Ireland & Portugal Get Some Breathing Room

Over the weekend, Ireland and Portugal got some much needed breathing room: they now have more time to pay their loans back. Ireland and Portugal now have seven years to pay back the emergency loans that they demanded during the crisis. This allows them to have better access to private lenders and eases the pressure on the government's public finances.

Link: http://www.nytimes.com/2013/04/13/business/global/euro-zone-finance-ministers-gather-in-ireland.html?pagewanted=all

Director Pay at Goldman Sachs Rises

Earlier this month, I commented on an article that described how many board members - of the top banks in the US - were receiving pay increases, while many CEOs, and other c-level executives, saw their salaries decrease. Many people have protested about the large pay packages CEOs receive, and it now has been a hot topic, however, many have not taken notice at the (relatively) huge packages the board members are getting; interestingly, this is not considered their full time job, despite the big money they earn. Most directors only meet a few times a year. Board members at Goldman have just received an additional 500 shares of company stock because of the "increase in demands." How many days did they work? How many times did the board meet? In 2012, the Board met a total of 12 times. What are your thoughts on this? The 500 additional shares comes to about $75,000 a year, in addition to the average compensation of $447,622.

Link: http://dealbook.nytimes.com/2013/04/12/goldman-directors-get-a-pay-raise/

Is strength of currency just politics?

This year the yen has depreciated 13% against the dollar, which reflects an initiative by the Shinzo Abe administration to aggressively buy bonds. Basically the US fears that with further devaluating measures, Japan will become too competitive, and go against previous agreements settled upon at G7 and G20.

Here is one example where the "unholy trinity" (IMF, World Bank, WTO) are flexing their muscles. Japan will continue to face pressures to "play fair" or else. While each of these entities are set up slightly differently, they basically put the power in the big players hands i.e the United States. While countries like Japan and Korea are relatively new to "rich club" of countries, it will be interesting to see how they react to submitting to the "rich clubs" authority.

China for now has dodged any accusations of this nature due to an appreciation of the yuan and a decrease in their surplus of exports.

If you think this is bad, you should see how the "unholy trinity" cripples developing nations with a plethora of neo-liberal regulations attached to loans. This essentially forces them to open their economies to free trade so that rich countries can exploit them (among many other things).

http://www.marketwatch.com/story/us-again-says-china-not-a-currency-manipulator-2013-04-12?link=MW_story_popular

Revolution in the air

View the article here.

Last week the Central Bank of Japan unveiled its plan to combat the deflation that has plagued Japan for almost 2 decades. Haruhiko Kuroda, the new central-bank governor, announced that the central bank would be expanding its balance sheet to over 1% of GDP a month and promised to double base money in two years. He also announced that the central bank would be doubling its hold of government bonds and raise the average maturity from 3 to 7 years. This plan would hopefully force investors to seek higher yields elsewhere: by investing abroad, which would weaken their currency, or by investing in the real economy, which would boost demand.

This risky move by the central bank might not be enough. Several structural factors are also to blame including a declining population, suppressed domestic demand, insufficient competition in many sectors, and excessive hoarding of cash by risk-averse companies. The author suggests that the government will have to do its part in eliminating deflation by tackling some of these problems head on. For example, the government could tax retained earnings that are not invested, punishing these risk-averse companies for hoarding their cash. He also suggests programs that would encourage women to join the workforce, promote immigration, and open up sectors to more competition.

A short loan is a cheap loan

We all know that the longer the term on a loan, the more interest you are going to be paying on it. Banks want to be compensated for the increased risk of a longer loan through a higher interest rate to boot. According to Jennifer Waters in a post in Marketwatch, although the monthly payments are cheaper, the end result of added interest is repulsive at best. Even with excellent credit today, if you were to take out a 96 month car loan at a 5% interest rate, you will end up paying $6,000 in interest on a vehicle that originally cost $31,000. You say, "Grant that's interesting and all, but who is going to take out a 96 month car loan?". Good question, and one that i asked myself.  Typically today car loans are around 60 months, or five years. When we take into account that in just five years the average price of a vehicle has gone up $3,000, we can see how many would want to possibly extend the duration of the loan in order for more liquidity on a month to month basis. More and more we are seeing 72,84, and yes, even 96 month loans.

This article is not groundbreaking in content, but it is a very good thing for us as "soon-to-be grads" to be reminded of. Give it a read and let me know your thoughts.

http://www.marketwatch.com/story/96-month-car-loans-wreck-your-wallet-2013-04-12

Pentagon budget highlights cuts and consolidation

http://money.cnn.com/2013/04/10/news/economy/defense-budget/index.html?iid=SF_E_River

The pentagon has proposed some much needed cuts in government spending. They are proposing a 526.6 billion dollar cut in some weapons programs and infrastructure. They would be terminating the lower priority weapons programs while consolidating the existing infrastructure. These proposals are looking to side step the forced cuts from the sequester that wasn't avoided. Since the US is spends the most money on the military than many of the other top countries combined, it begs the question if this is enough cut backs or if there should be more. Also, how will these cut backs effect the troops already stationed overseas and other more important defense programs?  

