Interest Rate Expectations Provide for an Unclear Future

Everyone has been awaiting the Federal Reserve's decision to raise interest rates for some time now. In this time, many investors have taken action on investments without considering the full risk in hopes for a greater return. With this type of wishful thinking, many have taken personal pleasure in their investments crediting it to their self worth, while disregarding the future implications of the near zero interest rates.
Further, as the time gets closer for the Federal Reserve to make their deacon about raising rates this December, it is unclear how the markets will reacts once the rates do increase. At this point, there has been so much talk about a hike in rates this December that it would be pretty crazy if the Fed didn't raise them. Therefore, with people trying to make predictions about the outcome of the rate change, it is quite difficult to know since the circumstances are so unique. The last time rates rose after being so low was in 1941, which was clearly a long time ago with very different circumstances. Therefore, there are a couple different ways of analyzing the effects of the Federal Reserve.
First off, it is possible that the stock market could weaken with the increased demand of low-risk Treasury bills and people being already wary about shares prices. Housing prices may also weaken when interest rates increase because mortgages will become more expensive. Another thing to consider would be inflation. As raising the interest rates would indicate that of a growing economy, inflation comes hand in hand with economic growth.
There is also the Efficient Markets Theory that denotes all available information is already reflected in market prices. Furthermore, since markets already know everything about rates, an increase in interest rates should already be discounted into share prices. Another approach to look at would be "nonconsequentialist reasoning" which implies that we can't think through consequences of an event until it actually occurs.
It is clear that there are a number of different results the interest rate hike could create, but the real surprise would be if interest rates didn't increase at all.
So what do you guys think will happen at the end of this month? How will the markets react?

http://www.nytimes.com/2015/12/06/upshot/for-any-fed-action-on-interest-rates-an-unforeseeable-reaction.html?ref=economy&_r=0

Volkswagen Holds Talks with Core Investor in Qatar

http://www.wsj.com/articles/volkswagen-holds-talks-with-core-investor-in-qatar-1449425599


Top VW officials had to meet with an important investor on Sunday to discuss the future of the car company. It is believed that the top investor is asking for multiple changes in the car company in order to gain back popularity. Officials said that this was a normal meeting, but many people speculate this. Volkwagen is trying to climb back to the top, and are trying to do so by first closing a deal worth 20 billion euros. Some things these investors are going for is to decrease worker representation on the board and decline the idea more diesel cars instead of electric. Even though, the meeting was rumored to have a lot of talks on labor issues, it was denied. So look to see VW to make a push in the market sometime soon.

Ukraine at a Fork in the Road

http://www.economist.com/blogs/freeexchange/2015/12/other-war-ukraine

The Ukraine has mixed politics with economics and is stuck in a debate between two plans. Plan A is pushed by the Ministry of Finance and supported by the IMF because it will make the budget deficit only 4% of its GDP. The IMF is known for having strict policies and because of this they do not support Plan B which would allow for a 10% Budget Deficit. Plan B, however, is supported by a member of the the president's party and is politically beneficial because it offers the public "hefty tax cuts."

This is another good example of economics and politics colliding. If Plan B is chosen then the IMF will stop disbursing bail-out funds to the Ukraine which would be detrimental to their economy. The current president, however, is worried about popularity, and tax breaks are always popular to the general public. The Ukraine is at a fork in the road and if they choose the wrong route, they will be looking at even tougher times ahead.

Whaling in Japan

The International Court of Justice ruled last year that Japan's whaling expedition were not for scientific purposes making them illegal, many hoped that this practice would come to an end. Despite this ruling, Japan has sent out a fleet to catch 333 whales which is a third size of the last catch. Some people argue that the Japanese tradition of whale hunting is only practiced by a small number of people in Japan and gets more heat and attention than is necessary. The consumption of whale meat has gone down dramatically since the international community began fighting against this practice two decades ago. The whaling program has cost Japanese taxpayers more than $400 million in subsidies since 1988. Do you think this practice gets an unnecessary amount of attention from the international community? Or do you think all the action taken against whaling is necessary? Are the whaling policies harmful to Japan's economy? 

http://www.economist.com/news/asia/21679603-japan-returns-southern-ocean-japans-whaling-fleets-steam-out-fight-western-culinary

South Korea Fines Volkswagen and Orders Recall Over Emissions Scandal

Article: http://www.nytimes.com/2015/11/27/business/international/volkswagen-south-korea-recall.html?ref=international

