FED Looking to Reduce its Balance Sheet

As the Trump administration continues to inspire growth in the equity markets around the expectation of deregulation and fiscal infrastructure increases, the FED's outlook has changed from hesitantly waiting to raise rates (as was the case during the Obama administration) to bringing rates up quickly to prevent the economy from "overheating." As the FED looks to raise rates, they also want to do something about their $4.5 trillion balance-sheet that they accumulated during several rounds of quantitative easing that took place in an attempt to stimulate the U.S. economy in light of the great recession.

As the FED looks to unload their balance sheet, the first step is not selling. They will likely move to adjust their re-investment policy. Currently, profits from the bonds on their balance sheet are re-invested into more bonds which serves to increase their holdings. Investors will keep sharp eye on the FED especially in the MBS market, as the offloading and lack of re-investment will have a large impact on both the primary and secondary mortgage markets.

Original Article - http://www.cnbc.com/2017/04/18/fed-official-backs-bond-pairing-this-year.html

Consumer Loans: Payday Lending is Declining

This economist article discussed how payday loans have been declining recently due to regulators. One example that was discussed was a woman making $12 an hour taking out a loan that would cost her $1,620 in interest, which was an annual rate of 838%. The woman fell behind on her payments, and ended up filing a lawsuit. The Delaware judge determined that the interest rate on the loan was not only illegal, but "unconscionable."

I have mixed feelings about the issue. While this interest rate is completely ridiculous, and isn't moral to charge someone this that makes $12 an hour, the woman took out the loan on her own will. While she wouldn't have done this had she made more money (which could even be an entirely different issue), it was her decision to take out the loan. It will be interesting to see if payday loans continue to decline, and if they do, what will take their place.

Article

Why America’s Federal Reserve might make money disappear

As the US economy grows, America’s Federal Reserve is trying to keep inflation in check by raising interest rates. One of the methods to achieve higher interest rate is through selling some of the assets acquired during and after the 2008 financial crisis under the policy, quantitative easing (QE). However, the effects of unwinding the effects of QE are uncertain and the Fed wants something that is predictable. An alternative is to see the bonds run off and collect the money when they are mature while reducing or halting further investment. 

http://www.economist.com/blogs/economist-explains/2017/04/economist-explains-10

Economists, in letter to Trump, say immigration can boost growth, jobs, wages

Around 1500 economists have signed a letter to President Trump and Congress, highlighting the advantages of immigrants working for the US economy. Their hope is that legislators while drafting an immigration policy will take into account the fact that "immigrants boost growth, jobs, and wages." Hotlz-Eakin, former director of the Congressional Budget Office who also served as the chief economist under President George.W Bush was the driving force behind the organization of the letter.  This letter was written in an attempt to shed some light on the situation that 11 million illegal people living in the United States face. Signatories included economic and policy experts from renowned institutes across America. They argue that immigrants help to make up the backbone of the American economy. They are not a threat to American workers but create more opportunities for jobs. Many immigrants contribute to the economy by starting companies in various sectors such as technology  (Silicon valley is full of them). It is reported that more immigrants work in the STEM field to boost economic growth. The article also discusses "immigrant-friendly environment." Give the immigrants a warm welcome, show the same level of respect you want, and its a win-win for everyone. Statistics have shown such positive impacts inherently increase wages. It is reasonable to say that labor force growth without immigrants will take a huge hit. In my opinion, innovation is the key to boosting economic growth. Immigrants bring innovation, diversity, and an increase in labor force participation to the American economy.



http://www.chicagotribune.com/business/ct-economists-immigration-letter-trump-0413-biz-20170412-story.html

China’s Economy Grows 6.9%, but Warning Signs Persist

After developing at a dramatically rapid rate for years, China slows down a little bit recent year. As the world’s second-largest economy after the United States, China announced that it grew 6.9 percent in the first quarter, which is slightly higher than the prediction that China would again report 6.8 percent growth for the first quarter. The higher growth rate was due to construction industry’s heavy use of steel, which had been expected to slow, while investment in electronics factories rose as overseas demand strengthened.

