The Restructuring of Rusal Saving the Oligarchs

This article discusses Putin's relationship with the Oligarchs of Rusal, a large aluminum company. The relationship has recently changes and now the Oligarchs are working with Putin and the relationship is much less adversarial then it was a few years ago.

In Speech, Obama Calls Jobs Report a ‘Hopeful Sign’

President Obama said that the American economy had lost only 11,000 jobs in November, less than expected. However, Mr. Obama warned everyone saying that “we have a lot more work to do before we can celebrate.” The author of this article also mentioned that Mr. Obama is under pressure from Democrats who push him to take new steps to promote job creation. “The White House says he will address the issue in detail on Tuesday, and in speech at Lehigh Carbon Community College here on Friday, the president made no specific promises.” In addition, Mr. Obama noted that even though the economy is growing, many companies are still reluctant to hire.

Management Shake-Up Continues at GM

As we have talked about in class, General Motors continues to struggle to become profitable again, even after receiving government bailout money. Fritz Henderson, GM's chief executive, was ousted on Tuesday, and other shakeups followed. New presidents have been appointed to various regions, and the marketing and sales divisions are being recombined.

Last month, GM reported a loss of $1.2 billion but positive cash flows for the third quarter. A public stock offering is planned for 2010 or 2011.

The swiftness of changes within GM is surprising, given the traditional sluggish response that has characterized the automaker. Will it be enough to get GM on the path to profitability again, though?

Iran seeks to boost gasoline production capacity

Iran is the world 5th largest oil exporter and it is issuing bonds worth $250 million to help in financing the production of gasoline. There will be an annual interest of 15.5 percent. The issue of bond will help them in their imports like import of natural gas. as there have been sanctions on Iran by the U.S. The Iranian government approved a plan to issue bonds worth $2.2 million to help finance priority development projects.

Putin talks of possible return to presidency

Prime Minister Vladimir Putin sent his strongest signal yet Thursday that he plans to return to Russia's presidency in 2012. Although his words were short of an outright declaration, the fact that he would admit to considering a run underlined his steely ambition. There is almost no doubt Putin would win because of his genuine popularity and the overwhelming political dominance of his United Russia party. Putin said Russia has "overcome the peak of the economic crisis" and claimed credit for softening its impact. He added the government will have to spend more money to support the economy in the meantime as Russia continues to weather its worst economic downturn in a decade as commodities prices collapsed late last year. But it emerged from the recession in the third quarter, its GDP rising by a seasonally adjusted 0.6 percent.his industrialization drive and World War II victory, but he denounced the massive repression of that era. He accused former billionaire oil tycoon Mikhail Khodorkovsky and other top shareholders in the Yukos oil company of ordering the killings of opponents and commercial rivals. Khodorkovsky, once Russia's richest man, is serving an eight-year sentence on fraud and tax evasion charges widely seen as a punishment for challenging Putin. Putin also accused Washington of hampering Russia's accession into the World Trade Organization

Indian Shares End Up on Strong GDP Data

This article discusses some of the current trends in India's economy. Economic growth has been stronger than expected. Due to this, confidence has grown, and shares have risen. In fact, GDP in India has grew 7.9% in the last year, due to an increase in manufacturing. A large part of this manufacturing has been in the metals industry. Markets for metals such as aluminum and steel are significantly gaining. Many other indicating factors, such as the number of cellphone subscribers and the strength of banks have also been appreciating. I think this article can help shed light on what is currently happening in India while we are studying the country's economic system.

Facebook Must Woo Investors Before Any IPO

This article discusses how social networking leader, Facebook, has created a dual-class stock structure as they move closer to completing the company's plan to sell shares to the public. However, many investors have concerns because there is no sustainable model that looks great for social networking. Previous leaders, MySpace and Friendster, have almost completely lost their allure. So will Facebook follow the pattern or will they somehow continue their superiority? Nonetheless, in September the company announced it was cash-flow positive and on track to generate $500 million in revenue in 2009. These revelations did subside concerns that Facebook lacks a business model. Just think, one day you may own shares to the site that is solely responsible for many hours of procrastinating....

Comcast Aims to Reshape Entertainment with NBC

Comcast recently announced plans to buy a majority of the NBC stock, giving them control over NBC company and the television stations and movie studios that it owns. While there may be some initial benefits in this for consumers, like quicker releases of movies to TV or faster TV on cell phones, many worry that Comcast is gaining too much power and is becoming a media conglomerate. Consumers could see higher prices and fewer choices with media becoming further concentrated due to this Comcast purchase.

