http://www.nytimes.com/2015/01/23/business/international/ecb-unleashes-aggressive-stimulus-plan.html?action=click&contentCollection=International%20Business®ion=Footer&module=MoreInSection&pgtype=article
European Central Bank plans to buy about $69 billion, of government bonds and other debt each month to stimulus the economy. They also plan to cut the interest rate it changes on loan to commercial banks from 0.15 percent down to 0.05 percent. The expected result is that there would be an increase in inflation and growth in individual countries. Moreover, governments would also be given a share of any profit the Europe Central Bank might make. "Mario Moretti Polegato, president of the Italian shoemaker Geox, said quantitative easing could help restore a sense of optimism." Although, this is a great step the European Central bank has taken to restore the economy, this alone, in absence of the government's stimulus policy, would no be able to change much of the situation i am afraid.
Saturday, January 24, 2015
The Economics of Optimism
http://www.economist.com/news/finance-and-economics/21640361-debate-heats-up-about-what-goals-world-should-set-itself-2030
The article primarily focuses on which goals the world should set and achieve by 2030. Bill and Melinda Gates proposed in their annual letter that "the lives of people in poor countries will improve faster in the next 15 years than any other time in history" and that the lives of people in poor countries "will improve more than anyone else's." Sustainable Development Goals, or SDGs, is a United Nations initiative that is intended to be agreed upon by world leaders at the UN General Assembly in September.
SDGs are being directly contrasted with Millennium Development Goals, or MDGs, which the Gates' family strongly supported. SDGs will replace MDGs as several of the eight MDGs have been achieved. MDGs consisted of eight goals with 18 targets while SDGs are proposed to consist of 17 goals with 169 targets.
Many economists are arguing over whether the SDGs have too many goals and targets. Some believe that "having 169 targets is like having no targets at all". I feel that the number of goals should be reduced from 17 to 10. I feel that this makes the SDGs more focusable and marketable. Do you feel that the number of SDGs should be reduced or do you feel that the broader the set of goals and targets, the better?
The article primarily focuses on which goals the world should set and achieve by 2030. Bill and Melinda Gates proposed in their annual letter that "the lives of people in poor countries will improve faster in the next 15 years than any other time in history" and that the lives of people in poor countries "will improve more than anyone else's." Sustainable Development Goals, or SDGs, is a United Nations initiative that is intended to be agreed upon by world leaders at the UN General Assembly in September.
SDGs are being directly contrasted with Millennium Development Goals, or MDGs, which the Gates' family strongly supported. SDGs will replace MDGs as several of the eight MDGs have been achieved. MDGs consisted of eight goals with 18 targets while SDGs are proposed to consist of 17 goals with 169 targets.
Many economists are arguing over whether the SDGs have too many goals and targets. Some believe that "having 169 targets is like having no targets at all". I feel that the number of goals should be reduced from 17 to 10. I feel that this makes the SDGs more focusable and marketable. Do you feel that the number of SDGs should be reduced or do you feel that the broader the set of goals and targets, the better?
Friday, January 23, 2015
Google is Becoming a Wireless Carrier
For years, Google has been preparing to offer wireless
mobile service. They currently
design and sell phones online, make the most used mobile software in the world,
and are capable of providing internet service with Google Fiber. However, instead of paying for and
putting up their own cell towers, they will use the networks of Sprint and
T-Mobile to provide their service.
In return, Google is expected to pay $2 per gigabyte to those carriers,
which will still allow them to provide very cheap service. That being said, what would happen to
AT&T and Verizon, who would lose market share and not benefit at all from
Google customers? Another interesting
point in the article: if this happens, will Apple look into providing their own
service with their iPhones?
http://money.cnn.com/2015/01/23/technology/mobile/google-wireless/index.html?iid=HP_River
Quantitative Easing in the Euro Zone
http://www.economist.com/news/finance-and-economics/21640371-policy-will-help-less-so-other-big-economies-better-late
Recently, there has been relatively low demand and falling prices in Europe causing "lowflation". The European Central Bank has tried many things to combat this deflation and low demand, including offering negative interests rates which also did not work. Months had gone by, and the ECB had decided to engage in quantitative easing. They plan on spending roughly 60 billions pounds, or $70 billion, for over two years to flood the money supply. The ECB has hopes that quantitative easing will help their recovery from the double-dip recession they have recently experienced. Their two channels in which QE will work is by the "signalling effect" (signalling to markets and firms to bring inflation closer to 2%) and the exchange rate (their hopes to strengthen the exchange rate since the serious weakening of it last spring). I think that by engaging in QE, the Euro zone could gain a little more strength in their economy and get them back on the upside of their current cycle.
Recently, there has been relatively low demand and falling prices in Europe causing "lowflation". The European Central Bank has tried many things to combat this deflation and low demand, including offering negative interests rates which also did not work. Months had gone by, and the ECB had decided to engage in quantitative easing. They plan on spending roughly 60 billions pounds, or $70 billion, for over two years to flood the money supply. The ECB has hopes that quantitative easing will help their recovery from the double-dip recession they have recently experienced. Their two channels in which QE will work is by the "signalling effect" (signalling to markets and firms to bring inflation closer to 2%) and the exchange rate (their hopes to strengthen the exchange rate since the serious weakening of it last spring). I think that by engaging in QE, the Euro zone could gain a little more strength in their economy and get them back on the upside of their current cycle.
