I.M.F Adds $430 Billion in Emergency Lending Ability

I.M.F. Adds $430 Billion in Emergency Lending Ability

The article discusses how the International Monetary Fund (IMF) has raised $430 billion in extra lending ability to be used if the euro zone crisis worsens or if global financial conditions deteriorate. Many world leaders discussed how this increase in lending ability from the IMF could bolster growth, reduce unemployment and poverty, and ensure financial stability around the world. This lending money came from Japan ($60 billion), Britain ($15 billion), Saudi Arabia ($15 billion), South Korea ($15 billion), and other small amounts from Sweden, Norway, Poland, Australia, Denmark, and Singapore equaling $200 billion. Other countries have indicated they will contribute, but haven’t declared how much. One issue is that emerging countries don’t have enough voting power within the fund. Critics say that the voting within the fund should be proportional to the countries’ economic output and that voting wouldn’t change depending on the amount pledged. Essentially, the increase in extra lending is a cushion and doesn’t change the quota contributions. Lastly, some countries don’t want to contribute to the fund because they think Europe’s problems are its own to fix.         

Inflation Is Outrunning The Earnings of Workers

This article discusses how inflation is outpacing earnings. Naturally, we'd see that as a bad thing, but I see this as an opportunity for us to get out of our unemployment. With real wages falling, businesses will be more willing to hire more workers, as workers will accept a lower pay in order to have a job (demand for labor increasing). One question that may remain is how long it will take for unemployment to decline, and how high inflation will rise and with how much more we will be buying what we produce.

http://www.nytimes.com/2012/04/14/business/economy/consumer-inflation-up-modestly.html

The Real Backyard: America and its Southern Neighbors

http://www.economist.com/node/21552587

This article is interesting because it looks at the differences between the US and Latin America, something that most do not know about.  Regional interdependence can have positive and negative implications for both sides but it looks like the US will have to make the effort to improve relations with Latin America rather than the other way around, given past history of involvement in their affairs and current events.  It will not be easy but it has the potential to be profitable for both sides in the long run, economically and politically.

For Two Economists, the Buffett Rule Is Just a Start

http://www.nytimes.com/2012/04/17/business/for-economists-saez-and-piketty-the-buffett-rule-is-just-a-start.html?pagewanted=1&_r=1&nl=todaysheadlines&emc=edit_th_20120417

This article is about the research these two economists have done. They have been looking at incomes over time (all the way back to 1913), and have found that the US has large income inequalities that are similar to the inequalities we had before the Great Depression. They suggest that the tax plan now called the Buffett Rule is not enough of a tax on the wealthy. This is very controversial in Washington, because there is an argument that if they tax the wealthy too much then it stifle economic growth. However, these two French economists disagree saying that other countries (including the US) has had higher tax rates than the US and this has not stifled economic growth. This large economic inequality has been growing. After WWII incomes were more equal, but over time they began to get more and more unequal. In fact "from 2000 to 2007, incomes for the bottom 90 percent of earners rose only about 4 percent, once adjusted for inflation. For the top 0.1 percent, incomes climbed about 94 percent." This low tax rate for the very wealthy is a recent development it started during Reagan and if we just returned back to the pre-Reagan tax rate it would be even higher than what Buffett is suggesting. The pre-Reagan tax rate was 50%. 

Jobs on the Decline

Although recent numbers of the unemployment rate in the United States have progressively gotten better since the recession last hit, according to the article, jobs created in early 2012 paid less than those created in 2011. In fact, there is a net loss of about 310 million in tax withholdings. Furthermore, the quality of jobs has significantly decreased in the last few years, and is acting, according to many economists, as a large hinderance to the recession recovery underway.

However, things are not as bad as they may sound. According to statistics provided by the US Bureau of Labor Statistics, the US added 750,000 jobs in the first few months of 2012, adding more than 100,000 jobs from 2011.


http://www.foxbusiness.com/economy/2012/04/13/data-says-quality-us-jobs-declining/

Response to Failure Test Korea's New Leader

Can anyone predict north Korea's actions? This has proven more difficult than an other country especially under Kim Jong Un leadership. The publicly announced rocket launch failure is the most recent of north Korea's curve balls. There is thought that this was done to show the world their strength but should there be worry amongst other countries. Maybe at least caution taken, since many predict a nuclear test next for north Korea. But this isn't the interesting part, what I find most interesting is how admitting this flaw is frowned upon. The elder militants will and are upset about the public announcement. History has shown the north Korea has pride and doesn't like to admit defeat. The north Korean government tends to hide and lie about these things. They continuously spoke of success when they failed to launch satellites in 1998 and 2009. With many conflicting over their actions, what will be their next move?

