Both barrels?

The Japanese economy has suffered a period of low nominal growth and deflation for the two previous decades. The Japanese Prime Minister Shinzo Abe is attempting to bring Japan's economic growth back to desirable levels through pressuring the Bank of Japan (Japan's central bank) to raise its inflation target to 2% more than the 1% it was set at (partly due to the Japanese preference on saving). In addition, Mr. Abe's administration would seek to use a fiscal package to help stimulate the economy. 

The question is whether or not using monetary policy from the Bank of Japan alone will be enough to suffice in growing the Japanese economy or will Mr. Abe's fiscal stimulus package be essential in reviving the Japanese economy. In this scenario, it may be better for a combination of monetary and fiscal stimulus to take place as monetary policy alone may not be enough for to encourage spending and create inflation. The current US economy is an example of how monetary policy is ineffective as despite interest rates are extremely low (near zero), low consumer confidence discourages consumers to borrow. The fiscal stimulus result in large amounts of money ejected into the economy in the form of large spending that will increase the nominal GDP. The major risk in involving a large stimulus package from the government would be its huge public debt.

source: http://www.economist.com/blogs/freeexchange/2013/01/japanese-economy

Next Made-in-China Boom: College Graduates

The current teenage and college-aged generation of China currently are taking advantage of a national effort to produce college graduates in numbers the world has never seen before. China is making a $250 billion-a-year investment in what economists call human capital. This is similar to the United States in the 1940s and early 1950s when the United States helped build up a white-collar middle class by using the G.I. Bill to educate millions of World War II veterans. China expects to have nearly 195 million community college and university graduates by the end of the decade. However, despite China's investment, well-educated professors are scarce in China. Therefore, many Chinese seek scholarships and federal grants to come to America to study. They hope to have around 120 million in the United States by the end of the decade as well.

The question is however, should we Americans be worried about job opportunities as China produces vast numbers of graduates to compete with us in the job market. The argument can be made that America still has the highest caliber in quality higher education. However, multinationals including I.B.M, General Electric, Intel, and General Motors have each hired thousands of graduates from Chinese universities. And what happens in a couple decades when the well-educated Chinese generation becomes the prime age to become professors, that would then lower the rate of Chinese students coming to America. Why would they come to America when they would have the same caliber professors in China the next couple decades?

In addition, in comparing elementary and high school academic curriculum and test statistics, China is well above America in math and sciences. Chinese culture emphasizes the family sacrifice to give the children all the resources to reach the highest and best education that they can afford. Hundreds of families across China and other Asian nations focus their money on getting their children through high school and college rather than pursuing material comforts. Can we Americans honestly say that as a culture we allow education to overshadow material items? I'd like to think we can but coming from an Asian background I've been thrown into both cultures simultaneously and sadly, I think American high school and elementary education is no where as demanding as other nations.

Sourcehttp://www.nytimes.com/2013/01/17/business/chinas-ambitious-goal-for-boom-in-college-graduates.html?ref=todayspaper&_r=0

Energy self-efficient by 2030: Can U.S. do it?

According to a report released on Wednesday by British Petroleum, vast stores of natural gas and oil found in shale formations could sharply increasing domestic production, making the U.S. energy self-sufficient by 2030. There are several reasons for this to happen. The first reason is the decline in oil and gasoline demand recently thanks to significant development in energy efficiency and fuel economy. The second reason is the tremendous demand increasing day by day in China and India, pushing the demand in the U.S. down from the top. The third reason is, of course, the large-scale development of shale formations only in North America along with previously "unimaginable amounts of crude oil and natural gas locked away in shale rock" across the U.S. It will make the U.S. become a global energy production leader, surpassing Saudi Arabia to become the biggest oil producer by 2020 because BP reported that fossil fuels will continue to be the dominant source for world's fuel mix.
However, whether the predictions come true or not, it depends on different factors including government regulatory on oil and gas development and the cost of extracting the oil from the shale formations. Fracking has been a controversial topic for quite some times, and until a new way of extracting the oil from the ground that doesn't harm the environment is found, public will make it difficult to actually unlock tight oil.
So the question remaining is to either keep hydraulic fracturing to get the oil but clearly satisfy the debate around the externalities or found a new practice that is not costly. It is also worth questioning how we are going to use the gas and oil in shale formations, at which rate we are going to extract, produce and consume, and how much to be exported.

Source: http://www.usnews.com/news/articles/2013/01/16/bp-shale-boom-key-to-us-energy-self-sufficiency

January market update: Avoid short-term thinking

https://www.fidelity.com/viewpoints/market-and-economic-insights/january-market-update-podcast?ccsource=email_weekly

In this update from Fidelity Investments, a brokerage and asset management firm, Dirk Hofschire, Senior Vice-President of Fidelity's Asset Allocation Research department, discusses what macroeconomic events he expects to occur in 2013 and how investors can prepare for these events.  Mr. Hofschire starts off his discussion by highlighting the reasons why the markets achieved great returns in 2012.  Among these reasons are that the major macroeconomic fears at the time, a collapse of the Eurozone or a U.S. default, did not happen.  The alleviation of these fears combined with the "accommodating" monetary policy employed by the Federal Reserve led to the positive market sentiment that caused the large returns enjoyed by most sectors of the economy.  Looking into 2013, the slow economic growth the U.S. has been experiencing is expected to continue as there is still considerable "fiscal drag" from the the budget debates that are expected to resume in March.  Looking internationally, Mr. Hofschire believes there is considerably more reason to be optimistic about the global economy in 2013 than compared to 2012.  Mr. Hofschire believes this is primarily due to China which has seen a re-acceleration in growth due to a serge in credit and liquidity being directed at real-estate and infrastructure in the country.  However, other countries as well are improving if at a slower pace as even distressed areas like Japan and the Eurozone are stabilizing.  In conclusion, Mr. Hofschire believes there is considerable reason to be optimistic heading into 2013.

Keynes, trains and automobiles

Shinzo Abe is running for the position of Prime minister in Japan and is running on a platform of revitalizing Japan's infrastructure. He announced is running for Prime Minister just days after the Sasago tunnel collapsed killing nine people. His platform is calling for about 150 billion dollars in government spending to update old infrastructure. The injection of government spending into the economy could have a very positive affect on getting their economy out of its recession. Japan already has a very large public debt that already is over 200% of the GDP so it is necessary to have a solid plan for the use of the funds so as not to waste the money and opportunity to turn the economy in the right direction.