GE, Comcast Announce Joint Deal

This article describes what will be the new ownership of the media company NBC Universal. General Electric is purchasing the shares in the company previously held by Viviendi, and it will lead to the company being owned 51% by Comcast, and 49% by General Electric. The deal will make NBC Universal much more valuable after its completion, because they will be combining their cable networks with Comcast. Since NBC Universal has been on a downward spiral in the last few years after a profitable decade in the 1990s, they are hoping this may turn things around.

Venezuela's Anti-Capitalist Cars: Wheels of Revolution

President Hugo Chavez of Venezuela has proclaimed that the Venezuelan workers are now free of the 'yoke of capitalism.' This comes from the joint venture of automobile manufacturing between Iran and Venezuela. President Chavez intends for this venture to be an example of socialist production principles. The only claims that support this anti-capitalist sentiment is the fact the autos are priced around 50 percent less than rivals. There is also no dealership facilities or credit facilities for citizens of Venezuela to go and purchase these automobiles. The only way to get one is if President Chavez orders them for public employees.

US gold hits record $1,218.40 on investment demand

Yet again gold prices have hit an all time high of $1,218.40 per ounce, as a result of an increase in demand for a currency hedge.

The result of the growth in gold prices could be blamed upon the strength of the US dollar, as well as on heavy buying by hedge funds and other gold investment products.

The range of gold prices between the last price and today's price is: $1,196.50 to $1,218.40.

The price of Silver increased too. The range is between: $19.10 to $19.47

Platinum was another metal that rose to all time high of $1,510.50 per ounce.

Another metal that rose was Palladium. It is currently worth $393.05 per ounce.

Its amazing to see the price fluctuations in global markets as well as the continuous flickering of gold and other precious metal prices.

I have been using a site to further see these fluctuations in greater detail. If anyone is interested, check out: www.netdania.com

Are You Too Late for the Junk-Bond Party?

Every once in a while, people don't just invest in an asset; they swarm it.

That's what has been happening to junk bonds. Goaded by the monstrous returns on junk—53% this year—and the miserable yields on cash, investors have put well over $20 billion into high-yield bond funds in 2009.

"The inflow of funds has been phenomenal," says Daniel Fuss, manager of the $18.5 billion Loomis Sayles Bond Fund. "I have not seen a rally like this, ever, in the high-yield market." Mr. Fuss bought his first junk bonds more than 40 years ago.

As they so often do, investors are piling in even as the party may be starting to wind down.

There have been plenty of reasons to party. A year ago, in the depths of the financial crisis, the bonds of below-investment-grade companies traded at an average of only 61 cents on the dollar, about as cheap as they have ever been

Stocks slip on concerns about holiday spending

NEW YORK (Reuters) - U.S. stocks declined moderately on Monday as weak data on holiday retail sales prompted questions about the consumer's ability to spend. The S&P Retail index (Chicago Options:^RLX - News) fell 1.3 percent after the National Retail Federation said that total Black Friday holiday spending was down from last year, suggesting that consumers were still reluctant to spend. "So far, the numbers don't look very strong," said Bruce Bittles, chief investment strategist at Robert W. Baird & Co in Nashville.

Wall St. Wanders as It Tries to Gauge Dubai Fallout

Wall Street shares fluctuated on Monday as investors gauged the fallout from Dubai’s debt crisis and weighed results from the first weekend of holiday shopping. The sales on the weekend after Thanksgiving provided a first snapshot of consumer spending for the holidays. Some 195 million people visited stores and shopped online over the weekend, up from 172 million last year, the National Retail Federation reported on Sunday. But total spending was virtually unchanged at $41.2 billion, and the average shopper spending fell to $343.31 a person, from $372.57 a year ago.

The Chinese Disconnect

The value of Chinese currency is not determined by supply and demand. The government controls the value by buying or selling Chinese currencies in the foreign exchange market. By keeping a fixed exchange rate with the dollar, China is able to maintain a huge trade surplus. This is not a good policy during the depression now. Because Chinese goods become so cheap that other countries have difficulties in competing with China. In other word, Chinese currency policy hammers growth in other countries.

