In the first quarter of 2012 the Dow Jones industrial average, the S&P 500, and the Nasdaq all increased substantially. The question is will the stock market continue to grow? In the past 5 years the S&P 500 has risen every year and had an average growth of 4.5%. Some say growth is due to The Fed's support of the economy.
http://money.cnn.com/2012/03/31/markets/lookahead/index.htm?source=cnn_bin
Saturday, March 31, 2012
Consumer spending jump highest since July
http://money.cnn.com/2012/03/30/news/economy/income-spending/index.htm?iid=SF_BN_River
It
is reported that the consumer spending rose 0.8% compared to January, which is
the biggest one-month jump since July of last year; after adjusting for inflation,
spending increased by 0.5%. Compared to a 0.2% increase in income in the same
period, it indicates that consumers are/were more willing to spend and it is a
good sign for economic recovery. According to this article, spending on durable
goods rose 1.6% in February, which was driven by strong auto sales as
automakers reported the best new-car sales in four years. Moreover, spending on
nondurable goods, such as food and gasoline, rose 0.9%. This increase is
virtually due to the higher prices of commodities. However, spending on
services, such as airfare and cable TV, grew only at a moderate rate at 0.4%. The
overall increase in consumer spending is 0.8%.
Furthermore,
as reported in this article, the job markets have created more than 200,000
jobs in February, and this improvement has helped lift overall income. Stuart
Hoffman, chief economist with PNC Financial, believed that the estimated rise
in income is likely to be higher in coming months, as more people now have
jobs. Additionally, as mentioned above, the increase in spending on nondurable
goods is virtually due to higher prices of commodities such as a higher price
of the gasoline. Hoffman believed/said that “at least in the February numbers,
it does not appear that higher gasoline prices are deterring consumers.
Instead, they [consumers] appear to be lowering their saving in order to
finance their spending. As the labor market continues to improve, income growth
will allow consumers to boost spending” To conclude, the aggregated effects/phenomena
as mentioned above are a good sign for the economic growth.
Cities get desperate when it comes to their debt
The federal debt is constantly covered in news, especially with policymakers starting to preliminary introducing budgets for the next fiscal year. However, how about municipal debt? Cities such as Detroit are considered in critical condition when it comes to the amount of debt they owe. Remedies include declaring bankruptcy, an oversight problem monitored by the state, or avoiding bankruptcy as all costs due to the negative stigma attached to the concept.
Fed's Low Interest Rates 'Toxic' for Economy: Pro
While the U.S. Federal Reserve has reiterated it would keep interest rates near zero until
late 2014, Sam Chandan, Chief Economist at Chandan Economics, says that
low interest rates distort asset prices and are "toxic" for the
economy.
"An extraordinarily low interest rate environment has become our drug of choice in this country. But the potential impact on the economy over the long run, in terms of how it distorts the markets, is potentially quite toxic. Its something we got to back away from," Chandan told CNBC.
The U.S. has not had an "interest rate environment that looks anything close to normal for a long time" and when that happens it will be difficult to handle. He gives the example of the housing market, which is struggling to recover despite low mortgage rates.
http://www.cnbc.com/id/46901256
"An extraordinarily low interest rate environment has become our drug of choice in this country. But the potential impact on the economy over the long run, in terms of how it distorts the markets, is potentially quite toxic. Its something we got to back away from," Chandan told CNBC.
The U.S. has not had an "interest rate environment that looks anything close to normal for a long time" and when that happens it will be difficult to handle. He gives the example of the housing market, which is struggling to recover despite low mortgage rates.
http://www.cnbc.com/id/46901256
Senate Upholds Big Oil Tax Breaks
Though I see where President Obama is coming from when he says that billions of dollars are going to the oil companies, but what would happen to gas prices if all these tax breaks were to be eliminated. We would see $5/gallon gas prices. I like the idea of going green and finding new renewable resources to power our nation, but that is not going to happen for a while and we should support oil companies as long as oil is such a huge component of the economy.
Friday, March 30, 2012
Jobless claims fall to four-year low
The number of people filing for unemployment fell to a 4-year low last week. The four-week moving average (considered to be a measure of health of the overall market by economists) also fell to a four-year low. The Labor Department has estimated a net gain of almost 250,000 jobs over the past three months, while the unemployment rate has fallen to 8.3%. Even 42% of the CEOs from the Business Roundtable said they expect to hire workers in the next six months. Ben Bernanke still cautions that while there has been improvement in the labor market, it hasn't been matched by growth in the overall economy.
Thursday, March 29, 2012
Sun Hung Kai Chairmen Arrested in Hong Kong
This article describes two good examples of corruption within an economy. The first example is bribery and the second is terrorism.
