all time high. This article discusses problems with a culture that is becoming increasingly dependent on the public sector. Are American citizens really going to continue this dependency on the government?? I think it will take time but as a country we can become more independent by helping our communities and supporting local businesses.

Fed decision to throw money into economy has critics

This week, a new stimulus package of asset purchases by the Fed is scheduled to be announced in an attempt to stimulate the economy. However, there are many economists who are saying that this is a bad idea and that there are going to be serious repercussions if the expected plan goes through. Some of the things economists point to as possible negatives are an asset bubble, high inflation, and a trading war stemming from the weakened US dollar. These are assuming the stimulus works, but many think that it won't even play a difference and is a waste of money. It's tough to help the economy and get approval from economists, there seem to be no foolproof way for successful stimulus.

U.S. Having Trouble Monitoring Spending in Afghanistan

Since the beginning of the United States occupation in Afghanistan in 2001, the U.S. has spent close to $55 billion towards rebuilding the war torn nation. Now, in what is regarded as the first audit report of U.S. spending in Afghanistan,government agencies have not been tracking the actual money spent has not been analyzed and examined. Reports from the pentagon and other government agencies such as the state department and USAID have stated that they cannot accurately report on how much money the country has spent on reconstructing Afghanistan. There are various United States contracting and construction companies that spend money in Afghanistan so it leads to very difficult task to track the entire amount of output. Do you think there is an efficient way to monitor and measure United States economic output towards Afghanistan?

US economic growth rate quickens

The US growth rate has increased to 2%, from 1.7% between April and June, but is still less than the 3.7% growth recorded from January to March. This growth has been despite the fact that there is growing unemployment in the country. Looking at this increased growth, the Fed said that they will go back into quantitative easing by flushing fresh money into the economy through the purchase of government bonds.
Where is this growth coming from?
Unfortunately, it is said that businesses are building up their inventory of goods and services and this contributed "more than two-thirds of the 2% annualised expansion in the economy".
However consumer spending has also risen by 0.4 %.

How Obama Will Address Outsourcing in India

Is outsourcing really affecting or helping the US economy.?
President Obama on his trip to India next week will be talking about US-India relationships and having so many US jobs taken by Indians. Is this good for the US or not?
Many of the President's aides say that this is helping the US because while providing jobs for so many Indians it is increasing the growing middle class who then demand foreign goods. Furthermore, it increases investment in the US. Thus, President Obama wants to spread the message to the US population that even though outsourcing might take away their jobs, in the long run it helps them out as exports rise and investments into the country expand. This has already been witnessed -"U.S. goods exports to India have quadrupled to $17 billion over the last seven years and services exports have tripled to about $10 billion".

GE to buy 'tens of thousands' of electric cars

GE will be ordering tens of thousands of electric car this coming week. It is the largest purchase of its kind in history. However, the brand remains unknown. The implication of this purchase is the fact that many gigantic corporations have maintained strong cash flow during the recession. Future acquisitions or investments should be happening soon and thus help the economic recovery.

Raised Retirement Age in France

The French Parliament just passed a bill that will raise the retirement age in France from 60 to 62 for some retirement benefits and full benefits from 65 to 67. France has a very young population at the current time and only one in five men aged 60 to 64 are employed in France. This is very low in comparison to other countries such as the United States and Japan. Even Italy which has a similar mentality to France about minimizing work so that people can live have 30 % of men working aged 60 to 64. This bill was passed because of the increased amount of debt that European countries have accumulated. Social Security increases the debt because people are receiving money without working. As France's population ages and more people fall into the 60 to 64 age range, the government worries that Social Security will become too expensive.

Obama and Silicon Valley

I picked this article because we discuss the advantages of silicon valley a lot and it just seems interesting that even with all the presidential support they are still so opposed to the present government. I agree with them about outsourcing being advantageous to them and the American Economy in the long run but the government is creating more investment in their market.

German retail sales unexpectedly fall

It was surprising news to most German economic observers to find that German retail sales for the month of September had fallen, despite a growing economy and decreasing unemployment. However, some have warned observers not to over-react, as German retail sales are often revised later. What is interesting to me is the implication that this has for German's exports. Germany always operates at high budget surpluses; do retail sales configure into this? Also, if German unemployment is still very low, then does this have implications for the overall productivity of the German economy?