Japan to be year late in hitting inflation target
http://www.bbc.com/news/business-30939747
According to the article, Bank of Japan's Governor expressed his opinion on Japan's goal of reaching 2% inflation would not be able to achived this year. Governor Kuroda thinks one more year is what Japan needs before reaching that level of inflation. One of the reasons for his deduction is the current low oil price that is affecting Japan heavily as the country does not produce any oil by itself but mostly importing. However he believes growth will soon to kick in and discussion about raising wages to match the expected level of price rise should be considered soon.
Japan's trouble in recent years has always been deflation, thus explaining why Shinzo Abe has been continuously trying to weaken the Yen to increase price level. I think the economic depression that happened last year was a surprising big hit to their economy, although I agreed with Shinzo Abe's approach and believe that Japan will soon reach their target of 2% inflation, although it might take longer than what Kuroda has anticipated.
Japan's trouble in recent years has always been deflation, thus explaining why Shinzo Abe has been continuously trying to weaken the Yen to increase price level. I think the economic depression that happened last year was a surprising big hit to their economy, although I agreed with Shinzo Abe's approach and believe that Japan will soon reach their target of 2% inflation, although it might take longer than what Kuroda has anticipated.
Thursday, January 22, 2015
Obama for equity
http://www.economist.com/news/united-states/21640351-barack-obama-tries-set-tone-2016-middle-class-economics
The link above takes you to the article in Economist about Obama's recent exhibition of the intent to bring equity in the American economy. The most striking part of the article discussed what plans President Obama has for the taxation policies. Obama expressed enthusiasm regarding hiking capital gains tax on the top earners and closing a loop-hole which allowed capital gains tax to be avoided when the owner of an asset dies. The tax proceeds from the increased taxation are aimed at tax cuts for people with lesser incomes. Yet, interestingly, Republicans were more concerned about the impact this could have on investment and jobs. I personally think that the tax cut is a great idea and will not impact jobs as significantly as the Republics propose.
The link above takes you to the article in Economist about Obama's recent exhibition of the intent to bring equity in the American economy. The most striking part of the article discussed what plans President Obama has for the taxation policies. Obama expressed enthusiasm regarding hiking capital gains tax on the top earners and closing a loop-hole which allowed capital gains tax to be avoided when the owner of an asset dies. The tax proceeds from the increased taxation are aimed at tax cuts for people with lesser incomes. Yet, interestingly, Republicans were more concerned about the impact this could have on investment and jobs. I personally think that the tax cut is a great idea and will not impact jobs as significantly as the Republics propose.
Wednesday, January 21, 2015
Brazil Raises Interest Rates to Help Curb Inflation
Brazil has increased their interest
with the intention of having an aggressive rate of monetary tightening to stop
high inflation. Bringing down the inflation will allow for more investment to
take place in the country. Brazil’s central bank voted unanimously to increase
the benchmark Selic rate to 12.25%. They
want to bring the 12-month inflation to 4.5% midpoint of the official inflation
range by 2016. However the president administration plans on having many
spending cuts and increases the price of electricity and bus transportation,
which could counteract what the central banks plan is.
http://www.nytimes.com/2015/01/22/business/international/brazil-raises-interest-rates-to-help-curb-inflation.html?src=busln&_r=0
Tuesday, January 20, 2015
What the Frack? The Importance of U.S. Institutions
http://www.foreignaffairs.com/articles/141203/robert-a-hefner-iii/the-united-states-of-gas
The author explains that those countries hoping to replicate the US's "fracking" revolution might be unsuccessful. Not because of the difficulty of developing the technology but, instead, because of certain institutions that are integral to the development of natural resources. The author makes the case that only the US's unique understanding of property rights--in addition to other important institutions-- made the fracking revolution an uniquely American experience.
I think that the author is correct, but what do you think?
The author explains that those countries hoping to replicate the US's "fracking" revolution might be unsuccessful. Not because of the difficulty of developing the technology but, instead, because of certain institutions that are integral to the development of natural resources. The author makes the case that only the US's unique understanding of property rights--in addition to other important institutions-- made the fracking revolution an uniquely American experience.
I think that the author is correct, but what do you think?
Venezuela Poor Keep Faith in Maduro's Subsidies as Oil Plunges
Venezuela continues to feel the negative effects of low oil prices around the World. During the term of Hugh Chavez, oil companies were turned into state owned entities. During this time, Venezuela flourished with the then high prices of oil. The country also spent most of this money leaving little savings. After the death of Chavez, Nicolas Maduro took over and has his hands full with a horrific economic situation. This economic situation has been defined by superinflation, scarcity and uncertainty. Oil currently makes up 97% of Venezuela's hard currency earnings, so it is no surprise the country is suffering the way it is.
In the midst of all of this many have and would blame Maduro, however the poorest citizens of Venezuela are sticking with the president. One reason for their loyalty is Maduro's avoidance of cutting social programs. The country must do something soon to turn it around as they are predicted to default within the next year.
Source: http://www.bloomberg.com/news/2015-01-19/venezuela-poor-keep-faith-in-maduro-s-subsidies-as-oil-plunges.html
In the midst of all of this many have and would blame Maduro, however the poorest citizens of Venezuela are sticking with the president. One reason for their loyalty is Maduro's avoidance of cutting social programs. The country must do something soon to turn it around as they are predicted to default within the next year.