 

http://security.blogs.cnn.com/2012/04/13/response-to-failure-tests-north-koreas-new-leader/

Should the U.S. legalize hard drugs?

http://www.washingtonpost.com/opinions/should-the-us-legalize-hard-drugs/2012/04/11/gIQAX95QBT_story.html?tid=pm_pop

This article is about the likely repercussions of the United States legalizing hard drugs like cocaine and heroin. It steps away from the traditional moral argument, taking the stance that regardless of the morality or immorality of using drugs people will do it. Instead it examines the economics of the situation. Individual drug dealers on the street, for instance, do not actually earn much. The bulk of profits from the sale of drugs goes to the cartels.

Cartels not only profit greatly from the sale of drugs, which are expensive when sold in the US, but are cheaply and easily produced, but they also oppose their legalization. With drugs like these being illegal, they can control the supply more easily, and that makes prices higher. Legalizing drugs like these would hurt the cartels enormously, but such arguments are almost always overshadowed by those about drugs being morally wrong.

The economist debate: The French Model

Here is another debate that is currently going on about whether the French political class who is running the so-called "French Model" that we learned in class has been failing its economy.

http://www.economist.com/debate/days/view/826




French election has been going on, and people notice that both prominent candidates, Nicolas Sarkozy and François Hollande, has not been spending any time about addressing potential problems of the "French model" to the economy, which seemed to be a problem recognized by many in this nation. Following the debate is really interesting as it relates directly to the materials we learned in class about French. This also help us to see other people's perspective about the question whether this French Model of Indicative Planning is sustainable. 

In Spain and Italy, Signs of a Lingering Crisis for Europe

This article is about the European Sovereign Debt Crisis. Although it has not been drawing as much attention since this fall and the economy seemed to be recovering, there are still major problems that need to be addressed. Spain’s unemployment rate is almost one fourth of the workforce and Spanish homeowners are struggling to repay their loans. Italy does not have the housing crisis but is faced with immense public debt. Last week’s increased borrowing prices of Spain and Italy reflects that. The upcoming EU economic health releases to be made over the next several weeks will demonstrate the extent of the problem as well. Southern countries have been using the European Central Bank loans in order to pay off their own national debt, which has not helped recovery since investors are cautious about entering the tumultuous market. The situation is influencing the political and economic climate of all of Europe. How do you think the EU should deal with the PIIGS countries?

http://www.nytimes.com/2012/04/16/business/global/for-europe-a-return-of-the-jitters.html?pagewanted=2&_r=1&hp

Mega Millionaires' Big Tax Bills

If you were lucky to win the mega million lottery and take the cash offering of $128 million, this article breaks down how much you would actually be able to keep after taxes.  All the different taxes and the amount that goes to the government is astonishing.  The amount of money millionaires give to the government is very eye opening and interesting to see.

http://www.smartmoney.com/taxes/income/mega-millionaires-big-tax-bills-1334090295769/?grcc=88888Z0ZhpgeZ0Z0Z0Z0Z0&mod=WSJ_hpp_sections_personalfinance

US and Latin American relations are changing

US and Latin America
This article from the Economist talks about the evolving relationships with the United States and the rest of the Americas.  The view of US power and ultimate authority is shifting in the eyes of 100 wise men and women, whom are presidents, eminences and ambassadors for the United States and Canada and Latin America.  A report by Washington-based Inter-American Dialogue reveals, that most countries in Latin America are seeing the US as "less and less relevant to their needs--and with declining capacity to propose and carry out strategies to deal with the issues that most concern them." One of the issues involves legalizing/decimalizing drugs in attempt to reduce violence cause by them.  Another is is immigration, Mexico feels the US had been unreasonably strict about protecting their borders.

New World Bank Pick expected Monday

For more than 60 years, the World Bank has been led by an American, as part of an agreement among Western European allies. However, new candidates from developing countries are threatening the U.S. reign. Dartmouth University president Jim Yong Kim is facing off against Nigerian Prime Minister Ngozi Okonjo-Iweala. There have been complaints that the bank's leadership needs to better reflect the world's evolving economic order.However, many analysts believe that Kim will still get the presidency because of the voting structure--the U.S. and Europe have 50% of the voting shares.

U.S.-Colombia Trade Pact Is Set

This story published in the Wall Street Journal points to the influence that the United States has on other countries economies. The United States enacted stronger regulations on developing economy of Colombia to be in stronger support of free trade and protect workers rights. The United States has this power to change how trading partners run there economies and over the next decade it will be a interesting to see how the EU and China will play into this power dynamic. Do you think the EU and China in the future have the same influence on a countries economic policy that the United States does?

After the sugar rush: Spanish bond yields have risen as the effect of cheap ECB cash wears off

http://www.economist.com/node/21552582

This article describes how the crisis in the Eurozone has not subsided, and why the crisis, especially in Spain and Italy, is likely only to get worse. The Spanish government has failed to address concerns, leading to bond prices to increase in the country as confidence falls. The Spanish budgeted was not cut by as much was hoped, and their economy is in deep recession, leading to significant fears that they won't be able to get themselves out of the crisis. While the world has largely turned to Greece as the failed economy and benchmark of recovery in Europe, Spain may soon send the Eurozone deeper into economic distress.

