7 ways to fix the economy

I found this write-up on msn.com in their Money section. It discusses 7 ways, multiple, economist think the US Economy can be improved. The economist featured in the article all agree the economy is showing signs of improvement but it will not see the same healthy state until the job market directly changed. This article is exhibiting the idea that through the government assisting in the creation of new jobs and the improvment of current jobs, will improve the US's Economy. This will increase the amount and wealth of consumers in all markets,fueling the markets. In return improving the state of the Economy.

The 7 ways addressed are some-what simple but more difficult actualy to accomplish:

Extend the payroll-tax holiday not; "not long term, just 1-2 years."
Spend federal dollars to put the jobless to work; "defecit spending genearting jobs."
Build out the nation's infrastructure; "the impact of fiscal stimulus on financial, commodity, labor and household markets."
Free the markets; "Stop introducing new stimulus policies, both fiscal and monetary.
Bring back the 1990s;  "We need two things simultaneously: short-term fiscal stimulus and a long-run return to the fiscal responsibility of the 1990s."
Repair aging roads and bridges; "The best thing the government could do is return to pre-2001 tax policies and use the (additional) revenue to invest in public infrastructure."
Fix the tax code; "Say what you want about the wisdom of raising taxes on the rich, but there's no evidence that doing so will lower unemployment or spur growth."

Through government intevention there is hope of improving the job market and in return improving the economy. This can seem appealing considering the fact that both sides can get actual benefit from the improvements. The government recieves hope of carry over improving the health of the Economy and cunsumers get the improvement of personnal living. Maybe the way of improvement is through improving the job market.

http://money.msn.com/investing/7-ways-to-fix-the-economy

African Union Opens Chinese Funded HQ in Ethiopia

Today, the African Union celebrated the official opening of its new building in Addis Ababa, Ethiopia. While a building’s grand opening may not usually make world-wide news, its unique creation has raised some interest. The 100 meter, $200 million, building was funded entirely by China – even most of the furnishings and materials were paid for and imported by China.  Functioning as the headquarters and conference center for African heads of state, this has served as the most obvious example of China’s increasing influence on the African continent; the center is being called “a reflection of new Africa” by the AU chairman, Teodoro Obiang Nguema. Chinese firms  have also built roads and  outsourced car manufacturing to Ethiopia.

The AU has been very positive about the investment and both Chinese and Ethiopian citizens have benefited from the increased availability of jobs through its construction. Overall, trade between Africa and China has increased by more than six times in the last ten years - to $120bn in 2011.

This article reminded me of the discussion we had in class about China’s role in the world economy. While China’s GDP growth may slow as it “catches up” to the United States, I believe that this investment demonstrates the potential of an economic alliance between China and African nations. It makes sense as the demand for natural resources increases globally and it becomes easier to outsource manufacturing. I expect to see this relationship develop further in the coming years.

African Union Opens Chinese Funded HQ in Ethiopia 

http://www.bbc.co.uk/news/world-africa-16770932

Obama Pushes ‘Buffett Rule’ to House Dems

This article is about an announcement that president Barack Obama made.  He said that he would work on revising tax break that helps rich people pay lower tax rates than many wage workers.  President Obama calls it a Buffet rule, which is interpreted from Warren Buffet’s comment; “I shouldn’t pay taxes at a lower rate than my secretary.” 

Revising the current tax break would help wageworkers and Obama would win the popularity vote.  It is predicted that this would close the gap of inequality a little, but when we think about the large amount of national debt of US, it is not so bright news in my opinion.  More tax break for many wageworkers mean that it will be a tax break for majority.  If top 1% income group’s revised tax break (higher tax rate) can cover the loss tax from majority, it’s the best, however, the fact isn’t like that. 

Also, Democrat’s debate on extending debt limit and extending payroll tax cut last year helped Democrats to gain more votes.  Extending debt limit means more debt but intension of more economic activities.  Extension of payroll tax cut will help workers to gain more income, but current popular programs like Social Security and Medicare will suffer from lower budget.       

      

As we all know, Mr. Obama is trying to run a presidential election in 2012.  His announced policies have positive and negative affects in the economy.  The debates that democrats make seems to be helpful in a short run, although, the policies were in demand by many people.  

Link:

http://www.bloomberg.com/news/2012-01-27/obama-pushes-buffett-rule-in-populist-talk-to-house-democrats.html

Europe struggles to find a strategy to grow out of its debt crisis

In this article, the current situation in Europe is further examined and what is to come of their next summit on January 30^th. The article discusses whether or not countries will be able to come to some sort of common ground over what should be done. While all the countries believe that growth is the answer, they all have different opinions over what is the best way to increase growth.

