Citizenship-for-Cash Program

You'll never believe the lengths that Malta, a Mediterranean island off the coast of Italy, will go to stimulate their economy. A new program that offers citizenship in exchange for a sum of cash is their new ploy to stimulate foreign investment. Though the European Union has cast a critical eye to these measures, the Maltese hope that this will help life their economy. It has actually been receptive amongst Chinese billionaires and wealthy Russians. But what potential problems does this interesting measure create? Read more here: http://www.nytimes.com/2014/04/06/world/europe/citizenship-for-cash-program-in-malta-stirs-security-concerns-in-european-union.html

The future of Japan

http://www.economist.com/news/finance-and-economics/21600145-shinzo-abes-fancy-economic-areas-are-big-enough-not-bold-enough-out-zone

Extremely interesting article about Japan in the present. The article talks about the policies the Bank of Japan and also talks about the allocation of SEZ's (special Economic Zones) which we are currently talking about in class. Deregulation is still  being pursued by Japan which shows how gradual liberalization can be. 

European Central Bank Hints at Bond-Buying Program

Europe has been experiencing low inflation lately, with levels as low as .5%.  This is becoming an issue and they are looking at ways in which they can increase inflation and lower the real cost of their debts.  One of the options they are considering is a quantitative easing program, and it is looking like they are ready to go through with it.  The European Central Bank is setting the goal to have 2% inflation by 2016. 

http://www.nytimes.com/2014/04/04/business/international/european-central-bank-leaves-rates-unchanged.html?ref=international&_r=0

A long and winding road

http://www.economist.com/news/finance-and-economics/21599394-world-needs-more-infrastructure-how-will-it-pay-it-long-and-winding

Banks are no longer financing investments in infrastructure as much as they use to. Infrastructure is a long-term investment, which is not what banks are looking to finance. One reason why banks are less willing to finance infrastructure is because many are still "repairing their dented balance sheets." According to consultants at McKinsey, the need for infrastructure spending is about $3.7 trillion per year, but the world is only spending $2.7 trillion per year.

One possible alternative to banks or government spending financing infrastructure are insurers, endowments, sovereign wealth funds and pension funds. According to the Economist, only 0.8% of these financiers' funds are invested in infrastructure, so they can afford move more funds into infrastructure. These financiers share many of the concerns banks do. 30 year loans lead to uncertainty and many chances for something to go wrong. According to the Economist, The best way to attract concerned investors is with simple deals and smart planning by the government in order to minimize the risk of such long investments.

Rand Paul's hopes for a flat tax

Rand Paul, a potential Republican candidate for the 2016 presidential election, favors the idea of a flat, simple tax, with tax breaks for individuals and businesses.  His main issue with the current tax system is the complexity and regulation by IRS.  His proposed tax system would apply to wages, salaries, pension payments, but fringe benefits would remain tax free.  He would tax businesses for capital gains, dividends, and interest, but these categories would be tax free for individuals, and eliminate the estate tax an some possible tax breaks.

This tax would not raise revenue, and in fact lower the amount of revenue collected by the federal government through taxes.  He would combine this with a reduction in spending to eliminate deficits.  While it is a flat tax, Paul says that it would in fact be a progressive tax in terms of net income and effective tax rate, which would hypothetically rise as income rises.

Read the article here.

The Russian Daredevils Who Climbed a 2,073-Foot Tower in China

I thought you might be interested in watching the video that goes along with closing paragraphs of the article about China, On Cloud Nine Trillion, from the Economist that we had to read for the class.
http://go.owu.edu/~ggskospl/E370/Lectures/Economist%20-%20On%20cloud%20nine%20trillion.pdf

Link to the video and article in The Atlantic:
http://www.theatlantic.com/international/archive/2014/02/video-the-russian-daredevils-who-climbed-a-2-073-foot-tower-in-china/283825/

Budding Business of Marijuana, is Regulation Good or Bad?

The article brings up a big topic about whether we should regulate goods and services that are controversial like drugs, abortion and prostitution or should we keep them hidden underground where the conditions are even worse.  For example using improper tools for abortion or having marijuana mixed with other drugs.  I personally think it would be better to know the ingredients that are going into my body and thus I think regulation would be better.  Regulation of prostitution has been proven better in Amsterdam but not in Sweden, which could be caused by other factors. The government could really profit from taxing these taboos. The article brings up different views of whether regulation is good or bad and whether this can hurt or help workers, industries and the government. What are your thoughts?

http://america.aljazeera.com/watch/shows/the-stream/the-latest/2014/3/28/budding-businessofmarijuana.html

Why China’s Manufacturing Sector Has Hit a Wall

(Article)

China’s manufacturing sector has contracted for the fifth straight month. This contraction is even more worrisome because there is typically a solid peak after the Chinese New Year. Chen Xingdong – Chief China economist at BNP Paribas in Beijing – said “The old growth is losing steam,” this in response to weak investment, industrial production and export numbers in the first two months.  China is expected to have to take steps to really boost growth in order to meet their 2014 GDP target of “about” 7.5%. Beijing is expected to use policy measures to stabilize growth, options including entry barriers for private investment, targeted spending on subways, air-cleaning and public housing and guiding lending rates lower. 