Source: http://www.bloomberg.com/news/2015-01-19/venezuela-poor-keep-faith-in-maduro-s-subsidies-as-oil-plunges.html
New Oxfam report says half of global wealth held by the 1%
http://www.theguardian.com/business/2015/jan/19/global-wealth-oxfam-inequality-davos-economic-summit-switzerland
A new report from Oxfam says that by 2016, 1 percent of the world's population will own more than the other 99 percent. We have noted the importance of income inequality several times in class and this article shows how bad it has become. Income inequality is bad for growth, crime, and governance and it has grown exponentially over the past 20+ years. It is important that world leaders take steps to lessen this inequality or there will be consequences. Oxfam has several suggestions for how to carry this out, including a heavier investment in health and education and higher taxes on corporations and the rich.
Monday, January 19, 2015
Brazil Relying on Taxes to Preserve Credit
http://www.bloomberg.com/news/2015-01-19/brazil-raises-taxes-by-7-5-billion-to-improve-confidence.html
Brazil is implementing a new tax package in hopes of staving off another downgrade in its credit rating. Brazil, the largest economy in Latin America, is currently one level above junk bond rating, per Standard and Poor's. This tax package is an attempt by Levy, the new finance minister, to increase global confidence in the Brazilian government. This tax package is going to impact an already distressed economy. Growth has been relatively slow compared to Latin America, and this trend is forecasted to continue in 2015. Additionally, inflation is a major concern for the country. It is estimated to be at 6.67% in 2015 while growth is forecasted at a meager 0.38%. The bleak economic conditions, paired with the deteriorating credit of the country is a major concern.
Brazil is an interesting case. Its GINI coefficient is 52.7 according to the World Bank in 2012. This is high compared to most other Latin American countries. Will these taxes be at the expense of the poor due to the focus on specific products? Also, the taxes could increase inflation in the short run. The government is not able to focus on price stability due to the lack of credibility it holds in the bond market. Furthermore, will Brazil be able to effectively implement taxes due to high levels of corruption? In Dream Big, Jorge Lemann, a Brazilian investment banker responsible for the acquisition of Burger King and Anheuser-Busch, noted the corruption and uncertainty that permeates the Brazilian economy. Brazil is forced to take strong action during this time of duress.
Brazil is implementing a new tax package in hopes of staving off another downgrade in its credit rating. Brazil, the largest economy in Latin America, is currently one level above junk bond rating, per Standard and Poor's. This tax package is an attempt by Levy, the new finance minister, to increase global confidence in the Brazilian government. This tax package is going to impact an already distressed economy. Growth has been relatively slow compared to Latin America, and this trend is forecasted to continue in 2015. Additionally, inflation is a major concern for the country. It is estimated to be at 6.67% in 2015 while growth is forecasted at a meager 0.38%. The bleak economic conditions, paired with the deteriorating credit of the country is a major concern.
Brazil is an interesting case. Its GINI coefficient is 52.7 according to the World Bank in 2012. This is high compared to most other Latin American countries. Will these taxes be at the expense of the poor due to the focus on specific products? Also, the taxes could increase inflation in the short run. The government is not able to focus on price stability due to the lack of credibility it holds in the bond market. Furthermore, will Brazil be able to effectively implement taxes due to high levels of corruption? In Dream Big, Jorge Lemann, a Brazilian investment banker responsible for the acquisition of Burger King and Anheuser-Busch, noted the corruption and uncertainty that permeates the Brazilian economy. Brazil is forced to take strong action during this time of duress.
Sunday, January 18, 2015
Swiss abandons Euro cap, franc soars
Click Here for article.
The Swiss National Bank made a an erratic move to remove it's price cap for the Euro, which saw the franc go up as high 30% with respect to the Euro since the removal of the cap. This article very well explains the economics of such a removal and the parties affected. As the franc grew strong, foreign products are much cheaper for holders of Swiss francs however this situation is complicated for swiss exporters since their products will be too expensive for foreigners. Importing Swiss products will be very expensive now. Swiss watchmaker Swatch's share has fallen 15% since the removal of the cap, and money other swiss companies will also suffer. Currency broker Alpari also suffered losses after the remover of the cap. But, having said that, the Euro did recover a bit as it went from buying 1.20 francs to 0.8052 francs, and then went up to buy 1.04 francs.
The Swiss National Bank made a an erratic move to remove it's price cap for the Euro, which saw the franc go up as high 30% with respect to the Euro since the removal of the cap. This article very well explains the economics of such a removal and the parties affected. As the franc grew strong, foreign products are much cheaper for holders of Swiss francs however this situation is complicated for swiss exporters since their products will be too expensive for foreigners. Importing Swiss products will be very expensive now. Swiss watchmaker Swatch's share has fallen 15% since the removal of the cap, and money other swiss companies will also suffer. Currency broker Alpari also suffered losses after the remover of the cap. But, having said that, the Euro did recover a bit as it went from buying 1.20 francs to 0.8052 francs, and then went up to buy 1.04 francs.
Russia's Struggling Economy
http://www.economist.com/news/europe/21639557-russian-economy-will-take-long-time-recover-it-badly-needs-structural-reforms-it
Within the first two weeks of the New Year Russia struggled as “the rouble fell by 17.5% against the dollar” and oil, their main export, prices dropped. This drop in oil will potentially cause the real income to decline due and take over 10% off of the budget. Russian money reserves may only last a year in a half if this situation persist; Russians have also began to loose hope in the rouble and withdrew deposits. There is a lot of pressure for the rouble because of foreign currency markets and liquidity within banks. Recovery from the failing rouble will be slow because of the lack of resources and weak institutions within the country. In the past, there has been growth within the county but now to move forward Russia must restructure and the economy.