Upstart Chinese Telecom Company Rattles Industry as It Rises to No. 2

In this article, Kevin O'Brien talks about Chinese telecom company winning an important contract in Scandinavia, battling such competitors as Ericsson and Nokia. According to O'Brien, the company has won acclaims for its innovation, competence, and low cost structure. As a result, currently it has one of the highest sales in the industry and continues to gain market share.

This article is very interesting since it shows how innovation is possible in an economy, which is not fully market-based. It also shows how China successfully goes through transition allowing for enough freedom for companies to innovate.

Down in the dumps

This article talks about general problems in the ex-communist economies . The author states that almost half of the citizens in those countries still feel that they had been better off in 1989 than now. In addition, according to the author "east Europeans face higher taxes, bigger debts, less public spending, lower pay and fewer jobs"; in the meantime, they do not have the same shock-absorbers as in the west.

Debate on Creating Jobs, Without Raising Deficit

President Obama has decided to shift his focus from health care to the growing unemployment problem the United States is currently facing. The Obama Administration is under increasing pressure from lobbyists to increase stimulus funding for those unemployed. However they are also facing pressure from government organizations to cut spending and get the federal budget under control. More and more people, including Republican representatives, are asking 'where are the jobs?' It will be interesting to see if the Obama Administration will be able to create jobs for the unemployed while curtailing government spending.

Austerity has helped Hungary to survive the recession—so far

For those who have read "Globalization and Its Discontents," this article would be a very good example of the IMF policies. In summary, it talks about cutting the government spending as a measure of combating recession in Hungary. Such an approach, contractionary in its nature, may seem very controversial. However, everything becomes clear, when the author mentions the IMF loan and the IMF requirement to keep budget deficit within 3.8% of GDP.

In reality, this IMF policy is not aimed to help out the Hungarian economy, but to support foreign-owned banks and the financial sector in general. Meanwhile, cutting government spending may have dire effects on the economy in the long run and can cost quite a few jobs.

Deflation in Japan: The Curse of Defeatism

Japan along with the rest of the world is facing an economic downturn. They are experiencing a severe deflationary problem. The new government, as well as the Bank of Japan seem to not be concerned with tackling this problem. Prices are falling and according to the Bank of Japan, may continue to fall for the next two years. This will cause the burden of Japan's debt to increase as well as cause firms and households to reduce spending. Japan also has high interest rates which does not help this situation out. The article concludes with guidelines for Japan to get out of this spiral.

Pigou Gets His Recognition

This article give history and discusses the importance of economist Arthur Cecil Pigou. His views are very applicable in today's economy. Pigou was the premier economist to consider social costs (today termed 'externalities') and how they should be considered in weighing the costs and benefits of a project. Pigou introduced the idea of marginal external cost which in tern founded the idea of a "Pigouvian Tax." Pigouvian taxes are being used in different forms today such as taxes on emissions from businesses.

Current day economist, Greg Mankiw, is a fan of Pigou and even started an informal Pigouvian Club. The article also briefly discusses how Obama is a Pigouvian whether he knows it or not.

Reading this article will give you a good picture of the pivotal economists in the last 100 years.

The Gloves Go On

This article gives an overview of the poverty, inequality, and growth numbers in China, India, and Brazil. China appears to be the best in terms of reducing poverty rates. For example, in 1981, 84 percent of Chinese population lived below the poverty line. In 2005, only 16 percent lived below this line. Even though the number is still very high, the progress made by China is very impressive.

India did relatively good job in reducing poverty. It also achieved high rates of economic growth and a better equality. The Gini coefficient decreased from 35.1 to 33.4 in 14 years (lower number indicates a more equal distribution). Brazil was not successful at all. The Gini coefficient remained high, the poverty rate decreased, but to a much smaller extent, and the average growth rate was relatively low. The author stresses out that both Asian countries should learn some lessons from Brazil.

Dubai banks given extra liquidity

A follow up with whats going on in Dubai with the debt extension. The central bank of the UAE is willing to provide liquidity to UAE banks and foreign banks operating in Dubai. Take a look at the article

A Grim Outlook on Benefit Taxes

Medicare and social security will eventually go bankrupt and leave all those who paid in without benefits. There has been recent talk especially by Senator Harry Reid of putting a surcharge on Medicare payroll taxes for those who make over $200,000. This in effect would increase taxes for the wealthy even more with them paying like 12 or 13 times more than lower-income workers. This would hurt the economy and decrease productivity because of the reduced incentive to make money since it will just be taxed away. 

