Higher Gas Prices?

We have all become accustomed to hearing the words, "expect gas prices to rise...". They are often plastered all over the news, articles, and newspapers. In a Marketwatch article by Myra Saefong, we begin to see her reasoning behind why she agrees. In one week, the average price per gallon of gasoline has jumped 17 cents, the highest weekly jump in two years. Also, during this time many refineries are typically switching to their summer blend which is more environmentally friendly. During this transition supply is temporarily cut, and the price is naturally driven upwards. Speculators and investors have anticipated this, which has already forced the price up. Price peaks for 2013 vary anywhere from about 3.70/gallon to over 4.00/gallon for high traffic areas. The only glimmer of good news for WTI (West Texas Intermediate) is that increased production of shale oil production in North Dakota and Texas should help with countering the volatility that is expected.

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The American Deficit

The deficit has been a topic highly discussed and debated in all of my years at OWU. We have talked about it in multiple classes here in Corns, listened to guest speakers, etc. This article from the Economist states that on February 5th, the Congressional Budget Office (CBO) forecast that for the fiscal year ending September 30th the deficit will clock in at $845 billion, or 5.3% of GDP.  This is significant because this figure will be the lowest since 2008 and in addition, it will be down nearly half from its peak of 10.1% in President Obama's first year in office, 2009. The deficit will obviously be a huge issue for President Obama in his second term. Let me state that the project is assuming President Obama and Congress do not override planned spending cuts and tax rises, most importantly the "sequester." President Obama has also stated that he is prepared to both cut entitlements and raise taxes as part of a broader deal. He and John Boehner were the topic of media attention in December but a deal never went through. Now, the problem is, if any changes occur to the already proposed plan or if the two parties don't find a common ground/compromise, then the long-term debt problem may never be addressed. So when is it too late for the American government to really understand the consequences of pushing off this further? They obviously are concerned about the issue, but the constant changes in both parties' requests have hindered the issue even further. 

Here is the link for the Economist Article

The New Capitalists

This article is in today's addition of The Economist.  It is talking about how North Korea, an example of a socialist economy, in some respects, is moving toward being a capitalist market.  This is not a political move, but instead is an economic move by the people.  It encourages people to give to the radio station that streams into N. Korea so that the people there are more informed that their current system is not free.  This is interesting to me because one of the few examples of a planned economy is appearing to change a bit.

Check out the article HERE!

The Next Supermodel

Since we have been talking about different markets in class, I read an article that discusses a few countries that are doing well using their private sectors as well as government intervention.  The Nordic countries, especially Norway, are currently in an economic boom with satisfied citizens.  They have found many ways to improve their society.  Their taxes have been lowered, corporate income tax is only at 22%, but they have been able to employ and spend enough government money to keep their economy growing.  While the US struggles with a deficit that is about 7% of our GDP, Norway only has a 0.3% deficit.  Their government is not having to deal with the financial burden that we are here.  At the end, the article declares that these countries are not perfect but that they are models that can be studied since it's actually reality and not just theory.

The Next Supermodel 

India to cut some subsidies in order for greater Food Security

http://www.business-standard.com/article/economy-policy/cut-energy-fertiliser-subsidies-to-make-up-for-food-security-montek-113020600706_1.html

The Planning Commission of India is a body comprised of top economists and headed by the Prime Minister in order to decide on the nation's economic issues. It is a powerful body and controls the levels of subsidies, Government involvement, etc.

Essentially, the deputy chairman of the planning commission makes most of the decisions as the Prime Minster almost always listens to him without question. Presently, Mr. Montek Ahluwalia is the Deputy Chairman. He was educated at Oxford, was the president of the Oxford Union, has served in the World Bank, and, in my opinion, is a complete idiot. The person has no idea about the indian grass-roots society and is making decisions that affect the lives of many.

In the article, you all can see another such instance of his foolishness. He wants to cut energy and fertilizer subsidies at a time when they are of utmost importance. Cutting fertilizer subsidies will raise the price of food and the middle-class, already depressed because of drastic increase in price levels in a short-period of time, would again bear the brunt.

Similarly, reduction in energy subsidies would cause the prices of everything to go up. Mr. Ahluwalia fancies himself as a reformist. However, he needs to realize that in order to reduce Government involvement in the private sector, one needs to make sure that the country's population would have employment. In a country where still about 40% of the population (more than the entire population of the United States) lives below the poverty line, one cannot reduce subsidies at a time when the economy is not growing, people are finding it hard to get jobs, and the middle-class is reeling under high prices.

