http://economix.blogs.nytimes.com/2011/01/25/the-moral-heart-of-economics/?_r=1
Most of this article discusses the morals behind/associated with economics. It also discusses the freedom associated with various economic systems and the private rights of individuals/amount of decisions they have. "Improvements in welfare occur when there are improvements in utility, and those occur only when an individual gets an option that wasn’t previously available. We typically prove that someone’s welfare has increased when the person has an increased set of choices." Overall, the article argues that any system of economics should be able to provide more choices for individuals; because of this, it increases not only the individual's quality of life but also is a moral science.
Saturday, January 24, 2015
UK car production increasing again
Investment in car production facilities in the UK of over £7
billion and the added popularity of premium cars abroad over the past two years
helped sales boost to 1.2% in 2014.The British Society of Motor Manufacturers
and Traders (SMMT) states that “demand for premium brands, such as Jaguar Land
Rover, had helped boost annual sales […]”. However, overall number of vehicles
exported fell. In the article, Mike
Hawes, SMMT´s chief executive, states that "[…] the industry has overcome
various challenges, including slower than expected EU recovery and weakness in
some global markets.", which makes a 1.2% growth in UK car manufacturing,
although a relatively small figure, representing a successful year when placed
in context.
National Governments Battle the Europe Union Over Energy
http://www.economist.com/news/europe/21639577-european-union-heads-battle-national-governments-energy-only-connect
The EU has made it clear once again that the free flow of energy between member nations is a top priority, but the energy commissioner, Maros Sefcovic, has run into several hurdles from national governments and Russia. The flow of gas has currently been reduced in Eastern Europe due to the continuing conflict between Russia and Ukraine. Flow from Ukraine to Slovakia has been reversed to meet demand in Ukraine. Several smaller EU-members have also been hurt as supply lessens across Europe because of their limited access to pipelines. Last year Russia proposed a pipeline (South Stream), but it was ruled illegal because the same Russian company would both run the pipeline and own the gas going through it. Now the EU is scrambling to build legal ones with connecting electricity cables in the same area, but it is running into resistance because of internal corruption (including Russian influence that often halts infrastructure) and obstinate behavior from national governments. Many provide energy through state-owned companies and do not want possibly cheaper energy coming in from their neighbors. In the mean time the commission is also battling Gazprom (Russian gas company) over abusing single market rules in vulnerable states.
I believe that the situation will work out in favor of the EU as far as Russia goes because of their currently weakened state from falling gas prices. Now is the time to prosecute the companies that have obviously been manipulating the market in Eastern Europe. As far as making EU members play nice on inter-connectors, those who are currently obstinate will stay obstinate because they know its risky for nationalized industries. There would have to be a EU set price index for the inter-connectors to work like they should.
The EU has made it clear once again that the free flow of energy between member nations is a top priority, but the energy commissioner, Maros Sefcovic, has run into several hurdles from national governments and Russia. The flow of gas has currently been reduced in Eastern Europe due to the continuing conflict between Russia and Ukraine. Flow from Ukraine to Slovakia has been reversed to meet demand in Ukraine. Several smaller EU-members have also been hurt as supply lessens across Europe because of their limited access to pipelines. Last year Russia proposed a pipeline (South Stream), but it was ruled illegal because the same Russian company would both run the pipeline and own the gas going through it. Now the EU is scrambling to build legal ones with connecting electricity cables in the same area, but it is running into resistance because of internal corruption (including Russian influence that often halts infrastructure) and obstinate behavior from national governments. Many provide energy through state-owned companies and do not want possibly cheaper energy coming in from their neighbors. In the mean time the commission is also battling Gazprom (Russian gas company) over abusing single market rules in vulnerable states.
I believe that the situation will work out in favor of the EU as far as Russia goes because of their currently weakened state from falling gas prices. Now is the time to prosecute the companies that have obviously been manipulating the market in Eastern Europe. As far as making EU members play nice on inter-connectors, those who are currently obstinate will stay obstinate because they know its risky for nationalized industries. There would have to be a EU set price index for the inter-connectors to work like they should.
