Greek Education Tax Folly

The Left-wing Greek government is in hot water concerning a taxation plan that seriously backfired. Based more on rhetoric and idealogical grounds, the implications of placing a 22% value added tax on private schools were obviously not considered. The idea was to simultaneously raise government revenue via plutocracy-targeting, rather than methods that would impact the common people. As with many programs, they people it was supposed to help actually become the ones paying the price.

The Greek education system is full of many types of private school, like technical, arts, eventing, etc. This tax cause massive price increases that forced many families out of the system. It was actually rather common for lower to middle-inclose families to prioritize education and pay the price for a better future. Because they could not handle the price increase, they moved to the already overcrowded public school system. This amplified problems there and cause many private schools to shut down, creating thousands more unemployed.

This shows that consumption isn't always in line with the socio-economic stratification assumed to be correlate. Also, as a policy maker, it is extremely important to consider the implications of a specific policy. Often - especially with "Robin Hood" policies - the ones who you are trying to help are often the ones who will ultimately bear the costs.

Do you see any more lessons here?

http://www.economist.com/news/europe/21677382-left-wing-government-aimed-new-tax-rich-it-hit-poor-instead-greece-reconsiders

With influx of new apartments, rent increases slowing in Denver

In the third quarter in the past few years, apartment rents in Denver have risen by and average of $67, this year rates are only up by $27. This slow down of rent increases is due to the fact that more and more apartment buildings are going up in the Denver Metro area. More supply equals more competition, and as a result, landlords are having to lower their rates in order to stay competitive with the new buildings. Especially now when there are more apartment vacancies daily.

This is a very classical example of supply and demand in its simplest form. My question is, if rates are starting to slow, why are vacancies rising?

Link: http://www.denverpost.com/business/ci_29042930/denver-apartment-rents-slow-increase-influx-new-inventory

Consumer Spending Slowing

American consumer spending has increased by its smallest margin since January this year.  The cause of this it is suspected to be slowing job growth and economic uncertainty overseas.  Personal spending increased by only .1% in September.  The personal savings rate did however increase from 4.7% to 4.8%.

http://www.wsj.com/articles/u-s-consumer-spending-rises-0-1-in-september-1446208382

Major oil companies unveil the damage of $45 crude

It was a bruising day for Europe's energy sector Thursday, with the full extent of the pain caused by low oil prices being laid bare in a series of earnings reports. Anglo–Dutch multinational Royal Dutch Shell  reported a loss of $6.1 billion, compared with a gain of $5.3 billion for the same quarter a year ago, a decrease of 70 percent. This included a large $8.2 billion write-off due to a downward revision of its oil and gas price outlook and also a decision to halt projects in Alaska and Canada.
The Video is very helpful and only 5 min.
Link:

http://www.msn.com/en-us/money/markets/major-oil-companies-unveil-the-damage-of-dollar45-crude/ar-BBmzbTW?li=AA4Zjn

China to End One-Child Policy, Allowing Families Two Children

From the 1970's the Chinese Communist Party has enforced that couples were only allowed to have one child.  However, this policy on Thursday has been changed to allow Chinese couples to have two children.  This came from the fear of the aging population jeopardizing the amount of economic growth China would be able to achieve.

Even though this gives Chinese citizens a heightened sense of freedom and choice about their personal lives, the party is unsure how quickly the birthrate will go up in the near future.  It will go up certainly, but by how much no one is certain.

Restrictions were lessened in 2013 allowing couples to have two children if one of the parents were an only child.  However, many couples declined the offer to have another child because of the expense and the pressure to raise children in a highly competitive atmosphere.  With that being said only 12% people eligible to have a second child took advantage of it.  

When asked about the new policy that came out this morning, some people were happy, but most of the society was either ambivalent or adamant that they would not be having a second  child.

Currently 1/10 of the population of China is over 65.  However, by 2027 this is expected to rise to 15% and to 20% by 2035.  Consequently, due to these vast increases in retired individuals there will not be enough working people during those years to support them according to the numbers now.

I agree with Mr. Liang when he says, "“It’s not just a problem of whether you permit ordinary people to have one or two kids. It’s about returning their reproductive rights to them,” Mr. Liang said in a telephone interview from Shanghai. “In over 200 countries and regions around the world, which of them nowadays controls people’s reproduction like this?”