According to the article, although the economy grew at a decent rate, the Government data still reflected some warning signs. Government might manipulated the data by using policy and statistical sleight-of-hand to achieve steady results. Therefore, it is possible that the released data is not reliable.

https://www.nytimes.com/2017/04/16/business/china-economy-growth-data.html?hpw&rref=business&action=click&pgtype=Homepage&module=well-region&region=bottom-well&WT.nav=bottom-well&_r=0

Spooked French Savers Send Money Out of Country

David Chazan examines the effects the upcoming presidential election \are already having on the French economy in this articles. Millions of euros have been transferred by French families to Luxembourg. Many are afraid of the consequences of the economic plans put forth by the candidates, Marine Le Pen and Jean-Luc Melenchon. Both have plans to stop using the euro and many families feel they are protecting their money from the French government by moving it to Luxembourg. The two candidates are in an extremely tight race with the outcome of the election being seen as unpredictable. I understand why the citizens of France would be worried about these economic plans. However, I think that if too many people send their money out of the country, it could cause an economic downturn.

https://uk.news.yahoo.com/spooked-french-savers-send-money-131724423.html

Ireland's Food Industries would be Worst Hit by a hard Brexit

Ireland's economy has become an important trading hub for many businesses. Multinational companies especially have an important role in Ireland as 90% of exports are shipped by multinational companies.

The Economist argues that Ireland has a dual economy where one side relies on foreign direct investment and the other is the traditional working jobs.

With the looming threat of Brexit, there has been a significant increase in the amount of firms that want to make Ireland home. Technology firms especially have showed special interest in Ireland that has a large english speaking population and low-tax rate and access to the markets of both Britain and the EU.

However, with the increase in large technology based businesses coming due to Brexit, Ireland's domestic industries have begun to shrink. Only 13% of goods exported are going to Britain. The Economist also argues that with the growing foreign direct investment in Ireland by these large multinational firms, the food industry in Ireland is going to take such a large hit that the FDI will not make up for the shortcomings domestically. A hard Brexit would hurt exports, Irish jobs and large tariffs. This hard Brexit would hurt rural Ireland more than the cities like Dublin and would continue to cause shortfalls in the housing market that would be exacerbated by the influx of economic migrants looking for jobs.

The Economist argues that a soft Brexit would be more beneficial for both Ireland and Britain as they both benefit from each other being strong. A soft Brexit would also allow both parts of the economy to benefit off of each other and not completely hurt the system. It will be interesting to see which kind of Brexit takes place and how this could affect Ireland. There are both positives and negatives to both scenarios.





http://www.economist.com/news/finance-and-economics/21720313-tale-two-economies-irelands-food-industries-would-be-worst-hit-hard

Stunning drops in solar and wind costs turn global power market upside down

According to the UN and Bloomberg New Energy Finiance, the world build more renewables for less money than ever last year.  "In just one year, the cost of solar generation worldwide dropped on average 17 percent... onshore wind dropped 18%... while those for offshore wind fell a whopping 28%."

The world's renewable energy is becoming more and more affordable, and the world should implement new strategies in order to utilize the power of wind and solar energy.  It does look though that the world as a whole is slowly adapting to the new energies.  We can rely on innovators to come up with new ideas to help push the world along in these changing times.

https://thinkprogress.org/renewables-cheapest-new-power-globally-74910c78bbbe

Uber Wants to Rule the World. First It Must Conquer India.

I found this article interesting because it talks about how Uber is trying to expand into India and are using “UberDosts,” or recruiters, who are paid by Uber for each driver that they bring to the company.  The recruiters must deal and train people, some who have never worked before, driven before, or have never even used a smartphone before.  Uber is using an aggressive approach to take over the market in India.

The reason for this aggressive approach could be because Uber was recently forced to leave China after getting beat by a competing service, Didi Chuxing.  Uber will not let this happened again and is making sure India goes better.  Uber currently is operating in 29 Indian cities in India, but there have been some problems, including competition.  A well-funded competitor, Ola Cabs, operates in around 100 cities and offers more services that Uber.  Both companies are fighting to control the market, but agree that their efforts can transform India because travel has become much more affordable, safe, and available.  The two companies also offer jobs, which are changing the lives of hundreds of thousands of drivers.  Drivers make between 30,000 and 60,000 rupees a month, or $450 - $900, which is above the average income.  Both companies continue to face multiple problems, but believe that the long-term push and change will be worth it.  Uber feels as if there are no problems that they cannot overcome and that they will become more profitable in the future.