            On Thursday November 26^th, South Korea has recalled over 125,000 Volkswagen cars. This was due to South Korea’s Environment Ministry ruling after their investigation into Volkswagen automotive cars; their investigation determined that the German carmaker had illegally manipulated an emissions device in cars with older diesel engines.  The investigation conducted by the Environment Ministry started in September after Volkswagen admitted that approximately 11 million cars worldwide had been fitted with cheating software. These devices made it appear that the diesel-powered Volkswagen cars were emitting less nitrogen oxide levels than they actually did. On November 26^th, at a press conference in Sejong, South Korea, Director of South Korea’s Environment Ministry Hong Dong-gon announced the findings from their investigation of Volkswagen that proved the illegal manipulation of nitrogen oxide emissions. Moreover, the engine breached set emission levels when the car was not under the usual test conditions such as during sudden acceleration, when air conditioner was turned on, and when the car was on the road said Director Hong Dong-gon. Volkswagen has completely acted unethically by abusing their moral obligations and violating environmental regulations. The cause of this can be related to various things such as decision making processes, organizational culture, and leadership, but so far we cannot confirm the root of this problem within Volkswagen. This led to the collapse of Volkswagen’s brand value. 

China’s economy may be slowing, but consumers haven’t stopped spending

China’s economy may be slowing down, even though consumers haven’t stopped spending. The Chinese consumer seems oblivious to the broader state of the economy. Whereas gross domestic product growth in China has fallen from 7.9 percent two years ago to 6.9 percent in the past quarter, retail sales growth has held firm at about 11 percent. Although sales growth of big-ticket items such as cars has been relatively modest, spending on smaller items and services such as movie tickets and mobile phone subscriptions has increased at a breakneck pace. There are many explanations for the consumer’s resilience. China’s government is actively promoting policies to shift its economy toward consumption. Income per capita is rising, and the middle class is growing, driven by urbanization, which typically involves the movement of populations from rural areas to coastal cities. Some of the strength in Chinese spending can be explained by people moving back to smaller cities after trying their luck in the large tier-1 cities, such as Shanghai and Beijing, where migrant workers often discover that life isn’t easy.

http://www.businessinsider.com/chinese-still-spending-as-economy-slows-2015-12

The Economy Is Growing, but Not Fixed Yet

This article agrees with the comments and predictions the economists made at the Economic Outlook Conference in that the economy is growing. In fact, "The unemployment rate was unchanged at 5 percent, and average hourly earnings rose 0.2 percent last month, both identical to the forecasters’ projections." These numbers actually lines up with what people have been predicted. However, although the new jobs number has been increasing, it does not show progression or fix some key weaknesses of the economy. The ratio of the population working was unchanged at 59.3 percent.

Source: http://www.nytimes.com/2015/12/05/upshot/the-economy-is-growing-but-not-fixed-yet.html

a capitalist fairy tale to counter growing inequality

The CEO of a medium sized credit card processing company, called Gravity Payments, has announced that the minimum salary will be $70,000 a year. He was able to do so by cutting his own compensation and benefits. Though in the spirt of doing good and helping people, it has caused several problems for the company. Many higher waged based employees have found it unfair to reward those who does work as hard or achieve as much as they do. The added attention to the company has overwhelmed them with job applications, thus relocating some employees to the recruitment department. Though the added publicity has helped to bring in new clients, the added costs of attempting to equalize the"middleman" company may end up damaging it more. http://www.bloomberg.com/features/2015-gravity-ceo-dan-price/

The Economic cost of civil war in Syria

The civil war in Syria does not seem to be ending anytime soon and unfortunately that means that Syrians will have to come to grips with the fact that they will either have to flee or stay in Syria and not only fall prey to the horrors of war but also the economic downturn that comes with it. A Harvard Center for International Development study estimated that large government-involved civil wars typically reduce GDP by 1.25 % each year whereas Syria’s 2013 GDP dropped a staggering 20.6 percent and the GDP in 2014 cannot even be calculated because the economy is so broken down. Fast forward to 2015 and the sheer amount of destruction means that there is no good way to put the situation in any words. Disturbingly so, the Syrian HDI has fallen back to a point where it was 38 years ago. THat means that the Syrian today has the same life expectancy, education and overall quality of life as a Syrian in 1977. 

The un employment rate is at 57 percent, one of the highest in the entire world. Comparable to nations like Haiti. The entire economy has become a sort of conflict economy which is forcing Syrians to try and attempt to "thieve" their way into the markets in Damascus. Sources predict that it will take over 30 years for Syria to return to its Pre War conditions and you really being to wonder when you put it in perspective, is it all worth it?

http://www.globalenvision.org/2015/03/25/cost-civil-war-syria%E2%80%99s-economy-after-four-years-conflict