Rebuilding Haiti: A Step Backward

Haiti is in a fragile political, social, and economic state. Modest gains that had been made in political stability were undermined by the overthrow of the prime minister after a year in office, for reasons that seem insufficient. Luckily bloodshed did not ensue after the overthrow, however the impact of this move could affect donor aid to the much in-need people of Haiti. This article gives a snapshot of life in the poorest country in the Western hemisphere, and the importance of aid for economic growth there. Weak institutions, high levels of corruption, and geographic location among many other factors, have historically held Haiti back from growth and even created negative growth in recent decades. A significant change in institutions and stability will need to occur before significant growth and poverty alleviation will become apparent in Haiti, and setbacks such as the recent overthrow of a political figures are hopefully on the decline.

The Dark Side of the Productivity Surge

According to the Bureau of Labor Statistics, even though the economy is declining in the US, non-farm sector's productivity grew at 9.5% annual rate in the July-September Quarter followed by 6.9% in the second quarter. Is this a good thing for economy? The author says it wasn't because of clever efficiency measures or the purchase of wonderful tools that help people get their jobs done faster. Such improvements take years, not mere months. Rather, it was because companies cut jobs and work hours drastically. Work hours fell at a 5% annual rate even as output increased at a 4% rate, the government said. So people working shorter hours had to do the same amount of work as before, or more. People who kept their jobs had to pick up the work of ex-colleagues. Many workers probably put in extra hours that weren't counted in the statistics in order to get all their work done. That would exaggerate the output-per-hour gain. I think this phenomenon can explain the current situation why GDP is recovering in recent months, but unemployment rate is still rising in the United States.

A Globe Redrawn

The following article talk about Russia after the Soviet collapse. The author points out to the huge inflation, the result of the repressed inflation of the central planning era. Additionally, he describes how wrong incentives aimed at continuous industrialization led producers to make tonnes of steel or cement, or tanks and rockets that no one wanted, "while shops were empty of the things they craved." The author states that "producing goods worth less in real terms than the materials used to make them could not go on for ever." "Meanwhile, shortages created a crime-ridden black economy that, by some estimates, was worth as much as 30% of the real one, perhaps more." Thus,when the Soviet Union collapsed, and the government chose to opt for the "shock therapy" in the transition to a free market economy, there was no mechanism in place to support it.

House Moves Toward Vote on Health Bill

In this Wall Street Journal article, the health bill and its progress is discussed. This is an interesting article that describes what is happening with the bill and how it is expected to turn out in the different political houses. Although it seems that total amount of money going to be dished out for this bill increases daily, the total as of today is $1.055 trillion. According to the article, "The bill would extend insurance coverage to 96% of nonelderly Americans, setting up exchanges where they could choose between private plans and a government-run insurance option. Funding would come in part from a new surtax on wealthy Americans." 

India Cleans Up Its Act

This article provides an interesting look into the environmental changes that India is under going in an effort to reposition its self as a world leader. India is making changes that will effect the global economy.

US jobless rate rises to over 10%

In October the unemployment rate in the US rose to 10.2% highest rate since 1983. 190,000 jobs were lost in the month. President Obama is willing to sign a extended unemployment benefit. Most job losses were in construction, manufacture and retail. People who had been out of work for at least six months rose to a record 5.6 million and accounting for 35.6% of the jobless total.

How Many Jobs Has Stimulus Created

This information is not in article form, but as a map. There are two different ways to view it - one is how many jobs (per state) stimulus has created, and the other is current unemployment percentages. It is possible to scroll on each state to view the information for each. The range of jobs created is 960-110,185 and the range of unemployment is 4.2%-15.3%.

The Berlin Wall - So much gained, so much to lose

This is a reflection on the Berlin Wall collapse 20 years ago. It's collapse not only brought political freedom from Communism, but also economic freedom from an inefficient, crumbling socialist system. The author noted that many East Berliners flocked to the West to buy fridges, jeans and Coke.

Comparing that event to today, the author laments how the pursuit of economic and political freedom have become disjoint. Countries like China and Russia are still governed by oppressive regimes while the world turns a blind eye because of the economic success of such nations. The idea of globalization has overtook the concern for social justice and welfare. However, things will change, whether it is an economically motivated reform that changes the political system, or, a political push that will likely destroy an economy. Both seem plausible.