Saturday, January 17, 2015
Deflation in the US?
http://econ.st/1DIqLOT
An article in Espresso by the Economist commented on possible deflation occurring in the American economy with the now lower prices of fuel. I believe that some deflation is necessary and will give the overall economy more of a boost to grow growth and stabilize prices, possibly allowing more production to happen with less cost and increasing demand.
However, the article is right to point out that extended periods of deflation are bad because they cause consumers to hold off spending, anticipating lower prices. I think that lower prices in the short run is what is needed in order to keep things affordable in the marketplace, but that's just me.
Friday, January 16, 2015
Brazilian Central Banker Escapes Justice
http://www.bloomberg.com/news/2015-01-14/the-talented-mr-youssef-brazil-s-black-market-central-banker.html
Corruption has allowed many politicians, CEOs and more get away with breaking the law.
On a different note, Brazil suffers environmentally and cruelly mistreats their natives for the sake of economic growth.
Tuesday, January 13, 2015
Indonesia might become the largest economy of Southeast Asia
http://www.bloomberg.com/news/2015-01-13/indonesia-tops-southeast-asia-luring-new-factories-survey-shows.html
By 2019, Indonesia will have 59 manufacturing plants set up, a 68% increase and this will lead Indonesia to surpass Malaysia and Thailand.
Indonesia is a mixed economy and revitalizing the economy has been one of the goals of the new Indonesian President Joko Widodo.
The President has been restructuring the fuel subsidies to increase budget for infrastructure, which should boost the economy. The government is also planning on starting a land bank to accelerate infrastructure projects.The Jakarta Composite Index (JCI) has also increased by 3% since the inauguration of the new President.
The British Chamber of Commerce predicts that investments in Indonesia will rise by 15% and the government will also cut permit procedures to make global trade easier.
By 2019, Indonesia will have 59 manufacturing plants set up, a 68% increase and this will lead Indonesia to surpass Malaysia and Thailand.
Indonesia is a mixed economy and revitalizing the economy has been one of the goals of the new Indonesian President Joko Widodo.
The President has been restructuring the fuel subsidies to increase budget for infrastructure, which should boost the economy. The government is also planning on starting a land bank to accelerate infrastructure projects.The Jakarta Composite Index (JCI) has also increased by 3% since the inauguration of the new President.
The British Chamber of Commerce predicts that investments in Indonesia will rise by 15% and the government will also cut permit procedures to make global trade easier.
Friday, May 2, 2014
China's Transition
http://www.economist.com/news/china/21601564-leaders-discover-some-transparency-can-help-make-society-more-stable-right-know
This is the best example of a change in the Chinese economic system. An opening up of the system will help economists better judge and make predictions for the economy. People can study the real story of China better and understand the economic system of China.
This is the best example of a change in the Chinese economic system. An opening up of the system will help economists better judge and make predictions for the economy. People can study the real story of China better and understand the economic system of China.
Thursday, May 1, 2014
Age Invaders
http://www.economist.com/news/briefing/21601248-generation-old-people-about-change-global-economy-they-will-not-all-do-so
The article by the economist talks about the shift in the demographics that will happened around the world in 25 years. This is a widely discussed topic today and economists say that the entire global politics will have to change in order to adjust for these changes. The authors talks about three channels through which the demography influences the economy: changes in the size of the workforce, changes in the rate of productivity growth, and changes in the pattern of saving. By examining those three channels we can estimate how the economy will shape up in the future. The trend shows that there are more workers in the labor force past the age of 65 today. This means that the new policies either extended retirement age or cut back on the supply of pensions. There is also a discussion of privatizing Social Security, which posses both opportunities and threats.
I would be interested to see what solutions do you have to resolve a problem that we will all face in not so distant future.
The article by the economist talks about the shift in the demographics that will happened around the world in 25 years. This is a widely discussed topic today and economists say that the entire global politics will have to change in order to adjust for these changes. The authors talks about three channels through which the demography influences the economy: changes in the size of the workforce, changes in the rate of productivity growth, and changes in the pattern of saving. By examining those three channels we can estimate how the economy will shape up in the future. The trend shows that there are more workers in the labor force past the age of 65 today. This means that the new policies either extended retirement age or cut back on the supply of pensions. There is also a discussion of privatizing Social Security, which posses both opportunities and threats.
I would be interested to see what solutions do you have to resolve a problem that we will all face in not so distant future.
Tuesday, April 29, 2014
Twitter Offers Investors Silver Lining but No Rainbow
http://www.forbes.com/sites/jeffbercovici/2014/04/29/twitter-offers-investors-silver-linings-but-no-rainbow/
Twitter has been struggling in the 6 months since it became a public company, not because it is not doing well but because there has not been enough user growth. More and more advertisers are signing on, but user growth is relatively stagnant. Instagram and Whatsapp have both surpassed Twitter in the amount of users. However, the company and investors are still holding out hope that growth will increase and the company will continue to do well based on its business model.
Twitter has been struggling in the 6 months since it became a public company, not because it is not doing well but because there has not been enough user growth. More and more advertisers are signing on, but user growth is relatively stagnant. Instagram and Whatsapp have both surpassed Twitter in the amount of users. However, the company and investors are still holding out hope that growth will increase and the company will continue to do well based on its business model.
