The wealthy haven't recovered from the Great Recession

The annual earnings of the top 1% of American's earners remain way below their 2007 peak, decreasing 30% from the $1.48 million four years earlier down to $1.05 million in 2011.  Despite the fact that the bottom 99% have seen their earnings drop a more modest 12% from their peaks four years ago, their income continued slipping. The average income of $42,826 in 2011 was essentially flat compared to two years ago, meaning that while the elite enjoyed a rebound, others have not. Most of the gains for the country's top earners came in the first year of the recovery, between 2009 and 2010, mostly because of the stock market's revival. The income of the bottom 99% is predicted to grow much more modestly than the top 1%, which again raises the question of equality.
Source: http://money.cnn.com/2013/02/19/news/economy/top-income/index.html?iid=SF_E_Highlight

Those in America's bottom 99% had an average income of $42,826 in 2011. That's essentially flat compared to two years ago -- meaning that while America's richest enjoyed a rebound, others have not. - See more at: http://money.cnn.com/2013/02/19/news/economy/top-income/index.html?iid=SF_E_Highlight#sthash.lpkGpZga.dpuf

Those in America's bottom 99% had an average income of $42,826 in 2011. That's essentially flat compared to two years ago -- meaning that while America's richest enjoyed a rebound, others have not. - See more at: http://money.cnn.com/2013/02/19/news/economy/top-income/index.html?iid=SF_E_Highlight#sthash.lpkGpZga.dpuf

Buffett Disappointed With Berkshire's 'Subpar' 2012

Warren Buffett has admitted in his quarterly letter to shareholders that he was disappointed in Birkshire Hathaway's performance in 2012.  He noted that the holding company's book-value rose 14.4% which was beaten by the S&P, which rose 16% in the period.  This is only the ninth time in Mr. Buffett's 48 year career that his firm has failed to outperform the S&P and comes after a year when the company had a total return of $24 billion.  Mr. Buffett rued the lack of a major acquisition in 2012 and hoped he would be more successful in this regard in 2013.  I believe 2012 was a very unusual year for the markets as they posted impressive returns despite significant risks in various regions of the world.  I expect that Birkshire Hathaway will be much more successful in 2013 and beat the S&P.  However, if the markets continue to rise on the back of unclear catalysts, Mr. Buffett might have a difficult time keeping up with its benchmarks.

Dennis Rodman will visit North Korea

http://www.cnn.com/2013/02/26/world/asia/north-korea-globetrotters/index.html?hpt=wo_t3

Dennis Rodman, the former basketball star, is in North Korea right now with members of the Harlem Globetrotters to entertain children while filming a tv show. Kim Jung Un is reportedly very fond of basketball and enjoyed the sport while studying abroad in Switzerland as a teenager. Maybe Dennis can use his charm and calm the country down in the mists of nuclear testing?

Phoney Currency Wars

In 2010 America was accused of purposely suppressing our currency in order to decrease imports and increase exports.  Although many countries believed this to be the case, it is truly meant to increase domestic spending and investment.  We are currently coming out of a difficult situation due to the monetary and fiscal policies implemented.  These are not traditional ways to bolster an economy but needed to be done in order to stay competitive.

http://www.economist.com/news/leaders/21571888-world-should-welcome-monetary-assertiveness-japan-and-america-phoney-currency-wars

What Mortgage Relief?

In this article in the New York Times, they discuss that many people are not receiving the assistance from banks that were suppose to be taking place. A certain number of individuals were suppose to receive some sort of relief based on the $25 billion that the banks settled with state and federal government. Although the banks are "helping" individuals, they seem to be looking out for the best interest of themselves and making sure they improve their balance sheets by helping people with second mortgages and home equity loans while overlooking people who need help with their primary mortgages. I have no issue with what the banks are doing because that is what is in the best interest for them but the question I ask myself is whether there could have been more guidelines in place so that people who are struggling with their primary mortgages received attention too.


http://www.nytimes.com/2013/02/25/opinion/what-mortgage-relief.html?_r=0

Which way for Mr. Hollande?