Stocks Rally on Jobless-Claims Report

A report was released yesterday that announced that jobless claims were down 20,000 last week to only 512,000 - the lowest since January of this year. Combined with this was the report that came out stating that workers are being more productive, and the productivity rate was quite high for this quarter. Because of this, stocks have been increasing. The article also further discusses jobless claims, as well as retail sales in October.

Nestle: The unrepentant chocolatier

Doubling R&D expenditure during a recession is not a route chosen by many firms. Nestle, however, is doing just that in its attempt to transform its image. Today, Nestle is known primarily for its chocolate and other sweets. Execs, however, are working to make it the world's leading health, nutrition, and wellness firm. Nestle is currently working on developing "functional foods," which claim health benefits.

Nestle's reasons are fairly clear--they want to move away from low-margin products which have been a victim to consumers' switch to private labels, to high-margin products and services. However, this move is not without risk--research costs are huge, consumers are unpredictable, and Nestle's image in other products could be damaged, just to name a few potential problems. Will this really work, or is it just a marketing gimmick? Only time will tell.

Berkshire Buys Burlington in Buffett’s Biggest Deal

Warren Buffett’s Berkshire Hathaway agreed to purchase Burlington Northern Santa Fe Corp for $26 billion, which will be the largest purchase for Berkshire. Basically, Warren took advantage of the soft market when competitive bids were relatively low. Burlington Northern would be Berkshire’s second- largest operating unit by sales. Buffett will use $16 billion in cash for the deal, half of which is being borrowed from banks and will be paid back in three annual installments.

U.S. Economy: Factories Expand More Than Forecast

Manufacturing in the U.S expanded faster than anticipated in October and exceeded every estimate of the 70 economists surveyed by Bloomberg. The news of the expansion eases concern that signs of recovery are strictly due to goverment stimulus. Our recovery is greatly linked to both the manufacturing and housing sector. The number of construction contracts unexpectedly rose again in September. First time home buyers are trying beat the November 30 deadline to qualify for the $8,000 tax credit. The economy still has many challenges ahead but gains in manufacturing and housing are a good sign.

Buffer Warren

This article discusses the repercussions of the recent recession on banks in America. It is no secret that banks in America have an inherent problem with cashflow, and that only accounting is used for measuring performance. As a result of this, there is a furious push by many regulators to force banks to have bigger equity buffers. Banks, however, argue that this is too expensive and will increase the cost of credit, hurting the economy.

Something must be done because with the promise of unlimited liquidity provision from governments, banks (unlike normal companies) do not have to worry much if they have loads of other short-term debt that constantly needs to be refinanced. Banks have too soft of budget constraints, which inevitably hurts consumers when bailouts need to be financed by taxes. The major issue moving forward is making banks more safe by increasing their equity.

US consumer spending falls

US consumer spending fell for the first time in five months in September. Household spending lowered by $47bn last month which is also due to decrease in income of the US citizens. This news came out after the news of US economic output grew by 3.5%. The growth happened due to the increase in the GDP and pulled the US out of its worst recession. The stimulus packagae helped the economy and there will another federal fiscal stimulus package coming up next spring to help the slow recovery of the economy.

Fish out of water

We've all heard the dismal unemployment statistics--10% in the US and nearing 20% in Europe. The outlook is even worse for people our age.

This article suggests that policymakers may have been approaching the problem from the wrong angle all along; instead of saving yesterday's jobs, perhaps the goal should be to create tomorrow's. What does this mean? Entrepreneurship, innovation, and venture capital.

Entrepreneurship has been a key to growth in both America and around the world. In many of these cases, from Silicon Valley to Israel, government intervention has played an important role. However, many problems can result. Two common ones are the temptation to spread the wealth around to everyone and a suspicion of foreign investors.

This shift in focus could mean an increase in entrepreneurship opportunities for our generation. It certainly beats unemployment!

Wilbur Ross Sees ‘Huge’ Commercial Real Estate Crash

Although the economy has been showing signs of improvement over the past few months, there are negative signs out there which might make us think otherwise. One of the biggest reasons for the poor economic situation that the country is facing was the housing market crash. That slump in the housing market has inevitably extended itself into the commercial property market as well, as pointed out by a well known investor, Wilbur Ross. Wilbur Ross said that the US. is in the beginning of a huge crash in commercial real estate.