Also note that Mr. Ahluwalia wishes to reduce these subsidies in order to accommodate the Food Security Bill. This bill was actually the brainchild of the President of India's biggest political party. The president's name is Sonia Gandhi and she currently holds no political position. However, she is the most powerful person in India as the Government was formed by her party. She herself could not become the PM because she was born in Italy and became a citizen of India only after her marriage to an Indian. Under her, nepotism runs wild. The prime minister, cabinet ministers, and even the deputy chairman of the Planning Commission are all her lackeys. And therefore, they would rather reduce subsidies and hurt the citizens than not implement her brainchild bill (Food security) and annoy Mrs. Gandhi.

French Taxation

In the second supplemental reading listed for Friday, “So much to do, so little time” the author references François Hollande’s plan to impose new taxes on companies and the rich, including a 75% top tax rate on incomes above $1.3 million.

Mr. Hollande contends that the tax increases are a “symbolic” measure, “never pretending that the rate increases would raise much cash.” Nevertheless, in late December France’s top court ruled that the 75% millionaire-tax is unconstitutional because it fails to guarantee taxpayer equality.

Although the 75% tax rate has been avoided for now, increased taxes on companies, capital gains, wealth and income have made negative impacts on many. The author argues that it is the combined influence of these taxes that have driven celebrities to leave the country and entrepreneurs to criticize the government for encumbering wealth creation.

http://www.economist.com/news/europe/21569068-françois-hollande-remains-intent-introducing-punishing-top-income-tax-à-bas-les-riches

Barclays to Cut Jobs in New York

 February 6, 2013, 6:15 p.m. ET

Dozens of bankers, traders and support staff who survived the collapse of Lehman Brothers Holdings Inc. will face layoffs in the latest round of Wall Street cutbacks.

Barclays BARC.LN +0.07% PLC plans to cut 275 New York employees in three locations around the city, including the former Lehman Brothers headquarters at 745 Seventh Ave. in Midtown Manhattan, the company said in a filing Wednesday with the New York State Labor Department. The company wouldn't say how many cuts will come at each building.

The cuts are part of a broad strategic overhaul set to be presented by Chief Executive Antony Jenkins next Tuesday. The Wall Street Journal has reported the firm could cut as many as 2,000 jobs in its investment bank.

Barclays had 23,300 employees in its investment bank as of June 30. The firm doesn't disclose its headcount for the Americas.

Lehman Brothers collapsed in September 2008 in the biggest-ever U.S. bankruptcy filing, leaving thousands of workers unemployed. Barclays later acquired the company's U.S. investment-banking and capital-markets operations.

Barclays, like its competitors, has been struggling with clients' diminished appetite for dealmaking and weaker trading volume. The company also has been damaged by scandals including a settlement of a rate-rigging probe that has now netted two other giant global banks.

http://online.wsj.com/article/SB10001424127887323452204578288332951705680.html?mod=WSJ_Markets_LEFTTopStories

China Signals Faster Push to Tackle Income Gap

February 6, 2013, 2:33 p.m. ET

BEIJING—The breadth of a plan to narrow the gap between rich and poor, and the fact that it came out at all, heightened the sentiment that China's leaders may be ready to take on powerful interests quickly rather than laboriously trying to reach a broad consensus first.

China's state planners have debated income inequality plans for eight years, and come up with at least a half-dozen drafts, but hadn't managed to win final approval, largely because of opposition of state-owned firms and other powerful actors that could be on the losing end of an income-redistribution scheme.

Premier Wen Jiabao set a final deadline of the end of 2012—and that one was missed as well.

http://online.wsj.com/article/SB10001424127887324906004578287614272457212.html?mod=WSJ_business_AsiaNewsBucket

High oil prices drive Greeks to burn wood

In Greece, the coalition government has pushed the price of heating oil to about 1.50 euros per litre by raising the tax on heating oil by 40 percent. That has caused a drop of a reported 80 percent in demand and forced many Greeks to move away from buying oil and find other means to keep warm. Some are even chopping down trees in the woods and city parks. The concern is to cut back on expenses, households are turning from oil to wood to heat their homes, but in turn are filling the night air with potentially hazardous pollutants. Burning wood in the home releases 30 times more air pollution than using a well-maintained heating oil or gas-burning boiler, resulting in an increase in air pollution which can lead to respiratory problems as well as aggravating allergies and disturb the neurological and reproductive systems. The problem has become so bad that the wood smog has been detected outside the main cities, including the western city of Patras and in northern suburbs of Athens. The wood smog phenomenon emphasizes the needs to move away from both oil and wood as fuel and heat sources, but then do they have other choices?