The current Socialist president of France is struggling to stay on the left side.  His current policies are starting to shake up the welfare state.  GDP is declining and unemployment is rising.  This is causing the super wealthy to leave the country and the poor to be getting poorer.  Although, Hollande is trying to change some policy, there is disagreement within his party of the best thing to do about the current situation.  According to this article, the socialist party has begun to admit that there is a need for supply-side measures to reduce the current high cost of labor.  There will need to be changes in policy in order to affectively improve Frances current economic outlook. This article does not believe that Hollande will take these important steps, but instead will attempt to manage the economy to keep France away from disaster but not improve the current situations. 

http://www.economist.com/news/europe/21571900-elected-left-frances-president-seems-be-veering-towards-centre-which-way-mr?zid=295&ah=0bca374e65f2354d553956ea65f756e0

Video: France's Moscovici

This video portrays France's Finance Minister, Pierre Moscovici, who is very optimistic for the European Union, and France's future. He points out that France is moving towards reform and that industry is moving towards a more competitive market, a problem that looms over France. Consumers should be pro-consumption and mentions that the Euro's appreciation comes from people's optimism on the strength of Europe and the competitiveness of the economies, however, he does mention that it is difficult for him to talk about strengthening or weakening the Euro. He talks about the 75% tax rate.

Spain's demise

You can access this article if you are a subscriber to the magazine or probably somewhere on the internet for free. This is a fascinating article that outlines the devastating crisis that is currently going on in Spain. It details a lot of the corruption and follows a few real estate developers, along with their strong advancement and sudden failure. It does a nice job of outlining the political troubles and the corruption in government. It also highlights the trouble of Spain's hectic political system.

Article: http://www.newyorker.com/reporting/2013/02/25/130225fa_fact_paumgarten

Americans Want to Cut Spending. They Just Don’t Know What to Cut.

http://economix.blogs.nytimes.com/2013/02/22/americans-want-to-cut-spending-they-just-dont-know-what-to-cut/?ref=economy

To cut spending or not to cut spending? Those are the questions that the author Rampell highlights in this article. The article talks about the tough decision that Americans have make when they look to cut an area of government spending. Do you cut the State Department or the Energy sector? Making these kinds of decisions isn't easy. According to the article, 70 percent of of Americans say its essential for Washington to pass major legislation to reduce the federal budget deficit this year. But what is the most important part of government spending to cut?

Housing to Drive Economic Growth

http://money.cnn.com/2013/01/27/news/economy/housing-economic-growth/index.html?iid=SF_E_Highlight

This article discusses the rebound in the housing market after the bursting of the housing bubble back in 2008. The article talks about how the housing recovery is acting as the primary driver of economic growth for 2013. Because of a combination of low mortgage rates, rising home prices, and a significant decline in foreclosures, buyers have begone to come back to the market.

Boosting Power in Burundi

The European Union has promised 68 billion euros to Burundi for the purpose of electricity generation in the small coffee-producing country of Africa. While the purpose is for electricity generation, the electricity is to improve food production in the country. Only 3.5% of the people in Burundi have power, and the demand for it grows at almost 13% per year. "There cannot be development without electricity" was said about one of the world's worst energy situations. Burundi's budget of 1.3 trillion francs for 2013 will be accommodated by 49% coming from international aid despite the troubles of the world economy. With all this aid going to these third-world countries, it makes me wonder how governments themselves are unable to raise necessary funds domestically. I suppose it is situation of priorities.

http://news.yahoo.com/burundi-68-mln-euros-eu-aid-boost-power-082336081--business.html

AIG = America's Improved Giant

Economist Article

American International Group or more commonly known as AIG insurance company was the topic of a sundry of different headlines across media during the financial crisis. It required a $182 billion bail-out and its future was in a haze. Four years later, it has gone back to the private sector and has become a "leaner, simpler business." The fact that AIG is still around is remarkable, it has gone through a transformation via selling many of its prized units such as Alico and AIA to finance its recovery. What will be interesting is what will become of AIG in the upcoming future. It has been restructured and sources say it is ready to grow again and become a dominant insurance player. However, many financial analysts are still confused about some sections of their finances. So, as we move on, I wonder how far AIG will come along or if consumers will have the confidence to go through AIG again. Of course, after Hurricane Sandy, the demand of insurance slightly increased and with insurance prices rising in America, AIG may have a good opportunity to capitalize. So did our government did the right thing to bail out AIG??? $182 billion is a pretty huge risk, would we consider doing it again if AIG or similar large corporations were to go down again?

