An article that I found interesting was the recall of over 362,000 Tesla cars. These cars are known as fully self-driving cars however they were recalled because this program is flawed. It was stated that “ the driver assistance system did not adequately adhere to traffic safety laws and could cause crashes.” Due to this recall the shares of Tesla have been impacted with a decrease of 5.7%. This is a big issue for Tesla because in March they were going to promote more artificial intelligence capabilities in their cars. However, since this recall impacted so many cars and revenues that Tesla is unlikely to promote their next expansion ideas. Overall, this was a very interesting article that shows that advances in technology and the speed in which this technology is being developed can be detrimental to the economy and safety of the population.
Saturday, February 18, 2023
China's economic recovery is off to a slow start
In the last few years, China has encountered large setbacks in growth and overall productivity within its market economy. This can be explained through the various lockdowns and restrictions that the Chinese government enforces to prevent a COVID-19 outbreak. In December 2022, China announced a lift on its travel ban which would restrict migrant workers and tourists from coming into the country and contributing to China's overall GDP. This is an essential part of China's economic recovery process, although, it is predicted they will have another slow to moderate growth year in 2023.
Many migrant workers have returned back to full work activities after the December/January holiday season, allowing for productivity to return to their base number. After all, production in an economy can be solely correlated to GDP growth from both the consumer and producer. These workers are contributing to the production of goods and services which are then bought by consumers and is a process that typically repeats at higher rates over decades of time. Data from the bureau of statistics of labor suggests that inflation has not had as large of an impact on China's economy as they predicted. From a year ago, consumer prices in china have seen a 2.1% increase. Although, food and energy prices have seen a much larger increase in price separate from the cost of many other goods and services.
On top of encouraging inflation rate numbers, road, and subway traffic in cities has returned to pre-pandemic levels. This is likely explained by a large increase in tourism and migrant workers within China due to the lift of the travel ban that China enforced in December.
Some setbacks in China's economy include a decrease in their turnover in freight transport from last year, high unemployment, a decrease in demand for medium to long-term house loans, weak currency, and low new home sales.
Policy Outlook:
Given current information, policymakers are expected to encourage any and all policies that benefit the domestic economy. Ting Lu, the chief China economist says "We still believe inflation is not a major concern in China this year and we expect policy to remain accommodative in 2023". It is also expected that policy will remain loose in 2023 and will follow a“growth-focused policy pragmatism.”
Finally, Robin Xing, chief China economist at Morgan Stanley believes that GDP growth in 2023 will be around 5.7%. But given the information presented above and the lift of China's travel ban, I am predicting GDP growth in China will be around 7% in the year 2023.
https://www.cnbc.com/2023/02/15/chinas-economic-recovery-is-off-to-a-slow-start.html#:~:text=Preliminary%20economic%20data%20indicate%20overall,Covid%20controls%20in%20early%20December.
Scrutiny of Major Crypto Institutions is Intensifying
A new way to clean up the steel industry
For every ton of steel produced, 1.8 tons of carbon dioxide are spilled into the atmosphere. Steelmaking accounts for 7-9% of the world’s anthropogenic greenhouse-gas emissions. The use of hydrogen is being explored as an environmentally friendly alternative for the steelmaking process, but all efforts are still in infancy. Because of the immense costs, it could take decades for steel mills to “go green”. The new way to produce steel is done by recycling carbon dioxide.
Scientists and researchers believe that this innovative type of technology could be implemented at current plants for $435 million each, which is quite costly, and is being examined most strongly in Britains steel making industry. Researchers claim that the investment would be paid back in only 22 months by the elimination of expensive metallurgical coke from the process, and from selling any oxygen that was surplus to requirements. Even allowing for a small increase in electricity consumption, implementing the system on both sites would save about £1.3bn over the course of about five years. There would also, the researchers conclude, be a reduction in carbon-dioxide emissions of 88%, resulting in a countrywide fall in overall emissions of 2.9%.
In regard to my last blog post that mentions the Inflation Reduction Act (IRA) introduced by the Biden administration, does it sound like this technology would be worth the investment by the government? I think yes because it would be targeting a major source of pollution, and would be an important investment for the future of the steel industry, and the workers within it. One problem that could arise is that current workers would either have to learn more about the new technology, or be driven out of the industry. But is this fair?
