Pakistan Call for Peace with India

Since their last war in 1971, India and Pakistan have lived in peace. However, controversy started last month when 40 paramilitary police were killed in the Kashmir region of India. The attack was claimed by a Pakistan-based militant group. On Feb 26 India retaliated with a jet raid of a militant camp in Pakistan. The next day on Feb 27, Pakistan shot down an Indian aircraft and captured the pilot after he ejected from the plane. However, as a sign of peace, Pakistan released custody of the pilot.

This past Saturday, Pakistan held a parade to show off its military power. Pakistan's president, Arif Alvi commented on the purpose of the parade stating, "Today's parade is sending the message that we are a peaceful people but we will never be oblivious of our defense." President Alvi has also released multiple statements making it very clear that war is not sensible and this dispute should be settled through communication.

I agree with president Alvi in the sense that war would be an inappropriate outcome for this dispute. If these two nations went to war this would obviously have an impact on many economies around the world. Many countries would have to get involved especially with threats of nuclear warfare. Hopefully we have seen the end of these violent attacks and peace can quickly be restored to these neighboring nations.

Link: https://www.reuters.com/article/us-pakistan-republicday/pakistan-call-for-peace-with-india-as-it-shows-off-its-military-might-idUSKCN1R409T

Defying Allies, Italy Signs On to New Silk Road With China

Despite warnings from its European allies as well as America, Italy has signed a deal with China which progresses the development of China's New Silk Road. The New Silk Road is a massive worldwide infrastructure project that the Chinese are undertaking to transport Chinese goods and resources through Asia, Europe, and Africa. The deal outlined billions in euros worth of agreements between Italian and Chinese companies.

The Italian government welcomed President Xi Jinping to Rome as a close ally and said that the deal will "build a better relationship" between the two nations. Critics including the Trump administration warn against the growing Chinese influence. One key fear is that the use of Chinese 5G wireless networks developed by Huawei could lead to Beijing spying on communications. The Interior Minister himself of Italy was absent from the deal signing due to his reservations on the deal, but ultimately concluded that as long as it served Italian interests "he was satisfied."




https://www.nytimes.com/2019/03/23/world/europe/italy-china-xi-silk-road.html

Ohio Gas Tax

Over the past few weeks the State of Ohio has considered raising the tax on gas.  Originally proposed by Governor DeWine in late February to increase 18 cents per gallon in one year and then increase each year after that with inflation as a part of his transportation budget.  The proposed budget then went to the Ohio House of Representatives where the tax was lowered from an 18 cent per gallon increase to increase 7 cents per gallon this year and then 3.7 cents per gallon the year after and would not be indexed to inflation.  Then this past Friday the Ohio Senate passed a tax that only increases the gas tax by 6 cents per gallon.  The two chambers must now work out the differences between the two bills before the end of March.  This tax will now make the cost of gas higher and as such we may see that commuters seek other means of public transportation when possible.  So those going on long distance trips may not fill up as much and may choose to fly out of CMH, CVG, or Hopkins.  Those in urban areas may choose public transportation instead of driving.  We will see how this affects the transportation choices of Ohio Commuters.








https://www.cleveland.com/open/2019/03/ohio-senate-passes-6-cents-a-gallon-gas-tax-increase.html

Global growth rebound hopes hit by weak factory data

In this article trade tensions were targeted as affecting factory outputs from manufacturers in Europe, Japan, and the United States. March surveys showed that this “setback” is not beneficial to the overall slowdown of the global economy. In Europe, factory activity contracted at the fastest pace in six years throughout the 19-country euro zone, Japans’ manufacturing output declined the most in three years, and in the U.S., manufacturing was at its’ smallest since June 2017 along with the 10-year Treasury note yield in New York reducing to a 14-month low. On Friday, U.S. stocks, European shares, and the euro all fell as well.

Global trade tensions are being pointed to as the root cause of these events. The article also mentioned that the “spillovers” from events in Europe, the problems in Italy and with Brexit, create an “uncertainty” that needs to be considered if countries seek to end the slow global growth. China’s economic slowdown, another external factor, is a large cause of the global economic slowdown. It most notably affects Japan for they also are hit by the trade tensions between China and the U.S., due to many of their outputs being shipped to China who then sends them as finished goods to the U.S.