Wilbur Ross is one of the nine money managers participating in a government program to remove toxic or dangerous assets from bank balance sheets. So a statement coming from a man like this seems to be giving all the wrong directions for the US economy which was expected to come back to life soon enough. However, property prices and commercial rent continues to rise putting further pressure on the economy as a whole.

Another well renowned investor, George Soros believes that gone are the days when the US consumer would drive the world economy. Although Ross does believe in self-correcting markets, he is of the opinion that it will take some time for the economy and the commercial estate market to correct itself. Although right now things just seem to be going the wrong way. Just to elaborate my point, I am attaching a little excerpt from the article:
"U.S. office vacancies hit a five-year high of almost 17 percent in the third quarter, while shopping center vacancies climbed to their highest since 1992, according to the property research firm Reis Inc."

Geithner: Economy Growing, Jobs Lag

WASHINGTON -- Treasury Secretary Timothy Geithner acknowledges the federal budget deficit is too high, but that the priorities now are economic growth and job creation.

Asked repeatedly on NBC's "Meet the Press" whether this means taxes will rise, Mr. Geithner avoided giving specifics. He did say President Barack Obama is committed to dealing with deficit in a way that will not add to the tax burden of people making less than $250,000 a year.

The White House has not decided how to reduce the red ink, Mr. Geithner said in an interview broadcast Sunday. "Right now we're focused on getting growth back on track," he said. "And we're not at the point yet where we have to decide exactly what it's going to take."

He acknowledged that the economic recovery, while showing positive movement, has been shaky and uneven.

Gulf monetary council 'on track'

Kuwait, Saudi Arabia, Qatar, and Bahrain signed an accord in June to create a joint monetary union council as a precursor to a Gulf central bank. Oman and the UAE are still questioning the idea of joining and creation of the council. The UAE wants to keep it own dirhams (currency) which will remain pegged to the dollar whereas Oman is not ready to follow the preconditions of joining the council.

New Chinese Stock Market Greeted With Enthusiasm

A new stock market in China, ChiNext, opened on Friday. The market was designed for technologically oriented companies and was modeled after the the Nasdaq stock market. In the first day alone the total value had almost doubled. The market was clearly well received. This market is growing far more than other Asian markets at this time. Unfortunately, the shares can be bought by mainland Chinese with few exception, even though there has been a lot of foreign interest.

E pluribus tunum

Everyone loves getting a bargain, which comes from paying less than you were willing to pay. This article looks at the topics of consumer surplus and maximum willingness to pay in the online music business, particularly iTunes. Apple's initial pricing strategy on iTunes was perplexing to some, because it charged a flat 99 cents per song for every song and every consumer. The argument is that Apple could have profited more and generated more surplus for consumers by adopting a more tailored pricing strategy.

A study at the University of Pennsylvania Wharton School of Business indicates that the market would sustain a higher uniform price than 99 cents. One alternative to this pricing scheme is to adopt song-specific pricing, similar to what iTunes did with its multi-tier system in April. The problem with this is that it would increase profits by only 3%, as consumers that are willing to pay more for one song are also likely to be willing to pay more for other songs, as well. Another option is an entry fee and then smaller per-song costs. The study indicated that an entry fee of $21.19 and a fee of 37 cents per song would raise both producer and consumer surplus.

One of the biggest issues with complicated pricing schemes is the cost to develop and implement them. However, it may be something that will become more common with technological improvements and firms looking for new ways to stay afloat.

US economy is growing once again

U.S. economy grew from pace of 3.5% between September and July. Obama is welcoming this news and he says that the steps taken by the government made a difference but there is still a long way to go. U.S. economy grew 0.9% compared to the last three months. It is the first time the US economy has expanded since the second quarter of 2008. But there are still some challenges the US has to face because the growth is shaped by government stimulus.

US Economy Exits Recession???

After four consecutive quarters of contraction the US economy has shown a positive GDP growth of 3.5% in the third quarter of 2009. Even though the article states we have exited the recession, US treasury secretary, Timothy Geithner, has acknowledged that the recession remains very much alive for millions of Americans who are still struggling with the financial downturn. The rebound in GDP was primarily led by an increase in consumer spending. However, many analysts expect the economic momentum to slow down in the fourth quarter. Nonetheless, I hope this upturn ignites some optimism among Americans and spur us further to pull ourselves out of this economic slump.