South Korea growth hits six year low in fourth quarter
According to the article, in Q4 of 2014, the fourth largest economy in Asia and critical U.S. trading partner, South Korea, experienced a significant drop in GDP growth rates, to 0.4% from Q3's 0.9%. This fell well short of projected Q4 growth of 2.7% due to falling infrastructure spending and a drop in the quantity of South Korean exports. This drop in spending was due to weakening tax revenues cutting the tax base available for investment. This below-projection data may force the South Korean central bank, the Bank of Korea, to continue cutting interest rates, when it next meets in February. (http://www.bbc.com/news/business-30945571)
This could have wider implications for the economies of southeast Asia and be an indicator of economic problems to hit the region. The region has grown rapidly in terms of GDP since about 1985, and only recently appears to be slowing in terms of economic growth: China and Japan have both posted less-positive economic indicators, and economists have indicated concerns over the stability of the tax base in southeast Asia, in addition to various economic bubbles, which could lead to collapsing confidence in the regional economy, stunting continuing growth and leading to longer-term economic headaches for economic planners in the region.
This could have wider implications for the economies of southeast Asia and be an indicator of economic problems to hit the region. The region has grown rapidly in terms of GDP since about 1985, and only recently appears to be slowing in terms of economic growth: China and Japan have both posted less-positive economic indicators, and economists have indicated concerns over the stability of the tax base in southeast Asia, in addition to various economic bubbles, which could lead to collapsing confidence in the regional economy, stunting continuing growth and leading to longer-term economic headaches for economic planners in the region.
Eurozone Nations Face Stronger Pressures to Lift Economies
http://www.nytimes.com/2015/01/23/business/international/ecb-unleashes-aggressive-stimulus-plan.html?action=click&contentCollection=International%20Business®ion=Footer&module=MoreInSection&pgtype=article
European Central Bank plans to buy about $69 billion, of government bonds and other debt each month to stimulus the economy. They also plan to cut the interest rate it changes on loan to commercial banks from 0.15 percent down to 0.05 percent. The expected result is that there would be an increase in inflation and growth in individual countries. Moreover, governments would also be given a share of any profit the Europe Central Bank might make. "Mario Moretti Polegato, president of the Italian shoemaker Geox, said quantitative easing could help restore a sense of optimism." Although, this is a great step the European Central bank has taken to restore the economy, this alone, in absence of the government's stimulus policy, would no be able to change much of the situation i am afraid.
European Central Bank plans to buy about $69 billion, of government bonds and other debt each month to stimulus the economy. They also plan to cut the interest rate it changes on loan to commercial banks from 0.15 percent down to 0.05 percent. The expected result is that there would be an increase in inflation and growth in individual countries. Moreover, governments would also be given a share of any profit the Europe Central Bank might make. "Mario Moretti Polegato, president of the Italian shoemaker Geox, said quantitative easing could help restore a sense of optimism." Although, this is a great step the European Central bank has taken to restore the economy, this alone, in absence of the government's stimulus policy, would no be able to change much of the situation i am afraid.
The Economics of Optimism
http://www.economist.com/news/finance-and-economics/21640361-debate-heats-up-about-what-goals-world-should-set-itself-2030
The article primarily focuses on which goals the world should set and achieve by 2030. Bill and Melinda Gates proposed in their annual letter that "the lives of people in poor countries will improve faster in the next 15 years than any other time in history" and that the lives of people in poor countries "will improve more than anyone else's." Sustainable Development Goals, or SDGs, is a United Nations initiative that is intended to be agreed upon by world leaders at the UN General Assembly in September.
SDGs are being directly contrasted with Millennium Development Goals, or MDGs, which the Gates' family strongly supported. SDGs will replace MDGs as several of the eight MDGs have been achieved. MDGs consisted of eight goals with 18 targets while SDGs are proposed to consist of 17 goals with 169 targets.
Many economists are arguing over whether the SDGs have too many goals and targets. Some believe that "having 169 targets is like having no targets at all". I feel that the number of goals should be reduced from 17 to 10. I feel that this makes the SDGs more focusable and marketable. Do you feel that the number of SDGs should be reduced or do you feel that the broader the set of goals and targets, the better?
The article primarily focuses on which goals the world should set and achieve by 2030. Bill and Melinda Gates proposed in their annual letter that "the lives of people in poor countries will improve faster in the next 15 years than any other time in history" and that the lives of people in poor countries "will improve more than anyone else's." Sustainable Development Goals, or SDGs, is a United Nations initiative that is intended to be agreed upon by world leaders at the UN General Assembly in September.
SDGs are being directly contrasted with Millennium Development Goals, or MDGs, which the Gates' family strongly supported. SDGs will replace MDGs as several of the eight MDGs have been achieved. MDGs consisted of eight goals with 18 targets while SDGs are proposed to consist of 17 goals with 169 targets.
Many economists are arguing over whether the SDGs have too many goals and targets. Some believe that "having 169 targets is like having no targets at all". I feel that the number of goals should be reduced from 17 to 10. I feel that this makes the SDGs more focusable and marketable. Do you feel that the number of SDGs should be reduced or do you feel that the broader the set of goals and targets, the better?