Competition Is Healthy For Governments, Too

This article discusses whether competition between governments is beneficial or not. It starts out by explaining how competition is essential for markets to function. It then turns to competition with respect to government. He argues that competition between governments allows people to choose to move based on the taxes and social services in the area. This is also the case for capital which has lead to a fall in corporate taxes over the last few decades. Conservatives are in favor of such competition between governments, due to their dislike of large governments. Liberals, on the other hand, are opposed to this competition between governments, because it can make it harder to redistribute income. The article also comments on the fact that it is easier to move to a different county or state than a different country. This is why tax systems are less progressive at state and local levels than at the national level.

Consumer bureau to crack down on mortgage servicers

 http://money.cnn.com/2012/04/10/news/economy/consumer_bureau_mortgages/index.htm

As stated in the news, announced on Tuesday, April 10^th,  the Consumer Financial Protection Bureau is considering new rules aimed at mortgage services to protect consumers against “costly surprises.”

According to this news, the bureau’s new rules will strengthen the requirements of services to issue mortgage statements. It will require the mortgage services to be more clear and transparent; for example, it requires the issuers to better disclosure about fees or changes in a loan’s interest rate. Put it differently, the bureau wants to ensure consumers, at any time, can know how much they owe, what they are paying, and how their payments are being applied. It is said that these new rules would be the federal government’s first major move to crack down on the entire mortgage serving industry crisis. 

Moreover, the new rules coincide with new standards set forth by a large settlement deal between states attorneys general and the five largest banks. The Consumer Financial Protection Bureau’s rules would ask all services to ensure better transparency for all borrowers.  According to the bureau, the new rules would start to take effect next January.  

Additionally, the rules would also tackle so called “force-placed” insurance. Force-placed insurance is property insurance that banks take out for homeowners who either miss an insurance payment or just do not have as much insurance as banks would like. The new rules would require the mortgage services to ask homeowners for proof of insurance before charging for force-placed insurance. 

In terms of my view, I support the new rules which will strengthen the regulations of the entire mortgage industry. Although the rules are seemed as clichés, they are actually fundamentals for the development of an industry.

To Seriously Improve Global Health, Reinvent the Toilet

This article talks about how better sanitation system could help two-thirds of the world's 7 billion peoples health.  According to the World Health Organization, an estimated 2.6 billion people don't even have an access to a minimally sanitary facility.  This causes illness and early death.  To prevent, we need to come up with new designs for toilets that are hygienic, pleasant, and cheap to make and use, and work without connected to a grid.  Few universities are working on reinventing toilets.  "Bad sanitation is a problem not so hard to solve, if only we devote ourselves to spreading the wonders of the toilet."http://www.bloomberg.com/news/2012-04-08/to-seriously-improve-global-health-reinvent-the-toilet.html    

African Energy: Eastern El Dorado?

http://www.economist.com/node/21552265
This article discussed the recent major oil discovery in Kenya.  Eastern Africa is a region that has often been overlooked, but with the discovery of natural resources and particularly as these nonrenewable resources become more and more scarce the region will garner more attention.  The author discussed the lack of regulations on these resources in the country.  How do you think the government should involve itself in the natural resource market in East Africa and what effects will these discoveries have long term?

Taxes—Who Really Is Paying Up

http://online.wsj.com/article/SB10001424052702304356604577338122267919032.html?KEYWORDS=economic+system

Do you pay your fair share in taxes?

Even as President Barack Obama pitches the "Buffett rule" to ensure that millionaires pay at least a 30% tax rate, some commentators are decrying the fact that about half of U.S. taxpayers don't pay any federal income tax.

But our tax system is more complex than any sound bite or simplistic headline can illustrate.

Some multimillionaires do pay a lower effective income-tax rate than some middle-income taxpayers; receiving a chunk of your income via long-term capital gains rather than a paycheck is just one reason that happens. But the top 20% of income earners paid 70% of federal taxes in 2007, according to the most recent data available from the Congressional Budget Office.

Yet wealthy people bear a bigger share of corporate income taxes, which are ultimately borne by individuals. "All taxes have to be paid by somebody at some point," says Steve Wamhoff, legislative director at Citizens for Tax Justice, the liberal lobbying arm of the Institute on Taxation and Economic Policy, a research group. "The corporate tax is paid by the owners of corporate stock and business assets."

Sales taxes can have an outsize effect on lower-income people. "After they buy basic necessities, they typically won't have a lot of money left over to save or invest," says Mr. Wamhoff. A wealthier family is "more likely to have a portion of their income that they can put to savings or investments that will never be subject to sales taxes."

What about those 46% who don't pay federal income tax?

Wealthier people face a tax rate as high as 35% on earnings, "but they get the biggest tax breaks," he says. "They start off with such a high tax that the biggest tax breaks don't bring them down to zero. They're benefiting hugely from tax breaks—much more than the poor people—but because they start off at the high level, their tax bills stay positive."

That said, 1,470 millionaires were among those who paid no federal income tax in 2009.