Argentina's Deadly Storms

Argentina has recently experienced torrential downpours that have claimed a significant number of lives and have caused large electricity blackouts in major cities. Moreover, the storms are yet another result of what the author calls "chaotic urbanization" and a lack of infrastructure funding. The city of La Plata, where 51 residents were killed by the downpours last Tuesday, was built at a natural drainage point. La Plata and the capital city, Buenos Aires, lack adequate drainage systems causing water to rise quickly in downtown areas. Argentina struggles to attract foreign direct investment that could fund infrastructure improvement projects because of its history of default. Adding to this problem is the high rate of inflation; argentines exchange and spend their pesos quickly, causing banks not to have enough money to fund the large loans necessary for building infrastructure.

http://www.economist.com/blogs/americasview/2013/04/argentinas-deadly-storms

Corruption in education - in light of what we discussed in class on Friday 4/5

I was pleasantly surprised when I opened up one of the Croatia news portals this morning to find Croatian professors in handcuffs (check out the photo). Here is an article in the English language: http://pmnewsnigeria.com/2013/04/05/dozens-arrested-in-croatian-university-bribe-case/. It seems that faculty in the area of economics have been very busy engaging in market activities. I guess they have learned something during their graduate school training. Or, maybe they have bought them as well.

It seems that some of the problems of corruption in education are not unique to Croatia, but rather prevalent in the post-socialist Eastern European countries: http://www.setimes.com/cocoon/setimes/xhtml/en_GB/features/setimes/features/2013/04/04/feature-02

ESPN a throw in on the Disney deal?

http://www.freeforpsp.com/free-wallpapers/movies/200911/10292.html

ESPN the worldwide leader in sports was once a throw in on a deal that allowed Disney to acquire the rights to ABC. About 20 years later the giant that is ESPN makes up about 60 percent of the cash flow that Disney has now. This company has come back in the past few years and became the first company to make affiliate fees work, which are fees to air their broadcasts on different networks. It is crazy to see a company that was once a unwanted throw in on a larger deal become something that Disney could have never imagined would be their cash cow.

A new flu: Deadly, however it moves, avian flu H7N9

Source: http://www.economist.com/blogs/analects/2013/04/new-flu

A pork butcher in the People's Republic of China was killed by an avian flu not previously seen in humans called H7N9. Previously only transmitted to birds, scientists confirmed that the flu can now jump from birds to mammals. The WHO said that there is still no evidence of human-to-human transmissions as all of the human's family members are not infected.

The article discusses in optimism how management in China is dealing with the H7N9 much better than it did with the SARS pandemic. Now, over a million in China now talk about it rather it being kept top secret. When the SARS pandemic occurred, it was not handled well which led to its spread to other regions as East Asia, the rest of Asia, and even the Western world.

Record Unemployment Rates in Euro Zone

The Euro Zone is going though some very difficult times, especially with the recent news regarding capital controls in Cyprus. Well, these troubling times are affecting the job market. The unemployment rate hit 12 percent after the first two months of the year, which is a record high. Cutting government spending and raising taxes - especially in Greece - has taken its toll. With less government spending, the job market gets hit and the demand for goods and services decreases. Greece is the country with the worst unemployment, 26.4 percent last recorded in December, and the youth in Greece are truly suffering with the unemployment rate rising all the way to 58.4 percent. Spain comes in second, with the overall unemployment reaching 26.3 percent in February.

The link below outlines unemployment rates all over the Euro Zone and some underlying reasons for the high percentages.

Link: http://www.nytimes.com/2013/04/03/business/global/unemployment-in-euro-zone-reaches-a-record-high-of-12-percent.html?pagewanted=2&hp&_r=0

Despite Difficult Times, Board Members Pay Increasing for Top Banks

Despite the financial crisis, board members at the top banks in the US have seen their pay increase. The article cites specific boards and the massive paychecks these board members are getting, although it "essentially being a part-time job." Goldman Sachs board members have seen their pay increase 50 percent since 2008. Board members at Goldman are expected to see their compensation increase once again after a very strong year in 2012. Goldman Sachs board members are lucky because they receive the highest pay among the nations top banks, with Morgan Stanley's board right behind them. The average pay of Citigroup's board is $315,000, which is a 64% increase from 2008.

Click the link below to get more details.

Link: http://dealbook.nytimes.com/2013/03/31/pay-for-boards-at-banks-soars-amid-cutbacks/?hp

Bank of Japan set to launch war on deflation

Japan's new Prime Minister Shinzo Abe has made the central bank's 2% inflation target a top priority.  He wants to drive down the value of the currency in order to get consumers to spend more and save less.  Some skeptics, and even Abe, acknowledge that this will be a difficult target to reach before the deadline.  Economists are especially worried about the sustained downward pressure on wages in Japan.  The central bank has already increased its bond-buying program and there are fears of political backlash over stoking a currency war.  Japan already has the highest debt-to-GDP ratio in the world and in January they announced a $117 billion government spending program.
http://money.cnn.com/2013/04/03/news/economy/bank-of-japan/index.html?iid=HP_River

Large companies in the US have grown faster than small companies

http://www.businessweek.com/articles/2013-04-03/large-companies-have-grown-faster-than-small-ones

According to the article, ever since the recovery from the recession, large companies have grown faster than small companies. The big companies have, on average, incrased employment by 7.5% compared 4.9% increase by small businesses. 

