Greece has a habit of bringing down Monetary Unions

This article covers the brief history of Monetary Unions, apparently the earliest attempt was recorded in 400 BC between the Greek city-states. This features different Monetary Unions, but I found the Latin Monetary Union interesting. It was a union that was started 1866 with France, Belgium, Italy, and Switzerland. Now remember, the domestic gold standard was still a policy within these countries. Instead of sharing one legal tender, the currencies were pegged to each other.

Once Greece gained it's independence from the Ottoman Empire, it's fragile economy joined the union. Needless to say, they didn't contribute much to the union and the union eventually failed with the beginning of World War I.

Fed-watching gives Asian central banks cause to pause

The following article details how the Central Banks in several Asian nations have lowered their interest rates recently to try to continue growth that is expected to slow down in the future.  However, the Asian nations are watching the US fed as well.  Many of these nations are exporters, and a strong dollar with US economic growth would bode well for their economies.  Therefore the Asian nations will try to implement monetary policy to make sure that their currency's value stays at an exchange rate that is favorable for the US to buy goods and services from them.

http://www.reuters.com/article/2012/01/30/us-asia-policy-fed-idUSTRE80T0XK20120130

Protest in Russia

http://www.economist.com/blogs/easternapproaches/2012/02/protest-russia

In Moscow on February 4th 2012, middle-class Russians began a protest march against Vladimir Putin. Tens of thousands of Muscovites carried creative signs and white balloons, strolled, unfazed by a temperature of -20°C, towards the Kremlin. Politically-affiliated columns of Communists, nationalists, anarchists and monarchists were overtaken and outnumbered by middle-class citizens who valued their private space too much to form columns. This was no revolutionary crowd—they came to display their dignity and demand honest elections, not to storm the Kremlin. They reject Mr Putin not as some ruthless tyrant (he is not) but as the lynchpin of a corrupt system of governance based on the supremacy of the bureaucrat over the private citizen.

The official name of the crowd was for fair elections and for a less corrupt government. Putins has been seen as a strong politician however Russian citizen have been expressing their demands in a strong vocal and organized way.  It will be interesting to see if Putin gets re-elected this March.

Time for action: Another set of measures to tackle deflation

http://www.economist.com/node/21547808

This article talks about how the (central) Bank of Japan is trying to boost Japan's economy. Out of the recent five quarters, the Japanese economy has shrank in four of them. The Bank of Japan has increased its credit-easing program and is aiming for a 1% inflation in order to avoid deflation.

US Postal Service to Cut 35,000 Jobs Amid Processing Plant ClosuresUS Postal Service to Cut 35,000 Jobs Amid Processing Plant Closures

The financial issues faced by the United States Postal Service are mainly due to the changing fashion in which people send mail. By 2015, the USPS will face an annual loss $18.2. With losses like that, changes need to occur within the USPS in order to stay viable. They have closed 214 mail-processing facilities since 2005, and close 226 more before February 2013. Unfortunately, this means many job losses, but a government institution cannot lose that kind of money each year and expect not to be privatized. Some other ways the USPS is trying to lower costs is asking for legislation to cut employee pensions and stop delivery service on Saturdays.

Dow 13,000 is a big number, but it's just a number

The Dow hit 13,000 this week, the highest it has been since the start of the financial crisis. This event has definitely caused people to start talking, but is 13,000 just a number? Many people think so. After all, the Dow only follows 30 companies, with the most expensive stocks carrying the most weight. The Dow can also rise even when the economy is shrinking and the number of jobs falling. But then again, seeing the number 13,000 can play games with people's minds, and different groups of people will react differently. Market investors will see this mark as a time to get out. Even though the Dow is far from being an accurate measure of the economy, it still manages to create a stir.

Shareholders vs. Stakeholder capitalism

Shareholders vs Stakeholder capitalism

As I did some research about Stakeholder capitalism, I found an interesting article from The Economist about the debate revolving around this issue. This topic is raised again due to the recent crisis. Even though the article was posted in mid 2010, I feel that it still raises quite relevant arguments that we should be aware of.