Friday, February 17, 2023
U.S. Households Lifting Economy After Being Stung by Inflation Last Year
In recent weeks there has been a massive swing from pricing in a recession. The swing has been mostly noticeable in the bond market where the 10 year treasury bond yield has gone back to the percentage it was at last year which was around 4.0%. Investors have concerns as stocks are continuing to lower in the past few weeks, but they have been able to avoid major losses. The outcome of the economy in the future still remains uncertain and there are many possibilities for the fed. With this year off to a strong start to the economy salaries and wages are surpassing inflation at the moment.
The economy has gone up substantially since the beginning of last year, we are on a good path to stabilizing inflation and the economy with it. Wages have gone up and with them going up inflation is slowing not affecting ast much because prices have for the most part stayed the same. I expect to rise more as the year continues.
Like the Weather, the US Economy Started 2023 Warmer Than Expected
There is a new idea embraced by economists that the US economy avoids a downturn entirely and hums along with the labor market intact and inflation under control. In recent days, better-than-expected reports on the labor market, retail sales, and even the housing market have bolstered the positivity of optimists. However, some data show that inflation is sticking around longer than expected, and pricing pressures remain even as the Federal Reserve promises more pain in the form of interest rate hikes. The current economy is doing better than was predicted at the end of last year. The widely followed GDP Now model from the Federal Reserve Bank of Atlanta predicts that the U.S. economy will grow at an annual rate of 2.5% in the first quarter, an increase from 0.7% in late January. In some ways, the more optimistic thinking comes amid a series of potentially negative economic readings. Inflation rose 0.5% from December to January, but the yearly rate fell for the seventh consecutive month. Bond yields have risen, with short-term Treasuries now yielding more than 5% for the first time since 2007 as markets price in higher Fed interest rates. This is interpreted as a belief that the Fed will be able to control inflation, even if it will take a little longer. The housing market is still under extreme pressure from rising mortgage rates, but builders were more confident in February, according to the National Association of Homebuilders, with sentiment reaching its highest level in ten months. According to the builder survey, the percentage of builders offering discounts or other incentives to entice buyers has decreased: In February, 31% of builders reduced home prices, compared to 35% in December and 36% in November; average price cuts in February were 6%, compared to 8% in December. Then there's the labor market to consider. The unemployment rate is 3.4%, wages have been rising, albeit not as quickly as inflation, and the number of available jobs actually increased in the most recent reading. Meanwhile, Social Security recipients saw their payments rise 8.7% in January as a result of the 2022 inflation rate. That brings us back to the Fed. The central bank is committed to returning inflation to its 2% annual target, a figure that is still well below half or more of current levels depending on the measure used. Consumers account for nearly 70% of the economy. With so many jobs available, consumers may be able to keep the economy running for longer than expected. Of course, Fed rate hikes have a lag effect, and those big hikes in 2022 may bite harder and derail the economy six months from now.
Thursday, February 16, 2023
Wholesale Inflation Increases More Than Expected In January
The most recent Producer Price Index figures, which quantify inflation at the wholesale level, rose 0.7% in January, exceeding Refinitiv economists' estimates of 0.4% and marking the largest month-to-month increase since this past summer. This data follows the most recent Consumer Price Index data which revealed that prices paid directly by consumer rose 0.5% in January, the highest in three months. Annual inflation was also hotter than expected, only decreasing 0.1% from 6.5% in December to 6.4% in January. These metrics indicate that inflation remains high despite the Fed having increased interest rates eight times in the recent months. The increases in all three benchmarks stem from 1.2% growth in final demand for goods, nearly one third of which can be traced to higher gasoline prices, up 6.2% in January. Separately, and particularly dismaying for consumers, food prices have also risen 10.1% since January, 2022.
Markets dipped following these inflation reports, as increased uncertainty with regard to how long it will take for inflation to cool, along with rising food and gas prices continues to foster uneasiness among investors across all markets. "Both inflation readings this past week point to the stickiness of inflation and the fight isn't over, especially when considering today's PPI reading was the highest month over month increase since early summer", said Mike Loewengart, head of model portfolio construction at Morgan Stanley. "It shouldn't be a surprise to see the market take a deep breather as hopes of a dovish Fed in the coming months fade."