At the summit, the will be attempting to pass “fiscal compact” which would require all signatories to have a balanced budget. There is opposition to this, such as Mrs. Lagarde, and the opposition believes this “makes Keynesianism illegal” and what they need to do is ease monetary policy and countries that have surpluses should spend more.

Three more problems in Europe are the fact that they have so much public spending, their production is falling further behind the United States after almost catching up in the 1990’s, and it is hard to obtain patents. Since there is no patent that exists that covers you in multiple European countries, it is very difficult to get a patent. They are trying to fix this and make one that gives you protection in many countries now.

U.S. Economy Picks Up Steam

This article examines the current situation of U.S. economy. Although the U.S. economy grew at its fastest pace in 18 months in the fourth quarter, the author points out that slower growth is likely to happen in the coming month due to a weak demand.
The U.S gross domestic product grew at an annual rate of 2.8% in the fourth quarter last year. But the acceleration is less the 3% a year, not enough to bring down the unemployment rate as indicated by economists.
The author also points out that the boosted in spending at the end of 2011 is in part by drawing down savings. This is unlikely to last very long. Economist Mr. Campagna said:"Everyone is just scared to overspend." Without enough consumers willing to buy services and products, a market-economy system like U.S. will suffer from low consumption and firms are not motivated to produce more product and services and the economy will only recover very slowly.

An Economy Crumbles: Uncertainty about whether Greece will stay in the euro is crippling its prospects

http://www.economist.com/node/21543522

The article is analysis of whether or not Greece will still be in European Union due to their downturn economy that has been in a recession for the past five years. The Greek banks have borrowed 43 billion euro of emergency funds from the Greece Central Bank. Credit is in short supply so banks had to decrease the amount of loans which has increased the price to obtain loans. At the end of 2011, the IMF released a report stating that a “50% write down on private-sector bonds… together with €130 billion of extra official financing at low interest rates would give Greece a decent chance of getting its public debts down to 120% of GDP by 2020”.  The unemployment rate has risen to 18%.  Greece has a deficit of 10% GDP which is a concern for a country that has so much “slack” and consumes more than it produces.

The uncertain future of the Greek economy has lead to few investors or businesses to make long term commitments in Greece. Greece’s future will be determined next year once its place in the euro is confirmed. It also depends on the IMF’s agreement for a new support package which they would only agree to if they think Greece’s “public finances are on a sustainable path.”  

One suggestion for the Greek economy is to shutdown “underutilized” public entities. Another suggestion is to fix the corruption of the tax system by outsourcing the job to “foreign tax officials or private-sector tax consultancy”.   In order to stay in the euro they have to convince the institutions or countries that are going to loan them money that they are not go to throw their money away. 

Bitcoins: Does an Internet Currency Mean the Doom of the Dollar

Since the financial crises, politicians and economists have been calling for a change to our economic system. Some even suggest getting rid of the Federal Reserve and returning to the gold standard for more stability. If stability is the issue, why not switch to a currency that can regulate itself? Bitcoin, created in 2009, is the worlds “first decentralized digital currency.” In theory, Bitcoin seems perfect; Through a set of complicated algorithms, it is controlled against theft, counterfeiting, and inflation. In practice, could a concept like Bitcoin perform as well as it's designed? 

Although this article focuses specifically on the Bitcoin and the concept of a digital currency, it brings up a lot of great questions as to where our economy, and the world economy are headed. With a currency that can regulate itself, what’s going to happen to regulatory institutions like the Fed? How would a decentralized currency affect politics?

http://business.time.com/2011/06/29/bitcoins-does-an-internet-currency-mean-the-doom-of-the-dollar/

http://www.economist.com/node/18836780

How Bitcoin works:

http://www.economist.com/blogs/babbage/2011/06/virtual-currency

http://www.weusecoins.com/

GDP Report Hurts Stocks

The nation's gross domestic product—the value of all goods and services produced—grew at an annual rate of 2.8% between October and December, up from 1.8% growth in the third quarter. The reading fell short of expectations for 3% growth, though the data showed the U.S. economy grew at the fastest pace since the second quarter of 2010.

U.S. stocks were down more than half a percent in midmorning trading, jeopardizing the market's chances for a fourth-straight weekly gain, after investors were disappointed by the most recent reading on domestic economic growth. 

The Dow Jones Industrial Average futures dropped 74 points, or 0.6%, to 126664. The Standard & Poor's 500 fell 4.3 points, or 0.2%, to 1314 and the Nasdaq Composite Index was flat at 2806.

 http://online.wsj.com/article/SB10001424052970204661604577186481168230406.html?mod=WSJ_hp_LEFTTopStories

Cuba's Communist Convene

This article gives the reader insight into Cuba's political process. As discussed in class, Cuba and North Korea are the only two nations in the world with a command economy. Cuba has been lenient economically recently, and with the country's political leaders gathering this weekend, it could mean that the leadership could loosen its economic grip on the country.