Iceland says bye to Big Mac

This article talks about how Iceland is also targeted by the world financial crisis. Symbol of globalization Big Mac is shutting down in captial Reykjavik. It is too expensive to keep them because of the economic situation and most of the imports come from Germany. There has been increase in costs due to fall of Krona currency and high tariffs on imported goods.

Home prices up slightly for third straight month

Home prices rose in the month of August. Although there has been stabilization in Home prices, economist feel that with the increasing unemployment rate and the expiration of home-buyer tax credit this could cause a decline. But for now in 20 metropolitan cities, home prices rose 1 percent. With low interest rates, cheap foreclosure properties and tax credits for first time-home buyers, economists believe there is an end in sight.

Where Jobs Are: The U-Haul Indicator

This article describes the less formal statistics that the author finds helpful to determine where unemployment and job opportunities exist and do not exist. Instead of looking in the usual places, like the Bureau of Labor Statistics or any other federal agency, but from U-Haul rates and prices. Places where jobs are low cost a lot to leave from, but not much at all to travel to. This article overall provides a different take on how to see the economy's effect on multiple facets of life.

Venture Capital Investment Still Lacking in Europe

This article discusses the lack of investments by venture capitalists in Europe ever since the global economic downturn. Third-quarter figures show a 48% decline in investments compared to a year ago. However, this doesn't mean that venture capitalists aren't spending their money, they are just spending their dollars more wisely. Not only in Europe, but in the United States as well, we need venture capitalists to invest their dollars, particularly in start-ups. This very well may be the match we need to ignite the global recovery.

Legalize It: Insider Trading Is a Victimless Crime, Says James Altucher

James Altucher, managing director at Formula Capital, believes that insider trading should be legalized after the fallout of the Galleon Group. Altucher feels that insider trading should be legalized because "it's a victimless crime, almost impossible to prosecute, and a big waste of taxpayer money". He also feels that the SEC should be focusing on tracking down frauds and the next Madoff or Enron. Additionally, he believes that insider trading can have the same positive effect on the market similar to the role that speculators play in leveling prices. It is an interesting proposition, but a most unlikely one.

Fraud Plagues Sugar Subsidy System in Europe

This article is proof that people abuse government subsidies.  The European Union provides 50 billion Euros ($75 billion at current exchange rates) in agricultural subsidies.  The EU recently discovered truck drivers were taking a 2,500 mile route instead of the direct 900-mile in order to receive more money in subsidies.  

Risk Trade Returns as Stocks, Oil Drop and Dollar Gains

NEW YORK -- With equities and oil prices falling in tandem with a rebounding dollar Monday, global markets demonstrated that they have not yet broken free of the risk-conscious trading logic that first emerged during the financial crisis a year ago.

The trend suggested that despite clear signs of global economic recovery the dollar continues to be seen as a safe haven play, rallying when investors become risk averse, as they did Monday, and falling as they gather confidence, which is what had been happening for most of the past eight months.

It also underscores how difficult it is to stake a claim on future trends for the recovery. In the past trading sessions, one sector tended to lead while others lagged. The sense that the worst of the downturn was behind us boosted riskier assets, driving down the dollar.

Stimulus fuels South Korea recovery

This article talks about how the Korean economy has increased in its fastest pace since the last seven years. The GDP has gotten better for the first time in four quarters. Private consumption and facility also helped in economic growth. Private spending, exports and capital investment all rose as well. There has been an increase in Asian economies recovery during the current global recovery.

Who cares if Wall Street 'talent' leaves?

On Thursday, White House pay czar Kenneth Feinberg outlined compensation restrictions at seven firms that got special bailouts, and the Federal Reserve proposed to review pay practices at 28 unnamed giant banks. Critics warn that reining in pay makes it hard to keep talented employees. Hemmed in, institutions like AIG, Bank of America and Citigroup could lose their best people. These firms would then perform even more abysmally, if that's possible, leaving them hard pressed to repay tens of billions of dollars of taxpayer-backed loans. Wall Street's employees have always received exceptional bonuses despite their performance, but now with a decrease in pay on the horizon, it appears that they have officially lost all motivation. Perhaps part of Wall Street's demise is that its employees had no incentives to perform better if their compensation always remained the same?

