http://blogs.wsj.com/economics/2014/12/12/u-s-wealth-is-near-a-record-yet-racial-gap-has-widened-since-recession/
"U.S. Wealth Is Near a Record, Yet Racial Gap Has Widened Since Recession"
Wealth inequality has grown at a faster rate than the economy since the Recession. To be fair, the rich were not heavily leveraged like the middle class with their mortgage debt. Middle class Americans were not investing but paying off their years of dis-saving. Of course, paring this growth with a cut in the estate tax is probably bot conducive to overall inequality.
Let me know what you think.
Saturday, March 28, 2015
Fears of a new global crash as debts and dollar’s value rise
http://www.theguardian.com/business/2015/mar/28/rising-dollar-debt-fears-global-economic-crash
This article discusses the effect the rising value of the dollar is having on other countries worldwide. In particular, it notes that it's hurting a number of mid-sized economies that have recently begun/were projected to soon begin major development (South Africa, Brazil, etc.). It also discusses the longer term effects of quantitative easing, including a 40% increase in money borrowed by developing countries. Also stated is the debate/attempts of smaller countries to bring this problem to the floor of the UN, which were rebuffed under the claim that it was the wrong forum (and that that was what the IMF was for). All in all, it is interesting to see the repercussions he implementation of quantitative easing has had on the global economy and begs the question of whether or not it stopped or just delayed economic crises.
This article discusses the effect the rising value of the dollar is having on other countries worldwide. In particular, it notes that it's hurting a number of mid-sized economies that have recently begun/were projected to soon begin major development (South Africa, Brazil, etc.). It also discusses the longer term effects of quantitative easing, including a 40% increase in money borrowed by developing countries. Also stated is the debate/attempts of smaller countries to bring this problem to the floor of the UN, which were rebuffed under the claim that it was the wrong forum (and that that was what the IMF was for). All in all, it is interesting to see the repercussions he implementation of quantitative easing has had on the global economy and begs the question of whether or not it stopped or just delayed economic crises.
Rising House Prices Responsible for Rising Inequality
This article
argues against a recent book on income inequality. According to the author of
the book, in the long run the rate of return on wealth exceeds economic growth.
Over time, this increases inequality as the share of national income going to
those who own capital (the rich) rises, while the portion going to labor
(everyone else) falls.
On the other
hand, Rognlie argues against it. First, he says that the rate of return on
capital declines in the long run due to law of diminishing returns. Second, not
all investments have increasing rates of return. That is, rates of return on
assets other than housing has been stable since 1970.
So, what is
your take on the argument? And, if housing is the real source of inequality
then what policy do you think should be put in place.
Link
Link
Patching Up the Social Safety Net
Mr. Friedman wanted to privatize social security because the poor were not able to put enough money towards benefits for retirement. He also says that programs funded for the poor were seen as charity and that they would become unfunded and dissipate. Every program except Medicare and Social Security is vulnerable. And now, we have turned to the rich to fund these programs. The United States has one of the best social insurances but it does a terrible job at closing the income gap and are losing political support. What do you think we should do in order to make social security program, or any program in the U.S., more worthy and dependable. How can remove the stereotypes associated with certain programs?
http://www.nytimes.com/2015/03/18/business/patching-up-the-social-safety-net.html?ref=economy&_r=0
http://www.nytimes.com/2015/03/18/business/patching-up-the-social-safety-net.html?ref=economy&_r=0
Japan nears deflation as consumer prices stop rising
http://www.bbc.com/news/business-32081871
The article notes that annual inflation in Japan has reached zero in February, moving away from their central bank's target of 2%. Economists noted that this news has put pressure on the Bank of Japan to employ expansionary monetary policy to offset falling oil prices in order to continue to steer the Japanese economy toward recession following heavy recessionary periods since the Asian Financial Crisis of 1997. The article further notes falling deflation and increasing wages, leading to a hypothesis of "good deflation" as consumer confidence should increase, in turn increasing demand recovery on the domestic side.
This article poses an interesting monetary challenge: traditionally, inflation has been seen as a sign of recession or depression, given that prices of products are dropping, denoting a lack of growth in wages or macroeconomic product. However, low inflation can potentially offset prices rising beyond points of affordability or otherwise artificially high price points, and can be relatively harmless if coupled with strong economic vitals in other sectors. Nonetheless, this will be a factor on which to keep an eye as it could indicate a negative growth trend in the Japanese economy, which could, in turn, knock-on to markets in Asia and the world in general given other indicators of global economic lag, such as recent figures coming from Europe indicating possible double/triple-dip recession.