Middle Income Trap

Do countries get “trapped” between poverty and prosperity?

There are two kinds of “trap” countries can fall into while they are trying to improve the level of development. Even though they follow the successful steps of their forerunners, poor countries cannot succeed because of the “poverty trap” and other countries progress really fast but then they get stuck, which is also called the “middle-income trap”. This trap was named by Indermit Gill and Homi Kharas who think this will affect countries like China, Malaysia and Mexico. Even though they escaped poverty they are still not rich countries. The theory suggests that because rich countries have the technology and poor countries have cheap labor, the middle income countries cannot compete with these. However this does not have to be true and countries can still compete on any level of wages or prosperity. Also there is evidence that middle-income countries grow faster than richer or poorer economies. So there is no clear evidence that the middle-income even exists. 

 http://www.economist.com/news/finance-and-economics/21571863-do-countries-get-trapped-between-poverty-and-prosperity-middle-income-claptrap

If Fed Ends Quantitative Easing Now, It'll Hurt More Than Just Housing

The Fed is planning to end their buying of morgage-backed security that has made housing market recover recently. As discussed in class, the buying of security which is monetary policy in its nature helps pump money in the market, consolidate customers' confidence and grow the economy as it is contributing up to 18% of U.S. GDP. The article discuss how the policy may harm the recovery of the housing market in this critical period.

Click here to read the article

Jobs in Jail: Remunerative Justice

http://www.economist.com/news/britain/21572201-government-wants-prisoners-be-more-productive-their-release-well-after

This Economist article highlights an interesting plan recently outlined by the British government. The ruling coalition describes its penal reform as turning prisons into "industrious places of productive work." Basically, the British government is beginning to offer prisoners more vocational training, and allow part-time work while in prison. This part-time work will often take place at local businesses outside of the prison and will generally pay very low wages, if any at all. In addition to the general societal benefit of cheap labor, the article describes how prisoners who hold something close to a 'real job' while in prison may be less prone to reoffend once they are released.

Prison management is a persistent problem for most governments around the world. In trying to deal with crowded prisons, American politicians could benefit from looking overseas for fresh ideas. Could this same plan work in the United States?

Berlusconi as Prime Minister could spell doom for Italy

http://edition.cnn.com/2013/02/22/business/italian-elections-letta-berlusconi/index.html?hpt=ibu_c1

Some politicians and financial experts believe that Silvio Berlusconi's possible return as the Prime Minister of Italy may spell doom for the country. Berlusconi has been a controversial figure and had to resign in 2011 as a result of his economic policies and personal legal battles. His return would lead to a trust deficit between Italy and the rest of Europe and would also harm the economy since he is expected to tax the middle class and big businesses further.
Italy, already under high austerity and declining GDP, would be hurt by his policies. His previous performance is also not very encouraging.
The incumbent Prime Minister, Mario Monti is guaranteed to lose and the race is only between Berlusconi and Pier Bersani, the leader of Italy's Democratic Party.

Zhuang Zedong: Ping Pong Diplomacy

Source: http://www.economist.com/news/obituary/21572171-zhuang-zedong-table-tennis-champion-died-february-10th-aged-72-zhuang-zedong

This article on the economist is an obituary on Zhuang Zedong, a PRC Ping Pong/Table Tennis player. It highlights the ping pong diplomacy through an anecdote that begins when Zhuang Zedong met Glenn Cowan. In 1971, Mao invited Team USA to China and a year later, Nixon normalized relations with the PRC. Although it seems unrelated, Mao and Nixon credited the ping pong diplomacy  for improved relations. Can sports or any other recreational activities influence global politics and economy? I certainly think that sports can definitely play a role for better or worse as the Olympics for example, does bare some political implications. However, I think the example of ping pong diplomacy is an extreme example of how sports can have a really strong effect on diplomacy and at the end of the day, sports will still be a fun and recreational activity rather than a diplomatic tool.