At the end of 2018, the euro zone was at its’ slowest economic growth pace in four years at 0.2 percent. The European Central Bank has decided to “offer banks a new round of cheap loans,” in the hopes that this will help the economy. Other solutions could come from the trade discussions next week between China and the United States. I am curious to see if the talks can really bring an end to the trade war that is contributing to the slowdown of global growth of many nations.

https://www.reuters.com/article/us-economy-global/global-growth-rebound-hopes-hit-by-weak-factory-data-idUSKCN1R32AX

UK Inflation Unexpectedly Accelerates For First Time In 6 Months

Throughout this article, the recent unexpected changes various UK inflation levels are summarized. More specifically, the CPI rose 1.9% year-on-year, after a rise of 1.8% from January of this year. Given that the inflation rate was expected to remain at its previous level, the article speculates that February's food, alcohol, and tobacco price hikes contributed to this unexpected increase. Core inflation rate was shown to slow to 1.8% from 1.9 the moth prior, which was also not anticipated. The article also mentions that the UK house price inflation decreased to 1.7%, making it the weakest rate since June 2013.

While this article does not explore possible causes and effects in detail, the unexpected nature of these statistics still fell within acceptable ranges. These general overall price level increases have unsurprisingly led to decreased sales of the affected products. Specifically regarding food, a no-deal Brexit’s possible effects on perishable goods will most likely include another price hike. It will certainly be interesting to see how these nations and their economies will continue to change within the next coming months, for a variety of reasons.

https://www.rttnews.com/story.aspx?Id=2987603

U.S. Treasury Yield Curve Inverts for the First Time Since 2007

On March 22, 2019, the US Treasury yield curve inverted for the first time since 2007. "The gap between the 3-month and 10-year yields vanished as a surge of buying pushed the latter to a 14-month low of 2.416 percent. Inversion is considered a reliable harbinger of a recession in the U.S., within roughly the next 18 months". The short-term interest rates exceeded the long-term interest rates on Friday. 

Historically, an inverted yield curve has been viewed as an indicator of a pending economic recession. When short-term interest rates exceed long-term rates, market sentiment suggests that the long-term outlook is poor and that the yields offered by long-term fixed income will continue to fall. Is this finally a trigger for a recession coming? Unemployment rates have been relatively low, high GDP, high earnings, etc. Are we on the cusp of the business cycle and looking to head downwards? How will this invert impact the economy?

https://www.bloomberg.com/news/articles/2019-03-22/u-s-treasury-yield-curve-inverts-for-first-time-since-2007?srnd=premium

The Fed's Rate Raising Days Are Over. Wall Street Couldn't Be Happier.

At the beginning of 2019, the Fed announced their plans to slow the economy using contractionary monetary policy. Their plan was to increase interest rates which concerned investors that the cost of borrowing might become too high, which would ultimately send the economy into another recession. In December, the odds of another interest rate increase was 30%. On Wednesday, the Fed unanimously voted to maintain its benchmark interest rate in a range of 2.25% to 2.5%. It is now more probable that we will be seeing a decrease in interest rates at some point during 2019. According to experts, there is actually a 29.3% chance that interest rates will fall. Earlier in the year, Jerome Powell announced that the Fed will be more patient in evaluating whether or not they will keep raising interest rates. It will be interesting to see the short-term effects that current interest rates will have on an economy that is expecting a slowdown.

https://www.nytimes.com/2019/03/20/business/stock-market-fed-interest-rates.html

U.S Oil Prices to reach $60 a barrel

The price of U.S Oil has increased by 40% since Christmas Eve thanks to the OPEC's production cuts. The article states that this increase has come from the strategy implemented by Saudi-Arabia-led OPEC. It claims that this increase is due to the oil cartel and allies, including Russia, agreeing to cut the production of oil due to a supply glut that was formed by the U.S becoming the world's largest producer of crude oil. This cut happened in December of 2018 when OPEC and Russia decided to put the production of oil by 1.2 million barrels a day. This would then cause prices to increase due to the lack of production. Crude oil, during Christmas Eve, costed around $42.53 a barrel, which is significantly low. Since the prices have risen, this has lead to an overall more efficient economy and shows that the cuts have been effective.

Should OPEC continue with these production cuts for now? And if so, how long should they continue? And if they shouldn't continue with the production cuts, what should OPEC do instead?

https://www.cnn.com/2019/03/20/investing/oil-gas-prices-opec/index.html

Housing Market Predicts Economic Slowdown

Article: https://www.housingwire.com/articles/48454-this-housing-market-clue-predicts-pending-economic-slowdown

The housing market is often used to determine the health of the economy, thus it's performance is often tracked to provide signals for the future. One such measure from the housing market is the rate of single-family authorizations. In other words, building permits requesting permission to begin construction. Recent data shows single-family authorizations have fallen 4.24% from January to February, also representing a year over year decline of 5.75%. This potentially illustrates an economic slowdown if the trend continues.