The article notes that annual inflation in Japan has reached zero in February, moving away from their central bank's target of 2%. Economists noted that this news has put pressure on the Bank of Japan to employ expansionary monetary policy to offset falling oil prices in order to continue to steer the Japanese economy toward recession following heavy recessionary periods since the Asian Financial Crisis of 1997. The article further notes falling deflation and increasing wages, leading to a hypothesis of "good deflation" as consumer confidence should increase, in turn increasing demand recovery on the domestic side.
This article poses an interesting monetary challenge: traditionally, inflation has been seen as a sign of recession or depression, given that prices of products are dropping, denoting a lack of growth in wages or macroeconomic product. However, low inflation can potentially offset prices rising beyond points of affordability or otherwise artificially high price points, and can be relatively harmless if coupled with strong economic vitals in other sectors. Nonetheless, this will be a factor on which to keep an eye as it could indicate a negative growth trend in the Japanese economy, which could, in turn, knock-on to markets in Asia and the world in general given other indicators of global economic lag, such as recent figures coming from Europe indicating possible double/triple-dip recession.
Friday, March 27, 2015
How American Frackers Plan to Beat OPEC
The American oil industry is under pressure as oil prices continue to fall. There has already been a dramatic drop in the price of a barrel. What once cost $105 last year is rounding out around $50 now. With that has also come job loss and the downsizing of corporations. However new problems are arising for the American oil industry. Saudi Arabi, the lead member of the OPEC cartel is taking a difference stance on this soft spell. Instead of decreasing production to boost fuel costs they have decided to increase production. This is thought to be an attempt to undercut American prices and dominate the market. Saudi Arabian oil drilling process is considerably less expensive then the US and they are able to produce barrels for around 10 dollars. This being said American oil industry CEOs remain unconcerned about this issue. One CEO states "we made plenty of money when barrels cost $100, we will make plenty of money when they cost $50.)
http://finance.yahoo.com/news/how-american-frackers-plan-to-beat-opec-143601751.html
Russia's Saving Grace
http://www.bloomberg.com/news/articles/2015-03-25/with-hotline-to-kremlin-nabiullina-turns-from-ruble-to-economy
On December 16, 2014 the Russian economy was falling rapidly. Investors and speculators were hoping for the central bank to intervene to abate the impact of the crashing ruble. Governor Nabiullina chose not to intervene. Like the US, the Russian central bank is supposed to be independent from the government, but it is documented that Putin exerts strong influence. Since December 16th, the ruble has stabilized and come back 19% against the dollar. This is not Nabiullina's first major decision. The article noted that in the past, Nabiullina was able to convince Putin to accept market solutions instead of imposing capital controls.
It will be interesting to see if her latest decisions will give her more autonomy in formulating policy for the Russian economy. Additionally, I want to see how the Russian economy responds this calendar year. What do you think?
On December 16, 2014 the Russian economy was falling rapidly. Investors and speculators were hoping for the central bank to intervene to abate the impact of the crashing ruble. Governor Nabiullina chose not to intervene. Like the US, the Russian central bank is supposed to be independent from the government, but it is documented that Putin exerts strong influence. Since December 16th, the ruble has stabilized and come back 19% against the dollar. This is not Nabiullina's first major decision. The article noted that in the past, Nabiullina was able to convince Putin to accept market solutions instead of imposing capital controls.
It will be interesting to see if her latest decisions will give her more autonomy in formulating policy for the Russian economy. Additionally, I want to see how the Russian economy responds this calendar year. What do you think?
Thursday, March 26, 2015
Potential Housing Market Crash?
This article debates whether the housing market is on pace
to crash again. The housing market is once again booming, and investors wonder
if they need to be worried. Homebuilders
have been reporting solid earnings and related companies such as Home Depot and
Lowes are approaching all-time highs.
There are also some housing exchange-traded funds who are at their
highest point since 2007. There
has been a drastic increase in people researching estimates for their homes,
which is a sign the market may becoming speculative again.
However, mortgage rates are expected to increase, which will
decrease the demand for buying houses.
Also, younger generations are trending toward living at home for longer
periods of time or living on a rent basis. Banks have also tightened their credit,
so there should not be another subprime meltdown. The author concludes that he doesn’t believe there will be another
crash, but it is still worth paying attention and keeping tabs on.
http://money.cnn.com/2015/03/25/investing/housing-bubble-homebuilders/index.html
Wednesday, March 25, 2015
Gender Gap in Education Cuts Both Ways
http://www.nytimes.com/2015/03/11/business/gender-gap-in-education-cuts-both-ways.html?ref=economy&_r=0
Last week the Organization for Economic Cooperation and Development — a collective think tank of the world’s industrialized nations — published a report about gender inequality in education, based on the latest edition of its PISA standardized tests taken by 15-year-olds around the world.