Raul Castro also introduced term limits on the presidency. If we use the Soviet Union as a case study, we may find that eventually future leaders will introduce economic and/or political policy that might lead to the collapse of the economic system. I believe this will happen after the death of Fidel and Raul Castro.

The paradox of prosperity

In this article, China is being examined as an economic power. However, it's being ridiculed in a way due to its continual use of a non functioning economy. "The paradox, as some within the party are coming to realize, is that for China to succeed it must move away from the formula that has served it so well." Even though China is fast moving towards establishing itself as a world superpower, both economically and militarily, it still has ties to its old communist methods. The article explains that for China to finally make that step towards becoming a world superpower, it must leave the old communist ties behind. http://www.economist.com/node/21543537

Portugal under pressure, but default unlikely

Portugal, along with many other European countries, has come under close scrutiny recently due to the debt crisis. Many investors fear that Portugal may be the next to fall. Today the yield on 10-year government bonds hit 15%, which is the highest it has been since the introduction of the Euro in 1999, and 3-year bonds hit 21%. Portugal currently has a 162 billion euro debt load, and the fear is that investors could lose up to 50% of their holdings if the country decides to default on its debts. Investors have been looking to Greece as a potential example of what also may happen in Portugal. Additionally, the economy is expected to shrink 3% this year.

Yet, investors still have bigger worries in the larger markets such as Spain and Italy. Portugal has been praised for the progress it has made on fiscal reforms. In fact, analysts are saying that Portugal is not in immediate danger of default, but the government needs to do a better job of controlling public spending. In contrast, Greece has struggled to make budget cuts and structural reforms. It is predicted that Portugal will return to the public markets in 2013.

Africa's Hopeful Economies

This article starts by explaining a new trend of increasing numbers of self made African billionaires. Africa suffers from gross inequalities, but there is an up and coming middle class. The Standard Bank (a bank that operates throughout the continent of Africa) estimates that 60m African household have an annual income greater than $3,000 at market exchange rates; by 2015 this number is expected to reach 100,000m. This "new middle class" can partially be attributed to Africa's increase in international trade, decreased inflation and higher productivity over the past few years. The article relates Africa to China 30 years ago when it took off as an international super power. Africa and China  appear to have have many similarities besides economic growth. To start Africa's population is estimated to double from 1 billion people to 2 billion in the next 40 years. Also demographically, the mean age of Africans is 20. As this generation moves into the working class age, Africa's productivity will certainly increase. These similarities to an up and coming China should not be ignored but factors such as corruption, war, and disease continue to cripple the continent. Also looking at statistics for "Africa" can be dangerous because each of Africa's 54 countries provide severely different economic and social challenges that need individual economic policies. Until these factors can be dealt with, this naturally rich continent will continue to be home to a mainly poor population.http://www.economist.com/node/21541008

Fed Signals That a Full Recovery is Years Away

The Federal Reserve declaring that the economy would need help for years to come, said Wednesday it would extend by 18 months the period that it plans to hold down interest rates in an effort to spur growth. The Fed said that it now planned to keep short-term interest rates near zero until late 2014, continuing the transformation of a policy that began as shock therapy in the winter of 2008 into a six-year campaign to increase spending by rewarding borrowers and punishing savers. The Fed forecast growth of up to 2.7 percent this year, up to 3.2 percent next year and up to 4 percent in 2014, but at the end of that period, the central bank projected that the recovery would still be incomplete. Workers would still be looking for jobs, and businesses would still be looking for customers. The economic impact of the low-interest rate extension, however, is likely to be modest. Many businesses and consumers can’t qualify for loans, a problem the Fed’s efforts do not address. Moreover, long-term rates already are at record low levels and, like pushing on a spring, the going gets harder as it nears the floor. Finally, the Fed already was widely expected by investors to hold rates near zero well into 2014, limiting the benefits of a formal announcement. Since the beginning of the financial crisis in 2007, the Fed has alternated bursts of activity with periods of rest, concluding several times that it had done enough only to find the economy still struggling to recover. The Fed announced last summer that the central bank intended to keep interest rates near zero through at least the middle of 2013, and that it would seek to reduce long-term interest rates through changes in the kinds of investment securities it holds. Since then, two meetings had passed without the introduction of any new programs. This is a perfect example of what we were talking about in class about economic systems vs. economic policies. The distinction is very clear in this article, and it will be interesting to see if these policies that the Fed plans to enact and continue, will spur the growth they predict low interest rates may incur. 

http://www.nytimes.com/2012/01/26/business/economy/fed-to-maintain-rates-near-zero-through-late-2014.html?ref=economy

A world in chaos? That may be a good thing.

http://www.bloomberg.com/news/2012-01-25/u-s-economy-preferred-by-investors-in-global-poll-on-markets-1-.html