Monday, April 28, 2014
A Billion Shades of Grey
Focusing on the increasing aged population, this article looks at the old population as they continue to participate within the work force well into retirement years. 65% of well-educated older american workers are working significantly longer period than their only high-school degree counterparts 32%. By working into their retirement, older educated workers are able to reap the rewards from their skill for much longer, increasing their savings for a future period or to give through inheritance. This will contribute to inequality as that inheritance gets passed down. Over the next 20 years the population of 60 year olds will double and will mean many more people collecting pensions, while the higher educated work force will be able to increase the productivity, this will hurt other countries with high population of uneducated workforce like China. Technological advance will allow for more skill from the older population, requiring less physical work to be done and more mentally based. This differs from manual labor which become more difficult as the body ages.
A Billion Shades of Grey
A Billion Shades of Grey
Comcast to shed 3.9 Million Subscribers
As most people know, for the past several months, the cable company Comcast has been attempting to purchase Time Warner Cable. Doing so would increase Comcast subscription numbers by 50%, and also narrow down what few cable options you have. Comcast has argued that its purchase would not limit cable options since Comcast and TWC provide services in different places. However, it does not seem so with this latest move. It sounds horrific that Comcast is going to simply trade consumers with another firm. I think this really shows the signs that Comcast has obtained or already had a monopoly over digital cable.
http://www.reuters.com/article/2014/04/28/us-charter-communi-comcast-idUSBREA3R0N620140428
http://www.reuters.com/article/2014/04/28/us-charter-communi-comcast-idUSBREA3R0N620140428
The New Censors of Hanoi
The article mentioned how the artists, authors in the north of Vietnam has been giving up on their ideas for a 'compensation' of material stuffs.
This is a common way to deal with defiant minds in socialism, when the government either make a 'buy out' incentive or punishment incentive. However, the fact that artists can make a deal with the government may mean that the condition is still 'live-able'. Even the media is controlled by the government, people are still aware of what is going on, the corruption in the parties' member, the political fight, or the nepotism.
And interestingly, to the author, it seems to happen only in Hanoi, instead of the whole nation.
http://www.nytimes.com/2014/04/28/opinion/the-new-censors-of-hanoi.html?ref=opinion
This is a common way to deal with defiant minds in socialism, when the government either make a 'buy out' incentive or punishment incentive. However, the fact that artists can make a deal with the government may mean that the condition is still 'live-able'. Even the media is controlled by the government, people are still aware of what is going on, the corruption in the parties' member, the political fight, or the nepotism.
And interestingly, to the author, it seems to happen only in Hanoi, instead of the whole nation.
http://www.nytimes.com/2014/04/28/opinion/the-new-censors-of-hanoi.html?ref=opinion
U.S. - Japan Trade Talks
U.S. - Japan trade talks yielded no major breakthroughs this past Thursday,spelling trouble for the Trans-Pacific Free Trade Agreement. The latest hangups are Japan wanting to protect its agricultural sector, and the U.S. wants to protect U.S. automakers from Japanese competition. While several rounds of negotiations over a couple of years have ensued with no major gains, these talks have the potential to import quotas and lower tariffs and open Pacific Industries in the U.S.
http://money.cnn.com/2014/04/24/news/economy/obama-tpp-trade/index.html?iid=SF_E_River
http://money.cnn.com/2014/04/24/news/economy/obama-tpp-trade/index.html?iid=SF_E_River
Recovery in the Job Market
This article points to research done by the National Employment Law Project that indicates that a greater number of jobs in middle- and high-paying industries were lost than low-wage jobs during the recession, but the greatest job growth in the economic recovery has happened in low-wage industries. In particular, fast food restaurants and strip malls have been hiring at a much higher rate than law firms and health care industries.
With a shrinking middle class that has lost its traditional manufacturing base, economists are worried about a greater stratification of classes and higher income inequality. Some recommend raising the minimum wage, a policy that has been opposed by many Republicans and business owners. Others suggest a need to vamp other social safety programs in order to support low-wage workers and reduce income inequality. Others are wondering what the middle class will look like if jobs continue to be created in low-wage industries and if high-wage industries catch up in job creation.
http://www.nytimes.com/2014/04/28/business/economy/recovery-has-created-far-more-low-wage-jobs-than-better-paid-ones.html?hp&_r=0
With a shrinking middle class that has lost its traditional manufacturing base, economists are worried about a greater stratification of classes and higher income inequality. Some recommend raising the minimum wage, a policy that has been opposed by many Republicans and business owners. Others suggest a need to vamp other social safety programs in order to support low-wage workers and reduce income inequality. Others are wondering what the middle class will look like if jobs continue to be created in low-wage industries and if high-wage industries catch up in job creation.
http://www.nytimes.com/2014/04/28/business/economy/recovery-has-created-far-more-low-wage-jobs-than-better-paid-ones.html?hp&_r=0
Sunday, April 27, 2014
Ambitious New PM Forges Ahead Against Corruption, Towards Bridge Building
The Serbian National Assembly has just approved former First Deputy PM Aleksandar Vučić as the country's new Prime Minister. Vučić has a storied political history, particularly with respect to tabling his nationalism in favor of stronger ties with the European Union. As with many aspiring new members, the EU imposes requirements on potential new member nations to improve their stability, especially prior to joining the monetary union. Vučić's approach to this seems sufficiently fresh: in a bombastic speech to the assembly, the new Prime Minister declared that they shall sleep and eat in the parliament building until market-oriented reforms are passed by a July deadline. Since Vučić seems to still enjoy majority support, his term may yield a new approach for how war-torn transition economies fare.