The Kwok brothers are two of the most powerful property business men in China, and are both billionaires. Both brothers along with Rafael Hui, a former city official, were all arrested in Hong Kong recently on suspicion of corruption in the form of bribery and misconduct in public office.
Hong Kong's laws are modeled after the British Legal System, which states that law enforcement agencies must offer bail to the suspects before they can decide whether or not to press criminal charges. So after the men were arrested, they left the ICAC law enforcement office.
Unfortunately this is not the first experience with corruption for the Kwok family. In 1997 former CEO of the family business, Walter Kwok was kidnapped and held for a ransom of $77.3 million. After his release he was able to re-enter back into the business and operate successfully for a number of years until 2008. In 2008 Walter was caught committing infidelity, which later caused his brothers to remove him from the executive board of the company.
The Kwok brothers are two of the most powerful property business men in China, and are both billionaires. Both brothers along with Rafael Hui, a former city official, were all arrested in Hong Kong recently on suspicion of corruption in the form of bribery and misconduct in public office.
Hong Kong's laws are modeled after the British Legal System, which states that law enforcement agencies must offer bail to the suspects before they can decide whether or not to press criminal charges. So after the men were arrested, they left the ICAC law enforcement office.
Unfortunately this is not the first experience with corruption for the Kwok family. In 1997 former CEO of the family business, Walter Kwok was kidnapped and held for a ransom of $77.3 million. After his release he was able to re-enter back into the business and operate successfully for a number of years until 2008. In 2008 Walter was caught committing infidelity, which later caused his brothers to remove him from the executive board of the company.
3.1 Million "Green Jobs"
http://money.cnn.com/2012/03/29/news/economy/green_jobs/index.htm?iid=HP_LN
The Federal Government has reported 3.1 million U.S. are "Green Jobs." Contrary to popular belief, green jobs are not only jobs involving green technology. Some of the jobs listed include thrift stores and school buses. These jobs are subsidized by the government and are considered "Green" in President Obama's plan to create 5 million green jobs.
The Federal Government's subsidizing of green jobs (the real ones, like building solar panels, not the thrift stores. That sounds like political maneuvering.) is an example of the government acting to reduce externalities. It also shows some slight socialism in the markets. By subsidizing "green industries" the government is allowing the businesses to survive where the market might otherwise dictate that the businesses fail. It is not directly dictating what should be produced, but it is making it easier for some companies to do so.
The Federal Government has reported 3.1 million U.S. are "Green Jobs." Contrary to popular belief, green jobs are not only jobs involving green technology. Some of the jobs listed include thrift stores and school buses. These jobs are subsidized by the government and are considered "Green" in President Obama's plan to create 5 million green jobs.
The Federal Government's subsidizing of green jobs (the real ones, like building solar panels, not the thrift stores. That sounds like political maneuvering.) is an example of the government acting to reduce externalities. It also shows some slight socialism in the markets. By subsidizing "green industries" the government is allowing the businesses to survive where the market might otherwise dictate that the businesses fail. It is not directly dictating what should be produced, but it is making it easier for some companies to do so.
Tuesday, March 27, 2012
Do the Rich Work Less as Their Taxes Increase?
Do the Rich Work Less as Their Taxes Increase?
The wealthy, according to the argument, are just like everyone else when it comes to incentives. If you tax their income above a certain rate, they will stop working, stop creating jobs and stop creating wealth that gets spread around the economy. (The term “going Galt” comes from Ayn Rand’s hero in “Atlas Shrugged,” John Galt). Jeffrey Thompson at the University of Massachusetts Amherst Political Economy Research Institute says the “going Galt” argument doesn’t hold up to close research. According to the data, “affluent households are unlikely to make substantial changes in their ‘real’ economic behavior in response to modest tax increases.”
So who do you believe? How much do you think taxes affect the rich behavior in America?
The wealthy, according to the argument, are just like everyone else when it comes to incentives. If you tax their income above a certain rate, they will stop working, stop creating jobs and stop creating wealth that gets spread around the economy. (The term “going Galt” comes from Ayn Rand’s hero in “Atlas Shrugged,” John Galt). Jeffrey Thompson at the University of Massachusetts Amherst Political Economy Research Institute says the “going Galt” argument doesn’t hold up to close research. According to the data, “affluent households are unlikely to make substantial changes in their ‘real’ economic behavior in response to modest tax increases.”
So who do you believe? How much do you think taxes affect the rich behavior in America?
