U.S. trade gap widens to 3-month high

In December, the U.S. trade gap widened to a 3-month high. A large portion of imports is attributed to the rising oil prices while the largest export was seen in weapons. One of the more encouraging signs was the fact that exports grew at a faster rate than imports. The article makes note of president Obama's goal to double exports by the year 2015, which at the moment seems to be a reach for the U.S. This appears to be a reach primarily due to the undervalued yuan. Obama's goal would be a lot more realistic if the Chinese allowed their currency to appreciate, which would decrease their exports/trade surplus. This might not tremendously increase the demand for U.S. exports but this action would definitely create a more level playing field.

Eye-wateringly expensive

This is a great article on the ethical problems that other countries face. Government officials have basically made it impossible for new companies to sell their products in Angola through bribes and what not. The author talks about how incredibly expensive everything was in the city because the government and their connected firms are holding onto extremely large profits. The last little story about a watermelon was kind of humorous but also sad that an economy can be so corrupt.

China raises interest rates. Markets yawn. Why?

NEW YORK (CNNMoney) -- China's central bank raised interest rates Tuesday morning. And the market responded with a collective yawn. At first, stocks barely budged. Ditto for bond yields, oil and the dollar.

As the day progressed, stocks actually marched even higher.

So much for fears of global inflation running amok and worries about how emerging markets would be forced to tighten monetary policy.

Yes, I'm being a bit glib. Investors would be unwise to ignore what's going on in China. The fact that the People's Bank of China raised rates by a quarter of a percentage point to just over 6% is of course interesting.

It is the third such move in four months and comes at a time where Ben Bernanke's Federal Reserve is still keeping its benchmark rate near zero and the European Central Bank is leaving rates at 1%.

China is experiencing inflation in its currency, so China responded by increasing the interest rates to curb the spending and increase savings in an effort to reduce the inflation. People say that China is not being aggressive in fighting the inflation; on the other hand, China wants to take a slow gradual to increasing the interest rates because being aggressive may result in slowing the lending and economic growth.

Lets make a deal! Mergers are back.

There has been a lot of intense activity with companies deciding to merge in the start of 2011. It is up 78% since the beginning of last year. A large $7 billion deal made by Ensco and Pride International was revealed. Every sector seems to be taking part in this exciting process, from coal companies to banks.

This activity has been thriving due to the combination of extremely low interest rates and a rising stock market, which make it easier for firms to do more deals. “Companies have the option of borrowing money at attractive rates to finance deals or using their stock/cash as acquisition currency."

I think this is great to hear our economy getting back on its feet. It is also seen that when companies are merging stocks seem to do very well, which is a plus. However, there can be a downside to mergers because it is not easy bringing together two different corporate cultures, so it doesn’t always work out. Is it a good thing that merging is going on right now with our economy starting up again?

Corporate Taxes

This article deals with corporate taxes, and explains that though the United States has one of the highest corporate tax rates, companies rarely pay that amount. With such a high rate (35%), companies have the incentive to devote mass amounts of time to finding loopholes. The government raises less revenue with this inefficient system. Of course, some companies aren't as ingenious as General Electric and do in fact pay the stated rate, or close to it. Either way, decisions by companies are almost always made with the tax consequences in mind. For instance, airlines buy more planes than they actually need. When companies do things they would not normally do, it slows economic growth.

China Raises Interest Rates to Quell Inflation

Today Beijing raised the interest rate for the third time since October to try to help inflation worries. They raised the one year deposit rate up to 3 percent and its one year lending rate to 6.06 percent, both by rising by a quarter of a percentage point.
Growth rate last year was at 10.3 percent, up from 9.2% in 2009 but inflation is 4.6%.
Inflows of cash from overseas and easy credit have caused the rates to rise all year.

The Economist: How does inequality matter? (blog)

This is something I came across which is very relevant to our Econ systems course work.

The question posted is regarding the impact of increasing inequality in the current economic crisis. A few reputable members of the American Economic Association have contributed to this debate.

Global inequality between nations and domestic inequality within nations are both sub topics that came out of this debate.

The socio-political dynamics seem to be a key concern for economists. However the reasons behind inequality, such as rapidly changing technology and possible solutions to inequality have also been discussed.

It was interesting to find what these economists had to say. Challenging views to mainstream ideas were delivered, which were backed with examples. Serious economists do not consider inequality to be an outcome of 'market failure', rather that it is a result of institutional failure. This idea was important in the podcast with guest speaker, Don Boudreaux. I noticed that these economists reflected that in what they wrote.

This blog is less academic then the podcast, however the many point of views thrown out in the debate help shape a better rounded understanding of unemployment and why it's continuing to exist and grow.

Troops held over DR Congo mass rape

Rape in DR Congo is a frequent unfortunate thing that has been happening since the beginning of the war. It was previously done by the rebels but recently, as talked about in this article, it is done by the army. The very people that were put in place to protect the population are the same that turned around and arm them.

What happened was an army officer got drunk and fired his arm and shot a civilian. It is unacceptable that an officer on duty with a loaded fire arm drinks. The villagers were upset because they thought the civilian was dead and attack the officer and killed him. When other officer heard about their colleague been killed, they attacked the village and raped about 50 women. And some of these women were tied by ropes and other beaten with a rifle before been raped in front of their children.

What I am trying to understand is that what do the women of that village have to do with the death of their colleagues? I strongly believe that the people that attack their colleagues are men, because in their culture the woman is suppose to at home cooking and taking care of the kids, so it is less likely that she would be where the officer was attacked.

Another point I want to make is that, this action are the cause of the miss management of the government. Because with the current shaky government in RDC it almost impossible for them to actually make a good selection of who can get into the army and who can’t.