Housing maintenance and remodeling also provide an indication to economic activity - they too are down. Maintaining a fourth-month decline, maintenance volumes have fallen 5.53% year over year, while remodeling volumes have fallen 10.07%. However, potentially attributable to an increase in labor costs, spending for both measures have increased. There are also a handful of cities where maintenance and remodeling volumes have increased, defying national trends. In all, it will be important to track the housing market as certain trends may give us an indication of the overall health of economy.

GDP likely to slow sharply this year and next

According the CNBC and recent Fed surveys in March, the US economic growth is likely to slow down sharply in 2020 and 2021. The GDP growth projected for this year is just 2.3 percent, which is down from 2.44 percent from the January survey and in 2020, many people from the Fed are projecting the GDP to get below the 2 percent mark.

The Fed survey has further led the Fed to lower their expectations for the rate hikes this upcoming year and the next. Many of the people in the Fed are also projecting that their will be major rate cuts with very minimal hikes in the near future. When looking abroad, the basis points for was knocked about 40 points off of GDP forecasts this past year.

This article was very interesting as it dives deeper in the ways the Fed are looking at why they think that this might happen in the next two years. One of the reasons is the trade deal expectations, specifically with US-China deals, and tariffs that might be implemented. Another reason stated was because of the fewer Fed hikes that will happen these next two years, including the Fed saying there will be a 100% chance of no hike in March. It will be interesting to see what will happen with the GDP and the Fed within the next couple months and the next couple years.

Source: https://www.cnbc.com/2019/03/19/us-economic-growth-is-set-to-slow-sharply-this-year-and-next-according-to-cnbcs-fed-survey.html

The US is experiencing a widespread worker shortage. Here’s why.

https://www.vox.com/2019/3/18/18270916/labor-shortage-workers-us


There are lots of job openings in America, but people that are looking for jobs were way more than that. The lower wage jobs, or healthcare related jobs, etc, are the ones that are having shortages. The low-wage workers have the most leverage in the market at the moment.
According to the article the reason why is because more people are starting to go to college, because that usually leads one to acquire a job that pays more than being a server, or a dishwasher, whichever low wage job it is. This would lead to increased wages, which should have been, considering the price levels that has been increasing for the past several years. The companies that require low wage workers than white collars would have to increase the salary to fill up the shortage.

Article suggests an adjustment to immigration policies which may loosen the high regulations towards foreign workers, in order to solve the worker shortage problem. What are your thoughts about this? Should the government revise the immigration policies, or do you think they should raise the minimum wage? (Or some other method?)

ECB must rethink policy framework after failing to lift inflation: Rehn

Despite the European Central Bank’s efforts, they are finding it difficult to raise their inflation to the target 2%. Their low inflation since 2013 has resulted in little to no price growth which is worrisome for the EU. The ECB has tried many different monetary policies such as record low interest rates, providing cheap funding for banks, and 2.6 trillion euros worth of bond purchases in an attempt to stimulate the economy and raise inflation. However, none of these attempts seem to be having any effect on inflation. Rehn, a potential candidate to succeed ECB’s current president, has stated, “Should this phenomenon prove to be lasting, it would imply a weakening of the impact monetary policy exerts on inflation via aggregate demand.” This weakening impact will be damaging to the ECB’s credibility as well as future influence if it continues. On top of these concerns, the European Central Bank’s board is going through large changes this year with over a third of the Governing Council due to be replaced this year. This will present interesting challenges for the ECB and their policies. 

Typically, we hear stories about inflation becoming too high and monetary policy being used in an attempt to decrease inflation. I thought it was interesting that the ECB has been trying to raise their inflation for many years. With them running out of options and policies, I think it will be interesting to see what their next move is. It was mentioned that this would require a review of the tools and assumptions used to implement monetary policy.

Link: https://www.reuters.com/article/us-ecb-policy-rehn/ecb-must-rethink-policy-framework-after-failing-to-lift-inflation-rehn-idUSKCN1QW16E

College Admissions Scandal & Scrutiny in Washington

The WSJ article, "College Admission Scandal Draws Scrutiny in Washington" by Michelle Hackman dissects the University scandal dubbed "Varsity Blues" that has resulted in an intense amount of media coverage over the past week. To summarize, the scandal is far reaching with more than 50 admissions consultants, college athletic coaches, and wealthy parents indicted on charges of illegal bribery and racketeering charges at schools that span from USC, Yale, Stanford, Georgetown, and Wake Forest. Wealthy actresses like Felicity Huffman and Lori Laughlin have been arrested and released on bail for paying between $15,000 and $500,000 to illegally have their children accepted into prestigious universities. There seem to have been a wide variety of ways that students were cheated into the system, either from falsified mental illness diagnoses to allow for solo SAT/ACT testing where proctors could change answers on these exams to having children admitted as athletes in college sports, some having never played the sport in their life.