Source: http://www.setimes.com/cocoon/setimes/xhtml/en_GB/features/setimes/features/2013/01/18/feature-03

Taking Europe's Pulse

This article from the Economist gives a nice info graphic view of various European countries and certain features of their economy. One of the more interesting pictures is the public debt as a percent of GDP map. Looking at this map you can see which countries are in control of their public debt and which countries are not.

BP Still Suffering Effects of 2010 Oil Spill

Following the oil spill in April 2010, BP is now faced with a fresh lawsuit for economic damages. Parties interested in getting compensation are many state and local governments in the South, with a demanded compensation of $34 billion.

BP representatives say that the company has set aside $42.2 billion so far and call the calculation method of these fresh claims "flawed." The company faces its final civil trial this month and are still hopeful for an out-of-court settlement. The latest financials show a 20% drop in profit for BP this quarter ($5 billion to $4 billion) due to a necessary sale of assets to pay damages ensuing from the disaster. CEO Bob Dudley remains optimistic about possible new ventures.

The company has already settled charged with the US Department of Justices and are yet to pay damages as ascertained by the Clean Water Act as well as the unquanitified natural resource damages.




http://www.guardian.co.uk/business/2013/feb/05/bp-deepwater-horizon-charge-rises

Brazil's Nightclub Fire

http://www.economist.com/news/americas/21571149-better-fire-prevention-should-be-memorial-night-hell

During a concert at a club in Brazil, a member of the band set off a street flare on stage, which caught the building on fire and led to the deaths of 235 people.  Another 100 are injured, many of which are in critical condition.  A majority of these people were students.  In an effort to collect tabs and not yet seeing the fire, bouncers first blocked people in attendance from leaving.  This surely increased the number of deaths and injuries seen as a result of the incident.  The club was also over capacity by over 300 people.  The club also had an expired public-health license and fire safety plan.  

In Brazil, each state sets its own laws.  A proposal to set minimum national standards went to Congress in 2007, but has yet to be pushed through.  Enforcement will be needed to render any new laws effective, but lining up enforcement is the job of mayors in Brazil.  Many clubs run without licenses because of the long wait and high amounts of paperwork needed to get the proper registration.

 

What type of government policies could prevent events like this from happening in the future?  Could one form of government control these tragedies better than another?   

Dell Closer to Buyout as Price Talks Narrow: Source

It appears a deal to take Dell, the world's third largest computer maker, private is set to go through.  The buyout is being done by a consortium led by former founder, Michael Dell.  Currently the buyout price has been narrowed from $13.50 to up to $13.75 per share.  This would give Dell a market value of up to $23.9 billion and make this the largest buyout since the financial crisis.  While even the $13.50 valuation is an improvement from the $11 the stock traded at before news of the potential buyout surfaced, it is a far cry from the $17.80 the firm traded at the previous year.  This rapid devaluation of the firm's stock reflects the loss of market share Dell has suffered to competitors like Lenovo Group and indicates the decline the company has been experiencing.  Michael Dell and his partners will hope to re-ignite growth in the firm if they are able to acquire it.  As for the economy as a whole, the fact that large-scale leveraged buyouts are beginning to occur again is a huge sign that the economy is recovering and that institutions are regaining an appetite for risk.

http://www.cnbc.com/id/100433280

Because Green Goes With Everything

In this article by the New York Times, Ron Shiffman an urban planner is interviewed. Ron has spent over 50 years trying to make New York City more livable and sustainable. In the interview, Ron states that going green is not a "fad" but it's a necessity. The city has done many things to improve their sustainability. I believe Ron is right that going green is a necessity, not only for New York City, but also for other heavily populated areas. I think there are many positive externalities that people can enjoy that go along with building and renovating communities to become more sustainable and environmentally friendly.  Although the initial cost may be higher to build more efficient buildings and better public transit systems, in the long run the energy savings alone should compensate for the initial investment. Not only will the citizens pay substantially less for energy (estimated 20-70%), but they will also have access to an outstanding public transit system that will help keep traffic in the densely populated area less as well. There is also the health side of the debate. Who can put a price tag on your own health? According to the article, New York City has rerouted delivery trucks, cleaned up rivers, landscaped medians, and planted tree pits in order to capture water. All of these measures help clean up the air and the greenery helps lower cooling cost in the summer. I think these steps taken in New York City will be taken into consideration by other urban planners and I hope to see continued improvements in NYC.