Link:  https://www.nytimes.com/2017/04/14/technology/uber-india.html?ref=business&_r=0

The Economist: Rescuing Myanmar's farmers from the debt trap

The Article

This article discusses a horrible cycle seen in some developing countries. Farmers borrow money to cover planting costs, but their product is a low-return crop, so to repay the bank they borrow from local moneylenders, with no way to pay back the moneylenders. This is a common story. The usurious loan terms keep farmers and agricultural workers in debt. They borrow "to cover planting costs, buy equipment or purchase land, and repay after the harvest".  Slowly opportunity is improving. with the development of microfinancing. However, there are still laws that prevent the ability for microfinancers to work with citizens. But, there is hope- cell phones. The World Bank is piloting a program that uses mobile-network data and crop-suitability mapping to arrange season loans using mobile money. One of the problems with using the local bank is high interest rates this is from a lack of competition. So, mobile money from the World Bank and microfinancing may create more competition forcing local banks to use more competitive interest rates.

Are We Witnessing The Beginning Of The End For Free Music Streaming?

The new platform of music-listening is no longer the outdated LP, cassette, or CD (though the Vinyl industry has seen a new high this past year since 1986). Streaming is easier, more accessible, and cheaper for the consumer, not to mention the vast library of music to choose from in the palm of your hands. While great for the consumer, it is not as good for the producer. Musicians see a percentage of $.01 per play, and is divided up between labels, PR, the production of music, and eventually lands in the hand of the source of the music. However, the new source of income in the music industry is music streaming- and labels are no longer willing to subsidize its growth in the expense of their own profit.

Platforms, such as Spotify and Pandora, have two different subscriptions- premium, where the listener pays a monthly fee and listens ad-free; or "freemium," where the listener does not pay, and the revenue collected comes from subscription. Currently, the split is 50-50. Ina new move, Spotify has relented after years of negotiation to withhold albums for a certain period of time after an album's release to free tier subscribers. The reason being is that, while the music industry is not seeing the return that they once were in music production, the shift toward is inevitable and cannot be fought.  Nevertheless, advertisement/freemium memberships give less in royalties per listen, as compared to premium memberships. Therefore, Spotify is willing to make an incentive for consumers to go to premium to access the full library.

While this will be interesting to see how consumers respond to this change, and whether or not this change could turn to consumers wanting progression or regressing back to old habits, Spotify faces another challenge: going public. The face of music streaming has many potential troubles ahead- it will be interesting to see how it reacts and responds.

Flanagan, Andrew. "Are We Witnessing The Beginning Of The End For Free Music Streaming?" The Record. NPR.com. 5 April 2017.

Creative Industries Are the New Bet for the UK

As the Brexit process is under its way, the UK has started planning on ways to boost its local economy through means not yet thoroughly explored. The industrial strategy being put together emphasizes the importance of the creative sector and its ability to not only expand the economy, but to also "support 2.9m jobs in the UK".
The Creative Industries Federation stated that areas such as "film-making, music, advertising, and video games are all big export earners" but are not given the proper attention by ministers. However, this view has changed overtime. Not limited to the fields previously mentioned (also including areas such as theater, architecture, fashion, museums, etc.), these have been taken into account more vividly after the government presented their industrial strategy Green Paper in January, exposing plans to boost the post-Brexit economy.
As more attention has been given to the industry, it was found that it is "the fastest growing sector of the UK economy" and that it is a crucial factor in delivering more jobs, trade and exports. In addition, it has been began being considered that this area of the economy will become "as important to future economic success as traditional industries, such as cars or oil and gas", given that it contributed £90bn to the economy in 2015, further expressing the magnitude and growing aspect of the sector.


Source:
http://www.bbc.com/news/business-39604320

Google is accused of underpaying women

This article mentions how Google is being sued by America’s Department of Labour (DoL) for underpaying their female workers. Google recently released a statement in which they stated that they had eliminated any gender wage gap that they might have had at some point. However, with this new lawsuit they might be proven wrong. This article also explains how the number of women that join the engineering and technology work fields has decreased in the past years. This might be due to the fact that women who work in places such like these have complained about the work environment. Some women have experience sexual harassment as well as they have felt excluded from networking social events. Recent statistic show that only about 18% of computer-science graduates were women, which is lower than in the past few years.

I wonder if this lawsuit will hurt Google as a company or if it would just get ignored. Also, I wonder if this would encourage other companies to listen to their female workers, eliminate the wage gap, and do something to stop sexual harassment in the work place. 

Link here.