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.

Mixed Forecasts for Holiday Spending

This article discusses the difficulties in predicting the holiday shopping season this year. There is an odd mixture of positives and negatives that are making it significantly less simple to forecast how well retail sales will do. The overall consensus seems to be that sales will drop no more than 1%, and will increase no more than 2.4% during the period of November and December. Despite this relative agreement however, there are still many disagreements existing on how exactly retail sales will perform and which areas will or will not sell well.

State Unemployment Rates Rise in 29 States

Unemployment rates are unfortunately not going down as before in many states according to this article. There was a report of an increase in unemployment in 29 states in October - up to 15.1% in Michigan. However, there is good news that rates fell in 13 states in the same period. Despite the dismal title of the article, there are encouraging statistics later, describing the number of jobs added in several states recently.

Chocolate giants ponder Cadbury bid

Hershey and Ferrero are competing with Kraft's to buy Cadbury. Cadbury has rejected the Krafts bid of $16.4 bn. Shares in Cadbury rallied 1.21 per cent on Wednesday to close at 797.50 pence in London. According to Wall Street Journal Hershey is getting aggressive about getting Cadbury. But it will be for Hershey to come up with a higher bid than Kraft. Hershey owned $119 million in cash and $1.5bn in long-term debt. 85 to 90 % of Hershey's sales are in the relatively slow-growth market of the U.S.

10 biggest job interview blunders

This article is not directly related to class materials but it is still a good read for all of the seniors seeking employment after graduation.

$4.8 trillion - Interest on U.S. debt

This article highlights the high debt, mainly interest, that the government has incurred this year. What does this mean for the role of the government in economic systems, as well as what are the implication of interest on future government involvement.

Obama Trip Shows Gaps on Issues as Role of China Grows

The meeting between President Obama and Chinese President Hu Jinato was indicative of China's growing role on the world stage and the different approaches of the two. The two presidents discussed trade issues, and climate change as well as the threat of Iran and North Korean's nuclear programs.

Both presidents told reporters that the United States and China agreed to work togther resolve the conflicts between the two countries.  The article notes that they both used very general terms and consequently raised many doubts about how well the two will work together.

The rest of the article outlines the growing conflicts between the United States and China.

End protectionism, China tells US

The Chinese President has said that protectionism should be shunned between China and the U.S. during the recent visit of Obama in China and also they should work on their trade economic policies. They both agreed on working together side by side to make the current global economic crisis better.

1 in 6 Americans goes hungry

The Department of Agriculture report, which has been released annually since 1995, said the number of Americans that were hungry rose to 14.6%. In 2007, 13 million households or 11.1% of Americans had trouble getting enough food. The one-year jump is all the more significant, given the number of hungry Americans had never been higher than 11.9% since these surveys began. Obama is now urging Congress to pass a "strong" child nutrition bill to help ensure that American children don't go hungry. To combat the nation's rapidly growing hunger problem, the Recovery Act is allocating $20 billion to the nation's food stamp program, and hundreds of millions of dollars to food banks and school lunch programs, including the USDA's Emergency Food Assistance Program, which was allocated an additional $150 million from the $787 billion economic stimulus plan.

US gold hits record;dollar drop boosts sentiment

Whats happening right now within the gold market is fascinating and unheard of! Gold has hit an unimaginable record of $1,134/ounce within the United States market, as markets opened Monday morning. This is a direct result of a weakening US dollar, and has led to widespread reactions from people around the world.

The massive rise in gold prices have been good news for some and bad news for others. For my family back in India, the enormous growth in gold is a major disadvantage, as our business revolves around 'the manufacturing of gold and diamond jewelry.' As prices keep increasing as world markets open, its getting harder for jewelers to buy gold, since people are reluctant to buy jewelry in this depleting economy!

This article also refers to an increase in the prices of Silver, Platinum, and Palladium, as a result in the surge of gold prices.

Market insiders predict a further rise in gold prices with no immediate signs of a decrease in the metals growth.

Its a great time to have gold and sell within the near future!

Sinking Dollar Aids Exports, but Trade Gap Grows

The dollar's recent weakness is helping boost the sale of U.S. goods abroad, but it isn't yet narrowing the nation's trade deficit.

While exports of goods and services rose by a seasonally adjusted $3.7 billion in September, higher fuel prices and strong demand for imported autos more than offset the gain, pushing the trade deficit to its widest point since January and highlighting a dilemma for policy makers: As the economic recession winds down, the trade deficit is quickly expanding.

Obama’s Free-Trade Credentials Draw China, APEC Scrutiny

Among the many issues discussed at the Asia Pacific Economic Cooperation Conference in Singapore, free trade and the Yuan's value created friction between the US and China. Basically, the US was calling on China to loosen its managed floating exchange rate regime to reflect a higher valuation of the Yuan. The US argues that the Yuan has been kept unreasonably undervalued to make exports competitive, contributing to the US' trade deficit with China. China hit back at the US, accusing it hypocrisy in imposing trade barriers by levying tariffs on Chinese steel and tire imports, while pressuring China to liberalize the Yuan.

The outcome of this dispute will be interesting. With China's rising economic influence, the US will have less and less control over global economic issues. With this dispute, another issue arises - How much has the US lived up to its mantra of free market capitalism that it has championed since the cold war?

Oil rise 'could derail recovery'

There has been an increase in oil prices this year and it is being traded at the price of $77 a barrel. The price of oil fell $2.43 to $76.85 a barrel on Thursday after rise in US oil supplies. According to IEA the real economy suffering from recovering as compared to the financial one that is without stimulus spending the progress of the economy will die. There will be an increase demand for oil in the near future as there was an increase in oil demand in 2009 by 210,000 barrels to 84.8 million barrels a day.

Gloomy Jamaica: Unfixable?

This article discusses the massive debt of Jamaica. With the global financial crisis, Jamaica's exports have been hurt and their deficit has grown substantially. Discussions for debt relief are taking place with the IMF, but the economic situation remains grim. Corruption and gang presence, as well as violence, is still high. The government needs to eliminate high crime rates before they can create economic growth and pay back their debt.

Wall Street Makes It Hard to Earn Legal Living

This article makes an argument that it is very hard to make a living legally on Wall Street. Even though there are many honest and decent people on Wall Street, they work in such an environment that constantly compromises their ethics. “The goal of investing is to get an edge, whereas the securities laws presume all investors should have the same information at once. If ever there was a recipe for a system rife with abuse, this is it. The harder that money managers, traders and analysts must work to get information that gives them that edge, the more likely some are to cross a legal line.”

The Cult of the Faceless Boss

Is it better to be unforgettable or to blend in? This article discusses the trend for executives to be bland and boring rather than noticeable. Perhaps the trend for faceless CEOs is a reaction to yesterday's vivid bosses, or maybe it is a just a strategy for trying not to get fired in such a turbulent economic climate.

Yet it is possible to take things too far. The people who have revolutionized their businesses have been interesting, memorable people--think Henry Ford, Thomas Watson, and Bill Gates. The point of this article is clear: an unusual degree of turbulence requires unusual bosses, not identikit ones.