In this article, it provides readers with a general view of the Economic Chaos taking place today. It is said that the chaos could be arranged in the order of A, B, C, D. A is for anger, B is for borrowing, C is for competitiveness, and D is for deadlock.  A category includes European anger at austerity measures, tens of thousands of Russians protesting the current policies of once popular Putin, and so on. Also, corruption is still a serious problem in the developing countries which also angers people.  More chaos in B includes the problematic borrowing and the debt issue. America’s federal government, state governments, financial corporations, and households all carry debt. Also, European government-debt-fueled schemes have reached their inevitable end. As a result, the economy is stagnant.  According to the article, the middle-class living standards in the West have not risen for several years, which might be partly caused by the advent of a poor global labor market. Millions of workers now compete with one another for the jobs in the same (although very large) market. D, for deadlock, is another remarkably global phenomenon that at the top of governments. For example, America’s Congress understood the debt problem before raising the debt limit; however, solving it is so painful that it didn’t get gone until the last desperate moments. In summary, although the chaos is disturbing and annoying, it says that hope is in there if we look hard enough, and it could also mean that the chaotic challenges are closer to finally being resolved.

 From this article, we can see that there are different problems existing in different countries, which could also mean in different economic systems. As discussed in class, there is not  a perfect economic system, but instead probably a better one. Moreover, it is also very hard to compare different economic systems among different countries, as we don’t know which elements of these systems cause the problems and how they should be resolved.

    

Japan posts first trade deficit since 1980

It is not a surprising topic to see after the disastrous earthquake and tsunami happened last year. We have been keep hearing that many electronics and manufactory companies was influenced. The export was weaken after the natural disaster. Also, with the shut down of several nuclear plants, the power was limited, which has brought many pause of production.
In addition, tourism has been hit too. People began to afraid of nuclear residue radiation, even dare not to buy brands made in Japan, especially food and skin care stuff.
There were also influences from strong yen and eurozone economc crisis. The article brings upm"In the latter half of the year, floods in Thailand knocked out more Japanese production capacity, while overall shipments were hurt by a strengthening yen, up 17% against the euro over that period."
There is a debate about whether this deficit will continue or not. Some think that the data already shows that in the new year, there is a obvious increase in trade. While other think that this deficit will linger.
In my opinion, this hard time for Japanese economy has not met the end yet. The influence of nuclear issue is huge. From what I know, many people already gave up buying Japan-made stuff, not to mention tourism and agriculture. Export of Japan will be absoltely hit in the coming, say 5 years. The recovery time will be longer than people thought.

Economy in U.S. Preferred by Investors: Poll

Economy in U.S. Preferred by Investors: Poll

At the World Economic Forum today representatives showed confidence in the United States economy in several polls.  Most important among them is a poll showing that 48% of experts believe America will be among the best countries to invest in this fiscal year.  By invest the poll is mostly referring to stock markets, which are always strong in the very laissez-faire American Economy.
This comes about due to several factors.  America is pulling out of its recession.  Job Growth in Ameria.  The European Union is facing a debt crisis and the impending defaulting of Ireland. 

The countries tied for second in the poll were Brazil and China. 

Fed adds more punch to low-rate pledge

I believe as the economy grows bigger and bigger, it is more difficult for any single entity to control the whole economy. However, when the economy gets into trouble, it all falls back to the government to step in, first to help, and second as a insurer. In other words, the government proves to be more important than ever with the role of stabilizing the market. Maybe, the government can play a bigger role in the economy in the future.

Obama: Debt ceiling fight contributed to poor economy

Obama: Debt ceiling fight contributed to poor economy

In President Obama's State of the Union address last evening, the economy was a substantial topic. In this article, he targets Washington for our economic issues and inability to pay our bills. Also, he states rules and regulations which he hopes to enforce upon the Congress and House to try and "clean-up" politics for the betterment of our economy.

World Needs to Create 600-Million Jobs in Next Ten Years: ILO

This article discusses the current state of world unemployment and how jobs need to be created to avoid civil unrest. An agency of the United Nations believes that 600 million jobs will need to be created. Because of the poor economy worldwide, there are over 200 million people unemployed. The other 400 million jobs needed come from the new people joining the workforce annually. Even for people that are employed, in developing countries many of them still live below the poverty line. In more developed nations, young people (ages 15-24) are suffering more than ever. Effective government policies will need to be put in place in order for anything to happen regarding unemployment. One way to improve the unemployment rate is to encourage private investment.