The author make a very interesting point about the long term effects of increasing taxes: "For high-income workers (earning the equivalent of $500,000 in today's dollars) the combined Medicare and Social Security tax has been growing at about 6% per year for 33 years. Another 50 years of such growth in entitlement taxes versus, say, 3% per year growth in income, means that two-thirds of a high-income earner's pay will go toward Medicare and Social Security. Assuming federal and state tax rates stay "reasonable" at 45% or so of income, the rich will have to borrow money in order to meet their total tax burden." 

U.S. IPOs Have Little International Flair

This wall street journal article discusses the recent increase in the issuance of United States IPOs along with the fact that other foreign companies have gone public but are not listing in America. Big foreign companies are going public and only a slight few are choosing to list in America. Just this year almost a 140 Chinese companies went public but only 10 went to list on American exchanges.  It has been a long time since the United States have led in the world of IPOs. Other countries are developing with growing economies and do not need America like they once did. 

South Africa moves out of recession

South Africa has moved out of recession with its .9% growth of its economy. It is the end of the negative growth in the last 17 years. S. Africa has suffered from economic contractions for the last nine months. South African dependency on global demand, job losses and South African firms failure would be prevented from a sharp recovery.

Abu Dhabi to 'assist' Dubai World

Dubai is going through debt problems. Dubai World is $59bn in debt has started to disappoint many investors in Dubai. Asian and European banks has quickly distanced themselves from Dubai. Shares on the Hang Seng Index in Hong Kong dropped steady to 3.45 percent after the morning session and down 765.28 points to 21,445.13 due to panic. Dubai will have to suffer a lot because of a lot of panic after the news and due to others reaction to the news.

Honduran economy faces challenges

The economy of Honduras has been suffering for a while and now they hoping for some change after upcoming elections. People are hoping that the new government can help fix the long done damage to the Honduran economy whereas Manuel Zelaya is boycotting the upcoming elections repeatedly.

European Confidence Improves to Highest in 14 Months

This article mainly states that European confidence improved in November to its highest level since the collapse of Lehman Brothers. It suggests that the recovery of the EU is moving forward. Consumer sentiment index rose from 86.1 to 88.8 in November. The author points out that the euro-area economy slowly recovers from its worst recession in 60 years mostly due to numerous bailouts and decreased interest rates.

Dmitry Medvedev's Building Project

The article discusses attempts by the Russian government to modernize the economy. The Russian president expressed recently his concern with strong dependence on natural resources, corruption, and rent-seeking. Now, he is planning on putting resources into various nanotechnology projects.

Even though the idea seems to be right, it is highly unlikely that Russia is going to reach desirable results any time soon. The author believes that unless the political system is reformed, there simply won't be incentives for the government to modernize the economy because it would definitely cut into politicians own profits.

I believe that the situation as we observe it now is not only the result of corrupt actions of the government, but also the result of incompetent transition to a market economy. The infamous "shock therapy" and rapid privatization created the severest inequality in the country, which resulted into concentration of monopoly power, corruption, and more importantly into the draining of human capital. Consequently, the level of innovation in Russia is very low, and the government does not provide any incentives for companies to innovate.

Unfortunately, I don't think that there is a quick remedy that would improve the situation somehow. The country needs reforms both in political and economic systems that if done right require a great amount of time. Still, I agree with the author that the political and, to say more precisely, judicial system should be reformed first to provide basis of institutions on which a market economy could be built.

Bernanke Warns of Risks in Push to Revamp Fed

This article discusses how Chairman of the Fed Ben Bernanke is warning politicians to take a step back from bank regulations and allow the central bank to do its job.  Does the Fed function as a political entity or a bank trying to make a profit?

Beijing Plans to Continue Its Stimulus Next Year

In this Wall Street Journal article China's plan to continue its stimulus into 2010 is discussed. Despite issues or concerns about the plan on the economy, the Chinese government will continue with their same stimulus. Accordingly, "the Politburo of China's Communist Party met Friday to discuss economic policy for next year, and decided it will 'maintain the continuity and stability of economic policies, and continue to implement the proactive fiscal policy and loose monetary policy.'" The Politburo promises for more economic growth and efficiency by leaving room for a few changes within the next year. But the real issue is that there has been nothing done for long term sustainable growth, only short term. A few Chinese economists are also voicing concerns about this plan wasting investment money. There are is much that needs to be done in order for China to prosper in future years. 

