Oil and Gas Boom 2014:Jobs, Economic Growth and Security

http://www.forbes.com/sites/davidblackmon/2014/02/20/oil-gas-boom-2014-jobs-economic-growth-and-security/

Recently, there has been a lot of negative press and feelings towards the oil and gas industries because of the negative impact they have on the environment.  However, these industries have created many jobs since the Great Recession, especially in Texas.  Texas' unemployment rate has outperformed the national average and created almost half of the new jobs in the United States, most of them in the oil and gas industries.  In addition, other industries benefit indirectly from the success of the oil and gas industries, such as shipping, which transports oil and gas.  They also increase national security because the United States does not have to depend on middle eastern countries to supply these commodities.  Eventually, politicians will have to decide whether the environment or jobs and national security are more important.

Japan's economy grows at slower pace, raises stakes for Abenomics

http://www.reuters.com/article/2014/02/17/us-japan-economy-gdp-idUSBREA1F0XF20140217

Japan's economy grew at a much slower speed than expected at the end of last year and this challenged policymakers in Japan to accelerate in consumption and exports to boost Japanese economy. Japan grew 0.3 percent in the fourth quarter and this value is well below the median estimate for a 0.7 percent increase. Many economists expect that growth will accelerate in the current quarter as shoppers buy more goods before the tax hike. But, what's more worrying is sluggish exports despite long-expected impact of a weak yen on boosting external demand. Export growth has remained sluggish over recent quarters, partly reflecting softer demand in Asian markets though some of it also underlined the shift by Japanese companies of their manufacturing plants to offshore centers.

Scottish Independence: Threat to Default on Scottish Share of UK Debt

In September 2014, the people of Scotland will vote yes or no on the question of independence.  It has been a long road, with Yes Scotland (the group promoting independence) consistently embarrassing itself.  Recently, the leader of the Scottish Nationalist Party, Alex Salmond, has voiced that a post independent Scotland would have a currency union with the UK.  The British Chancellor of the Exchequer, George Osborne, has rejected the notion that the UK would enter a currency union with an independent Scotland.  Salmond has called this rejection a bluff and furthermore said that if there was no currency union, Scotland would simply not take their share of the debt with them following independence.  The news article states that doing so would increase the mortgage of Scottish homeowners by over $8,500.  What the article is forgetting though is the various other problems an independent Scotland would face if they did not take their fair share of the debt.  First, doing so would cause investors to be doubtful that Scotland could pay off any debt whatsoever.  Essentially, the Scottish government could not be trusted to pay off any debt since it had given up the responsibility to pay off its fair share of the UK debt.  This point could certainly be argued regarding the logic by saying "Scotland is a new country.  That debt is UK debt, not Scottish."  To investors, that would appear as just an excuse to get out of the debt.  Another problem is that the UK would be less willing to help start up an independent Scotland.  While present Scotland has its own parliament, it doesn't have nearly as many powers as a US state has.  The UK is still very much centralized, with most power being centered in London.  As such, an independent Scotland would have to get start up equipment and information from the UK.  Scotland can certainly do this by itself, but the costs would be very high and a post independent Scotland would already be worse off anyway considering it would have to raise taxes to fund the predicted Scottish budget.  If it had to cover the startup costs by itself, those taxes would be even higher, and or the Scottish government would have to borrow money at higher interest rates.

http://www.telegraph.co.uk/news/uknews/scotland/10648683/Alex-Salmonds-debt-threat-would-cost-Scottish-households-5200-a-year.html

THE EURO and the European ECONOMY-

http://www.economist.com/blogs/economist-explains/2013/11/economist-explains-10

This is a great article that talks about the relative strength of the Euro which is defying the trends in the European Economy, It is a couple months old, however it is still valid. I think we were just talking about the Euro in class, and I think this article should be an interesting read for all those baffled by the strenght of the Euro.

The Worldwide Wobble

http://www.economist.com/news/leaders/21595900-world-economy-will-have-bumpy-2014-recovery-not-yet-risk-worldwide

This article discusses the future of the world economy and how it will not be stable. 2013 was a year of rapid growth in the world economy, but that is not predicted for 2014. There have already been significant losses in January. Many believe the economy is now fragile and worry about what could happen next. Although economists have predicted some bleak outcomes, they could not always be correct, and this article states not to be pessimistic. It will be interesting to see how the major world actors will play a role in these predictions and if the economy will continue to be as unstable as they say.