http://www.nytimes.com/2013/02/03/realestate/debriefing-because-green-goes-with-everything.html?pagewanted=2&_r=0

Why Do Chinese Billionaires Keep Ending Up in Prison?

http://www.theatlantic.com/international/archive/2013/01/why-do-chinese-billionaires-keep-ending-up-in-prison/272633/

As China's economy has grown, so has the number of wealthy Chinese. However, the top 1% has also suffered increased scrutiny, resulting in numerous investigations, arrests and imprisonments of China's richest citizens.

Is it more dangerous to be a billionaire in China than the United States? Statistics cited within this article would say yes.

Forbes Magazine and its Chinese equivalents post yearly lists of China's richest, the most famous being the Hurun Rich List. After the release of each list since 1999, many of the wealthy and their respective companies have experienced declining share prices and have received fewer government subsidies. Additionally, a large number of tycoons who were once mainstays on the list are now embroiled in corruption scandals and serving lengthy prison sentences.

The author of this article, Rebecca Chao, outlines two main reasons behind China's issue of disappearing billionaires:

-The first is that the nature of a booming, developing nation allows fortunes to be amassed quickly without much deference to the rule of law. When such a country continues to gets richer, the government is then compelled to enforce regulations more strictly and punish illegal business practices. Many of the wealthy Chinese billionaires first amassed their fortunes with the help of widespread corruption. Subsequently, that corruption is now being investigated with real consequences.

-The second reason is what Chao describes as the government interest of 'killing the chicken to scare the monkeys'--essentially sending a message to corrupt businessmen and officials. Moreover, Chao describes the interest of the Chinese government to condemn ostentatious displays of wealth when the vast majority of the country is still struggling to improve their meager economic lot.

Extreme income inequality, heavy Chinese emigration to Western nations, and the common practice of the wealthy hiding their fortunes through 'clever' accounting are all major problems for both the government and its citizens. At this point, many wealthy Chinese see reaching the Hurun Rich List as a curse very much worth avoiding.

Is this issue exclusive to command economies? Is this one unique advantage America has over China, a more equitable judicial system that checks government oversight and protects certain rights? How much of a role does China's 'command' economy play in the persecution of corrupt businessmen?

Netflix's $100 Million Bet on Must-See TV

Netflix recently announced that they will be showing an original series of their own, "House of Cards." While I've noticed that Hulu Plus has their own TV series as well, I was surprised at Netflix's star-studded cast and ambitious expenditures. The program is a $50 million per season investment, and economists are saying it's pretty risky. But Netflix says they want to be seen as not only a distributor of other producer's shows, but to be a provider of "an experience that cannot be replicated by [our] competitors." The article also mentions that streaming others' content is becoming more expensive- yet another incentive for Netflix to start up some unique material. Do you think Netflix is making a smart move? The pricey new show will cost the company nearly $2.00 per share with the first two seasons alone. But I personally admire their bold move, and I respect how they are trying to up their game against other online streaming websites. I think Netflix is popular enough that a successful TV series will prove to help them more than disappoint.

http://money.cnn.com/2013/02/01/technology/innovation/netflix-house-of-cards/index.html?iid=HP_LN

A New Model of Capitalism for Nordic Countries

This article from The Economist talks about Sweden's slow move toward more conservative economic policies and how that has helped their economic growth. Public spending as a share of GDP is 49% today while it was 67% in 1993.The corporate tax rate has also been decreased from 26% to 22%. As a result of these changes Sweden's economic performance has benefited. Between 1993 and 2010 GDP growth has averaged 2.7% a year, outperforming many other EU countries. Despite their conservative movement, Sweden has a strong welfare state still with 30% of the labor force employed by the Government. It seems that Sweden has slowly improved its institutions in a way that doesn't undermine their basic foundations, but have increased their performance.

China's latest investment craze: U.S. pecans

http://money.cnn.com/2013/01/31/news/economy/china-pecan-exports/index.html?iid=SF_E_River

The article basically says that the Chinese are developing a thing for US pecans. The trend started a few years ago in 2007 when the price of China's previously favorite nuts - walnuts - rose significantly. Because of the rise in the price of walnuts, the Chinese had to look for a cheaper alternative and they found US pecans which accounts for 80% of worldwide supply.