Nelson Mandela stable after surgery

Nobel Peace Prize winner and former president of South Africa recently underwent surgery for abdominal pain. The whereabouts and specific reason for the surgery are unknown, but it has been reported that the 94 year old is currently in good shape and faces no immediate health risks. Although Mr. Mandela no longer plays a physical role in the South African government, he symbolizes change and equality in a country that unfortunately has not changed much economically since apartheid. Some fear that civil unrest and a fight for a change of government will come with the death of Madiba. Lets hope that this country, that has already suffered, will find a peaceful solution to these economic and social problems.

http://www.bbc.co.uk/news/world-africa-17163576

Why the Federal Reserve can't fix housing

http://money.cnn.com/2012/02/23/news/economy/federal_reserve_housing/index.htm 

As it says in the article, the Federal Reserve cannot fix the housing problem anymore. This news is a reflection on the U.S. Monetary Policy Forum, which is a one-day meeting presented by the University of Chicago Booth School of Business. Attendance includes Federal Reserve officials, members of foreign central banks and economists from some of the world’s largest banks and top universities. The U.S. Monetary Policy was held last Friday, February 24, 2012. This forum focused heavily on weaknesses in the housing market and was not very optimistic. Traditionally, the Fed aided the housing market by lowering its key interest rate and thereby owning mortgage rates. The main problem is that the current Fed’s interest rate is already near zero. Moreover, the mortgage rates are already at record lows. However, even through the rates are approaching to a historic low, the housing market remains in a slump. There are some arguments saying that the Federal Reserve can continue to lower the interest rates with unconventional moves; an example is the asset purchases that is called quantitative easing. However, it states (in this article) that such policies are unlikely to have a meaningful impact on housing for now. The main reason for this is that more of the homeowners who might qualify for refinancing at lower interest rates have already done so. Furthermore as Fed president Charles Plosser stated that the Fed’s policies—buying assets that target housing specifically like mortgage-backed securities—has already overstepped its bounds in 2008, when it started buying mertgage-backed securities. He believes those actions have blurred the lines between fiscal and monetary policy, which is a growing problem in the wake of the financial crisis that Plosser calls “dangerous.”As says in the article, according to the purview of Congress, the Fed Reserve officials have recently become more outspoken about problems concerning the housing market. According to St. Louis Fed President James Bullard’s opinion, the housing market is largely out of the Fed’s hands now.

As shown in this article, government intervention is a means to control or alleviate the problems existing in the economy. Nevertheless, policies are not always as effective as they may seem. Therefore, the people and policy tools that should be involved are tough issues that the governments and economists are facing today.

Google to Sell Heads-Up Display Glasses by Year’s End

By the end of 2012 Google is planning to launch a new breed of smart-phone. Android based, these Google Glasses are expected to stream and retrieve data about their surroundings through 3G or 4G data collection, GSP, bluetooth, motion sensors, and more. Costing about the same as current smart-phones, consumers will be able to connect and share with those around them just by looking.
Although the article doesn't directly talk about the economic effects, it does generates some questions about where our country is headed in terms of regulation and privacy rights. where are Google's boundaries in relation to privacy tracking their consumers and recording on the front built-in camera? How is this going to affect driving laws?

http://mashable.com/2012/02/22/google-glasses-2012/
http://bits.blogs.nytimes.com/2012/02/21/google-to-sell-terminator-style-glasses-by-years-end/

Shaun Donovan: Why the mortgage settlement is a fair deal

http://money.cnn.com/2012/02/24/real_estate/donovan_mortgage_settlement/index.htm?iid=HP_LN

As an effort to "stop the neighborhood from burning down" President Obama and Secretary of Housing and Urban Development Shaun Donovan have engineered another plan to help homeowners who have either been foreclosed upon or are currently living in an "underwater" home.  The settlement is $25 billion in relief for homeowners.  $2,000 will go to homeowners who were unjustly removed from their homes. 
Among other things included in the deal were a "bill of rights" for homeowners.  They would be entitled to receiving help from their lenders among other things.  This is a response to the way banks often treated borrows while the borrowers were in trouble.  It was often found that banks did not help their borrowers or even inform the borrowers that they were in trouble. 
This move is in a lot of ways symbolic.  $2000 dollars will not help families without homes.  The move is there to create a legal base to show the Federal Government will help families struggling and how the Federal Government will no longer tolerate the actions of banks who treat their borrowers poorly.  
Something of a move away from Laissez-faire Capitalism.

Europe's Banker Talks Tough

This article focuses on the tough realities that many of Europe Zone countries are facing do to unsustainable government spending and social contracts that have hinder growth. With the Euro Zone on the threat of a recession and many countries nearly on default there have been many different calls for limiting cuts in government in favor for higher taxes to drive revenue and keep debt market stable, but the ECB leader Mario Draghi threaten the latter might have real effects on the growth of the economy. He hopes that euro zone countries will be to able grow there way out of the challenges they face. He also talks about the challenges the Euro will face as there is no way to shift wealth between the different countries that make up the Euro currency.