There are 3 main reasons for this: 1. Most construction companies are small businesses. They suffered greatly in the housing market crash and are still struggling, 2. The big companies had greater cash reserves to face the huge credit crunch which followed the recession. Therefore, they were not hurt so badly, 3. Big companies also cater to international markets and since the value of the USD declined, it helped in increase of exports. 

Game of Thrones Premiere Sets Piracy Record

This article reports that the TV show "Game of Thrones,"was the most pirated show in 2012. The city with the most illegal downloads was London, and the country with the most illegal downloads was the US. While Hollywood is peaking its concern about piracy, HBO's programming president sees it as a sign of success. He's taking this high demand as a compliment, and said in an interview that it didn't negatively impact their DVD sales. The co-creator of the hit show agreed, but said if viewers could pay just 99 cents for their download rather than illegally watching it, the show could pay for a few more "dragon scenes."

Do you think HBO is being too lax about piracy? What do you think would happen to the entertainment market if piracy laws were more strict?

http://money.cnn.com/2013/04/02/technology/game-of-thrones-piracy/index.html?iid=HP_LN

Why Does Greenland's election have global impact?

No one typically pays much attention to Greenland.  There are so few people that live there, so they typically do not have much global impact.  Their most recent election, where only 30,000 people voted, could create an export market for metals used in electronics that could really boost many other countries economies.  This potential export is due to the fact that many ice caps in Greenland are melting making rare-earth metals more easily extractable.  Many of these metals are used in computers and tvs.  The government, depending on who wins, will lift bans on mining Uranium which is typically mixed with these other metals.  Is the government holding down their economy but currently not allowing these metals to be mined?

http://www.economist.com/blogs/newsbook/2013/03/economist-explains-why-greenland-election-global-implications

Balancing the Economy: Bottoms Up

With China being considered one of the largest economic forces in the world, their statistical data is now being questioned.  Many countries outside China have always chosen to take their GDP, inflation rates, growth rates, etc with a grain of salt.  Now two economists from Morgan Stanley have decided to try to find their own data to estimate these statistics.  They are finding that the governments estimates are significantly off.  The government has left out major portions of the economy including online shopping and gaming, etc. This has major economic impact across the globe.

http://www.economist.com/news/china/21574503-consumption-china-may-be-much-higher-official-statistics-suggest-bottoms-up

US economy ekes out 0.4% growth in fourth quarter

http://www.bbc.co.uk/news/business-21969730

The Department of Commerce said the US economy grew faster than expected in the last quarter of 2012. It was estimated that the growth would be 0.1%, but thanks to increased investments in plant and equipment the growth rate was 0.4%. However at the moment the figures are lower than they were in the previous quarter. The defence spending  and government expenditures were cut which hurt economic output. The revision of DGP did not have an impact on the overall economy. During the October-December quarter showed that the home sales were rising and the labor market was improving. Chief investment officer of Harbor Advisory said that the economy is improving. According to last year’s rate, the investment bank was expecting US GDP to increase by 2.2%. Last week the US Federal Reserve said that stimulus measures are still needed. The Fed is buying $85bn a month of Treasury bonds and mortgage backed securities so the borrowing costs for households and businesses are lower. The Fed also wants to see long term trend of falling unemployment.   

Jobless Claims Rise Slightly

This  article discus the amount of americans filing for unemployment benefits this year.

The number of Americas filing for their first week of unemployment benefits rose last week, suggesting a stall in what has generally been a steadily if slowly improving job market. Analysts were expecting 335,000 people to have filed for unemployment benefits but turned out to be a figure of 341,000, an increase of 16,000. With so many articles claiming job growth in america, this doesn't seem to follow the trend. 

http://money.cnn.com/2013/03/28/news/economy/unemployment-benefits/index.html?iid=SF_E_River

One in four U.S. firms in China report data theft

http://money.cnn.com/2013/03/29/news/china-data-theft/index.html?iid=SF_E_LN

According to a survey conducted by the American Chamber of Commerce in the People's Republic of China, more than one in four U.S. businesses operating in China have experienced the breach or theft of proprietary data or trade secrets. To many American businesses in China, the risk of data breaching is rising. This poses a serious obstacles for foreign businesses in China along with rising labor costs and slow economic growth. Also, it is worth mentioning the tensions between China and the U.S. over the issues of cyber-security and computer hacking after China was accused of being behind a number of cyber-attacks on US firms. I think it will be interesting to see how this is going to affect the economy in China in terms of foreign investment.