Last year, over 20% of U.S. production went to China! Next year, this number is expected to increase to over 30%. This is fantastic news for pecan growers in the US,  found in every state south of the Mason-Dixon Line but especially concentrated in Georgia, Texas and New Mexico. However, China's interest in US pecans has also kept the price of pecans high for both US consumers and European food companies that use them as an ingredient. That has essentially led to a number of US food makers having chosen to cut back on the use of pecans.

European Economy showing signs of recovery

http://www.timesleader.com/stories/European-economy-on-upswing,258825

The economy of Europe has been showing signs of recovery. Inflation has reduced and unemployment has also reduced. The stock markets are performing better and investors are sounding positive. Though debt continues to be a main concern, the biggest focus is unemployment.

The fall in inflation has reduced burden on consumers and may also lead to further aid from the European Central Bank. Though the economy is not doing its best, one can say that the worst is most probably over.

Construction jobs are difficult to fill

Construction has been a major driver of hiring in recent months, but now builders are having difficulty finding skilled workers. About 18% of the jobs created in January belongs to construction as home building has rebounded. 2013 is predicted to be a good recovery for housing due to low mortgage rates, rising home prices and low inventories of new homes for sale.
However, builders say hiring has been crimped because the qualified workers can't be found. One of the reason is that many skilled workers left the field to find other jobs after the housing bubble burst.
So is that a new path for students and unemployed people to consider working in? I guess it's worth to give it a little thought.
Source: http://money.cnn.com/2013/02/01/news/economy/construction-jobs/index.html?iid=SF_E_Lead

Google ending antitrust in europe

http://www.nytimes.com/2013/02/02/business/global/google-submits-proposals-to-resolve-european-antitrust-concerns.html?ref=business&_r=0

Google for the past 3 years has been locked in an anti trust case against the European union and also Icomp who claims that they are monopolizing the internet search engine market and making it impossible for other people in the market to claim a stake. Recently they had an agreement with the country of France for 60 million euros to agree to remove the anti trust laws and make Google a viable search engine again. After an extensive search however it was found that even though Google did not break any laws, it just had many complaints filed against them due to the fact that they were pretty much a monopoly in Europe  Google is supposedly looking to end the case as soon as possible but many competitors are looking to prolong the case for obvious reasons.

Health insurance in America The insured and the unsure

http://www.economist.com/news/business/21570756-will-obamacare-spur-firms-drop-workers-health-cover-insured-and-unsure

Obama's health care plan has brought up a lot of debate on whether or not the plan will be effective or if it is even the right thing to do. In 2014 the main portion of the Obamacare plan will come into affect. This article takes a look at how the Obamacare plan will affect the existing health care plans that many Americans have with their employers. There are many surveys of companies of different sizes and how they will change their health care plans. Since people will be able to get individual personal health care much easier, employers are seeing a chance to save money on there high employee health care bills by dropping employees from company plans and just paying the 2000 dollar fine per worker. One survey found that 30% of employers will definitely or probably drop insurance in the years after 2014.

Federal Debt Limit Suspended Temporarily

http://www.washingtonpost.com/business/economy/senate-votes-to-temporarily-suspend-federal-debt-limit/2013/01/31/256cae78-6bde-11e2-ada0-5ca5fa7ebe79_story.html

The U.S. Treasury Department will have the ability to borrow more and more money due to the limit of federal debt being suspended temporarily. Without this limit, the Treasury can ignore the debt ceiling and continue borrowing. The debt limit will come into play again on May 19. The Treasury is predicted to run up about $450 billion dollars in debt until this date. The debt ceiling is likely to be raised when it comes into play again. Lifting the debt limit cannot mean anything but bad things for our economy in the long run. It worries me that the debt limit has been completely lifted for the next few months rather than simply raised.

Beer Merger Blocked Mid Sip

The U.S. government has stepped in and officially blocked a deal that would have brought Anheuser-Busch InBev with the Mexican beer company, Grupo Modelo. Supposedly, the government blocked this mega-deal in the best interest of American consumers. Anheuser already owns half of Grupo Modelo, but the government feared that complete ownership would be "a significant competitive threat." The head of the US Justice Department's antitrust division, Bill Baer, commented on Anheuser's domination in the beer market and how they have repeatedly increased prices of the years.