As Germany Booms, It Faces a Shortage of Workers

Data was released this past week indicating that the unemployment rate in Germany is the lowest it has been in 18 years. For many countries, such as our own, this would be a great accomplishment but for Germany it is a clear sign of their severe lack of workers. When other Western European countries were opening up their borders to Eastern European workers, Germany as well as Austria enacted strict legislation making it very difficult for immigrants to come and find a job. Thus, these people, coming from countries such as Poland, Slovakia, and the Czech Republic moved elsewhere to find employment. Unfortunately for Germany, they were successful. Now they are settled in their new jobs and homes and it is unlikely that they will leave anytime soon. Industries including manufacturing, telecommunications, and health care are suffering because of this problem. The issue is further compounded by the low birth rate; the average number of children born to each woman is only 1.38. I found this article really interesting after reading and hearing so much lately about unemployment in the US, it was quite shocking to learn about this issue Germany is facing.

Euro Bailout Fund is Enough to Protect Against Future Crises

Last week, Germany and France proposed a new plan to deepen integration among the 17 countries that use the Euro as their national currency. The proposal is meant to strengthen the economic rescue fund, which amounts to 440 billion euros. It also could lead to the euro nations agreeing to more of their economic policies in a unified bloc.

I think it's pretty relevant to the article we had on France because that article discussed how the economic policies of France potentially led to them not taking as hard a hit with the recession. Perhaps their involvement in leading this new proposal is a function of their luck, or rather planning, with their economic policies. Obviously based on what has happened recently all nations want their economic systems to be better protected against another crisis similar to the one we've just had, and this proposal is supposed to be a big step towards safeguarding against history repeating itself.

Recovery Progressing, But Don't Heighten Expectations

In this article, the author talks about American recovery from the recession, noting the recent reports of 3.2% GDP growth in Q4, up from 2.6% in Q3. Yet this is still relatively small growth, disappointing, as the US is not falling 5.7% short of its potential. Despite this, real demand (GDP minus inventory sales) grew at an annual rate of 7.1%, the highest quarterly rate since 1984. The falling value of the dollar, while somewhat demoralizing, allows for cheaper exportation and thus increases for the US. Increasing exports would help our economy become slightly more balanced between imports and exports, decreasing our trade deficit (if only a little). The article suggests we be cautious, however. High commodity prices threaten to unseat current growth patterns, and potential economic shocks worldwide and in the US could hinder progress.

I find the article to be encouraging overall. It is more balanced in its approach to US recovery, as one might expect from an outside party. I think the idea of discussing real demand instead of simple quarterly percent GDP growth is a smart move. If this kind of demand continues and producers are able to increase the supply, we may see increased growth in our near future. Yet we must be wary of the rising commodity prices--especially food and petroleum. Possible oil spills or natural gas explosions, both sources of economic shock, should be taken into account as well. Seeing as employment is only a meager 1% above post-recession lows, growth in the face of American pessimism will be difficult, but it is certainly not out of reach.

Disney Looking Into Cradle for Customers

Disney is taking on a new approach to widen its childhood market- newborns. It is a risky new approach where representatives of Disney Baby will visit a new mother and offer a free Disney Cuddly Bodysuit in 580 maternity hospitals in the United States. Disney estimates the North American baby market to be worth $36.3 billion annually.

There are some parents and critics who already believe Disney is already a large powerful force in the lives of parents and its a strategy that is taking advantage of families at a very vulnerable time.

I believe it is a great market for Disney to expand to as well as develop new strategies and products to full fill the needs and demands of the market. But I believe that this new promotional strategy is too aggressive during a very special moment in a family, that should be free of business promotions. I know I would hate for someone to promote baby wear after the birth of my child.

What is everyone else's thoughts?

Egypt’s Transition

In this article, Obama comments that Egypt still has many options as to how the government will be restructured now that former President Hosni Mubarak has stepped down. Obama illustrates that it will be up to the people of Egypt as to how this will be done. Specific organizations such as the Muslim Brotherhood will not have the authority to shape the government as they see fit. Egypt’s revolution was started by the people, for the people. The people will ultimately redefine the governmental hierarchy and what type of economic system will represent Egypt. Interestingly, the type of change going on in Egypt can be characterized as a Marx inspired revolutionary change. A Marxist revolutionary change consists of building up to a crisis and resolving itself by systematic change. This is exactly what has happened in Egypt. The public outcry and protests against Mubarak’s reign eventually led to a change in government structure and power. President Obama remains hopeful that Egypt will cooperate with the United States and accept a partnership with the U.S. in the near future.

Leviathan Oil Field in Israel

The Leviathan Oil Field is a huge strategic find for Israel. Already having problems with their oil-rich neighbors and relying on them for oil, this newly found field could make Israel self sustaining for an estimated 50 years. The field is believed to hold 16 trillion cubic feet of natural gas. Two companies own the field, Delek located in Israel and Noble located in the United States.

China's property market: Protecting the Middle Class

In this article, it is explaining the difficulties that China is facing with its continued increasing middle class. China has such a large population, in addition to a fast growing economy that it is starting to affect the middle class and the tax system.

Housing prices have been on the rise since the start of the fast growing economy. China's cities such as Shanghai and Chongqing have implemented new property tax for those who are putting down payments on second homes. Also, the government has made owners of two houses unable to purchase any more houses. In Chongqing, they specifically are introducing a luxury tax on luxury homes, where as in Shanghai, it only applies to those who own more than one property. In the future, the Chinese government plans on increasing the construction of government subsidized housing.

These kinds of taxes will help continue to grow the middle class and allow them to live comfortably in the one of the largest economies in the world.