The gender gap in math persists, it found. Top-performing boys score higher in math than the best-performing girls in all but two of the 63 countries.Test scores in science follow a similar.
But these are hardly the most troubling imbalances. The most perilous statistic in the O.E.C.D.’s report is about the dismal performance of less educated boys, who are falling far behind girls.
Last week the Organization for Economic Cooperation and Development — a collective think tank of the world’s industrialized nations — published a report about gender inequality in education, based on the latest edition of its PISA standardized tests taken by 15-year-olds around the world.
The gender gap in math persists, it found. Top-performing boys score higher in math than the best-performing girls in all but two of the 63 countries.Test scores in science follow a similar.
But these are hardly the most troubling imbalances. The most perilous statistic in the O.E.C.D.’s report is about the dismal performance of less educated boys, who are falling far behind girls.
Deadlines Near as Greece and Germany Seek a Consensus on Debt
Tensions within the European Union are rising because Greece has failed to propose a plan to pay off their debts. As the strongest economy in the EU, Germany does not want Greece, the weakest economy in the EU, to bring them down. Other European Union nations want to resolve Greece's debt issues before lending them any more money. So far Greece has not shown any attempts to pay off this debt. Even the European Central Bank has cut Greece off from borrowing.
Link to Article
Link to Article
US consumer prices rebound in February
This article summarizes the on-goings of the U.S. economy. In particular, it focuses on the 0.2% rise in the price levels for the month of February. This is a new trend compared to the three consecutive months of declines. Gas prices rose by 2.4% in February, after falling 18.7% in January. As usual, oil prices remain volatile and the strong dollar continues to put pressure. The fed has indicated that they will be increasing interest rates, while the dollar value rises against the euro and yen, as those economies cannot keep up. It is expected that the strong dollar will keep inflation stable in the near future, while also making imports cheaper.
US consumer prices rebound, underlying inflation firming
U.S. consumer prices rebounded in February as gasoline prices rose for the first time since June, and there were also signs of small increase in underlying inflation pressures, which could keep a June interest rate increase on the table.
http://www.cnbc.com/id/102529573
http://www.cnbc.com/id/102529573
The middle class is on the decline in every state ... in size, anyway.
http://money.cnn.com/2015/03/24/news/economy/middle-class-smaller/index.html?iid=HP_LN
Since the year 2000, middle class households have decline in every state. As many state populations continue to grow, it's shocking to believe that only 51% of population is in the middle class, compared to the 70's when 61% of the households were in the middle class. Wisconsin had the largest drop of 5.8% while Wyoming on decreased by .3%. So which class are American household migrating towards? Actually, many have made their way to upper middle class. Signs are showing that our nation is becoming richer as the lower class also decrease by 3%. It will be interesting to see if this trend continues and what effect it will have on future policies.
Since the year 2000, middle class households have decline in every state. As many state populations continue to grow, it's shocking to believe that only 51% of population is in the middle class, compared to the 70's when 61% of the households were in the middle class. Wisconsin had the largest drop of 5.8% while Wyoming on decreased by .3%. So which class are American household migrating towards? Actually, many have made their way to upper middle class. Signs are showing that our nation is becoming richer as the lower class also decrease by 3%. It will be interesting to see if this trend continues and what effect it will have on future policies.
Monday, March 23, 2015
Asia’s About to Spawn a New Tiger Economy: Good Morning, Vietnam
PricewaterhouseCoopers have announced that they believe Vietnam will be one of the worlds fastest growing economies until 2050. The news comes at a time where China's growth is slowing and production there is becoming more expensive. Some firms like Samsung and Intel are investing plenty of money because of cheaper production costs. It is estimated that GDP will grow in Vietnam for years to come.
However, there are some issues. Banks in Vietnam are not the best and some could fail. The work being provided is very labor intensive and does not require much education. While it will be better for the people of Vietnam, it is not fully a step in the right direction. The government needs to make sure it takes all the right steps to ensure that its country takes advantage of these growth opportunities to give its citizens a better life. Interesting read.
http://www.bloomberg.com/news/articles/2015-03-22/asia-s-about-to-spawn-a-new-tiger-economy-good-morning-vietnam
However, there are some issues. Banks in Vietnam are not the best and some could fail. The work being provided is very labor intensive and does not require much education. While it will be better for the people of Vietnam, it is not fully a step in the right direction. The government needs to make sure it takes all the right steps to ensure that its country takes advantage of these growth opportunities to give its citizens a better life. Interesting read.
http://www.bloomberg.com/news/articles/2015-03-22/asia-s-about-to-spawn-a-new-tiger-economy-good-morning-vietnam
Sunday, March 22, 2015
April Fools?