Link: http://www.cnn.com/2013/01/31/us/justice-beer/index.html?hpt=hp_t2

Technology Taking Over

In this article, Thomas Friedman, the highly regarded author of "The World is Flat,"talks about the affect that technology is having on employment, innovation, income, and other areas of life. Interestingly, he quotes author and professor Erik Brynjolfsson on the idea that most economists argue that technology advancement increases the overall size of the pie, and with time, all else will follow; however, Brynjolfsson points out that not everyone benefits from the developments of technology. Brynjolfsson continues his thought with "those with more education start to earn much more than those without it, those with the capital to buy and operate machines earn much more than those who can just offer their labor, and those with superstar skills, who can reach global markets, earn much more than those with just slightly less talent."

Friedman believes that graduates - and all workers for that matter - must develop skills that technology can't provide or that can be complements to it.

Link: http://www.nytimes.com/2013/01/30/opinion/friedman-its-pq-and-cq-as-much-as-iq.html?src=recg

Why secretary is still the top job for women

http://money.cnn.com/2013/01/31/news/economy/secretary-women-jobs/index.html?iid=Lead

This article compares the top five jobs for women in 1950 and 2010.  There were similarities between these lists, and one of those is that the top job for women is still being a secretary.  The other top jobs are being a cashier, an elementary or middle school teacher, a nurse, and a nurses aid.  Over the years there has been a push from feminist groups to call change the title of the job to administrative assistant and equal out the level of pay between genders.  However, in 2011 the term secretary started to make a comeback.  This list doesn't really surprise me, especially because generalists make up the majority of the job market regardless of gender.  The top job for men in 2010 was a truck driver.  

European demography: Working-age shift

link: http://www.economist.com/news/finance-and-economics/21570752-growth-will-suffer-workers-dwindle-working-age-shift

In addition to combating its current economic problems, Europe may have to look forward to dealing with future economic problems as well. In 2013, data shows that the working-age population (20-64) in the EU will fall and is predicted to continue to fall for the next 50 years.In addition, the old-population will increase significantly which will reduce the labor force participation in the economy and dent growth. It is predicted that employment and labor productivity may rise until 2020, and from then on, it will start to fall. Europe will face a similar demographic problem as Japan does. As we have seen with Japan's lost decade(s), Europe's may not recover any time soon.

Obama unveils his own proposal for immigration reform

http://www.washingtonpost.com/politics/obama-unveils-his-own-proposal-for-immigration-reform/2013/01/29/b27dcb78-6a47-11e2-95b3-272d604a10a3_story_1.html

This article has a series of important economic implications.
It will be interesting to see just how the sudden influx of legal workers (a process that has already been started with Obama's executive orders), will affect various aspects of the economy.
The increase in basic labor will most likely diminish real wages across the board and increase the payoff for human capital, or for educated individuals. 
One can envision an increase in demand in the housing market, now that many immigrants will be able to take out a mortgage.
The proposal even includes provisions to make it easier for immigrants with doctorates in science and technology to obtain a green card, thereby increasing the influx of highly educated individuals who will also be big time consumers in the American economy.
I personally think this is great news and that this has been the sensible thing to do for quite a while.
I imagine that the U.S. will experience a significant shift not only in its economy, but also in its political ideology across the board.

Win-Win for Bailed Out Executives

Firms that have been bailed out by the government are still receiving huge bonuses that are approved by - yes, you guessed correctly - the government. Three companies - Ally Financial, AIG, and General Motors - all received money from the Troubled Asset Relief Program and had to abide by strict rules when handing out bonuses and giving raises to top executives. Despite the guidelines imposed for these firms, they somehow convinced the Treasury to rethink the guidelines that were set and no longer imposed the tight parameters: "“In 2012, these three TARP companies convinced Treasury to roll back its guidelines by approving multimillion-dollar pay packages, high cash salaries, huge pay raises and removing compensation tied to meeting performance metrics,” Christy Romero, the special inspector general, said in a statement."

What are your thoughts on the Treasury changing their policy and allowing big bonuses and raises to firms that were recently bailed out?

Link: http://www.nytimes.com/2013/01/29/business/generous-executive-pay-at-bailed-out-companies-treasury-watchdog-says.html?hp&_r=0

Official Report from the special inspector general: http://www.sigtarp.gov/Misc/2013_SIGTARP_Bailout_Pay_Report.pdf

The Road to Renewal

http://www.economist.com/news/international/21570677-after-centuries-stagnation-science-making-comeback-islamic-world-road

This Economist article highlights much of the recent scientific, technological, and business progress within Islamic nations. Although the article uses religion as the main form of comparison between nations, it is clear that most Islamic societies tend to operate under different economic systems from Western societies. There exists a clear disparity between the level of scientific achievement between the two geopolitical systems, much of which has been previously described as cultural or societal. Many of the 'Islamic countries' mentioned in the article were affected directly or indirectly by the political protests of the Arab Spring. In this greater movement towards more democratic, free-market economic systems compatible with Islam, we begin to see this slow change manifesting in other parts of society. As discussed in class, population growth and technological development are the two driving factors behind change within an economic system. Perhaps these factors may be signaling broad economic advancement spreading throughout the Muslim world.