Unusual Good News From Inflation

This article gives a fascinating look at consumer spending based on CPI data and how it works alongside lesser-known PCE data. Consumption has shown a "resilience" despite the recent tax increases and higher gas prices. Personal consumption is estimated to grow at 3% annual rate during the first quarter. The article goes on to explain CPI versus PCE. PCE is personal consumption expenditures which is calculated monthly and is used to calculate real consumer spending. The article explains the math in depth, but the short of it is that using the PCE index rather than CPI adds 0.7% growth without inflation to real consumption and real incomes. The Fed considers the PCE index superior to CPI data because PCE reflects the cost of living more accurately. Because of the recent the divergence of CPI and PCE (usually at 0.3%, currently 0.7%), this has slowed core CPI inflation to below mandated levels. The problem with this is that it causes higher real interest rates. Unfortunately, actual inflation does not affect real rates, but rather the consumer's interpretation of CPI (expected inflation), so with this
       In all, the inflations expectations working with PCE have validated the current monetary policy, which is great for real incomes and spending.

http://www.economist.com/blogs/freeexchange/2013/03/divergence-between-cpi-and-pce-prices

2 Chinese Cities Move to Cool Overheated Housing Market

http://www.nytimes.com/2013/04/01/world/asia/2-china-cities-move-to-cool-overheated-housing-market.html?_r=0


Many economists claim that China's current growth is unsustainable. It seems that some Chinese politicians are paying attention. Both Shanghai and Beijing have undertaken new measures to prevent potential housing bubbles. These restrictions include legislating that unmarried individuals can buy only one residence, increasing the minimum downpayment on property purchases, and a new capital gains tax on owners selling a residence. Future policies include bank reform regarding loans, mortgages, and credit. Part of the government's concerns consist of not only economic downturn but also social instability between the rich and poor. With soaring property prices all over the country, these policies appear sensible. 

Hollande Wants 75% Tax on Rich

France's President Francois Hollande proposed a 75% tax while campaigning last year. his controversial proposal was rejected by the French judiciary, however Hollande has not given up the fight. Holland's original proposal was an income tax of 75% on salaries over 1 million euros. Now Hollande is calling for businesses that pay out salaries over 1 million euros to pay the tax, rather than having the burden fall on the individual. Despite France's struggling economy Hollande seems committed to making reforms, but this slightly altered tax proposal seems destined to be rejected again. 

Unfashionable for 30 years, industrial strategy is roaring back

View the article here.

Industrial strategy is making a comeback in Britain. Over the last 30 years British politicians have been hesitant to back firms and industries, instead letting the market rule. This period of inactivity followed several unsuccessful attempts at industrial strategy. However, more recently industrial strategy is back on the table. Britain's chancellor of the exchequer, George Osborne, has pledged to "back sectors that are global successes," promising £1.6 billion of state cash to automotive, agri-tech, and aerospace firms. His plan also included tax relief incentives for high-end television and animation firms. In 2008 Peter Mandelson, a current member of parliament, was appointed as the Labour party's business secretary where he approved loans to many nuclear and automotive firms and assisted technology start ups, proclaiming that it was time for ministers and markets to mix. At first others were skeptical of Mandelson, but this month marks the publishing of the governments 2nd "sectoral vision." This vision was of the aerospace sector and included plans for a £2 billion technology institute. 

The Economics of Evil Google

http://krugman.blogs.nytimes.com/2013/03/23/the-economics-of-evil-google/

Paul Krugman makes an interesting case about the dilemma Google faces.
He argues that the use of search engine illustrates a unique model where they have high-intensity users and low-intensity users with differing willingness to pay.
Normally, the willingness to pay would be distributed so that the firm can just choose to maximize profit by setting price equal to marginal cost, but in this case, the firm only faces high fixed cost and almost zero marginal cost.
Due to the nature of the internet search engine, Google cannot price discriminate, and therefore, it must determine how best to extract the most profit in order to keep up with the high fixed cost.
Krugman concludes that this model more readily resembles models for utilities and envisions the public ownership of internet search engines.

OH educators train how to handle shooters

http://www.sfgate.com/news/article/OH-educators-train-how-to-handle-shooters-4398033.php

In a program designed after the Sandy Hook Elementary shootings that killed 20 students and six staff members in December, 24 Ohio educators received firearms training through a 3-day pilot program organized by the Buckeye Firearms Association. The program taught participants strategies for reacting to school shooters through the use of model guns with plastic pellets while playing roles in gunman scenarios based on real-life situations. The 24 educators selected to participate were among more than 1,400 applicants. The article went on to assess whether arming teachers is the best way to stop mass murders. Do you think arming teachers will solve the problem? Or will this just make kids afraid of their teachers?