Study Finds Greater Income Inequality in Nation’s Thriving Cities

The larger and more vibrant cities in the United States have more income inequality than the smaller cities. This could be because of the industries that are in the cities. The technology and finance cities are going to have higher incomes than the cities that have transportation or warehousing sectors. The lower income cities are mostly located in the Midwest and South. President Obama said that he would raise the minimum wage to reduce the inequality. Many mayors are also trying to lower the income inequality. They could do this by raising the taxes on the higher income people and also creating incentives like better schools and cheaper housing.

http://www.nytimes.com/2014/02/20/business/economy/study-finds-greater-income-inequality-in-nations-thriving-cities.html?ref=economy&_r=0

Why Hasn't Japan's Massive Government Debt not Wreaked Havoc(yet)?

http://wallstreetpit.com/102203-why-hasnt-japans-massive-government-debt-wreaked-havoc-yet/

   One of the most surprising graphs I saw while in class was one that showed the debt to GDP ratio of several OECD countries. While the USA and Britain certainly had high ratios, the Japanese had debt that comprised 219% of GDP, an almost comically massive number, and based on what I've learned in economics, totally unsustainable. So the question I'm hoping to answer is why has Japan not descended into chaos, or at least had issues with its credit rating or balance of trade?
   There are a number of factor in the Japanese economy that make it very different to most Western countries. Chief among these is the incredibly high domestic savings rate. Within Japan this is used by banks and government institutions to purchase government bonds and securities, allowing it to fund and service the massive debt. In addition to having an economy capable of handling much more public debt than most, in 2007 and onward Japan received a massive influx of foreign purchases of short-term government securities, further enabling the government to maintain such high debt levels. Such activity was motivated by the financial crisis and the relative stability of Japanese securities compared to those in Western markets.
   However, all of this, the high saving and foreign investment is only a short term measure. For Japan to really address the problem more serious measures must be taken, and political pressure is mounting in Japan for something to be done. While it seems incredibly unlikely that Japan is going to go into some kind of economic disaster as as results, something must happen eventually.

   My question is what? Will Japan have its usually bulletproof credit rating downgraded? Will taxes be raised to avert disaster? Japan seems as prepared as anyone to tackle such a massive problem, but it remains unclear whether it will happen before serious consequences arise.
 

The Economic Impact of The Olympics

The Olympic games in Sochi are expected to be the most expensive games in history. This came as a surprise to me after hearing all of the reports of the unfinished buildings and dangers that the visitors are facing. Many people believe that the games are a great opportunity to boost the economy of the host city, but that is not the case for Sochi, or Russia as a nation. The article estimates these games costing in  excess of $50 Billion. The reason for this might have stemmed from the 2008 Summer games in Beijing, which took the world by storm and set an standard for entertainment. But the costs of the games has far outweighed the revenues. Some experts think that Sochi may not benefit now, but they will be known for their participation as a host city and historically this has drawn companies into emerging economies to open their businesses. Whether or not this happens in Sochi, I guess we will have to wait and see. The olympic games are known for creating employment, while it may be short lived, it does seem to lower national levels of unemployment. Russia has a very tight labor structure and unemployment is very low to begin with, so we have not seen any remarkable change, simply because there is not room for change.

Fed Sets Rules for Foreign Banks

The Federal Reserve approved new standards for foreign banks that will require the biggest to hold more capital in the U.S. Under the rules, foreign banks with U.S. assets greater than $50 billion would have to maintain more loss-absorbing capital than some other countries require, potentially forcing them to raise additional equity or debt for their U.S. units. The banks must have enough capital and liquidity to survive a credit crunch.

Fed Chairwoman Janet Yellen said the rules are necessary to protect the global financial system and put U.S. and foreign banks on equal footing. However, there is a disagreement with the Fed about the appropriateness of the new policies. Foreign banks have criticized the move, saying the requirements could conflict with home-country regulations and force them to withdraw from the U.S.

http://online.wsj.com/news/articles/SB10001424052702303945704579391244050104458?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702303945704579391244050104458.html

Worsening U.S. Divorce Rate Points to Improving Economy

The number of Americans getting a divorce has risen over the last three years. In 2012, about 2.4 million Americans filed for divorce. Divorce has a social and emotion impact, but there are also broad economic effects. Divorce contributes to the formation of households, increasing the demand for housing, appliances, and overall spurring the economy. It is also encouraging women to enter the labor force.

The increase in divorces has led to an increase in household formation. In the past four years, about 5.3 million households have been formed. There has been a great demand for condos, apartments, and furnishing. When divorce occurs, it often results in an increase in demand for housing by creating two households.