Blackouts, currency dives and corruption: Pakistan’s economy is on the brink of collapse
Pakistan is a country that faces many more challenges and hardships than more developed countries like the U.S. Most recently, Pakistan is suffering a bombing attack on a mosque that killed 100+ people. Along with this attack, Pakistan on January 24th, all 230 million residents of the country were hit with a nationwide blackout due to lack of oil and gas available to fuel the power sources needed to run factories, businesses, and infrastructure. This has further led to the Pakistani rupee to be at a record low against the dollar, and their economy hanging on by a thread. There has been lots of government corruption for months, leading up to all of these effects, and has quickly depleted their foreign reserves, and skyrocketed debt. Essentials to the Pakistani citizens have skyrocketed in price to the point it is all Pakistani citizens can really talk about.
After months of a depleting economy in Pakistan, The International Monetary Fund is beginning to consider aiding the country with a $7-billion payout package that is secured for desperate emergencies. Despite Pakistan being in a crippling condition, the International Monetary Fund wants to see Pakistan implement their own monetary policy reforms before they unlock the $7-billion. The IMF over the years has provided millions to the Pakistani government to aid with economic growth for the country. Pakistan has to make many critical moves within their economy to aid the direction of the economy to switch. It will definitely be interesting to see if the IMF hands over the $7-billion package or not and how this will affect the world economy and oil and gas resources in the coming months as countries may attempt to aid this country suffering so much.
East Palestine, Ohio train derailment
Recently, 38 train cars filled with toxic chemicals were derailed in East Palestine, Ohio. This derailment has affected the area negatively and brought to light many concerns and current topics we have been covering in class. It's been stated that this train derailment could have easily been avoidable and was caused due to the constant cost-cutting of the railroad industry. This perfectly relates to perfect markets and market failures. The requirements for perfect market failures are related to lack of competition, lack of information, issues pertaining to the provision of public goods, and externalities. Many issues we see today, including this train derailment, are not considered failures of the market because the market prioritized efficiency. So, this type of incident, although very troublesome to the people in the community, should not be a surprise. The market favors efficiency and the railroad industry has been outdated and in need of innovation for a while now. Rather than pursuing innovation, though, the railroad industry's main concern has been with cutting costs in order to compete with the shipping and trucking industries. Due to these cutting of costs, overtime, the train, and railcars become less equipped with proper safeguards and precautions. This is why our system is not completely laissez-faire. The government is supposed to oversee most industries and ensure people's and workers' safety. However, it is quite evident that the government has not done the proper due diligence regarding the safety and protocols of the railroad industry as pointed out by the Vox article. Since the markets only favor efficiency and not safety that is left up to the government but if the government is lackadaisical and enforcing then what should be done to prevent these types of accidents?
https://www.vox.com/policy-and-politics/23597778/ohio-train-east-palestine-trainwreck-accident-chemical-norfolk
https://www.npr.org/2023/02/16/1157333630/east-palestine-ohio-train-derailment
Wednesday, February 15, 2023
Airline Boom
Airline Boom
Air India, the largest international airline and second-largest domestic carrier in India, is buying 470 Boeing and Airbus passenger jets as it seeks to modernize its fleet and tap into the increasing demand for affordable air travel from the country’s expanding middle class. This purchase is the United States plane maker's third-largest sale of all time, in dollar value, and its second of all time in quantity. The financial terms of the deal were not disclosed, but the order could be worth tens of billions of dollars. Over the next 15 years, it is estimated that India will need more than 2,000 aircraft, and the purchase of these planes will be done by Air India. Air India is a carrier seeking to reinvent itself and expand its operations, and this boom in airline demand will help Tata Sons, Air India's owner, compete against upstart discount rivals, including India's dominant carrier, IndiGo. This massive order provided a one in a lifetime for Air India to compete against plane giants in an industry where the winner usually takes all. US President Joe Biden called the agreement "historic," and Indian Prime Minister Narendra Modi applauded the deal as a sign of the strengthening “strategic partnership” between India and other countries. The demand for air travel in India and elsewhere in Asia has grown substantially over the past decade, fueled by fast-growing economies that have raised incomes and made travel more affordable for millions of people. Brendan Sobie, a Singapore-based aviation analyst said, “There’s a lot of catch-ups to do” for Air India, as it is competing with newer budget airlines that moved faster to tap demand on domestic services as well as foreign carriers that are giant competitors on international routes.