Warren Buffett Calls Out Coke's 'Excessive' Executive Pay Plan
The renowned investor, Warren Buffett, the owner of Berkshire Hathaway is the largest share owner in Coca Cola's stock (KO). Recently, Coke's Chairman and CEO Muhtar Kent presented an equity plan at the company's annual shareholder meeting this past Wednesday. This has been a very controversial plan, but Muhtar Kent maintains the pay-for-performance plan is in line with the company's goals. Warren Buffett was not convinced by Coke's CEO and abstained from voting at the annual shareholder meeting. Hedge fund manager David Winters argued the plan will dilute Coke's existing shareholder value by 14.2%. The plan based on one equity investment will award executives with $13 billion over four years, which Winters claims will be taken from shareholders. The fundamental purpose for firms in capitalism is to maximize shareholder wealth, but it appears this plan might not accomplish this goal. On April 23, 2014 Coke's equity plan passed without Buffett's vote. There was much discussion about Buffett's decision to abstain from voting. He did not agree with the plan, but instead of voting against it he abstained. I believe that he assumed the plan would pass even if he voted against the equity plan. However, if he did vote against the plan, Coke investors would likely overreact and possible sell the stock which would drive down share price, thus decreasing Mr. Buffett's profitability. By abstaining, he made it clear to Coke's executives that he did not agree with the equity plan, but did not cause a panicked sell-off of shares. A great tactical move by Mr. Buffett, but the fact remains for Coke its largest share owner does not exactly see "eye-to-eye" with the executive team and could create potential problems considering how significant Mr. Buffett's actions have on the market.
http://www.insidecounsel.com/2014/04/25/warren-buffett-calls-out-cokes-excessive-executive
http://www.insidecounsel.com/2014/04/25/warren-buffett-calls-out-cokes-excessive-executive
Another BRIC out of the wall?
http://www.economist.com/blogs/buttonwood/2014/03/emerging-markets?zid=295&ah=0bca374e65f2354d553956ea65f756e0
This article discusses the potential future of Russian economy. In 2001 Russia has been included to the list of BRIC countries (Brazil, Russia, India and China) as he emerging markets with a lot of importance for the global economic community. Russia has shown the best performance out of the four countries, primarily due to the commodity boom.
The chain of recent events with Ukraine have significantly damaged Russia's position in the world and its future forecast. Foreign investors, who were very enthusiastic about Russia's growth, have voiced their concerns with sanctions having negative effect on Russia's economy. Foreign investment is declining and will continue to until the situation is resolved. Forecast predict Russian economy to grow 1% in 2014 and 2% in 2015.
This article discusses the potential future of Russian economy. In 2001 Russia has been included to the list of BRIC countries (Brazil, Russia, India and China) as he emerging markets with a lot of importance for the global economic community. Russia has shown the best performance out of the four countries, primarily due to the commodity boom.
The chain of recent events with Ukraine have significantly damaged Russia's position in the world and its future forecast. Foreign investors, who were very enthusiastic about Russia's growth, have voiced their concerns with sanctions having negative effect on Russia's economy. Foreign investment is declining and will continue to until the situation is resolved. Forecast predict Russian economy to grow 1% in 2014 and 2% in 2015.
Rebirth of America's dead factories
There is a resurgence for manufacturing factories in the
U.S. The article quotes the president of Industrial Reality Group Stuart
Lichter, “Demand for closed factories has picked up since the recession”. International
firms have also dramatically shifted their production to the U.S. as a way to
grow their business and cut costs. This is interesting since the norm for the
past decade or so for international business has been to use Chinese factories
as a hub for manufacturing, not the other way around. This may be positive for
the U.S. overall by creating new jobs and rejuvenating idle assets, as there
are thousands of closed factories, industrial plants and military bases that
have been idle for many years. If manufacturing begins to boom in the U.S. this
may change details of our economic situation in many ways.
Many low-wage workers not protected by minimum wage
http://money.cnn.com/2014/04/23/smallbusiness/minimum-wage-exemptions/index.html?iid=SF_E_River
Recently, President Obama has proposed raising the country's minimum wage rate. The writer looks at the unfortunante group who will not recieve any benifit from the wage increase because certain rules make them exempt from receiving minimum wage.
Here are some examples of people who do not have to receive minimum wage:
Recently, President Obama has proposed raising the country's minimum wage rate. The writer looks at the unfortunante group who will not recieve any benifit from the wage increase because certain rules make them exempt from receiving minimum wage.
Here are some examples of people who do not have to receive minimum wage:
- Disabled workers
- People who work for very small businesses
- Teenage trainees
- Tipped workers
- Home care aids
- delivery people
China's Enticing Attempt
It seems very converse to think that Chinese population hardly contributes to their own economy, but this is the truth. Except for in major cities like Beijing, Shanghai, Guangzhour and Shenzhen, Deng Hong is beginning to implement infrastructure that promotes further spending. He aims to slightly reverse the trend of saving in China to incorporate slightly more spending. They recently build the Global Centre which is a meant to symbolize consumption - an increasingly essential ingredient of China's economic development, according to the article. But this article suggests that these are only small steps that China is going to. They prescribe further measures that China should be taking for the country to really take off economically. While these policy prescriptions could easily aid the country, what does this mean for the United States in term of economic power? How will this effect the international system?
http://www.economist.com/news/special-report/21600801-chinese-consumers-are-spending-plenty-they-could-do-even-better-billion-shoppers
http://www.economist.com/news/special-report/21600801-chinese-consumers-are-spending-plenty-they-could-do-even-better-billion-shoppers
Thursday, April 24, 2014
Sluggish Economic Recovery Proves Resilient
According
to the article, the U.S. economy began expanding in June 2009, and after 58
months, the recovery is one of the most sluggish, based on the high
unemployment and low GDP growth rates.
