Money and Morals

http://www.nytimes.com/2012/02/10/opinion/krugman-money-and-morals.html?scp=9&sq=income%20distribution&st=cse

The article discusses how the Congressional Budget Office supplied data on the widening income gap, which has produced more conversations about inequality in the United States. In comparison to other rich countries, the United States is the place where economic and social status is most likely to be inherited. The main disagreement with inequality is whether it is about morals or money. People who say that the problem is morals explain how there have been a decrease in the working-class family values. On the other hand, people who say that the problem is money explain how many Americans have a high school education or less, marriage rates and male labor force participation have decreased, and births out of wedlock have increased. The article discusses how these negative aspects of Americans cause terrible implications for the society as a whole. Also, one obvious answer for these negative aspects of Americans includes the decrease in the work opportunities available to less-educated Americans. Due to the decrease in employment benefits, health benefits, and entry-level wages for lower-education working Americans, the United States has become a society in which less-educated Americans have a hard time finding jobs with decent wages and good benefits. Therefore, the social changes that have taken place in America’s working classes are the consequence of rising inequality, but not the reason for it.             

Europe strengthens fiscal ties

In a step toward greater economic and political integration, all but two members of the 27-nation EU signed a treaty aimed at ensuring fiscal discipline.
The goal is to prevent a future crisis and foster economic growth by ensuring that governments do not spend beyond their means and rack up unsustainable debts, said European Council president Herman Van Rompuy at Friday's signing ceremony.

'Stingray' Phone Tracker Fuels Constitutional Clash

Stingray is a great example of how certain policies affect markets.  Designed to locate a mobile phone whether or not it is in use,  there is a strong demand for the product from law enforcement bodies. however some argue that the device violates the fourth amendment and to regulate its use.

http://online.wsj.com/article/SB10001424053111904194604576583112723197574.html

US Pushes Target for Hiring the Disabled

http://online.wsj.com/article/SB10001424052970204520204577251303726662194.html?mod=WSJ_hps_sections_careerjournal
This idea is interesting, though controversial.  The government seems to be trying to create incentives for the hiring of disabled Americans by having a policy that could remove government contracts from companies that do not have the required employment rate (7%) of disabled to non-disabled workers.  There are questions as to whether this violates the 1990 Americans with Disabilities Act or is progressing the 1973Rehabilitation Act.  But one reason I think the government has this policy is to successfully reincorporate veterans from Iraq and Afghanistan into the workforce, because when veterans returned home from Vietnam in the late 1960s and early 1970s most faced discrimination in the workplace.

Goodbye, First Amendment: ‘Trespass Bill’ will make protest illegal

Late yesterday, the House of Representatives approved a bill that would make it illegal to protest at any event where Secret Service is present or "nearby". This includes any event Romney, Santorum, and Gingrich are attending. The bill only requires the President's signature to become a law. Are we moving away from a democratic state?


http://www.economicpolicyjournal.com/2012/02/houses-passes-new-bill-that-would-make.html

http://rt.com/usa/news/348-act-tresspass-buildings-437/

1 in 5 older Americans scrimp on health care to save money

I thought this was a very interesting article but at the same time I found it to be very tragic. In recent statistics, twenty percent of Americans over the age of fifty have switched to cheaper prescriptions rather than taking the medications they are recommended to take. Also, more citizens of this age are choosing to skip out on doctor visits and all of this can be credited to the current high health care costs that we have in the United States. An even staggering percentage was that nearly one in five persons over the age of fifty either skipped or postponed a visit to the doctor to save their money. Still, others who have taken the route of taking generic drugs or even sticking to free samples to take care of their bodies rather than prescribed medicines. Those who reported they were doing these cutbacks also said they would often take half of the pill or reduce the dosage to make them last longer. This is very scary to see that people are jeopardizing their own health just to save a little extra cash but at the same time this tells us just how much this Great Recession has impacted our everyday lives and financial situations.

Economists see more reasons for optimism this year

According to a survey, many economists are gaining confidence that some facets in the U.S. economy will begin to improve within the next year, however they are not fully capable of excluding caution in their expectations for overall economic growth. With that said, the forecasts for employment, home construction and business spending are looking up. With the average GDP growth rate forecasted to grow around 2.4%, a slight improvement from 2011, things may be looking up. 