Moreover, this admissions scandal has caused lawmakers in Washington to take a deeper look at the ways in which wealthy parents can legally have their children accepted in prestigious colleges. The article cites that "tax - deductible donations and binding early decision practices" are the main culprits. Senator Ron Wyden argues that these donations allow the federal government to "[perpetuate] the system by awarding tax breaks to these contributions [...]" and others claim that ED schools offer an unfair advantage to wealthy students who do not have to consider different financial aid packages from other universities.

Above all, I think this scandal really highlights the inextricable link between inherited wealth and human capital as we have discussed in class. Combined, both legally or illegally, these inputs of income and status have a huge impact on inequality in society. On one hand, one can argue that of course parents should be able to do everything in their power to help their children succeed. Yet, alternatively, is a charitable donation really out of the good of someone's heart if it is in actuality a transactional practice to allow their child entrance into the University? What happens to low income students or students from minority backgrounds in these cases? Representative Bonamici stated that
"This [scandal] shows we have to focus even more on equity." I am curious if this scandal will really have an effect on policies about the admission to universities, or if the wealthy parents and contributors to these scandals will face lawsuits and fines to quell the public outrage, really only a bandaid to this systematic issue.

Article Link: https://www.wsj.com/articles/college-admission-scandal-draws-scrutiny-in-washington-11552654841

Philip Morris Boss Thinks You Should Give Up Traditional Cigarettes

The managing director of Phillip Morris, one of the biggest tobacco producers, stated in a morning show that smokers should give up traditional cigarettes in favor of e-cigarettes and heated tobacco products. He admitted that cigarettes kill 100,000 people in the UK annually and he takes that fact very seriously. The company is positioning itself for a future where people do not smoke traditional cigarettes. When asked why they just stop selling cigarettes, he responded by saying that smokers would just switch to another brand and put the company out of business. The company produces 800 billion cigarettes a year but aims to reduce that number in favor of less harmful products. An interesting fact in this article is that according to Phillip Morris, 80% of smokers who tried heated tobacco products quit smoking compared to only 30% of smokers who tried e-cigarettes. I believe this will be a trend with tobacco companies as peoples views of traditional cigarettes shift. After this announcement their share price increased by about 1% so it seems to be working out in their favor.

Source: https://www.ibtimes.com/philip-morris-boss-thinks-you-should-give-traditional-cigarettes-2775037

Many S&P 500 CEOs Got a Raise in 2018 That Lifted Their Pay to $1 Million a Month

Median pay for CEO's of companies on the S&P 500 rose in 2018 from $11.7 million to $12.4 million. The increase was a result of strong corporate profits and a good year for the stock market. This increase means that many CEO's are now making more than $1 million a month. The average pay raise for this group was 6.4%, while wages rose 3.5% for the average worker in the US. This discrepancy is interesting to me because in 2018 did CEO's improve there productivity by a little less than double what the average worker did. I would argue they most likely did not and the pay increase should be a similar percentage to the average.

They got this raise despite the very poor performance of the market in December, which wiped away most the gains for the year and made the market return poor for many investors. Yet the CEO's still received large pay raises.

The question is how much value does management of a company produce. I would assume its much greater than an individual worker and that the group of people who have the ability to manage a large publicly traded company is very small as well. So it makes sense that their wages would be much greater than the average person. However, why are they still getting large bonus when they do not produce a ton of value for shareholders, like in 2018 and why was the group pay raise in terms of percentage much greater than the average persons.

https://www.wsj.com/articles/many-s-p-500-ceos-got-a-raise-in-2018-that-lifted-their-pay-to-1-million-a-month-11552820400

CPI Increase

In February 2019 the Consumer price index increased for the first time in almost half a a year. The increase was modest around 0.2 percent , the main reasons for this increase was gains in the cost of food, gasoline, and rent. Although we saw the CPI increase it was still the lowest annual increase we have seen in 2 - 1/2 years .

What is very interesting is we as a country had pretty decent increase in wages for the year, in the month of February we saw a 3.2% increase in wages, but very little increase in prices which is fairly odd. This could be contributed to a slowing growth both domestically and globally .










https://www.cnbc.com/2019/03/12/consumer-price-index-february-2019.html