https://www.aljazeera.com/economy/2023/2/15/air-india-announces-orders-for-470-boeing-airbus-jets
Economic Impacts of Turkey and Syria Earthquakes
A large, catastrophic, life changing event like the 7.8 magnitude earthquakes that struck Turkey and Syria on February 6th can have major economic effects on these nations, on top of death tolls, the destruction of homes, and an uncertain future. This was to be a crucial year for the Turkish economy, due to a great amount of notable changes in their social, political, and economic realms. Turkey was already subjected to high energy prices, and other national security issues due to effects of the war in Ukraine. However, economic policies enacted by Erdogan kept interest rates on bank deposits between 10-15%, despite severe inflation rates in Turkey. This earthquake will change everything about the current economic standing of Turkey. The Turkish economy was projected to grow by about 3-3.5% in 2023, but now with a possible disaster relief cost of up to $84 billion, this growth certainly will not stand. With over 8,000 residential and commercial buildings completely destroyed, thousands of public schools, hospitals, and government offices damaged, and gas, oil, and electricity lines broken, there is going to be a severe investment of national funds to this repair, as opposed to the investment in economic infrastructure. A loss of 2.0-2.5% of growth is projected to be lost, therefore the country is only expected to grow its GDP at a rate of 0-0.5% in 2023.
https://www.cnbc.com/2023/02/09/turkey-earthquake-comes-at-a-critical-time-for-the-countrys-future.htmlTuesday, February 14, 2023
Lael Brainard Elected to Lead New Government Economic Team
On Tuesday, February 14th, President Biden announced that his former advisor on inflation and macroeconomics Brian Deese was stepping down from his position. Once out of office, Biden then appointed Lael Brainard as Deese's replacement. Brainard was a member of the FEDs board of governors for the past nine years or ever since 2014. This new position gives her the title of director of the National Economic Council and replaces a figure that has been in office since before Biden was elected as President. This switch of roles had no other government involvement as this specific position didn't need to be approved by the Senate, unlike many other economic government roles.
In this role, Brainard will be given tasks such as helping to implement Biden's economic agenda and giving him new insight into possible inflationary problems happening in the United States. Because of this change, there could be greater emphasis on different parts of our economy that Brian Deese wasn't highlighting as much during his time in office. This wasn't the first time that Brainard had been considered for an economic role in the government. Back in 2020, at the start of Biden's presidency, she was nominated as a possible replacement for the treasury secretary. Brainard, unfortunately, lost this nomination to another female candidate; Janet Yellen who is currently still the treasury secretary.
As Brainard starts her new career she has major inflationary problems to confront as inflation is at a high right now around the country, and is causing backlash as common goods such as eggs are becoming less and less affordable to many. Along with these problems she has to deal with underlying pandemic economic issues and has to push Biden's current economic policies further. Essentially Brainard has a lot on her plate and will have much to do with her newfound promotion.
Sunday, February 12, 2023
The Biden administration's response to Chinese balloon
This week, journalist Anna Swanson wrote an article for the New York Times entitled "U.S. Blacklists 6 Chinese Entities Involved in Spy Balloon Programs." In the article, Swanson discusses how the United States is responding to the supposed "weather balloon" which is now believed to be a Chinese spy balloon that flew over the U.S. last week. The balloon was eventually shot down on the coast of South Carolina after it had traveled a vast majority of the country.
In response, the Biden administration has listed 6 Chinese companies that are now heavily restricted in terms of selling parts to the United States. These companies include 5 Chinese companies as well one as one research institute that all specialize in airship military programs as well as balloons designed for recon and intelligence gathering. It is unclear at the time if these companies were directly involved with the balloon. The Biden administration also used diplomatic retaliation for the situation by canceling the secretary of state's trip to Beijing later this year.
Republicans argue that the Biden administration's stance was "too soft" to effectively reflect the magnitude of the situation. They also heavily critiqued Joe Biden for waiting until the balloon was out to the ocean to shoot it down. The White House's response was that due to the risk of a civilian potentially getting hit with the debris from the balloon, they choose to wait until there was no risk of it hitting anyone. The Chinese government's response to the situation has been to deny that the balloon was for surveillance purposes and instead insist that it was a weather balloon.
https://www.nytimes.com/2023/02/10/business/economy/china-spy-balloon-sanctions.html