Rising Manufacturing Orders Signal Further U.S. Growth: Economy

The U.S. manufacturing expansion has accelerated in March, driven by gains in production and orders. This is the latest sign that economy is beginning to shake of its winter stagnations and building momentum into the second quarter.

‘Solid March’

The solid sales of Toyota in March have pushed the first-quarter industry result even further than last years results despite experience one of the worse winters. Toyota dealers are experiencing the best two weekends in sale and are optimistic for sales to come in the spring. The increase strides in the labor market are helping spur demand as well.

‘Consumer Optimism’
A pick up in spending by Americans has contributed to help spur factories. Economists have said that this improved optimism in spending is due to consumers believing the economy is growing.

http://www.bloomberg.com/news/2014-04-01/u-s-ism-manufacturing-index-rose-to-53-7-in-march-from-53-2.html

America and the IMF: Dereliction of Duty

http://www.economist.com/news/leaders/21599772-congresss-failure-support-international-monetary-fund-shameful-and?zid=307&ah=5e80419d1bc9821ebe173f4f0f060a07


The article defends the role of the IMF the goal of global economic development around the world, especially in the developing nations. Economist uses a recent example of Ukraine that needs funds to established crumbled institutions in order to start the rebuilding process on its road to greater European integration.

Article criticizes the Congress' failure to live up to their commitments to support countries like Ukrine. While the US approved $1 billion dollar package, the IMF is working on the package of $15 billion, which is significantly larger and more impactful. Meanwhile, the Congress is opposed to reforms that would strengthen the IMF and give them more ability to fund economic recoveries. The reforms are for the quota systems, that determines how much the country pays in, how much say it has in decision making and how much it can borrow from the fund in case of a downturn. The main issue is that the US has the largest quota and can singlehandedly veto the deal. Also, a number that small European economies have significant say, while emerging economies have very little. Thus the reforms would give emerging economies more input, but the Congress have be rejecting the reform for the past three years.

The Congress did so again recently when President Obama attempted to attach the quota reform in the legislature approving bilateral aid to Ukraine. The main argument from the lawmakers is that new reforms would put additional pressure on taxpayers and reduce the US's influence. According to the Economist both of those claim carry no weight because the US will still retain its veto power and the larger role of emerging economies would be at expense of European economies, that seem to be approving this reform. US's refusal to approve this critical package to Ukraine could be seen as the country's failure to live up to its expectations and create dissent between the US and other members.

In recent history of increased criticism of the IMF and its austerity measures, this is a very different look at the importance of the IMF for the economic growth around the world.

Rising Income and Government Payments

The average personal income in the United States rose by 0.3 percent between January and February. However, economists are attributing a large part of that rise to increases in government transfer payments instead of increases in salaries or wages. As the graph from the article in the Wall Street Journal indicates, government transfer payments accounted for over half of the increase in income while wage increases (accounted for by both increases in salary and becoming employed) were responsible for only 40 percent of rising income.

The CNBC article notes that consumer spending also increased from January to February by 0.3 percent, and that the increase is attributed in large part to increased demand for healthcare services as more people are receiving coverage from the Affordable Care Act. The personal savings rate also rose 0.1 percent. The data shows that certain consumers are receiving higher incomes, but not from sustainable sources. Medicaid spending is supposed to stop when the Affordable Care Act enrollment period ends, and if the unemployment rate does not decline nor do workers receive pay raises, personal income and consumer spending may decline again, along with overall economic performance.

http://blogs.wsj.com/economics/2014/03/28/vital-signs-income-gets-a-lift-thanks-to-government-assistance/

http://www.cnbc.com/id/101534224

Immigrants from the Future

Immigrants from the Future

The Defense Advance Research Projects Agency a branch under the Pentagon hosts the annual DARPA Robotics Challenge. Experts all over the globe that have their creations compete on a course of simple tasks make robots that a human could do without much effort. This year’s winner is SHAFT a Japanese automaton that can accomplish things like climbing a ladder, clearing a path, cut a hole in the wall, or attaching a fire hose. Generally displaying tasks that can be done by human hand, but instead are substituted for metal. The idea is to eventually get a working robot that will be able to replace certain tasks that could possibly replace everyday human tasks. 