Unemployment seems to be fairly consistent, however it did go down by .6% since Novermber, and Panelists are continually forecasting very strong business spending this year. 

http://www.msnbc.msn.com/id/46540520/ns/business-stocks_and_economy/#.T00qfRzx24Q

New Push for Reform in China

This article examines a recent report on economic development of China by the World Bank and government insiders considered to have the ear of the nation's leaders. China could face an economic crisis unless it implements deep reforms, including scaling back its vast state-owned enterprises and making them operate more like commercial firms. The report warns that China's growth is in danger of decelerating rapidly and without much warning, which resembles what has occurred with other highflying developing countries such as Brazil and Mexico. The phenomenon, "middle-income trap", might occur when a certain income level was reached , a sharp slowdown could deepen problems in the banking sector and elsewhere, prompting a crisis.

What if Greece had to get a new currency?

http://www.bbc.co.uk/news/business-16981897

In class, professor Skosples mentioned how Greece's problem could be solved by an overnight conversion of currency. However, this article points out that it takes at least 4 months to develop a new currency system for the troubled country.
It also mentions that it's impossible to prevent information leakage if such plan is to be carried out. In that case, people will simply try to convert their monetary asset into another stable currency, thus leading to severe devaluation of the Euro.

Europe Gets Ready for Round 2 of Bank Loans

http://www.nytimes.com/2012/02/27/business/global/27iht-ecb27.html

The European Central bank is still struggling with creating a plan to sucessfully pull the Eurozone out of its current financial and credit crisis.  How do we get more money to countries that are already heavy in debt?  I don't know but, "this week the bank will offer a second installment of the three-year loans. After the first injection of cash helped reopen bank financing markets in Europe and bolster stock and bond markets around the world, there is intense interest in how much money banks will borrow, and what the effect will be."  These cash injections are for private banks that do not have enough capital to accommodate the market demand.  If there is a lot of borrowing then this means banks are willing to take the money and hunker down.  There is already easier money to borrow out there without the restrictions attached to this money; this is only a "tweak" in current monetary policy.  If banks borrow a lot now it would be bad for the markets some experts say.


To be honest, I have read a lot about the European Debt crisis but apparently it is not enough because I am never quite positive on the end goal or the macro approach of the ECU.  I hope others have had more cognitive success

Euro Zone Decision on Bailout Funds' Size Likely to be Delayed

With Germany still opposed to the bailout, the euro zone leaders may not be able to meet international demands. The euro zone wants to lend more money to the IMF in hopes of repairing the broken European economies but without Germany, the euro zone's biggest economy, they cannot afford to do so.

The European Central Bank supports the increase but Germany is insistent that the current bailout fund is large enough and if it were to increase, nations would try less to work their own way out of debt.

The meeting to be held tomorrow will vote on this and the funds would be given to Greece to expand its financial lifeline.

The US and Canada are both denying requests to participate in the funding so the euro zone is looking at countries like China and Japan. These two nations have stated that the euro zone must move first before they will consider participating.

Measuring Housing's Drag on the Economy

This article aims to assess how much of the recent financial crisis can be blamed on the housing market. Housing had a major part in causing the recession and it is also slowing the recovery. The article comes to the conclusion that over half of the reason the recovery has been so slow is housing. Due to the housing crisis, it was impossible to get interest rates low enough that enough people would want to borrow to buy a house (due to the Fisher equation we learned in class). It also points out that the states that were hit the hardest by the housing bubble are the ones that are having the hardest time recovering. Overall, the article comes to the conclusion that a great deal of blame can be put on housing for the recent recession and slow recovery.

Corporate tax rates: a useful trim

This article discusses President Obama's proposed corporate tax reform. The corporate tax rate in the United States, including state and local taxes, is currently 39.2%; this is high above the OECD weighted average, which is just under 30%. This high tax on corporations has encouraged more firms to produce abroad, causing domestic employment to decline. Obama plans to lower the tax rate to 32.6% and provide tax credits which incentivize domestic investment. This is expected to cost about $950 billion altogether, which Obama claims he will pay for by eliminating other tax breaks to make up for the new ones. He has, however, been somewhat vague about what which tax breaks to eliminate, which is always a difficult decision to make. There have also been arguments that large corporations who invest heavily abroad, such as Apple, will be hurt by these tax breaks and lobby to resist them.

http://www.economist.com/node/21548245

BP oil spill trial delayed

This article covers the recent postponement of the BP trials in Louisiana Federal Court. There is still a chance of some out of court settlements, but BP is mainly focused on the trial. The plaintiffs are a collection of fishermen, and hotel owners. BP's oil spill infringed on other business, it is very rare to see externalities of this size.