What if the health reform dies?
http://money.cnn.com/2012/03/26/news/economy/health-reform-mandate/index.htm?iid=SF_E_River
The main topic discussed in the article is whether or not the Affordable Health Care Act will be ruled constitutional by the Supreme Court this week. The act would allow people to get affordable health care insurance. The argument for the mandate is that a majority of Americans will be insured and it would reduce the costs imposed by the uninsured on everyone else. This is the argument because when uninsured individuals go to the emergency room to seek treatment they most likely will not pay for the care they received. This cost is taken on by the hospital which the hospital passes on to the insured by raising the cost of services that they use. If the court finds it unconstitutional then the whole law could be struck down or the just the mandate could be repealed on its own. Should the government play a role in health care like other countries like Canada and Great Britain or should the market decide who is going to be able to pay for health care services?
The main topic discussed in the article is whether or not the Affordable Health Care Act will be ruled constitutional by the Supreme Court this week. The act would allow people to get affordable health care insurance. The argument for the mandate is that a majority of Americans will be insured and it would reduce the costs imposed by the uninsured on everyone else. This is the argument because when uninsured individuals go to the emergency room to seek treatment they most likely will not pay for the care they received. This cost is taken on by the hospital which the hospital passes on to the insured by raising the cost of services that they use. If the court finds it unconstitutional then the whole law could be struck down or the just the mandate could be repealed on its own. Should the government play a role in health care like other countries like Canada and Great Britain or should the market decide who is going to be able to pay for health care services?
Monday, March 26, 2012
Economic Recovery Will Fail Without Our Trust
Behavioral economist, Jeremy Riftkin, hypothesizes that modern economists fail to recognize a second "invisible hand" in today's market, social trust. He claims that commerce and trade are an extension of cultural relations, and without social trust markets would collapse. Current economic problems are at large due to a lack of trust domestically and globally. There is a lack of consumption because there is a fear that other's won't reciprocate. While developments in technology has enabled the integration of markets, causing interdependence between economies, the concept of the nation state is hindering the expansion of our empathy to the human species as a whole.
http://www.huffingtonpost.com/jeremy-rifkin/economic-recovery-will-fa_b_448353.html
http://www.newscientist.com/blogs/culturelab/2010/02/jeremy-rifkin-the-third-industrial-revolution.html
http://www.huffingtonpost.com/jeremy-rifkin/economic-recovery-will-fa_b_448353.html
http://www.newscientist.com/blogs/culturelab/2010/02/jeremy-rifkin-the-third-industrial-revolution.html
Bernanke Warns on Weak Job Market
In a recent speech, Bernanke claims that although there has been a recent decline in unemployment, this trend will not continue unless the economy grows more quickly. He shared rates giving evidence that a large share of the unemployed have not had jobs for six months or more. Roughly 40 percent of the unemployed fall into this category, according
to government statistics, compared to 25 percent after other recent
recessions. So unless our economy begins to strengthen more rapidly, the recent trends of lower unemployment will not continue.
www.nytimes.com/2012/03/27/business/bernanke-warns-on-weak-job-market.html
www.nytimes.com/2012/03/27/business/bernanke-warns-on-weak-job-market.html
Sunday, March 25, 2012
The Good, Bad, and Ugly of Capitalism
http://www.nytimes.com/2012/03/17/opinion/nocera-the-good-bad-and-ugly-of-capitalism.html?scp=2&sq=capitalism&st=cse
In this article, the chairman and chief executive of Starbucks, Howard Schultz, discusses the importance of moral capitalism in business today. He states that profitability is very important, but treating your customers, employees, and coffee growers should be just as important. Starbucks has embraced a large societal role and explains the importance of the value of your company. In this article, Starbucks' moral capitalism is compared to the “rip your eyeballs out” capitalism of Goldman Sachs. Goldman Sachs corporate culture value is more concerned with making as much money as possible, by whatever means necessary, than their own customers. Many Americans think this “amoral, eat-what-you-kill capitalism” is very repulsive. Also, that these practices don’t represent the values that Americans want to see in corporations. Finally, the article reveals that sometimes the best way to do well is to do good. It is interesting to me that even corporations have and need a system to be efficient and acceptable in the economy and that different corporations can learn from these other corporations with different values, such as Starbucks and Goldman Sachs.
In this article, the chairman and chief executive of Starbucks, Howard Schultz, discusses the importance of moral capitalism in business today. He states that profitability is very important, but treating your customers, employees, and coffee growers should be just as important. Starbucks has embraced a large societal role and explains the importance of the value of your company. In this article, Starbucks' moral capitalism is compared to the “rip your eyeballs out” capitalism of Goldman Sachs. Goldman Sachs corporate culture value is more concerned with making as much money as possible, by whatever means necessary, than their own customers. Many Americans think this “amoral, eat-what-you-kill capitalism” is very repulsive. Also, that these practices don’t represent the values that Americans want to see in corporations. Finally, the article reveals that sometimes the best way to do well is to do good. It is interesting to me that even corporations have and need a system to be efficient and acceptable in the economy and that different corporations can learn from these other corporations with different values, such as Starbucks and Goldman Sachs.