Seattle’s minimum wage increased from $9.47 an hour to $11 starting April 1. The judge claims there is no evidence of negative impacts of such a decision and thus went against local franchise owners’ objections. The owners tried to reclassify franchises as small businesses since, they claim, they operate like small businesses more than as a large national chain. But workers claim franchises have resources small businesses do not have. Furthermore, Seattle is raising the minimum wage to $15 an hour by 2017 for large businesses.
Do you believe franchises should be viewed as small businesses? Even if they are, do you believe they should increase wages?
Another blog entry spoke about the Walmart increase in wage. Do you think this is related to what is happening in Seattle?
Germany new 30% rule for women on boards
In early March, the German parliament passed a new law that would require the largest companies in Germany to name women to 30% of seats on non-executive boards. This would increase the quota to 50% by 2018. Furthermore, many big companies in Germany have already met the quota while others severely lack representation of women on their boards. Smaller companies in Germany also have certain binding targets to increase the number of women on their boards. The quota also applies to senior leadership positions. Critics of the new law say that companies may give unqualified women positions to satisfy the requirements. On the other hand, people have said the new law does not do enough to fix the gender imbalance on boards. Norway has the best record for women since nearly 36% of board members are women. This is a stark contrast in Japan where only 3% of women are hold positions on boards but it is well known that female labor participation rate in Japan tends to be very low.
http://money.cnn.com/2015/03/06/news/women-boards-germany-30/index.html
http://money.cnn.com/2015/03/06/news/women-boards-germany-30/index.html
Mobile Payments: Unfriending cash
http://www.economist.com/news/finance-and-economics/21646802-facebook-enters-booming-market-mobile-payments-unfriending-cash
On March 17th, Facebook announced that in America its instant-messaging app will soon allow users to send each other money just as easily as texts and photos. All they need to do is link their debt cards to their Facebook account, tap on a dollar sign in the app, type in the amount, and press send.
Snapchat has also recently entered the market for free person-to-person (P2P) payments with a service called Snapcash. However, Facebook's service differs in the fact that it does not make instant payments. The money arrives after a few hours, or in some cases, even a few days. This is because money is not transferred between accounts managed by the social network but through conventional payment channels from one bank account to the other.
Facebook's new offering if proof that technology firms are moving onto banks' turf. Other examples include Apple's SmartWatch, Google's Softcard, and South Korea's Naver. If Facebook was to expand its offering internationally and make payment instant, the impact could be huge, especially because it would be able to overcome some of the logistical and regulatory challenges that banks face when serving customers across borders.
Do you think that technology firms and their payment apps will begin make banks more obsolete? What kind of impact do you foresee this technology having on an international scale?
On March 17th, Facebook announced that in America its instant-messaging app will soon allow users to send each other money just as easily as texts and photos. All they need to do is link their debt cards to their Facebook account, tap on a dollar sign in the app, type in the amount, and press send.
Snapchat has also recently entered the market for free person-to-person (P2P) payments with a service called Snapcash. However, Facebook's service differs in the fact that it does not make instant payments. The money arrives after a few hours, or in some cases, even a few days. This is because money is not transferred between accounts managed by the social network but through conventional payment channels from one bank account to the other.
Facebook's new offering if proof that technology firms are moving onto banks' turf. Other examples include Apple's SmartWatch, Google's Softcard, and South Korea's Naver. If Facebook was to expand its offering internationally and make payment instant, the impact could be huge, especially because it would be able to overcome some of the logistical and regulatory challenges that banks face when serving customers across borders.
Do you think that technology firms and their payment apps will begin make banks more obsolete? What kind of impact do you foresee this technology having on an international scale?
Lagarde says IMF to co-operate with China-led AIIB bank
Christine Lagarde, the International Monetary Fund Chief, has voiced her support of the new China-led AIIB (Asian Infrastructure Investment Bank), stating that IMF would be delighted to cooperate with this venture. The bank, established in 2014, has already gotten 30 members and the backing of some strong economies like Germany, England and Italy. Mrs. Lagarde also believed that the World Bank would likely to cooperate with AIIB. On the other side, the US has voiced its criticism of England for backing the venture, stating it serves as "a lever for China to extend its influence over the region".
In my opinion, the ground of United States's concern is ambiguous, and other countries supporting this newly formed bank could actually open up a lot of investments projects for countries in Asia, especially countries with not as developed infrastructre that desperate needs capitals. With or without the bank, China influence on the region is more or less already established. This looks more like a knee-jerk reaction from the US than actual concern.
Source: http://www.bbc.com/news/business-32007090
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