Housing to drive economic growth (finally!)

http://money.cnn.com/2013/01/27/news/economy/housing-economic-growth/index.html?iid=SF_E_MPM

There was a survey among economists about the economic growth this year and the housing market was one of the main growth drivers. Compared to previous years, the supply isn’t in excess as before. After five years buyers are brought back to the market. As the demand for housing increases, more construction and manufacturing jobs will be created. Also, because the supply is tight, this should lead to increased home values and have a huge impact on the consumption in general. However, even though the housing market is supposed to recover, the economic growth is predicted to increase only of 2.4% in 2013, and the biggest concern is a standoff on Capitol Hill. 

Why Disability Figures Are Good for Job Market

http://blogs.wsj.com/economics/2013/01/26/number-of-the-week-why-disability-figures-are-good-for-job-market/?mod=WSJBlog&mod=marketbeat

This article discusses Social Security Disability Insurance and their declining numbers. Social Security Disability Insurance pays benefits to you and certain members of your family if you are "insured," meaning that you worked long enough and paid Social Security taxes. Currently the number of people applying and getting approved for disability benefits hit multiyear lows in 2012, a potential sign of an improving labor market. There has long been a corelation between high unemployment and rising applications for disability. Usually this is due too the increase in poor americans and them reaching the end of their unemployment benefits. On the other hand this could be a positive sign that the economy is getting better. As the job market grows and new jobs are added people there is a trending decrease to file for Social Security Disability Insurance. What do you think?

Healthy People Create Economic Health

The World Economic Forum met this past week in Switzerland to discuss trending economic issues in the world and share ideas on how to solve them. An inevitable topic was healthcare universally. It was commented that the healthcare is "sick and injured" and in the US it is the only growing big-ticket expense item at around 18% of government spending. Clearly healthcare needs to become more affordable, but more preventative as well. Only 1.5% of healthcare spending is spent on diagnostics, but  upwards of 80% is spent on those diagnoses. Technology and information are key. A deeper focus is needed for providing education and information to those in need of medical attention, and this will drive  healthcare costs down as treatment becomes more preventative.

But how much is this the government's responsibility? The article inserts an interesting piece about how regardless of the technological change, and without a cultural change, will not be enough to support the healthcare system. Some of the private investors suggest that they would like to see those pay for their own healthcare to suggest that fitness and exercise is cheaper than operations and insurance. So it appears that this is not only an economic issue but a societal one as well. As the health of society remains as a top priority on the world spectrum, the question posed is whether to attack it with more changes to the system itself, or begin efforts in helping those to become more responsible for their own health first.



http://www.bbc.co.uk/news/business-21183984

Working Age Shift in Europe

According to experts and policymakers, the economic climate in Europe has turned the corner from its struggle with recession. However, even if the EU can overcome its problems with economic policy and achieve higher growth rates, the long-term outcome still appears dismal. This article claims that substantial- and uncontrollable- changes in the EU's demographics are the cause for this negative outlook. The region's working age population is significantly declining starting in 2013, and will continue to do so. Moreover, the older age population is also shrinking. This combination raises the old-age dependency ratio from 28% to 58% within the next forty years. The result of this is the decline in employment rates, as more people are outside of the workforce and more people depending on the earnings of the younger population. This puts pressure on states' public finances, which will have to increase their spending and deal with less income.


http://www.economist.com/news/finance-and-economics/21570752-growth-will-suffer-workers-dwindle-working-age-shift

Wage Stagnation In the United States

Wages in the United States have stayed relatively the same since the 1970's for male workers. The median salary for male workers has hovered between $40,000 and $45,000 for the last for decades. Women's wages have been rising steadily over the same time period, but started from a much lower wage than men in the 70's. As the article states, education is one source of potential growth but educational attainment in the United States has slowed down, especially for men. It seems that an overhaul of the educational system with a renewed focus on innovative ideas is necessary to buck this recent trend for Americans.