The Honey Boo Boo Investment Plan

Video Here

I pretty much can't stop watching Toddlers and Tiaras (that reality show about the wonderful world of child beauty pageants) because it makes me feel better about myself. This clip inexplicably features a variety of "financial experts" providing investment advice to the parents of child star Alana Thompson (aka "Honey Boo Boo") to help them capitalize on their newfound fame and fortune.

The experts first recommend putting Alana's earnings into a trust fund to which she will be granted access once she turns 21. They also suggest putting a chunk of the earnings from the show into a tax-free 529 plan in which investments are made according to the child's age (as the child nears college age, investments become much more conservative). Someone has even made calculations to determine exactly how much money the family would need to put into the 529 plan every month in order to save the equivalent of 4 years' tuition at an average public school.

Perhaps seeing the writing on the wall, the experts also make recommendations about investment strategies that are NOT geared toward saving for college. I won't spoil the surprise by telling you what they are (but one of them is purchasing disability insurance).

Businesses need a killer instinct

For the past years many people have viewed the military as a barbaric and unnecessary part of the government but this article examines the need for businesses to be lead more like a military. The article states that people in the military are much more adept at making split second decisions and making more important decisions to the company. These people are more used to high stress and much more independent as well, making them more efficient in many areas. Businesses that are struggling should consider a more military style of leadership to change things up

The post-industrial future is nigh

View the article here.

For a long time China has generated a large portion of its GDP from industrial and manufacturing sectors. In fact, in 2005 industry as a percentage of its GDP was roughly 18 percentage points above the global norm. Conversely, its service sector as a percentage of GDP was almost 8 percentage points below the global norm. This is largely due to the fact that China has kept its currency artificially weak and has suppressed labor rights in order to keep wage rates low, which has led to export industries being very profitable.

However, this year might mark the first time that its service sector will surpass its industrial sector. In 2012 industrial sectors made up 45.3% of China's GDP compared to service sectors which made up 44.6%. Over the past 20 years service sectors have been steadily increasing as a percentage of GDP while industrial ones have remained relatively the same.

The creation of more jobs in the service sector has several implications. First, the Chinese market might be shifting more towards a consumption-based market, which doesn't automatically involve exporting less but could potentially lead there. Second, service sector jobs are often more human capital-intensive. This could mean better labor rights and higher wages.

Austerity-hit Italians prepare to vote

Berlusconi, three-time prime minister of Italy, had been relying heavily on television performances to win the election for him, but news of the Pope’s resignation has diverted attention away from him, giving way to an even bigger lead for Bersani.  Bersani’s platform consists of sticking to the previous course of budget discipline and structural reforms, but with an aim toward social equity.  He has also promised to “recognize gay civil unions, reform laws to allow children of immigrants to have citizenship and cut defense spending to pay out more for schools and hospitals.” 

In Italy, the unemployment rate has recently risen to a record of 11.2% and the recession has continued to worsen. 

Italy has many parties running against each other, unlike our main two in the United States.  Other than Bersani and Berlusconi, there is Monti, a former economics professor, Beppe Grillo, a former comedian who is appealing to voters through the use of a grassroots campaign, Antonio Ingroia, a frmer anti-mafia prosecutor, and Oscar Giannino, a pro-business journalist.  However, this split seems to be favoring Bersani and pulling votes away from Berlusconi.

For the first time in recent history, the Italian elections are taking place in winter, which could also take away from the overall voter turnout.

http://www.theaustralian.com.au/news/breaking-news/austerity-hit-italians-prepare-to-vote/story-fn3dxix6-1226584382340