Tangled up in green tape

http://www.economist.com/node/21547804


This article is about the regulation imposed by the EPA and how the nature of it has become enormously confusing. Several pieces of legislation have been approved, only to be struck down right before they come into effect, or end up being severely reworked. This causes difficulties for companies trying to prepare around these regulatory shifts and financial loss on their end.

The article also discusses the difficulty these regulations have in getting approved. Congress had made the issue of environmental safety and reform a partisan one, making it far more difficult to get any regulation through without huge discussion and legal challenges. The difficulty of the American regulatory system makes trying to counter these market externalities a near impossibility, and point out a glaring flaw in the way we operate.

Analysis: U.S. factory jobs rebound seen destined to fizzle

This article talks about the increase in the labor market, especially in the manufacturing sector, is only temporary. The firing of large numbers in the automotive industry and the even more emergence of other foreign dramatically cheaper labor markets caused a sharp decline in the labor markets but will not be the cause of stopping of the current growth. Chinas labor market wages have been increasing and the US have seen an increase in its job market to help recover in from the recession, in actuality. Efficiency will be the killer of the manual labor market. Companies first find ways to improve their product and then they find ways to produce it more efficiently. This usually means as production technology improves, workers are laid off and machines are brought. This is a topic that has been on the platforms of multiple champagne parties.

 A very interesting part of the article is a small writing at the end discussing contracting services from accounting firms, consultancies and other companies. These contracting of specialty firms are aimed at efficiency. Jobs in business services, a sector that includes many people working indirectly for manufacturers, have grown eight-fold. That is good news for students such as us.


http://www.reuters.com/article/2012/02/26/us-analysis-us-factory-jobs-rebound-seen-idUSTRE81P0P520120226

Your Very Own Floating Bond-Villain Lair for $680 Million

http://www.businessweek.com/lifestyle/your-very-own-floating-bondvillain-lair-for-680-million-02242012.html

It should be clear that if the mega rich are still able to flip the bill for a $680 million dollar toy, there are still people that are doing just fine despite the economy.  I found this particularly interesting given the various news stories that have risen over the last couple days detailing how many of the c-level executives at many major corporations have received multimillion dollar bonus checks despite their company actually losing money for the year.  Some companies have taken the correct step and lowered these bonuses but obviously, not every firm is doing this if people are still able to buy things such as a floating island yacht.

Restructuring Greece Within the Euro is Illusory

http://www.spiegel.de/international/europe/0,1518,816410,00.html

This is an interview with Hans-Werner Sinn, a German economist who is the head of an economic think tank. It is about why he believes that, in order to resolve the issues that Greece is facing, the country must stop using the euro. He argues that, unless Greece drops the euro, its external debt will continue to increase, and it will never be able to pay it off.

If, as he suggests, Greece were to drop the euro in favor of its own currency, it would allow the country to become competitive again. Currently, goods made in Greece are far too expensive even for Greeks to purchase them. However, a change in currency, Sinn posits, would dramatically reduce the price of these goods, encouraging citizens to buy domestic goods instead of importing them. It would also make the tourism industry cheaper, attracting more tourists.

This is not to say that leaving the euro will immediately solve the problem. Sinn estimates that the country will descend into turmoil for up to 2 years. However, this would offer a permanent fix, rather than just buying time like the recent loans have. Greece, he says, will still need the planned bailout of €130 billion in order to make this transition too. It is impossible to know whether this plan would actually work without implementing it, and there is heavy opposition by those who have investments which rely on Greece's continued use of the euro. For this reason, it is uncertain that this is ever likely to happen