Perceptions of Corruption compared to Development

http://www.economist.com/blogs/dailychart/2011/12/corruption-and-development

This link provides an interesting explanation and graphic representation of corruption, in the form of the Corruption Perceptions Index, as it compares to the Human Development Index which provides a combined measure of education, health and wealth.  It relates to our discussion of efficiency and corruption in class.  It was especially interesting to me to look at the countries that were high in corruption and low on the HDI scale that may be affected negatively affected by the corruption in their country.  Particularly their economies will be hurt by the lack of external investment when investors feel uncertain about the economic environment and the potential for major gains.  These countries were largely located on the African continent and war torn countries such as Afghanistan and Sudan.  It will be important to follow the policies undertaken to address the perceptions and realities of public-level graft, as corruption can have major political implications in a country.  The outliers of Greece and Italy as more developed states, but with a higher perception of corruption can be compared to the outliers of the other extreme such as Cape Verde, Bhutan and Botswana that are less developed countries, but have a lower perception of corruption than many states in their region.

Can 'Super Mario' save Europe and America?

This article describes why Mario Draghi (a.k.a. "super mario") will be the most important person in economics in 2012. Draghi just recently took over the position of chairman of the European Central Bank. As the U.S. economy is finally beginning to recover from the recession there is a fear that a collapse of the European market could "derail" that recovery. As chairman of the European Central Bank, Draghi will play a large roll in making sure that the European market does not collapse. There is a lot of confidence in Draghi as he has already "defused the funding crisis" in Europe. The banks took out more than 500 billion euros in loans and now they have more liquidity than they know what to do with.
In this current situation Draghi and his colleagues on the ECB board would like to implement a new bailout plan called the European Stability Mechanism, which politicians will control. Unfortunately the maximum amount for loans is 500 billion euros which is not big enough. The question now is whether or not Draghi can successfully reassure the European market and help ensure that the U.S economy does not get derailed from its recovery.
http://finance.fortune.cnn.com/2012/01/24/mario-draghi-ecb/

Jaime Vavrek

U.S. GDP Growth Rate Forecast: 3% in Q4 on Consumer Spending, Q1 Likely Weaker

Some have said that the United States is on its way to a double-dip recession, but this article says otherwise. House construction has increased, companies have rebuilt inventories, and in general, people are becoming more confident as leading economic indicators has shown progress. A fourth quarter growth rate of 3% in 2011 is the highest rate the country has seen in a year and a half. New house construction and old house purchases has seen an increase as well. I think this point is a good indicator of forward progress away from another recession because the housing sector failing was a big factor in sending our country into a recession in the first place. A final point this article makes is the concern in the EuroZone. Forecasters worry that if governments fail, credit can freeze up again and negatively affect the United States.

Eurozone May Fall Into Recession

http://www.economist.com/node/21542824

Since the beginning of 2012, positive changes in the economy have occurred in many Eurozone countries. Business confidence and activity have risen in many countries, most notably Germany, who maintained 3% GDP growth in 2012. In the fourth quarter of 2011, however, many countries experienced a decline in GDP growth, and GDP growth in the Eurozone as a whole is currently estimated to have fallen by 0.3-0.4%. The bond markets in the Eurozone are also crumbling, and billions of euros in bonds must be issued to pay maturing debts. In Greece, the number of bank deposits has been declining steadily since 2009, and GDP is expected to have fallen by about 6% in 2011. On top of this, Greece has billions of dollars in bonds to repay in 2012. All of these factors, in theory, should increase savings rates and decrease consumer confidence in the Eurozone, which contracts the economy and causes recessions.

How Economic Inequality Harms Societies

After discussing economic inequalities and briefly describing how it affects economic systems and societies, it reminded me of a very interesting Ted lecture that I watched over break. The speaker, Richard Wilkinson, presents hard data on how economic inequality harms societies, and explores what happens when we make the income differences bigger or smaller, as well as presenting other variables such as education, violence, trust, etc. The only objection I have on this video is that at times he sort of pushes the limits between causation and correlation. The video is about 17 minutes long, but it's well worth the time. Take a look:

http://www.ted.com/talks/richard_wilkinson.html

Swap-O-Matic Vending Machine Based on Barter Economy

http://gadgetbox.msnbc.msn.com/_news/2012/01/21/10202145-swap-o-matic-vending-machine-based-on-the-barter-economy

SWAP-O-MATIC Vending Machine Based on the barter economy is entering the vending machine market in New York City.  To join the barter economy the user has to enter his or her email address and zip code to get started here, they do not plan to stay in just the NYC market for long so join and maybe we could get on at owu.  Credits are tagged to your email address by recycling goods into the vending machine, the vending machine will give the recycler a bottle water or can of soda in return. The company is currently very small and plans to use their IT database to find their customers and not just limit themselves to NYC.  The link includes other online-based bartering tools

EU agrees to Iranian oil embargo

http://www.irishtimes.com/newspaper/breaking/2012/0123/breaking8.html

This issue is something that has been going on for years.  The United States is afraid of Iran getting a nuclear weapon so it has worked to use economic sanctions, often in conjunction with other nations of the EU and UN, to get the later to abandon its current nuclear program, which Iran defends as a project to create more energy for Iran.  Given the semi-hostile relationship between the two nations (Iran has recently threatened to cut off the Strait of Hormuz, a bend that leads to the Persian Gulf) the more support for sanctions the better because it would help to try and get the intended result, especially with some EU members accounting of a large share of Iran's exports.  The results of support for the sanctions (US and EU) and opposition to them (Russia and China prominently), to me hints at a continuing economic divide among the world between markets and more command-style economic models.