Can Main Street Catch Up with Wall Street?

On the one hand, the Dow Jones industrial average once again danced around 10,000 last week. Earnings of Caterpillar (CAT), Google (GOOG), and Apple (AAPL) far exceeded expectations. If U.S. gross domestic product rebounds as expected on Oct. 29 and turns positive for the first time in 15 months, it would confirm that the recession ended in the third quarter, at least statistically. Meanwhile, back on Main Street U.S.A., the picture is drastically different. Unemployment has doubled in a year, to 9.8% in September, and there are about six unemployed Americans for every job opening.

An uncelebrated century: Smaller American banks are now at the centre of the credit storm

PARTNERS BANK of Naples, Florida, earned a dubious distinction on Friday October 23rd. It became the 100th American bank failure of the year. On the same day six other lenders—two more in Florida and banks in Minnesota, Wisconsin, Illinois and Georgia—joined the rollcall of failure in the aftermath of the credit crisis. More banks have failed in other years. The post-war record was set in 1989 when 534 banks went under. That was at the peak of the savings-and-loan (S&L) crisis, which erupted in the late 1980s and continued in the early 1990s. This year has seen more failures than any since 1992, but another 75 banks must go under to overhaul that year’s total.

An IMF Just for Emerging Markets

The article discusses the role of the International Monetary Fund as the lender of last resort to countries wresling with economic crisis. The IMF was set up after World War II, and its structure by then was based on the balance of power between the U.S. (its main creditor) and European countries. Nowadays, the IMF's role in stabilizing the world economy might be limiting because of the prejudices among the developing countries against the dominating roles of the U.S. and the Western Europe in the IMF. During the Asian financial crisis in 1997, the IMF lent out funds to many Asian countries. However, it also imposed on some of those countries strict monetary and fiscal policies which were not very efficient at that time. The author mentions the idea of a new version of the IMF called Emergency Monetary Fund, which might become the lender that developing countries can rely on.

China's economy picks up steam

This article talks about how China in the third quarter of the year has expanded its economy by 8.9 per cent from last year. The government's massive stimulus plan of $586bn helped the economy. Another factor that helped the economy is domestic consumption such consumer spending which helped third of the economic growth.

When Two Plus Two Equals Three

The author reports on the minor changes that the Cuban government is trying to make in order to come out of its dire economic state. The food shortages that are characteristic for a socialist economy are very severe. According to the author, "despite its abundant farmland, Cuba imports 80% of its food." This tell a lot about the inefficiencies of the Cuban economy. Another problem, is corruption. Very similar to the Soviet Union, bureaucracy is abundant and the government leaders are appointing people to the key positions not according to their qualifications, which creates additional barriers for efficiency.

US bank failures top 100 for year

U.S. bank failures have reached 100 this year. Because of the bad economy there has been an increase in loans that may lead more banks to suffer. Fortunately savers' money is not in danger because it is backed by the US government. Banks are buying other banks to save them from collapsing.

As Detroit Crumbles, China Emerges as Auto Epicenter

China has taken over the reigns in the auto industry surpassing the likes the Detroit auto industry. This year China will become the world’s largest car producer. Speculation has been circulating that the Chinese are looking to bid for American car companies such as Ford and GM. With world class technologies China can become a dominant force in the auto industry.

Losing Their Lifeline - 7,000 a Day

This article headlines the fact that while the Senate debates on whether or not to continue unemployment benefits, around 200,000 people are set to stop receiving checks at the end of October. This take place a full month after the House has already confirmed the bill. The goal is to lengthen the period of time for benefits for 14 more weeks. Leaders from both parties are trying to solve the dilemma, and possibly get the bill to the floor by next week. The article also features the efforts of several people to obtain new jobs in wake of the vast unemployment throughout the nation.

Sarkozy Pushes for More Control of European Central Bank

French President Nicholas Sarkozy has called for a change in the way the European Central Bank is run. He believes that the ECB needs to change their monetary policy and start to publish minutes from their meetings. Sarkozy believes that they need to do something other than raise interest rates in order to curb inflation.