White House privacy push seeks cooperation

http://www.reuters.com/article/2012/02/23/us-privacy-online-idUSTRE81M0AM20120223

By Jasmin Melvin

WASHINGTON | Thu Feb 23, 2012 5:09pm EST

(Reuters) - The White House proposed on Thursday a "privacy bill of rights" that would give consumers more control over their data but relies heavily for now on voluntary commitments by Internet companies like Google Inc and Facebook.

The White House on February 23 proposed a “bill of rights” that would give online consumers a greater privacy protection and government a greater power to police Internet firms.

Obama claimed that as the Internet grows, consumer trust is essential for the growth of the digital economy.  Therefore an online privacy Bill of Rights is so important.  internet companies such as Facebook and Google have been accused for tracking customer’s online activities and then used to generate advertising revenue. 

36 state attorneys sent letter to Google on wed expressing the concern about Google’s plan to share user’s information across their products without giving consumers an opt-in-option. 

Many internet companies agreed to give consumers a more privacy.  Although, there are doubts about implementation and enforcement. 

As most of us conceive that the digital economy is growing, it is still in an immature stage.  There haven’t been much regulatory on it and there is a risk of system failing, due to how the information online is handled.  We learned in class that there is a market failure if there is a lack of information.  Thankfully, Internet provides information and made our life more efficient.  If internet companies are upfront with people about how they handle the information they collected, advertising revenue wouldn’t be hurt and people won’t feel uncomfortable, but it is an impossible scenario.  Like the article says, the implementation and enforcement of “online bill of rights” is doubtable.    

                

Home Resales Climb Higher

Home Resales Climb Higher

The housing market has been one of the weakest parts of the U.S. economy, but there are signs it is starting to recover after a price collapse that began 5.5 years ago. In 2011, about 4.26 million homes were sold, up 1.7% from 4.19 million in 2010. Seeing an increase in home sales is very encouraging to me because you have to have pretty high consumer confidence to buy a home, possibly the biggest purchase of your life. Hopefully this is a sign that the economy is on the up and we will see continued growth in the economy for the months to come.

Japan's Economy Contracting

With our review of the Japanese economic system this past week, this article seemed relevant.  Japan is experiencing a contraction in it's economy.  There are multiple factors influencing the shrink, but part of it is obviously due to the current economic situation.  High unemployment in countries such as the US can result in problems for Japan which is a largely export-driven economy.  Japan has also been affected similarly by the debt crisis in the eurozone as well as floods in Thailand hurting the regional economy.  Despite the government intervention that exists in the country, Japan is still very much feeling the effects of a global recession.

http://www.bbc.co.uk/news/business-17008164

Postal Service seeks 50-cent stamps

http://money.cnn.com/2012/02/17/news/economy/stamp_price_hike/index.htm?iid=SF_E_River

The US Postal Service is currently in financial troubles and presented their 5-year business plan to Congress last week. One part of the plan was to raise first-class stamp prices to 50 cents (currently it is at 45 cents). The Postal Service said if nothing is done they could lose up to $18 billion in the next five years if nothing is done.

The rise in stamp price could "yield $1 billion a year in new revenue." Also in the plan, they have suggested closing down some mail processing plants and cut the delivery of first class mail from six days to five days. The Postal Service would also cut jobs and force employees who are eligible to retire to retire.  The plan has received opposition from employee unions and Congress. The unions wants Congress to act. The plan of the cuts were introduced in December of last year but were delayed until May 15th, if Congress does not act by then the Postal Service will go through with these cuts.

I thought this article was interesting because we were talking about the government's role in providing certain goods if there are market failures. Do you think the government should run the Postal Service or should a private firm do it?  

The Bank of Japan, Time for action

The Bank of Japan has been criticizing as too conservative for a long time. There is complaint says that the central bank could have boosted Japan’s economy if it had increased its balance-sheet more rapidly during the financial crisis. On February 14th the BOJ finally tried to disprove its critics.

First, it changed its wording on price stability. Instead of calling it an “understanding” among the nine individual policy-board members, it now refers to price stability as a “goal” of the institution.

Second, the BOJ increased its ongoing credit-easing programme by agreeing to purchase an additional ¥10 trillion ($130 billion) in long-term Japanese government bonds by the end of 2012. That triples the amount of its monthly purchases and brings the overall amount of credit easing to ¥65 trillion.

Yet as we read in our class materials, the economy still faces some severe problems: a declining and aging population, sluggish global growth and a still-strong yen that eats into corporate profits. Plus the reconstruction needs after the disaster last year, I would anticipate the recovery of Japanese economy still has a long way to go, and BOJ obviously needs to do more.