An Economist's Invisible Hand

At the Heavenly Models home for deceased economists, an award is being presented to the resident whose work best explains financial crises, global warming, and other pressing issues of today. The favored candidates include John Maynard Keynes, the patron saint of stimulus programs; Hyman Minsky, an American disciple of Mr. Keynes who warned about the dangers of financial deregulation; and Milton Friedman, the late Chicago economist. (Mr. Friedman's free market principles are out of vogue, but Federal Reserve Chairman Ben Bernanke recently took his advice on how to prevent depressions by pumping money into the economy.)

Obama should dine with Singh more often

Why are US-India relations important for many years to come?

This article was published in the NewYork Times on the eve of the Obama's state dinner with the Indian Prime Minister- Manmohan Singh. The article talks about the importance of US's relations with India especially in comparison to the US-China relations.
The US-China trading relationship is gigantic but very one-sided. America's imports from China are 4.5 times its exports to China. On the other hand, America's trade with India is small but growing. However it is more balanced than not when compared to that of China. Indian exports to USA are only 25 percent larger than U.S exports to India. Moreover, India is more open to FDI than it was before which is a postive sign for the near future.
What America's partnership with India does is to balance out the politics and trade in the Asian region. India is indeed the largest democracy in the world. However, America cannot afford to ruin its relations with China. The only way to tackle its one-sided trade affair with China is to look for alternatives, and India provides a perfect one.

The Lehman Crisis: An Unhappy Anniversary

One year after the collapse of the Lehman Brothers, many are still discussing the causes and impact of the financial crisis that has crippled our economy. The roots of the crisis, lay in the real-estate debacle, where CEOs of major financial institutions failed to control risk and over-leveraging in real estate and real-estate related assets. As a result there was a huge exodus from private capital to safe Treasury securities, paralyzing capital markets, freezing lending, and send risk premiums on corporate and personal debt to record highs. The Feds definitely shoulder some of the blame for not anticipating the crisis, however they should receive some credit for their immediate response. There is dire need for a reform to establish procedures for winding down and liquidating large, troubled nonbank financial institutions. It is critical that we learn from our mistakes and prevent such an event from occurring in the future.

O.E.C.D. Cautious in Economic Forecast

This article discusses a particular role China has had in the recession. China has helped pull many OECD countries out of a recession, mostly due to easy bank lending and their large stimulus package. These things have allowed China's economy to expand rapidly. However, it will still be a difficult journey toward sustained growth. Growth is expected to be stuck at a low level for a while due to high debt levels. Still, hopefully this growth trend in China will contribute to an eventual full recovery.

Dealing with America's fiscal hole

The deficit problem of the United States seems a big problem which do not have clear answers. The article explains that the United States held federal debt for 41% of GDP last year and it will double in the next decade. Even though a sudden crisis is unlikely from the case of Japan and Italy which holds much more debts, the US should think about tight monetary policy especially when inflation threatens private investment (crowding out effect). America's deficit problem is in essence a spending problem. However, American citizens seem to prefer bigger government and more help for health care as well. The author suggests the possibility of tax revenue reforms and explains some examples.

From the book (The Birth of Plenty) that I have read last week, I learned that the government should ensure property rights, scientific rationalism, capital market, and transportation and communication. I feel that the US already covers these four factors and government size is now becoming very big. The government might better off by giving out some of the roles to private firms. However, it might not be "now" since people are still suffering and need some help. I hope the gilemma will be solved in a few years.

Green With Envy

This article discusses the fundamental tension throughout the world between the effectiveness of carbon reducing policies and commitment to free trade. There is an urgency to deal with global climate change right now so naturally nations are drawing up policies to limit emissions. However, in the globalised world that we live in today, trade outside of a countries borders could have a problem with emission limits. Different countries will likely have different carbon emission, which could lead to political problems.

Should Government Policies Favor Owners Over Renters?

The author of this article argues that the tax credit given to those who purchase new homes is very inefficient. He says that those that who will receive the tax credit would have bought a house without it anyways. In addition, the sales spurred by the credit, will shift renters into owners, which does not absorb the excess supply of houses. He also notes that besides the inefficiencies, 70 percent of all the dollar benefits, "accrue to households with adjusted gross income greater than $100,000. The tax credit may unintentionally be weakening the rental market.

Government and poverty

An interesting piece on the role of government in providing an environment where prosperity is not reserved for only a few.

Thanks to prof. Gitter for pointing out the article.