Firms are firing less, but not hiring enough

http://money.cnn.com/2013/04/10/news/economy/jobs-hiring-layoffs/index.html?iid=SF_E_River

Far fewer Americans are getting fired or laid off these days than they were in 2009. In fact, layoffs are back at their pre-recession lows. However, hiring has not returned to 2007 levels. This means firms are holding on to their current workers but still don't seem ready to hire new workers. Meanwhile, the population has grown. In order for the unemployment rate to come down significantly, improvement in the job market needs to come from more new hires, not just fewer layoffs. But the sad truth is, companies create profits, not jobs. Consumers with money to spend create demand and the jobs follow. One can only hope.

Seniors say, 'We can't afford Social Security cuts'

http://money.cnn.com/2013/04/11/news/economy/social-security-chained-cpi/index.html?iid=SF_E_Lead

According to the article, in a recently released budget, President Obama proposed basing the way the annual increases are calculated on "chained CPI," which grows more slowly than the current inflation measure. That would mean that seniors would get smaller bumps in their Social Security payments each year. Even though the difference is technically not considerable at first, it could accumulate over time and pose as a problem for the seniors. However, this seems like a much needed step to fix the deficit since Social Security and Medicare are the two vast drivers of budget deficits. Taxing rich people who only account for 1 or 2% of the population is not going to do us any good even though it appears to be reasonable. Nobody hates the seniors but something has to be done in order to get us out of this mess.

Facebook Founder Mark Zuckerberg Launches Fwd.us To Influence Immigration, Education Issues

Mark Zuckerberg has rounded up other Silicon Valley leaders to start a new political campaign: Fwd.us.  This campaign aims to revamp our immigration policy, boost education, and encourage investment in scientific research.  They propose a plan to help current illegal immigrants living in the U.S. become citizens.  Along with this plan, they hope to "attract the most talented and hardest-working people, no matter where they were born."  When it comes to learning, Zuckerberg calls for more of a focus on science, technology, engineering and math.  

"Today's knowledge and ideas-based economy, the 28-year-old Harvard dropout wrote, is very different from the economy of the 20th century that was based on natural resources, industrial machines and labor."

He believes that Fwd.us will help to ensure more jobs, innovation, and investment.

http://www.huffingtonpost.com/2013/04/11/fwdus-mark-zuckerberg-facebook_n_3060893.html

Morocco's tourism looking to UK and Germany

Unlike its North African neighbors such as Egypt and Tunisia, Morocco hasn't experience significant decrease in tourism. Tourism is the most important industry in the economy, employing some 470,000 people in this country of 32 million and being the main source of foreign currency. More than half of Morocco's 9.3 million visitors in 2011 were French and Spanish, but those groups arrived in smaller numbers and stayed fewer nights due to financial crisis in their nations. As a result, tourism industry's growth was only 1% in 2011, a very slow rate compared to the past. Morocco is targeting visitors from Germany and the United Kingdom, as well as wealthy Arab tourists from the Gulf, who tend to stay longer and spend more than other tourists. The country is focusing on sea and sand tourism with an intention of expanding into mountain and desert tourism. It is quite surprising that Morocco hasn't been approaching East and South East Asian market where many countries are developing quickly.
Source: http://news.yahoo.com/morocco-looks-uk-germany-beef-tourism-214605526.html

Is Getting a PhD Becoming Less Useful?

http://www.economist.com/node/17723223?spc=scode&spv=xm&ah=9d7f7ab945510a56fa6d37c30b6f1709

This article discusses the fact that earning a PhD might not be worth the time and money that it requires in today's society. One reason is because of the declining job outlook for those with doctoral degrees. Another issue is the fact that those with PhDs are not earning very much more in the workforce than those with master's degrees but they spend much more time earning their degrees. It is noted that too many PhD students are being produced for the amount of jobs available to them. It seems that those with PhDs should be prepared to spend their lives in academia. It might be a better option for those interested in furthering their education in order to increase salary opportunities to consider earning their master's degree rather than a doctoral degree.

Fast food workers in New York protest demanding higher wages

On Thursday hundreds of fast food workers protested for higher wages and union representation.  One woman said that she has worked at McDonald's for three years and only makes $8 an hour.  The protesters want $15 an hour, which is almost double the amount they are currently making.  The state legislature voted to raise the minimum wage from $7.25 to $9 by 2016, but this will restrict the ability for the industry to create jobs.  The protesters also commemorated the assassination of Martin Luther King Jr., where he was supporting a protest by sanitation workers.

http://www.foxnews.com/us/2013/04/04/fast-food-workers-in-new-york-protest-demanding-higher-wages/ 

Margaret Thatcher dies at 87

Margaret Thatcher died earlier today at the age of 87. The video below discusses the new path that her policies and ideas brought to Great Britain. Although many remember her highs and the great changes she brought, the beginning of her tenure was quite challenging. She served for 11 years and unfortunately was pushed out by her own party. After leaving office, Thatcher stayed out of the public eye.