Obama's Abuse of Power

An appeals court says his recess appointments are unconstitutional.

President Obama has shown increasing contempt for the constitutional limits on his power, and the courts are finally awakening to the news. A unanimous panel of the D.C. Circuit Court of Appeals ruled on Friday that the President's non-recess recess appointments are illegal and an abuse of executive power.

On January 4, 2012, Mr. Obama bypassed the Senate's advice and consent power by naming three new members of the National Labor Relations Board and appointing Richard Cordrayto run the Consumer Financial Protection Bureau. Other Presidents have made recess appointments and we've supported that executive authority.

But here's the Obama kicker: He consciously made those "recess" appointments when the Senate wasn't in recess but was conducting pro-forma sessions precisely so Mr. Obama couldn't make a recess appointment. No President to our knowledge had ever tried that one, no doubt because it means the executive can decide on his own when a co-equal branch of government is in session.

In Noel Canning v. NLRB, a Washington state Pepsi bottler challenged a board decision on grounds that the recess appointments were invalid and that the NLRB thus lacked the three-member quorum required to conduct business. The D.C. Circuit agreed, while whistling a 98 mile-per-hour, chin-high fastball past the White House about the separation of powers.

Nokia Makes a Profit

http://www.guardian.co.uk/technology/2013/jan/24/nokia-returns-to-profit-smartphones

The article talks about how Nokia has ended an 18-month period of losses amounting to over €4bn. The turnaround is mostly attributed to the the increased demand for smartphones, which rose over the Christmas period, and the flagship product is the company's new 'Lumia' phone. The company also cut costs by reducing the workforce as sales rose in comparison to the previous quarter, and scrapped the 2012 dividend. An interesting factor is that consumers have responded well to a perceived rise in quality of the products sold and this has seen an increase in the average selling price. Nokia has attempted to increase its competitiveness by switching to Microsoft's operating software to keep it on par with Apple's iPhones and Google's Android phones.

Mortgages - Appraising High-End Homes

In this article published in the New York Times it discusses the issues that many high end buyer and sellers are facing. Although there has been a pick up in million-dollar-plus-market for homes there has been an unexpected issue. Appraisers are called in when the deal is going to be financed. The problem is that there is a lack of comparable properties to these high end deals and the appraisal values are coming in well under the asking price. There is a difficulty arising here with the sales price. If a lender uses a certain ratio based on appraised value then that typically leaves a large gap between asking price and funds available to spend. The question I pose is what should the seller do? If I were a seller my asking price would be derived from my opinion but mostly my real estate agent who is responsible to price my property accordingly. When I hear an offer significantly off from my asking price I have two options. Wait for a cash buyer. Which would be few and far in between due to the very low interest rates that many people are choosing to take. Or I could take the deal with the understanding that every person financing will be coming in with similar offers due to the appraisers. However, I could wait until more properties have been sold that are comparable so my appraisal could be more accurate. Either option is filled with pros and cons and it would take an immense amount of time and consideration to determine what is right.

http://www.nytimes.com/2013/01/27/realestate/mortgages-appraising-high-end-homes.html?ref=todayspaper

Is Obama a Socialist?

http://www.dailyfinance.com/2012/12/05/obama-socialist-dictionary-most-popular-words/

This article tries to address concerns raised by Americans that President Obama is a socialist. It can be said that though Obama's policies which focus on a stronger, more centralized Government may be taken as marginalization of the private sector. However, this may be more of hype than substance. Socialism, in this regard, cannot be confused with a Soviet-style regime. This is only monitoring of the private sector and in that too, the focus is on the financial sector. One can say that since Obama's 1st term also coincided with the Global Financial Crisis, he had to take strong Governmental measures in order to reduce its impact on citizens. Since then, a view has been formed regarding Obama that shows him as a socialist. However, his policies were necessary for benefiting a large portion of the population, and in doing so if he had to restrict some freedoms for the private sector, then that is only good governance and not socialism.

When You Don’t Do What You Meant To, and Don’t Know Why

The research showed that we, human, do not make decision on rational basis as economists long believed but tend to do all sort of things much under the control of our emotions. For example: You promise wake up early, do homework then go to class on time but end up doing exactly what you didn't intend to do: lying in your bed till noon. The reason for the procrastination is our underestimation of the seriousness if not doing what was planned or trying to rationalize our choices towards our bias rather than rational judgements on facts. One of the methods to reduce regrets and make more good decisions is to "Step back and do what you will tell you best friend to do."

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