The Emergence of Social Capitalism

http://www.forbes.com/sites/haydnshaughnessy/2012/01/23/the-emergence-of-social-capitalism-adaptation-or-threat/

This article presents the interesting concept of social capitalism, which either serves as an adaptation to capitalism or even threatening to be its replacement.  The idea of social capitalism is "socialization", which is basically socializing problems and challenges and even the socialization of data, as the article mentions.  Social capitalization is driven by collaboration and sharing, through the help of technology and crowdsourcing. The idea still has time to develop as we learn more about this trend, but it was an interesting article by the author to consider the potential that the emergence of this type of system has for the future of our economy, whether it is beneficial or harmful.

Obama Offers to Cut Corporate Tax Rate to 28%

http://www.nytimes.com/2012/02/22/business/economy/obama-offers-to-cut-corporate-tax-rate-to-28.html

This article is about Obama and Geithner's plan to lower the corporate tax rate in the United States.  Aside from this being a blatant political move to preemptively counter Republican rhetoric on Obama being a socialist who raises taxes, I think this move could yield positive results.  The idea is to lower manufacturing corporations tax rates from 35% to 25% and non-manufacturing corporations down to 28%.  The idea is to simplify the code and fill in existing loop holes in the system.  Studies have found that over 20% of S&P index companies paid 20% tax rates because of loop holes and claiming profits outside of the U.S.  The changes should increase competitiveness of the current and potential future manufacturers in the U.S. as we already have the highest corporate tax rate in the developed world.

I am not sure if this move will bring in more revenue (if that is the goal) as it claims.  The thing about these corporations is they hire the best accountants to find the tax holes.  That's why we are addressing this issue today.  Hopefully corporations (especially the extremely profitable ones) will take a morality high ground and pay their legal part.

http://www.nytimes.com/2012/02/21/business/global/european-ministers-are-poised-to-approve-greek-rescue.html?_r=1&hp

European Ministers Are Poised to Approve Greek Rescue

After months of tense negotiations, euro zone finance ministers were poised Monday to bring Greece back from the brink of default through an agreement to a second giant bailout in exchange for severe austerity measures — and subject to strict conditions. The Euro Zone is going to watch carefully over the Greek economy to ensure they are taking proper measures to get out of debt along an appropriate time line. They have also established various regulations for the Euro Zone in case of future like events. The Dutch have also recommended permanent lenders' representatives monitor Athens to ensure the austerity of implementation measures.

Jobless claims plunge to nearly four-year low

Jobless claims has dropped to a four-year low, last week. unemployment claims totaled 348,000 in the week ended feb. 11, which is significantly less than predicted forecast of 365,000. Economists say that an improving job market could be the beginning of a new trend. But, despite a seeming improvement, recovery is still threatened by economic instability overseas, like European fiscal turmoil and unrest in an oil-rich middle-east region.

Is China Faking its Economc Growth

http://money.cnn.com/2012/02/16/news/economy/china_chanos/index.htm?iid=SF_E_River

For quite some time, China has been known for its rapid growth and size in the market.They have adopted a "do whatever it takes" attitude as they continue to dominate the market and expand as a country. But has their push for growth occurred too fast? In the past year China reported a 4.5% inflation rate and had a growth rate of 8.9% in the fourth quarter. Some are saying however, that China has understated their inflation by as much as 5% and a recession could be in the future. This high inflation would explain the increase in China's prices. Instead of slowing the inflation, China has focused on increasing spending. Other signs of high inflation are the slow in demand for housing and construction resources. Is China covering up high inflation so they don't discourage investors?

Pietro Ichino and Italy's Labor Laws

Through the experience and works of Pietro Ichino, professor of labor law and author of Inquiry into Labor, Faris provides us some insight on the failures of the Italian system, which is currently one of the debt-laden Eurozone nations forcing the E.U. into crisis.

Ichino argues that the institutions surrounding the transfer of labor are far too restrictive to private companies and unrealistic that they are preventing Italian-based companies from becoming globally competitive. In particular, Ichino takes a shot at a law that protects workers from being fired for except for the most exceptional of offenses perpetrated by the worker. This law discourages private companies from hiring labor in times of question, since the hiring of labor is not an easily reversible cost. In addition, it prevents downsizing by companies, since they are unable to unload labor costs. Another economic downside that I see in this is a reduction of the incentive structure. If someone's job is essentially guaranteed, they have no incentive to improve their skills, job performance, or to work harder.

It seems that in recent, Italian labor laws have changed to become less restrictive, but while the law protecting workers from being fired remains relevant, Italy will still lag behind other nations in terms of business environment. It is disturbing that so many death threats have been made against Ichino and his peers, and may signal how difficult it will be, politically, to change that law and other so-called 'workers protection' laws.