Thatcher video

Retail Investor Goes for Yield: Survey

The dumb money may be getting smarter.  This article discusses retail investors', frequently referred to as the 'dumb money', performance in the last month.  The article Credits this group of investors with making astute decisions as they chose to not continue to ride the bull market and dumped top performing large cap stocks like Dell in favor of smaller, dividend payers.  This move was unusual for retail investors as they usually get caught up in the euphoria of a bull market and continue to buy growth oriented, riskier securities until there is a major pullback.  The move proved particularly wise as stocks stalled at the beginning of April and treasury yields fell, making dividend paying securities a good place to be.  My question to you guys is do you think this good judgement on the part of retail investors is an aberration or are common investors actually getting smarter?

http://www.cnbc.com/id/100624266

Doctors driven to bankruptcy

Recently there have been more doctors filing for bankruptcy, causing some to stop practicing.  What is particularly surprising is that the majority of these doctors have not had malpractice lawsuits.  The change in regulations, shrinking insurance reimbursements, and the rising costs of malpractice insurance are all causes of this new trend. This has caused doctors to send patients to other doctors and hospitals for care, which can make it hard for patients to be able to see specialists because of the distance.  I think it is very disappointing that the economy has caused health care providers to stop practicing and it is harder for some patients to access healthcare.
http://money.cnn.com/2013/04/08/smallbusiness/doctors-bankruptcy/index.html?iid=HP_LN

Changing Trends in U.S. University Admissions

In this article, Fareed Zakaria discusses the changing trends in U.S. college admissions. He contends that universities are moving them away from granting admissions on merit and achievement and moving in the direction of providing a privileged experience to a bunch of students that already are privileged in some way or the other.

In the article, he quotes from a book ‘Paying for the Party: How College Maintains Inequality’ saying that some state universities admit rich students that are from out of state and can pay heavy tuition but are not great academic performers. He adds that top-notch universities do admit high achievers who deserve merit scholarships but their number is so less that it is almost negligible. About the private colleges, he says that, they have less merit based scholarships and most of the spots are for minorities, legacy students or the athletes.

He says that the economic mobility is on a decline in the U.S. If a student from not a very privileged background works really hard to enter a top university on merit scholarship, it is becoming harder and harder for him given the current trends.

Source: http://www.time.com/time/magazine/article/0,9171,2140209,00.html#ixzz2PqZgH8qG

China's Internet: A Giant Cage

This article discusses ways the Chinese government has attempted to regulate the internet. While such control seems impossible, the Chinese have achieved surprising levels of success through many expensive, focused efforts. Many local companies (and foreign companies) have worked together with the government and cooperated in acts of censorship. As we mentioned in class, Google searches within China about the 'Tiananmen Square Massacre' are either blocked or removed. Cyber-hackers have also received unofficial support from the government, even destabilizing networks within the United States.

http://www.economist.com/news/special-report/21574628-internet-was-expected-help-democratise-china-instead-it-has-enabled

How long will the government's control over the internet last? Is there any potential for the internet to foment democratic political change within China, similar to the role of social media in the Arab Spring protests?

North vs South Korea (and America)

As most of you know, the tensions between North and South Korea have been getting more and more hostile. North Korea is one of the most highly militarized countries in the world. After threats of nuclear war have emerged, I believe this is an issue that will and needs to be a priority of our nation. America has already done joint exercises with South Korea's military. The highly sophisticated weapons all sides possess is daunting. Just how concerned do we have to be??? If the bombs of WWII caused that much destruction....what could the current weapons do...

North Korea Economist Article 

Jobless Aid for Millionaries

At the worst of times during the US recession, households that made more than $1 million received almost $80 million in unemployment benefits. In 2010, the government paid out $29.9 million to these households. 2,300 households received this aid, with almost 20 percent of them coming from New York. The article discusses the opinions of millionaires and the poor. Also, the article discusses the payments that certain income levels received during the recession.

Link: http://www.bloomberg.com/news/2013-04-05/millionaires-got-80-million-in-jobless-aid-in-recession.html

Some Shareholders Slow Executive Pay Increases

This article outlines the few shareholders that have been successful in holding the executives pay. For example, 128,000 retires of Verizon were able to have the company to agree to reduce the stock options  for executives when the company underperformed. An independent consultant suggests that many company boards are not giving new CEO's huge pay packages until they have proved themselves. The article also discusses the trouble with some methods of finding the best pay package for the chief executive: The corporate peer group. Utilizing a corporate peer group is supposed to pay a chief executive based off the practices of similar companies, however, it has turned into an "arms race."Some companies mirror the pay packages of firms that make more profit and are larger.

Link: http://www.nytimes.com/2013/04/07/business/shareholders-can-slow-the-executive-pay-express.html?hp&_r=0

Funny Economics Quotations

http://economicsoftheworld.blogspot.com/2010/06/funny-economic-quotes.html

These are some hilarious quotations on economics and economists.

My favorites:
-An economist is a man who knows a hundred ways of making love but doesn't know any women.
                                                                                                                              Art Buchwald.

-An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.
                                                                                                                      Laurence J. Peter.