Do you think this policy will be effective for China? 

http://www.nytimes.com/2015/10/30/world/asia/china-end-one-child-policy.html?hp&action=click&pgtype=Homepage&module=first-column-region&region=top-news&WT.nav=top-news&_r=0

Fed Keeps Interest Rates Near Zero, but Says Economic Indicators Remain Strong

The Federal Reserve announced that it still isn't ready to raise interest rates. This is the 7th year where short-term interest rates are near zero. However in the announcement, it left open the possibility that the Fed could raise the rates in December during their final meeting of the year.

They said even though job growth had slowed, other economic indicators that go into the interest rate were strong. Also, the Fed said they weren't as concerned about the global economy as they were in their last meeting in September. The decision to keep rates near zero was supported by nine of the 10 members of the Federal Open Market Committee.

This most recent statement indicated that Fed officials are still fairly confident that the labor market will continue to improve and inflation will rise. Those factors are what impacted the Fed to say there could be an increase in rates in the near future. If the rates are raised, they would be raised slowly, as to minimize economic disruptions.

Now, the big question is will the Fed actually raise rates at their last meeting of 2015, which takes place December 16 and 16. After all of these months of speculation, do you think it will finally happen? Or will there be another excuse to keep them near zero?

http://www.nytimes.com/2015/10/29/business/economy/fed-interest-rates.html?ref=business&_r=0

Sick of dealing with the daily traffic congestion on the road? Soon you may not have to.

Since the creation of the automobile, overly-congested roadways have caused copious amounts of pollution in major cities across the world. Ultimately, this increase in pollution ultimately led to a widespread awareness of environmental protection reforms across the globe. To help combat the problem, SkyTran, a NASA Space Act company, has been developing what will come to be known as a sky taxi.

By the end of October this year, the company hopes to debut an “aerial mass transit system featuring cars that magnetically glide 20 to 30 feet above the ground along elevated tracks” (Kavilanz) in Tel Aviv, Israel. Initially, just one car will run on the transit path of about 900 feet; but soon, more cars will be assimilated into the debut system. After the debut of the system in Israel, SkyTran also hopes to expand to other countries around the world including the United States.

The goal of this project is to help alleviate the environmental implications that pollution has created by replacing automobile transportation with a more environmentally sustainable transportation mechanism. The taxis run solely on magnetic alleviation technology in which electromagnets produce the lift and force to propel the cars forward. Not only is this technology more environmentally-friendly, it is also cheaper and simpler to build than railroads and subways, and can be installed in a matter of days.

Not only will this new mode of transportation help with reducing the carbon footprint has left on the world; but it will also allow developing countries to have a more sustainable mode of transportation that they can actually afford. That being said, do you think that the introduction of a mass transit system of transportation in developing countries will help them to better establish themselves in the global marketplace? Will this be able to allow them to move from that of a developing country to that of a developed country? Furthermore, what implications do you think this will have on the automobile and railway industries?

Link: http://money.cnn.com/2015/10/23/smallbusiness/skytran-air-taxis/

Japan’s Struggling Economy Finds ‘Abenomics’ Is Not an Easy Fix

Over the past few years and tracing back Japan has been a country under constant contraction, whether it is often or takes a while. So essentially it is very difficult to gauge an economy which is no volatile. It is very difficult to analyze an economy that is again going towards a contraction, so what are to say about this instance?

Three years ago the new Prime Minister Shinzo Abe had proposed to end this constant state of recession and move towards a more stable situation. Under his time the central bank intervention was at an all time high and was policy to induce the economy. However; this over time was not the best policy to implement either because many analysts conclude that Japan has been on a track of deceleration which is a major contribution to its current state.

Taking Advantage of Corporate Taxes

In Europe multiple investigations are being conducted involving corporate tax laws. The week of October 22^nd, 2015, in Luxembourg and Netherlands, the European Commission ruled that subsidiaries of multinational corporations in the two countries were paying too little of corporate tax. Multinational corporations such as Starbucks and Chrysler received these light tax deals because these countries were trying to enhance foreign direct investment through “state aid.”

            After a proper investigation it was found that these multinational companies were taking this low corporate tax rates as preferential treatment. According to the article one of Chrysler’s chairman, John Elkan, sits on the board of The Economist’s parent company. These two multinational companies ended up underpaying corporate taxes at unfair amounts.