The increase in divorce did not occur until after the recession. During the recession, many couples chose to stay together. Either because their homes were underwater or one or both were unemployed. Before the recession, it is the home of a married couple that contains their largest assets to divide. When the recession hit, the value of housing decreased and a married couples assets shrunk. The recession itself caused great financial losses, divorce would just add to this loss.

http://www.businessweek.com/news/2014-02-18/worsening-u-dot-s-dot-divorce-rate-points-to-improving-economy

Yes, the Wealthy Can Be Deserving

Havard Professor Gregory Mankiw again raises the issue about compensation of the wealthy across many fields in society today. First he uses Robert Downey Jr's $50 million compensation for his role as Iron Man in the Avengers blockbuster as an example of income well deserved, even in the public's opinion. However, in some cases, such as in the finance industry, it is more difficult to see why CEOs are so highly compensated; Mankiw argues that the decisions they are responsible for making have significant monetary value for shareholders, employees and stakeholders.

He adds that their compensation is subject to taxes as high as 33.8% that can serve as a redistribution effort by the government to fund public services/goods.

A billion-dollar daily shot in the arm for the American economy

New supplies of oil and natural gas will equate to about $1 billion dollars a day. Experts estimate that energy production accounts for 2.2% of GDP.  New sources of oil and natural gas have created a new opportunity for an industrial revolution.  Expert Clay Jenkinson claims the new technology that is reaching deep oil deposits have created more than just an oil boom, it has sparked an industrial revolution. The also argues that while fracking for oil and natural gas  can bring great prosperity to any region it is located, it must be managed responsibly so to prevent negative externalities to the region. If the technique of fracking can be mastered, and risk to surrounding water supplies and other natural resources minimized, could fracking be more of a blessing than a curse?

http://www.exxonmobilperspectives.com/2012/08/17/a-billion-dollar-daily-shot-in-the-arm-for-the-american-economy-2/?gclid=CISKn4Pm0bwCFa9FMgod0lQA6Q&gclsrc=aw.ds

VW work council says will pursue labor representation at U.S. plant

While Volkswagen's determined to involve their employees in decisions, their employees seem determined to not have the United Auto Workers union involved in the future Chattanooga work council.

As the United States is, as a rule, rather unwelcoming to labor unions, it may not be a surprised that the existing workers would also be unwelcome to the current Union option.  However, the German System that Volkswagen comes from is contrastingly very welcome to the idea of unions and cooperation between employees and management, as we learned in class this previous week.

So it would be interesting to see how Volkswagen and plant employees come to a compromise.

Read the article Here

Cold Calculations: The Economics of Snow

(Click here for article)

This has been an extremely harsh weather with constant snow and negative temperatures. Not only is it dangerous be exposed to these kind of conditions but  the decisions we make while experiencing this weather can also be harmful to us. Poorer people have a decision to make between food and comfort and typically they pick comfort. With these extremely cold temperatures gas bills sky rocket leaving less income for things like food. Being malnourished in this extreme weather only makes it more dangerous for people to be exposed to the extreme cold. The rich do fine in the cold buying more food while cranking up the thermostats.

The article continues about the effects the cold weather has on increased school closings. As all OWU students have experienced days where it is certainly questionable if we should be having class, students from other schools are not falling behind while enjoying their day(s) off. An increased focus on the cold weather outside takes away everyone's focus from the classroom, teachers and professors included.

The parable of Argentina: There are lessons for many governments from one country’s 100 years of decline

This article discusses the potential Argentina had in 1914. At that time, the country enjoyed higher GDP per capita than France, Germany, and Italy, as well as higher growth rates than the US. The author blames Argentina's failure to add value to their commodities (such as making their high-quality beef into "Argentine steak") as a large factor. Also, throughout the 20th and 21st centuries, Argentina has been plagued with extremely populist policies, combined with lots of governmental mismanagement and crony capitalism.

Chile and Uruguay have both been able to pull ahead of Argentina because they embraced more free market policies in the 1970s and 1980s. "Children from both those countries—and Brazil and Mexico too—do better in international education tests." Cristina Fernández, current President of Argentina has been embracing similar policies as her predecessors, taxing imports and agricultural exports. The article also points to the overall Argentine political system and weakness of its institutions as leading reasons why its economy has yet to emerge to its potential. The author concludes by offering the lesson learned by Argentina: "good government matters." The article points out some of the things we have discussed in class. How large of a role should the government play? Are there effective ways to eradicate corruption? 

http://www.economist.com/news/leaders/21596515-there-are-lessons-many-governments-one-countrys-100-years-decline-parable