Cities that have the longest way back from the recession

This is an interesting article that breaks down the top five cities that have the furthest track back from the recession. A large determinant of this study is based on the recovery of jobs in the areas. Many of these cities revolve around one particular industry in their area and due to the struggles of that product, the city and its citizens are suffering as well. Sitting at number five in order to number one is Flint, MI, Champaign-Urbana, IL, Santa Barbara-Santa Maria-Goleta, CA, Reno-Sparks, NV, and Carson City, NV. The manufacturing industry is very large in Flint and has continued to struggle with the recession and is the reason for a loss of several thousand job and they expect to only regain approximately 600 jobs by the end of 2012. At the top of the list, Carson City is still currently losing jobs and is not even projected to recover any by the end of the year. It is tragic to see these cities struggle so much through the recession and even more sad to think that many people there have no way of leaving or escaping the downfall. Poverty is becoming more and more normal in those cities which leads you to wonder if these cities will ever be able to recover from the losses.

Tax code to blame for US income inequality?

Tax code to blame for US income inequality?

This article is about Massachusetts Governor Mitt Romney's income (sort of). The governor and presidential hopeful will not tell his income but did say he gives fifteen percent of his income to the government for taxes.  Romney is a wealthy American who is part of the one percent, so is it fair for him to have to pay the same or less percentage of his income in taxes compared to a teacher or other Americans who make far less than he does?  Do you think tax breaks to the rich help the economy or is causing for a greater income inequality in America? 

Booming Mongolia: Mine, all mine

http://www.economist.com/node/21543113

“GOIN’ to OT?” drawls Andy, a burly tattooed man with that worldly air common to those who have done time in the American army. The gate at Incheon airport in South Korea is packed with travellers, mainly Mongolian expatriates on their way home, waiting to board a flight to Ulaanbaatar. Andy’s is a fair guess as to the destination of one of the few other Western passengers. “OT”—Oyu Tolgoi, or “Turquoise Hill”—is in the middle of nowhere, a desolate spot in the Gobi desert, another hour-and-a-half’s flight south of Ulaanbaatar (inevitably, “UB”). But it is the site of the biggest foreign-investment project in Mongolia, a copper-and-gold mine that is springing up at a remarkable speed and is expected, by 2020, to account for one-third of Mongolia’s GDP.

For Andy, who normally “does security” in places such as Afghanistan, Nigeria and Somalia, OT is a rest cure. Conditions are comfortable, the locals are a delight, and nobody tries to shoot him. And there are the transits through UB, a veritable Bangkok of the steppes—at least if your comparators are Kabul and Mogadishu. In the OT bus from UB airport into town, Andy is on tenterhooks waiting for the overnight hotel allocation. He is delighted with his billet—one where overnight guests are readily tolerated. The other news is less cheery: the airport bus will leave at four in the morning.

Can Venture Capital Save The World?

http://www.forbes.com/sites/helencoster/2011/11/30/novogratz/

We all know that foreign aid to poor countries especially to Pakistan has never really worked. Even if by some miracle the money does reach the people in need, it is usually a short term relief. The idea is to provide these poor people with a mechanism that will be permanent. Sort of similar to teaching them how to fish rather than giving the fish straight away. This article talks about this American woman who is using micro finance banking to relieve these poor people from the poverty trap they have lived in their entire lives.

Haiti Can Be Rich Again

http://www.nytimes.com/2012/01/09/opinion/haiti-can-be-rich-again.html?_r=1&scp=3&sq=Economic%20Systems%20Today&st=cse

Haiti used to be a country full of agricultural innovation, success, and productivity, but ever since the devastating earthquake that hit Haiti in 2010, the country has experienced many conflicts, pressures, and problems dealing with the success of their economy.

There have been many discussions about Haiti’s past system and the success that it provided for the country. This system included small farms and a decentralized economy, which provided Haitians with a better quality of life and additional trade, as well as pride and independence. Even though Haiti’s economy had some conflicts with control and power, the regional economies succeeded with their decentralized political and military system.