Friday, January 23, 2015
Google is Becoming a Wireless Carrier
For years, Google has been preparing to offer wireless
mobile service. They currently
design and sell phones online, make the most used mobile software in the world,
and are capable of providing internet service with Google Fiber. However, instead of paying for and
putting up their own cell towers, they will use the networks of Sprint and
T-Mobile to provide their service.
In return, Google is expected to pay $2 per gigabyte to those carriers,
which will still allow them to provide very cheap service. That being said, what would happen to
AT&T and Verizon, who would lose market share and not benefit at all from
Google customers? Another interesting
point in the article: if this happens, will Apple look into providing their own
service with their iPhones?
http://money.cnn.com/2015/01/23/technology/mobile/google-wireless/index.html?iid=HP_River
Quantitative Easing in the Euro Zone
http://www.economist.com/news/finance-and-economics/21640371-policy-will-help-less-so-other-big-economies-better-late
Recently, there has been relatively low demand and falling prices in Europe causing "lowflation". The European Central Bank has tried many things to combat this deflation and low demand, including offering negative interests rates which also did not work. Months had gone by, and the ECB had decided to engage in quantitative easing. They plan on spending roughly 60 billions pounds, or $70 billion, for over two years to flood the money supply. The ECB has hopes that quantitative easing will help their recovery from the double-dip recession they have recently experienced. Their two channels in which QE will work is by the "signalling effect" (signalling to markets and firms to bring inflation closer to 2%) and the exchange rate (their hopes to strengthen the exchange rate since the serious weakening of it last spring). I think that by engaging in QE, the Euro zone could gain a little more strength in their economy and get them back on the upside of their current cycle.
Recently, there has been relatively low demand and falling prices in Europe causing "lowflation". The European Central Bank has tried many things to combat this deflation and low demand, including offering negative interests rates which also did not work. Months had gone by, and the ECB had decided to engage in quantitative easing. They plan on spending roughly 60 billions pounds, or $70 billion, for over two years to flood the money supply. The ECB has hopes that quantitative easing will help their recovery from the double-dip recession they have recently experienced. Their two channels in which QE will work is by the "signalling effect" (signalling to markets and firms to bring inflation closer to 2%) and the exchange rate (their hopes to strengthen the exchange rate since the serious weakening of it last spring). I think that by engaging in QE, the Euro zone could gain a little more strength in their economy and get them back on the upside of their current cycle.
Japan to be year late in hitting inflation target
http://www.bbc.com/news/business-30939747
According to the article, Bank of Japan's Governor expressed his opinion on Japan's goal of reaching 2% inflation would not be able to achived this year. Governor Kuroda thinks one more year is what Japan needs before reaching that level of inflation. One of the reasons for his deduction is the current low oil price that is affecting Japan heavily as the country does not produce any oil by itself but mostly importing. However he believes growth will soon to kick in and discussion about raising wages to match the expected level of price rise should be considered soon.
Japan's trouble in recent years has always been deflation, thus explaining why Shinzo Abe has been continuously trying to weaken the Yen to increase price level. I think the economic depression that happened last year was a surprising big hit to their economy, although I agreed with Shinzo Abe's approach and believe that Japan will soon reach their target of 2% inflation, although it might take longer than what Kuroda has anticipated.
Japan's trouble in recent years has always been deflation, thus explaining why Shinzo Abe has been continuously trying to weaken the Yen to increase price level. I think the economic depression that happened last year was a surprising big hit to their economy, although I agreed with Shinzo Abe's approach and believe that Japan will soon reach their target of 2% inflation, although it might take longer than what Kuroda has anticipated.
Thursday, January 22, 2015
Obama for equity
http://www.economist.com/news/united-states/21640351-barack-obama-tries-set-tone-2016-middle-class-economics
The link above takes you to the article in Economist about Obama's recent exhibition of the intent to bring equity in the American economy. The most striking part of the article discussed what plans President Obama has for the taxation policies. Obama expressed enthusiasm regarding hiking capital gains tax on the top earners and closing a loop-hole which allowed capital gains tax to be avoided when the owner of an asset dies. The tax proceeds from the increased taxation are aimed at tax cuts for people with lesser incomes. Yet, interestingly, Republicans were more concerned about the impact this could have on investment and jobs. I personally think that the tax cut is a great idea and will not impact jobs as significantly as the Republics propose.