            The European commission is currently conducting similar investigations on Amazon and Apple. Lawyers believe that if multinational corporations have a choice between taxes and court they will always choose taxes. In conclusion these multinational corporations were gaining an advantage by gaining a low corporate tax rate. As the European commission investigates the situation, I believe that the shift in corporate taxes in Europe will even the playing field of multinational corporations in Europe.

http://www.economist.com/news/finance-economics/21676785-corporate-tax-europe-set-change-european-commission-attempts-outlaw

$68-billion California Bullet Train Project Likely to Overshoot Budget and Deadline Targets

The monumental task of building California's bullet train will require tunneling through the geologically complex mountains north of Los Angeles. State officials say the tunnels will be finished by 2022 — along with 300 miles of track, dozens of bridges or viaducts, high-voltage electrical systems, a maintenance plant and as many as six stations. A Times analysis of project documents suggests however, that deadline and budget targets will almost certainly be missed — and that the state has underestimated the challenges ahead. A confidential 2013 report by the state's main project management contractor, New York-based Parsons Brinckerhoff, estimated that the cost of building the first phase from Burbank to Merced had risen 31%, and the total cost of the project would rise approximately 5%. Bent Flyvbjerg, a University of Oxford business professor and a leading expert on megaproject risk, said the lagging schedule, litigation, growing costs and permit delays arising so early in construction are warning signs that even more delays and higher costs are imminent 
This article provides insight into the difficulties of central planning. Specifically, it illustrates the undesirable consequences of having insufficient information necessary for the state to produce the system in an efficient manner.

http://www.latimes.com/local/california/la-me-bullet-train-cost-final-20151025-story.html

Wifi calling... What does this mean for our phone bills?

AT&T and Verizon have pensioned the FCC to start testing wifi connected calls for cell phones. Though there are currently apps that allow you to call using a wifi connection on iOS devices, you can only do so however if the person you are calling has the same app. What this new wifi calling feature will do is when you're connected to a wifi hotspot and make a phone call, it will use the wifi signal instead of accessing your data usage. So what will this latest innovation mean for the network industry? Will prices for wifi hotspots go up or will there just be an abundance of them? And will consumers be able to reduce their data usage plans? If you're always connected to wifi theres no real need to pay the $100 a month for the XXL data usage plan!http://www.theverge.com/2015/10/25/9611746/verizon-wi-fi-calling-feature-seeks-fcc-approval

Corporate tax scandals in Europe

Luxemburg and the Netherlands were recently ruled to have provided government "subsidies" to subsidiaries of multination corporations within both country's respectively. According to the rules of the EU, such state sponsored subsidy's are illegal and the European commission have ruled that they each paid 20-25 million Dollars less than what they both owed. Both Countries have resorted to appeal this decision because they feel that this will deter investment in the future. tax avoidance is a major issue in the international community whereby multinational firms attempt to shift their business to countries where they feel they will be taxed a lesser amount. While this sounds well and good, there are certain particulars to this case that made the commission question the validity of the exchanges going on. Upon close examination, the commission found that there was a manipulation in the amounts for which different subsidiaries of the same MNC were found selling goods to one another, basically a change in the transfer prices that wasn't adding up in both countries. While there were undervaluations on both ends, MNCs essentially worked a way around the system in order to pay a fraction of the tax that they were supposed too.

MNCS go through such complicated structures in order to avoid paying corporate taxes and it seems that the involvement of these respective governments is in question regarding how active a process they played in helping out such MNCs. Regardless, MNCs would rather prefer taxes than court dates.

http://www.economist.com/news/finance-economics/21676785-corporate-tax-europe-set-change-european-commission-attempts-outlaw