As discussed in the book, Comparing Economic Systems in the Twenty-First Century, the fundamental goal of comparative economic systems is to learn what economic systems work best and in what settings. This fundamental goal is currently what Haiti is realizing and how their past economic system could potentially be the reformed system they are looking for. With the help of non-governmental organizations providing for Haitian farmers, using a decentralized economy, and many more plans for the country, Haiti may already be heading in that direction. 

The visible hand--liberal capitalism vs. state capitalism?

http://www.economist.com/node/21542931

The crisis of Western liberal capitalism has coincided with the rise of a powerful new form of state capitalism in emerging markets, says Adrian Wooldridge

from the Economist print edition

BEATRICE WEBB grew up as a fervent believer in free markets and limited government. Her father was a self-made railway tycoon and her mother an ardent free-trader. One of her family’s closest friends was Herbert Spencer, the leading philosopher of Victorian liberalism. Spencer took a shine to young Beatrice and treated her to lectures on the magic of the market, the survival of the fittest and the evils of the state. But as Beatrice grew up she began to have doubts. Why should the state not intervene in the market to order children out of chimneys and into schools, or to provide sustenance for the hungry and unemployed or to rescue failing industries? In due course Beatrice became one of the leading architects of the welfare state—and a leading apologist for Soviet communism.

The argument about the relative merits of the state and the market that preoccupied young Beatrice has been raging ever since. Between 1900 and 1970 the pro-statists had the wind in their sails. Governments started off by weaving social safety nets and ended up by nationalising huge chunks of the economy. Yet between 1970 and 2000 the free-marketeers made a comeback. Ronald Reagan and Margaret Thatcher started a fashion across the West for privatising state-run industries and pruning the welfare state. The Soviet Union and its outriggers collapsed in ruins.

The era of free-market triumphalism has come to a juddering halt, and the crisis that destroyed Lehman Brothers in 2008 is now engulfing much of the rich world. The weakest countries, such as Greece, have already been plunged into chaos. Even the mighty United States has seen the income of the average worker contract every year for the past three years. The Fraser Institute, a Canadian think-tank, which has been measuring the progress of economic freedom for the past four decades, saw its worldwide “freedom index” rise relentlessly from 5.5 (out of 10) in 1980 to 6.7 in 2007. But then it started to move backwards.

The crisis of liberal capitalism has been rendered more serious by the rise of a potent alternative: state capitalism, which tries to meld the powers of the state with the powers of capitalism. It depends on government to pick winners and promote economic growth. But it also uses capitalist tools such as listing state-owned companies on the stockmarket and embracing globalisation. Elements of state capitalism have been seen in the past, for example in the rise of Japan in the 1950s and even of Germany in the 1870s, but never before has it operated on such a scale and with such sophisticated tools.

State capitalism can claim the world’s most successful big economy for its camp. Over the past 30 years China’s GDP has grown at an average rate of 9.5% a year and its international trade by 18% in volume terms. Over the past ten years its GDP has more than trebled to $11 trillion. China has taken over from Japan as the world’s second-biggest economy, and from America as the world’s biggest market for many consumer goods. The Chinese state is the biggest shareholder in the country’s 150 biggest companies and guides and goads thousands more. It shapes the overall market by managing its currency, directing money to favoured industries and working closely with Chinese companies abroad.

State capitalism can also claim some of the world’s most powerful companies. The 13 biggest oil firms, which between them have a grip on more than three-quarters of the world’s oil reserves, are all state-backed. So is the world’s biggest natural-gas company, Russia’s Gazprom. But successful state firms can be found in almost any industry. China Mobile is a mobile-phone goliath with 600m customers. Saudi Basic Industries Corporation is one of the world’s most profitable chemical companies. Russia’s Sberbank is Europe’s third-largest bank by market capitalisation. Dubai Ports is the world’s third-largest ports operator. The airline Emirates is growing at 20% a year.

State capitalism is on the march, overflowing with cash and emboldened by the crisis in the West. State companies make up 80% of the value of the stockmarket in China, 62% in Russia and 38% in Brazil (see chart). They accounted for one-third of the emerging world’s foreign direct investment between 2003 and 2010 and an even higher proportion of its most spectacular acquisitions, as well as a growing proportion of the very largest firms: three Chinese state-owned companies rank among the world’s ten biggest companies by revenue, against only two European ones (see chart). Add the exploits of sovereign-wealth funds to the ledger, and it begins to look as if liberal capitalism is in wholesale retreat: New York’s Chrysler Building (or 90% of it anyway) has fallen to Abu Dhabi and Manchester City football club to Qatar. The Chinese have a phrase for it: “The state advances while the private sector retreats.” This is now happening on a global scale.