Currently more money and thought is being put into drones as the most likely next move into autonomous labor. While delivering a package may seem like an easy task, though none of it can be done with extensive human involvement. Only after a human explicitly outlines a destination and drop off point can the task be accomplished. 

Labour Relations in College Sports

Student athletes at Northwestern University are filing a class action lawsuit against the university to get compensation for their time playing football at the school. The players argue that they are required to spend more then 40 hours a week on practice, games, workouts, and studying film. They argue that this is more than most people work in one week. Additionally, the student athletes are required to attend class and succeed, even though they must commit most of their time to football. If the athletes are successful then the university would be required to pay some sort of wage. More likely however, the school will just declare those athletes demanding a wage as ineligible so they cant play.

http://www.economist.com/blogs/gametheory/2014/03/labour-relations-college-sports

Can we close the pay gap?

The article again approached the problem of income inequality, which is growing and growing in the US specifically. Interestingly enough, there was an act (Dodd-Frank Act), which required American companies to disclose the compensation ratio of executives to median compensation in the companies, however just like any other movement, it has been delayed for 4 years and "counting". Likewise, in Europe, a proposal suggested EU's companies to "reveal their pay ratios and allow shareholders to vote on whether they are appropriate". And as expected, it didn't get through because of criticisms from those who had the upper hand. 

Excuses for the extreme compensation for executives surrounds incentives, this is especially applied to banking sector, and even more specifically to big banks. However, isn't the banking's performance is more correlated to the economy instead of compensation, which suggesting that the high remuneration did not incentivize as much as they (whom receive the big money) claimed it was. 

European government seems to be more active regarding the problem than the U.S. Though it is obviously that the European model values equality income more than US does (especially Germany). But no matter what, it is really ridiculous for income to increase by 31.4% for the top 1% and by 0.4% for the bottom 99% from 2009-2012 (in the US). 

Either government has some brilliant idea to spread the money more evenly or it probably the case that the "invisible hand" behind the government is too powerful.

http://opinionator.blogs.nytimes.com/2014/03/29/can-we-close-the-pay-gap/?_php=true&_type=blogs&_r=0

S. Korean exports grow thanks to free trade pacts: report

Free trade pacts that went into effect in the last decade played a role in fueling South Korean exports. According to the Korea International Trade Association, nine open trade arrangements reached so far allowed local companies to make further inroads into 46 countries, helped by the lowering of tariffs and other trade barriers.

It said the free trade agreement with Chile that went into effect in April 2004 led the two-way trade to grow an average of 16.3 percent annually, with the total volume hitting $7.12 billion last year from just $1.58 billion in 2003. Exports to the South American country have grown an average of 16.9 percent in the past 10 years, with imports gaining 16 percent.

In the case of the trade pact with the Association of Southeast Asian Nations that went into full swing in June 2006, trade grew 11.8 percent on average annually, with outbound shipment gains hitting 14.4 percent. This is a higher rate of growth than the 8.1 percent export growth tallied for the entire country in the past seven years. Numbers for the FTA with the European Union that went into effect in July 2011 revealed trade expanding an average 4.4 percent per year in the last three years. For the trade agreement with the United States that has been in force for two years, South Korea's exports were up 5.1 percent. This is said be again better than the overall growth figures tallied in 2012 and 2013.

http://www.koreaherald.com/view.php?ud=20140330000326

Petro Poroshenko, the billionaire chocolate baron hoping to become Ukraine's next president

The Ukrainian presidential election is due in May.  One of the candidates, a boxer (weird choice for a presidential candidate), has already stepped out of the race to support a different candidate: Petro Poroshenko a confectionery oligarch.  According to the article, he made a huge profit off of chocolate which was apparently a huge risk at the time.  During the Kyiv protests, he supported the anti government protesters at the cost of business, and even handed out candy bars to the protesters (presumably for free).  It seems to me that Petro could probably be able to increase the economic growth of Ukraine considering his economic background.  While, I am very skeptical of him running for president, he has shown some promise to the people and has not proven to be a failure like his running mate Yulia Tymoshenko who has a criminal history.
http://www.telegraph.co.uk/news/worldnews/europe/ukraine/10731848/Petro-Poroshenko-the-billionaire-chocolate-baron-hoping-to-become-Ukraines-next-president.html