8 reasons why gas will hit $5 a gallon this year

This article is one that none of us want to see when it comes to gas prices. Currently, barrels are going for about $100 a barrel compared to the $75 a barrel last October. The average price right now is $3.62 which is ten percent higher than it was only two months ago. One reason gas prices will continue to increase is because of the situation we have in Iran. With the U.S. embargo with Iran, we have continued to look for even more from the smaller country of Japan as they have cut more oil ties with Iran as well. Another reason is due to the economic recovery in the U.S. As we continue to improve the economy, this means that we will have to suffer higher prices and with any recovery, the demand for oil-based products will increase. A third reason is that with summer approaching, history shows that there is typically a boost in demand for gasoline with all of the vacation driving that takes place. This is very unfortunate to read because I think we are all already worried about securing a job for the summer and on top of that a great deal of expense will be added on having to drive too and from work. I'm sure many of us seniors are hoping to save as much as we can to pay off loans and these gas prices are certainly going to take a large portion of our cuts.

U.S. Auto-Makers Face Tougher Times in China

The Chinese government has begun removing incentives that used to be given to the three American auto-akers, General Motors, Ford and Chrysler when the auto-industry was on the rise. Now that the industry is decreasing, China wants to put limitations on these companies. For example, the government is making it much more difficult to receive construction permits, which in turn is making it much more difficult for these american auto companies to build their factories. After a 23% fall in auto sales in January the future of the American auto industry in China looks like it will only continue to shrink in the near future. This current decline in China's auto-industry is sending a message to the foreign automakers. According to Alex Taylor III the message that China is sending is, "We still want you here, but we don't need you as much as we used to". As long as auto sales continue to drop in China, foreign auto-makers such as GM, Ford and Chrysler will continue to struggle there.

http://money.cnn.com/2012/02/23/autos/us_automakers_trouble_china.fortune/index.htm

Fed Likely to 'Sit Back' as Economy Gets Better: Bullard

Unemployment should drop below 8 percent this year as part of an improving economic climate that could take more monetary easing off the table, Fed President James Bullard told CNBC.

he thinks the unemployment rate, currently at 8.3 percent, drops to 7.8 percent by year's end, allowing the central bank to take more of watchful eye and less of an aggressive role in molding economic outcomes.

"With the better data, the super-easy policy already in place — I think we've got a lot on the table here," Bullard said. "So this is a normal situation for the committee to sit back, get more data, try to collect our thoughts about the things that are affecting our economy right now."

The Fed last year implemented what is known as Operation Twist, a $600 bond-buying program that sells shorter-dated notes and buys longer-dated ones in an effort to drive down long-term borrowing rates. The program expires in June.

http://www.cnbc.com/id/46510655

At the ECB, the Tweak that Quietly Saved the Banking System

http://www.nytimes.com/2012/02/27/business/global/27iht-ecb27.html?pagewanted=2&hp#

The European Union has, as we know, been struggling to maintain its economic prominence during the recession. The globalized nature of policy has created a so called “domino affect” through which large and small Euro Zone countries have been tied together. When one country has problems in its economy, it has relied on EU institutions – notably the European Central Bank (ECB) – to provide loans to banks, in order to stimulate the economy.  ECB changed its policy in November by allowing 3 year loans (three times more than previously) at a 1% interest rate. These loans were made available for a time in December and will become available once more this week. This decision was made as a compromise of how this institution should deal with the debt crisis. While the intent is to increase economic vitality, the ECB does not know what the exact response from banks will be.  Earlier this year, 489 billion Euros were borrowed from a variety of banks across the Euro Zone. If banks utilize this money effectively, these loans could be the right start for resolving the crisis.

'Stupid' and Oil Prices

This article examines the reason why the oil price in the US has rising dramatically recently. President Obama has been blaming the rise in oil price due to the increasing demands of Brazil and China, the turmoil in the Middle East, especially new fears of a supply shock from a conflict with Iran. However, the more likely suspect is what Mr. Obama does not like to mention, the monetary policy of U.S. Oil trade is in dollars, and its price therefore rises when the value of the dollar falls, all else being equal. The Federal Reserve throughout Obama's term has pursued the easiest monetary policy in modern times.

More Uncertainty for 2013

One of the tool the government can use to intervene in the market is tax. But the tax system in United State has so many uncertainty, which affects how many companies and individuals make decision. I think the tax system needs to change, and a more stable tax system seems to be more appropriate for long-term growth.