Economists and politicians offer numerous
explanations for the slow recovery. Republicans blamed Democrats for tax
increases, debt and regulations, that have added uncertainty to the economy
while Democrats blame Republicans for withholding support for stimulus spending
when the economy needs a boost and brinkmanship during fiscal battles.
Some
economists attribute the unusually weak growth to the continuing effects of the
financial crisis as these crises historically generated long-lasting drags on
financial conditions. Others say that that the labor force and productivity are
growing slowly while consumption and savings are reduced compared to the past.
At the same time, some policy makers are concerned about the instabilities of
the Fed.
On
the other hand, it is believed that a typical recession remains distant because
if boom must precede bust, no bust is in sight since growth has been so slow.
At
least, we should not be worried for now as it looks like the economy is still
growing and another recession seems far away.
http://online.wsj.com/news/articles/SB10001424052702304626304579510070088630140?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304626304579510070088630140.html
Anti-Corruption Group Finds Fault With European Union
Transparency International, a prominent anti-corruption group, is prepared to announce a 250 page report about corruption in the European Union. Some of the findings included in this report are that the Parliament was accepting money for softening tobacco legislation and a form of lawmaking that is done behind closed doors called trilogues, which are not able to be subject to much public scrutiny. Transparency International is calling for a "legislative footprint,"disclosing all input received from lobbyists when making legislation. It is also being recommended that they establish a European Public Prosecutor.
http://www.nytimes.com/2014/04/24/business/international/anti-corruption-group-finds-fault-with-european-union.html?ref=international&_r=0
http://www.nytimes.com/2014/04/24/business/international/anti-corruption-group-finds-fault-with-european-union.html?ref=international&_r=0
Wednesday, April 23, 2014
Korea vs. U.S.: Executive salary gap
The companies recently reported on the annual salaries paid to these executives based on laws calling for disclosure for those who are registered on the corporate board and receiving 500 million won ($481,000) or more.
Most of the population seemed to think that these executives were getting paid too much.
Out of the 200, the average pay package of the highest-paid 20 executives reached $22.71 million.
Back in Korea, the highest-paid 20 executives out of the 640 who were obligated to reveal their salaries were found to be receiving an average 8.44 billion won.
This shows that the U.S. executives were paid about three times the amount of their Korean counterparts.
Among the U.S. companies, 200 executives were paid more than $2 million annually. Their pay packages included not only monthly salaries, but bonuses and stock options as well.
http://www.koreaherald.com/view.php?ud=20140414001165
Powdered Alcohol - Good or Ridiculous?
The federal government recently approved the sell of powdered alcohol by a company called Palcohol. The founder of Palcohol was inspired to come up with an alcohol pack during activities like hiking and camping without having to carry heavy bottles of wine, beer or spirits. One package weighs about an ounce and is small enough to fit into any pocket. When used as directed, the consumer adds five ounces of liquid to the powder, creating a beverage equal to a standard mixed drink. There are several versions to pick from such as distilled vodka, cosmopolitan, mojito, etc.
The company expects Palcohol to be on sale this fall.
Note: snorting alcohol powder is bad idea...
New-home sales tumble in March; prices rise
The spring home-buying season has not started out so well. Single
family home sales dropped 14.5% from February to march, this came as a surprise
as economist predicted an increase after February. Some economists blame this
winter’s crazy weather but others noted the current high prices and high
mortgage rates. The economy is still
recovering, so it will be interesting to see how this plays out in the future.
Tuesday, April 22, 2014
Judges May Overturn Decision on Two Former Traders
http://dealbook.nytimes.com/2014/04/22/appeals-court-raises-doubts-about-governments-insider-trading-case/?_php=true&_type=blogs&_r=0
This article discusses a trial in the United States Court of Appeals between two former hedge fund traders, Todd Newman and Anthony Chiasson, and the government. The Court of Appeals has said to be questioning "whether the judge in the trail erred she instructing jurors". There was an hourlong hearing, including a three judge panel, that hinted that the decision might be overturned. This article outlines the hearing and discusses whether the Wall Street crackdowns are truthful. Mr. Bharara has had a sweeping campaign as a United States attorney to eliminate insider trading on Wall Street. Mr. Bharara's perfect record (80 insider trading convictions without a single defeat) is now in jeopardy.
The article not only discusses what went on in the hearing with Mr. Bharara, but states that "a judicial chiding here or there will not slow his momentum, and legal experts said the appellate court could very well uphold the insider trading convictions, A reversal, however, might undercut one of his greatest achievements".
The outcome of this appeal will be very influential on Wall Street and for Mr. Bharara's reputation.
This article discusses a trial in the United States Court of Appeals between two former hedge fund traders, Todd Newman and Anthony Chiasson, and the government. The Court of Appeals has said to be questioning "whether the judge in the trail erred she instructing jurors". There was an hourlong hearing, including a three judge panel, that hinted that the decision might be overturned. This article outlines the hearing and discusses whether the Wall Street crackdowns are truthful. Mr. Bharara has had a sweeping campaign as a United States attorney to eliminate insider trading on Wall Street. Mr. Bharara's perfect record (80 insider trading convictions without a single defeat) is now in jeopardy.
The article not only discusses what went on in the hearing with Mr. Bharara, but states that "a judicial chiding here or there will not slow his momentum, and legal experts said the appellate court could very well uphold the insider trading convictions, A reversal, however, might undercut one of his greatest achievements".