Abenomics Is Not Easily Fixable in Japan's Economy

Recently, in Japan, people are starting to question the policies of Shinzo Abe's "Abenomics", seeing as the Japanese economy has contacted numerously in the past few years. Abenomics describe the economics policies enacted during Abe's term as prime minister since 2012. They include fiscal stimulus, monetary easing, and structural reforms. The potential growth rate is around 0, so any small shock can put Japan into recession, according to the chief Japan economist at JP Morgan & Chase, Masamichi Adachi. Abe has been criticized for inappropriately raising the sales tax, which disincentivized people to spend money in the economy. In addition, Japan's GDP is the same as it was in the mid-1990s, according to the article. We also know that another thing that could possibly disincentivize workers and consumers is the fact of respecting your elders in Japan, which has a good underlying tone, but it also does not motivate people to work harder if they are younger, or produce more GDP for the economy. With more and more people skeptical of Mr. Abe's policies, he will have to change his policies in order to not have Japan recess even more. One proposal may be to implement more quantitative easing into the Japanese economy, as well as lower the sales tax, encouraging people to spend more into the economy. http://www.nytimes.com/2015/10/26/business/international/japans-struggling-economy-finds-abenomics-is-not-an-easy-fix.html?ref=business&_r=0

Is Tim Cook Right About the Level of Innovation in Apple Inc.'s iPhone 6s?

The improvement leaps Apple made from 6 and 6 plus to 6s and 6s plus were greater than the leaps from 5s to 6 and 6 plus, such as faster processors, quicker wifi connections, better camera resolution on both sides, among a few of the improvements. Overall, the design and look of the phone didn't really change. It is being talked about that Apple may move away from using LCD touch screens, that are used on all smartphones, not just Apple phones, and being incorporating AMOLED displays for the 2017 iPhone.

Apple has been coming out with a newer version of the iPhone about every two years, but because of the increasing pressure from their competitor, Android, Apple has almost doubled what they were originally spending on research and development. They may soon start releasing new models every year, and making them so that the older models become obsolete in order to keep market share. My biggest question about this strategy is that wouldn't doing all this every year, give incentive to customers to switch to Android, or any other phone for that matter, in order to keep costs low? Apple products are only compatible with other Apple products. If they remake new phones and items that go with only these phones, owning anything Apple is going to become more expensive than it already is. I can see this as providing incentives to consumers to switch to brands that are compatible with more than just their own products, and from different technology generations.

Link: http://www.fool.com/investing/general/2015/10/25/is-tim-cook-right-about-the-level-of-innovation-in.aspx

Rates May Not Be Our Biggest Concern

Although The Fed's decision regarding an interest rate hike is prevalent, its decision on how to reinvest money from matured Treasury bonds is just as prominent. Currently the Fed holds about $215 billion of Treasury bonds that are expected to mature next year, and $800 billion by 2018. Being that the bond market is experiencing a phase of volatility, the Fed's decision on how to reinvest these funds will have big implications on that volatility. Traditionally the Fed uses proceeds from matured bonds to purchase more primary market Treasury bonds; however, it would be wise for the Fed to reinvest its funds into bonds in the secondary market. Since the market expects rates to rise, there have been negative implications on bond liquidity, which would be eased by secondary market bond investing. By making an appearance in the secondary bond market the Fed would be fulfilling the role that banks have traditionally filled: which is currently suffering because of stricter regulations. Whatever the Fed ends up doing will have a large effect on the bond market. Where they decide to reinvest their money should be something that is publicized before being done so that it is not a shock to investors.

Source: http://www.bloomberg.com/news/articles/2015-10-24/fed-s-next-big-decision-may-not-be-about-rates-as-rollover-looms

Uniting Behind the Divisive ‘Cadillac’ Tax on Health Plans

The “Cadillac” tax is known to be the excise tax on high-cost health care plans, and the authors of the article, N. Gregory Mankiw and Lawrence H. Summers, strongly support this policy. They believe that every family should have health insurance to avoid “the risks of financial insecurity, personal bankruptcy, and forgone essential care” due to the expensive medical treatment. However, some people tend too much for insurance, which, as a result, they become too quick to look for professional medical care or easily accept any unnecessary tests or treatments by the treatment. This leads health spending to be beyond what is optimal.

Some firms prefer paying their workers in the form of health insurance rather than in cask because compensation in form of wages is subject to income tax and payroll tax, while employer-provided health insurance does not. As a results, workers end up with excessive health insurance and low wages. The Cadillac tax comes in and solves this problem by placing a tax on the excess of insurance cost above threshold, “$10,200 for individual coverage and $27,500 for family coverage.” This gives companies an incentive to reduce insurance and  pay more in wages. By increasing wages. firms are in an advantage in recruiting and retaining workers in the long run.

Link: http://www.nytimes.com/2015/10/25/upshot/uniting-behind-the-divisive-cadillac-tax-on-health-plans.html?ref=economy