The link above takes you to the article in Economist about Obama's recent exhibition of the intent to bring equity in the American economy. The most striking part of the article discussed what plans President Obama has for the taxation policies. Obama expressed enthusiasm regarding hiking capital gains tax on the top earners and closing a loop-hole which allowed capital gains tax to be avoided when the owner of an asset dies. The tax proceeds from the increased taxation are aimed at tax cuts for people with lesser incomes. Yet, interestingly, Republicans were more concerned about the impact this could have on investment and jobs. I personally think that the tax cut is a great idea and will not impact jobs as significantly as the Republics propose.
Wednesday, January 21, 2015
Brazil Raises Interest Rates to Help Curb Inflation
Brazil has increased their interest
with the intention of having an aggressive rate of monetary tightening to stop
high inflation. Bringing down the inflation will allow for more investment to
take place in the country. Brazil’s central bank voted unanimously to increase
the benchmark Selic rate to 12.25%. They
want to bring the 12-month inflation to 4.5% midpoint of the official inflation
range by 2016. However the president administration plans on having many
spending cuts and increases the price of electricity and bus transportation,
which could counteract what the central banks plan is.
http://www.nytimes.com/2015/01/22/business/international/brazil-raises-interest-rates-to-help-curb-inflation.html?src=busln&_r=0
Tuesday, January 20, 2015
What the Frack? The Importance of U.S. Institutions
http://www.foreignaffairs.com/articles/141203/robert-a-hefner-iii/the-united-states-of-gas
The author explains that those countries hoping to replicate the US's "fracking" revolution might be unsuccessful. Not because of the difficulty of developing the technology but, instead, because of certain institutions that are integral to the development of natural resources. The author makes the case that only the US's unique understanding of property rights--in addition to other important institutions-- made the fracking revolution an uniquely American experience.
I think that the author is correct, but what do you think?
The author explains that those countries hoping to replicate the US's "fracking" revolution might be unsuccessful. Not because of the difficulty of developing the technology but, instead, because of certain institutions that are integral to the development of natural resources. The author makes the case that only the US's unique understanding of property rights--in addition to other important institutions-- made the fracking revolution an uniquely American experience.
I think that the author is correct, but what do you think?
Venezuela Poor Keep Faith in Maduro's Subsidies as Oil Plunges
Venezuela continues to feel the negative effects of low oil prices around the World. During the term of Hugh Chavez, oil companies were turned into state owned entities. During this time, Venezuela flourished with the then high prices of oil. The country also spent most of this money leaving little savings. After the death of Chavez, Nicolas Maduro took over and has his hands full with a horrific economic situation. This economic situation has been defined by superinflation, scarcity and uncertainty. Oil currently makes up 97% of Venezuela's hard currency earnings, so it is no surprise the country is suffering the way it is.
In the midst of all of this many have and would blame Maduro, however the poorest citizens of Venezuela are sticking with the president. One reason for their loyalty is Maduro's avoidance of cutting social programs. The country must do something soon to turn it around as they are predicted to default within the next year.
Source: http://www.bloomberg.com/news/2015-01-19/venezuela-poor-keep-faith-in-maduro-s-subsidies-as-oil-plunges.html
In the midst of all of this many have and would blame Maduro, however the poorest citizens of Venezuela are sticking with the president. One reason for their loyalty is Maduro's avoidance of cutting social programs. The country must do something soon to turn it around as they are predicted to default within the next year.
Source: http://www.bloomberg.com/news/2015-01-19/venezuela-poor-keep-faith-in-maduro-s-subsidies-as-oil-plunges.html
New Oxfam report says half of global wealth held by the 1%
http://www.theguardian.com/business/2015/jan/19/global-wealth-oxfam-inequality-davos-economic-summit-switzerland
A new report from Oxfam says that by 2016, 1 percent of the world's population will own more than the other 99 percent. We have noted the importance of income inequality several times in class and this article shows how bad it has become. Income inequality is bad for growth, crime, and governance and it has grown exponentially over the past 20+ years. It is important that world leaders take steps to lessen this inequality or there will be consequences. Oxfam has several suggestions for how to carry this out, including a heavier investment in health and education and higher taxes on corporations and the rich.
Monday, January 19, 2015
Brazil Relying on Taxes to Preserve Credit
http://www.bloomberg.com/news/2015-01-19/brazil-raises-taxes-by-7-5-billion-to-improve-confidence.html
Brazil is implementing a new tax package in hopes of staving off another downgrade in its credit rating. Brazil, the largest economy in Latin America, is currently one level above junk bond rating, per Standard and Poor's. This tax package is an attempt by Levy, the new finance minister, to increase global confidence in the Brazilian government. This tax package is going to impact an already distressed economy. Growth has been relatively slow compared to Latin America, and this trend is forecasted to continue in 2015. Additionally, inflation is a major concern for the country. It is estimated to be at 6.67% in 2015 while growth is forecasted at a meager 0.38%. The bleak economic conditions, paired with the deteriorating credit of the country is a major concern.