Chinese leaders ponder a stable economic future
It was not a huge surprise. As the world's largest exporter, China is being buffeted by a downturn in demand from its markets in Europe and elsewhere.
Continue reading the main story
“Start Quote
Every single country that has followed this model has ended up with a serious debt problem”
End Quote Michael Pettis Peking University
But the figure of 7.5% was also a clear sign that China's leaders want officials to focus on more sustainable economic growth.
Many economists are stressing that China needs to undertake fundamental reforms if it is to avoid serious economic problems in the future.
Continue reading the main story
“Start Quote
Every single country that has followed this model has ended up with a serious debt problem”
End Quote Michael Pettis Peking University
But the figure of 7.5% was also a clear sign that China's leaders want officials to focus on more sustainable economic growth.
Many economists are stressing that China needs to undertake fundamental reforms if it is to avoid serious economic problems in the future.
The oil industry's plan to lower gas prices
link: http://money.cnn.com/2012/03/23/news/economy/oil-industry-gas-prices/index.htm?iid=SF_BN_River
Oil is hands down one of the resources that Americans rely almost every single day. Since it is relied upon so heavily there is constant debate on the prices of gas and the way in which we attain our gas. Currently the oil industry is trying to reach out to people and say that they would like to lower the prices of the gas that we use so often. They are proposing that we drill more, tax less and cut regulation as well. It is obvious that the oil industries point of view and the Republican party point of view go hand in hand. Obama has been criticized for imposing heavier regulations for pollution and the reduction of global warming. The oil industry proposes that their ideas will increase oil production greatly, which in turn would lower the prices of gas. Especially if the production came domestically. The issue is that while Obama has been in office oil production has increased roughly 15% and the prices certainly have not decreased. One of the oil industries main ideas are to have Obama announce that there will be a plan to help decrease the price of oil simply to get consumers to expect the decline in price, and the price will then decline. I feel that our continuing dependence on oil is a slippery slope and that although it may seem like the best thing to do right now, we need to continue to try and find cleaner, more efficient ways for energy.
Oil is hands down one of the resources that Americans rely almost every single day. Since it is relied upon so heavily there is constant debate on the prices of gas and the way in which we attain our gas. Currently the oil industry is trying to reach out to people and say that they would like to lower the prices of the gas that we use so often. They are proposing that we drill more, tax less and cut regulation as well. It is obvious that the oil industries point of view and the Republican party point of view go hand in hand. Obama has been criticized for imposing heavier regulations for pollution and the reduction of global warming. The oil industry proposes that their ideas will increase oil production greatly, which in turn would lower the prices of gas. Especially if the production came domestically. The issue is that while Obama has been in office oil production has increased roughly 15% and the prices certainly have not decreased. One of the oil industries main ideas are to have Obama announce that there will be a plan to help decrease the price of oil simply to get consumers to expect the decline in price, and the price will then decline. I feel that our continuing dependence on oil is a slippery slope and that although it may seem like the best thing to do right now, we need to continue to try and find cleaner, more efficient ways for energy.
The Castros, Cuba and America: On the Road Toward Capitalism
Here's the link:
http://www.economist.com/node/21551047
It has been known a while ago that underlying the Cuba's communist shell is the changing and reforming of the whole system into some form of capitalism. Even though Raul Castro might say that he doesn't want to dismantle the current system in Cuba, I think that's just mere words. And you know what - China and Vietnam also have to go through the same ruse - "no we're not trying to dismantle the (communist) system." It's just the way it has to be done. Just like China or Vietnam, I think that the capitalistic form of Cuba (in the future when they totally transform out of socialism) will be not quite similar to the US's.
Of course, the transition's biggest obstacle would be mainly political and oppositions from those that benefit the most from the system (which usually is the minority). It will be interesting to see how Cuba get out of this.
http://www.economist.com/node/21551047
It has been known a while ago that underlying the Cuba's communist shell is the changing and reforming of the whole system into some form of capitalism. Even though Raul Castro might say that he doesn't want to dismantle the current system in Cuba, I think that's just mere words. And you know what - China and Vietnam also have to go through the same ruse - "no we're not trying to dismantle the (communist) system." It's just the way it has to be done. Just like China or Vietnam, I think that the capitalistic form of Cuba (in the future when they totally transform out of socialism) will be not quite similar to the US's.
Of course, the transition's biggest obstacle would be mainly political and oppositions from those that benefit the most from the system (which usually is the minority). It will be interesting to see how Cuba get out of this.
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