This special report will focus on the new state capitalism of the emerging world rather than the old state capitalism in Europe, because it reflects the future rather than the past. The report will look mainly at China, Russia and Brazil. The recent protests in Russia against the rigging of parliamentary elections by Vladimir Putin, the prime minister, have raised questions about the country’s political stability and, by implication, the future of state capitalism there, but for the moment nothing much seems to have changed. India will not be considered in detail because, although it has some of the world’s biggest state-owned companies, they are more likely to be leftovers of the Licence Raj rather than thrusting new national champions.

Today’s state capitalism also represents a significant advance on its predecessors in several respects. First, it is developing on a much wider scale: China alone accounts for a fifth of the world’s population. Second, it is coming together much more quickly: China and Russia have developed their formula for state capitalism only in the past decade. And third, it has far more sophisticated tools at its disposal. The modern state is more powerful than anything that has gone before: for example, the Chinese Communist Party holds files on vast numbers of its citizens. It is also far better at using capitalist tools to achieve its desired ends. Instead of handing industries to bureaucrats or cronies, it turns them into companies run by professional managers.

The return of history

This special report will cast a sceptical eye on state capitalism. It will raise doubts about the system’s ability to capitalise on its successes when it wants to innovate rather than just catch up, and to correct itself if it takes a wrong turn. Managing the system’s contradictions when the economy is growing rapidly is one thing; doing so when it hits a rough patch quite another. And state capitalism is plagued by cronyism and corruption.

But the report will also argue that state capitalism is the most formidable foe that liberal capitalism has faced so far. State capitalists are wrong to claim that they combine the best of both worlds, but they have learned how to avoid some of the pitfalls of earlier state-sponsored growth. And they are flourishing in the dynamic markets of the emerging world, which have been growing at an average of 5.5% a year against the rich world’s 1.6% over the past few years and are likely to account for half the world’s GDP by 2020.

State capitalism increasingly looks like the coming trend. The Brazilian government has forced the departure of the boss of Vale, a mining giant, for being too independent-minded. The French government has set up a sovereign-wealth fund. The South African government is talking openly about nationalising companies and creating national champions. And young economists in the World Bank and other multilateral institutions have begun to discuss embracing a new industrial policy.

That raises some tricky questions about the global economic system. How can you ensure a fair trading system if some companies enjoy the support, overt or covert, of a national government? How can you prevent governments from using companies as instruments of military power? And how can you prevent legitimate worries about fairness from shading into xenophobia and protectionism? Some of the biggest trade rows in recent years—for example, over the China National Offshore Oil Corporation’s attempt to buy America’s Unocal in 2005, and over Dubai Ports’ purchase of several American ports—have involved state-owned enterprises. There are likely to be many more in the future.

The rise of state capitalism is also undoing many of the assumptions about the effects of globalisation. Kenichi Ohmae said the nation state was finished. Thomas Friedman argued that governments had to don the golden straitjacket of market discipline. Naomi Klein pointed out that the world’s biggest companies were bigger than many countries. And Francis Fukuyama asserted that history had ended with the triumph of democratic capitalism. Now across much of the world the state is trumping the market and autocracy is triumphing over democracy.

Ian Bremmer, the president of Eurasia Group, a political-risk consultancy, claims that this is “the end of the free market” in his excellent book of that title. He exaggerates. But he is right that a striking number of governments, particularly in the emerging world, are learning how to use the market to promote political ends. The invisible hand of the market is giving way to the visible, and often authoritarian, hand of state capitalism.

From the beginning, the Euro had inherent flaws as a currency model

The Euro was designed to increase the economic importance of the European continent and to create a trade-free zone. While the experiment got off to a promising start, recent years have highlighted flaws in the system that seem not to do solely with specific economic events, but also with flaws in the institutions that created the Euro.

One institution, the monetary system, was imposed on a collective group of sovereign nations. While all of the involved nations fell under the blanket term of 'capitalism', the specific policies and institutions all varied in very noticeable ways. As a collective, the Eurozone created institutions such as the European Central Bank, which was an attempt to create an institution at a higher level than those in individual countries. However, the actions of the European Central Bank were divisive and often clashed with decision-making in individual countries. Agreements made at the beginning of the pact were periodically ignored, making the pact weak and almost worthless, at a power level far below the leadership in individual countries. This shows the difficulty of creating effective institutions between sovereign nations, since the resulting higher-level institutions are only vehicles of compromise, and are often ignored by the leadership in the lower-level institutions and rendered useless.

Another inherent problem with the Euro was the fact that it tied many separate economies, many of which were operating on different levels. While the economies in Western Europe were robust, the economies in Eastern and Southern Europe often lagged behind. Putting them on the same currency prevented individual countries from controlling their own monetary policy, which is a basic and critical economic institution. Consequently, the Euro was valued too highly for the struggling economies and too lowly for the strong economies. It made the debt of struggling countries, including the countries currently in crisis of Greece, Spain, and Italy, look more attractive due to their presence in the Eurozone.

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