The outcome of this appeal will be very influential on Wall Street and for Mr. Bharara's reputation.
Monday, April 21, 2014
Money From Nothing
Chronic deflation may keep Bitcoin from displacing its fiat rivals
This article examines the bitcoin, its growth (from $490 million to $7.9 billion) over the last year, and its status as a "real" form of money. It views the success and allure of the bitcoin by looking at its capability to be: a unit of account, a medium of exchange, and a store of value--the three characteristics that define "money."
The article argues it is best used as a medium of exchange, as it can be quickly and cheaply transferred across the globe in exchange for goods, services, or other currencies. The author questions its stability as a store of value, considering a major recent heist of nearly 6% of outstanding bitcoins from the Mt. Gox exchange. Also, the author doubts the bitcoin's chances at being a unit of account, based on volatile values and people's tendencies to view bitcoins in terms of dollars or euros, instead of having its own intrinsic value. In conclusion, the article views the eventual capping at 21 million units as a method to deter constant central bank meddling with the currency. It also discusses that natural inflation is good for money and that the future of the bitcoin will undoubtedly be very interesting.
This article examines the bitcoin, its growth (from $490 million to $7.9 billion) over the last year, and its status as a "real" form of money. It views the success and allure of the bitcoin by looking at its capability to be: a unit of account, a medium of exchange, and a store of value--the three characteristics that define "money."
The article argues it is best used as a medium of exchange, as it can be quickly and cheaply transferred across the globe in exchange for goods, services, or other currencies. The author questions its stability as a store of value, considering a major recent heist of nearly 6% of outstanding bitcoins from the Mt. Gox exchange. Also, the author doubts the bitcoin's chances at being a unit of account, based on volatile values and people's tendencies to view bitcoins in terms of dollars or euros, instead of having its own intrinsic value. In conclusion, the article views the eventual capping at 21 million units as a method to deter constant central bank meddling with the currency. It also discusses that natural inflation is good for money and that the future of the bitcoin will undoubtedly be very interesting.
The fuel of the future, unfortunately
http://www.economist.com/news/business/21600987-cheap-ubiquitous-and-flexible-fuel-just-one-problem-fuel-future
Coal may be dirty and have numerous environmental costs such as increased emissions of Carbon Dioxide and sulfur dioxide. Coal mines are also known to be very dangerous places to work. Despite the numerous problems associated with coal, it is still a crucial source of energy and economic output in many nations and may prove to be beneficial for developing countries that less focused on the environment. The coal industry is one that is truly consumer friendly because its prices are not determined by cartels.
America's Shale-gas boom has had an effect on coal production in the U.S. Duke Energy and AEP have both shut down coal-fired plants. Still, The Federal Energy Information Administration predicts that the U.S. will still be generation 22% of its electricity from coal in 2040, which is only a 4% decrease from current output. Another effect on the coal industry from America's Shale-gas boom is that coal prices have significantly decreased, and much more coal is now being exported. Coal companies are becoming increasingly concerned that their decreasing revenue will soon not be able to cover the high cost of capital and production in the coal industry.
Coal may be dirty and have numerous environmental costs such as increased emissions of Carbon Dioxide and sulfur dioxide. Coal mines are also known to be very dangerous places to work. Despite the numerous problems associated with coal, it is still a crucial source of energy and economic output in many nations and may prove to be beneficial for developing countries that less focused on the environment. The coal industry is one that is truly consumer friendly because its prices are not determined by cartels.
America's Shale-gas boom has had an effect on coal production in the U.S. Duke Energy and AEP have both shut down coal-fired plants. Still, The Federal Energy Information Administration predicts that the U.S. will still be generation 22% of its electricity from coal in 2040, which is only a 4% decrease from current output. Another effect on the coal industry from America's Shale-gas boom is that coal prices have significantly decreased, and much more coal is now being exported. Coal companies are becoming increasingly concerned that their decreasing revenue will soon not be able to cover the high cost of capital and production in the coal industry.
The Cost of Closure- Malaysian Flight 370
The ongoing search for answers in the case of the missing Malaysian flight 370 is far from over. The families of the 239 passengers are attempting to keep up hope, but searching at least for answers and closure. The search has been ongoing for 44 days and little concrete information has been offered up. Officials have decided to prolong the search and rescue efforts which could cost an estimated quarter of a billion dollars (US). This cost estimate includes the use of various underwater search drones, currently out on their eight mission for information.
With the month long battery lifespan of the black pinging boxes over, there are increased research and development efforts to create new black boxes whose batteries could last up to 3 months. No matter the cost, lives and answers are the primary concern.
With the month long battery lifespan of the black pinging boxes over, there are increased research and development efforts to create new black boxes whose batteries could last up to 3 months. No matter the cost, lives and answers are the primary concern.
Sub-Saharan Africans Pay Twice as Much to Send Money Home
Compared to Latin America and Southeast Asia, Africa pays twice as much to send money home. Transactions fees cost $1.8 billion annually. This is due to the decrease of transactions costs in Latin America and Southeast Asia but in Sub-Saharan Africa the costs have stayed the same. It is ridiculous that the poorest people in the world are paying the highest price. But the expatriates have no other choice, they must send money home. The Oversees Development Institute calls for better regulation of money transfers and banks, blaming the high fees on the lack of competition. Western union, who makes up a high amount of the remittance transfers says there is not way around the fees.
http://america.aljazeera.com/articles/2014/4/17/african-remittanceseconomy.html
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