Brazil is an interesting case. Its GINI coefficient is 52.7 according to the World Bank in 2012. This is high compared to most other Latin American countries. Will these taxes be at the expense of the poor due to the focus on specific products? Also, the taxes could increase inflation in the short run. The government is not able to focus on price stability due to the lack of credibility it holds in the bond market. Furthermore, will Brazil be able to effectively implement taxes due to high levels of corruption? In Dream Big, Jorge Lemann, a Brazilian investment banker responsible for the acquisition of Burger King and Anheuser-Busch, noted the corruption and uncertainty that permeates the Brazilian economy. Brazil is forced to take strong action during this time of duress.
Brazil is implementing a new tax package in hopes of staving off another downgrade in its credit rating. Brazil, the largest economy in Latin America, is currently one level above junk bond rating, per Standard and Poor's. This tax package is an attempt by Levy, the new finance minister, to increase global confidence in the Brazilian government. This tax package is going to impact an already distressed economy. Growth has been relatively slow compared to Latin America, and this trend is forecasted to continue in 2015. Additionally, inflation is a major concern for the country. It is estimated to be at 6.67% in 2015 while growth is forecasted at a meager 0.38%. The bleak economic conditions, paired with the deteriorating credit of the country is a major concern.
Brazil is an interesting case. Its GINI coefficient is 52.7 according to the World Bank in 2012. This is high compared to most other Latin American countries. Will these taxes be at the expense of the poor due to the focus on specific products? Also, the taxes could increase inflation in the short run. The government is not able to focus on price stability due to the lack of credibility it holds in the bond market. Furthermore, will Brazil be able to effectively implement taxes due to high levels of corruption? In Dream Big, Jorge Lemann, a Brazilian investment banker responsible for the acquisition of Burger King and Anheuser-Busch, noted the corruption and uncertainty that permeates the Brazilian economy. Brazil is forced to take strong action during this time of duress.
Sunday, January 18, 2015
Swiss abandons Euro cap, franc soars
Click Here for article.
The Swiss National Bank made a an erratic move to remove it's price cap for the Euro, which saw the franc go up as high 30% with respect to the Euro since the removal of the cap. This article very well explains the economics of such a removal and the parties affected. As the franc grew strong, foreign products are much cheaper for holders of Swiss francs however this situation is complicated for swiss exporters since their products will be too expensive for foreigners. Importing Swiss products will be very expensive now. Swiss watchmaker Swatch's share has fallen 15% since the removal of the cap, and money other swiss companies will also suffer. Currency broker Alpari also suffered losses after the remover of the cap. But, having said that, the Euro did recover a bit as it went from buying 1.20 francs to 0.8052 francs, and then went up to buy 1.04 francs.
The Swiss National Bank made a an erratic move to remove it's price cap for the Euro, which saw the franc go up as high 30% with respect to the Euro since the removal of the cap. This article very well explains the economics of such a removal and the parties affected. As the franc grew strong, foreign products are much cheaper for holders of Swiss francs however this situation is complicated for swiss exporters since their products will be too expensive for foreigners. Importing Swiss products will be very expensive now. Swiss watchmaker Swatch's share has fallen 15% since the removal of the cap, and money other swiss companies will also suffer. Currency broker Alpari also suffered losses after the remover of the cap. But, having said that, the Euro did recover a bit as it went from buying 1.20 francs to 0.8052 francs, and then went up to buy 1.04 francs.
Russia's Struggling Economy
http://www.economist.com/news/europe/21639557-russian-economy-will-take-long-time-recover-it-badly-needs-structural-reforms-it
Within the first two weeks of the New Year Russia struggled as “the rouble fell by 17.5% against the dollar” and oil, their main export, prices dropped. This drop in oil will potentially cause the real income to decline due and take over 10% off of the budget. Russian money reserves may only last a year in a half if this situation persist; Russians have also began to loose hope in the rouble and withdrew deposits. There is a lot of pressure for the rouble because of foreign currency markets and liquidity within banks. Recovery from the failing rouble will be slow because of the lack of resources and weak institutions within the country. In the past, there has been growth within the county but now to move forward Russia must restructure and the economy.
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