Inflation in Moldova

Moldova is currently in the midst of an energy crisis. Prices of energy have been rising and Moldova receives almost all of their energy supply in gas supplied by a Russian company, however only 67% of their gas needs are being satisfied. Because of this Moldova's parliament declared a state of emergency to secure more. Negotiation attempts with the Russian company have been made but were unsuccessful. Moldova even accused Moscow of intentionally undersupplying them but Russia denies doing anything intentionally. The state of emergency allows Moldova to look towards other European countries for their energy supply. The rising energy prices combined with the global supply chain issues and pandemic recovery has resulted in rising costs for most products in the economy. Food prices have been effected the most rising by 8.3% compared to the 6.7% inflation rate. This was unexpected by the National Bank of Moldova and they are scrambling to react appropriately. The inflationary pressures are on the demand side so they have raised their interest rate from 4.65% to 5.5% to discourage borrowing and encourage savings. They do not expect a quick recovery and fear the inflation rate may exceed 10%. Moldova relies heavily on foreign aid and are again looking for outside assistance to  stabilize them through this crisis.

https://www.euronews.com/2021/10/22/europe-s-energy-crisis-moldova-declares-state-of-emergency-over-gas-prices

Australia and Climate Change

Australia, a nation among the developed, is currently one of the most prime advocators of coal and fossil fuels. Prime Minister Scott Morrison, from the Liberal Party, is a conservationist who is still stuck in the past with supporting and subsidizing coal mining and fossil fuels extraction.

He has only recently agreed to attend the UN Climate Conference in Scotland, and that was not without criticism from Queen Elizabeth II and mocking from a billboard in Times Square.

Australia is currently the largest exporter of coal and has suffered among the most from wild fires. But still, Australia doesn't have any concrete plans for working towards curbing climate change, whereas other developed nations all have pledged in some manner to reduce emissions by 2050, or even 2030! The Liberal Party and the National Party have used coal as their political agenda.

And as much as I hate to say this, because I am from India, Adani, one of India's largest industrialist, is looking to invest in Australia to build the world's largest coal mine. And the current Australian government is ready to provide subsidies for this investment to happen.

Australia, is like a black mole, because it is becoming the sole reason for negating other developed nations' climate change efforts. It is not only slowing other countries' efforts, but also pulling their efforts because only when everyone work together does any real change take place quickly.

Article: https://www.nytimes.com/2021/10/21/world/australia/australia-coal-fossil-fuel-carbon.html

Interest rate cuts in Turkey

Turkey has been suffering with severe inflation, where people are complaining and crying about how they will feed their children if the prices keep rising. While this is happening, Turkey’s central bank announced a bigger-than-expected interest rate cut. Opposition parties and the people are really concerned and questioning the independence of the central bank. Opposition leaders have condemned this action. Meral Aksener, head of the country’s third largest opposition party, called it “an irrational decision made by a frivolous government through an unqualified bureaucrat.” With all this going on, Lira has hit an all time low with this action. It is now at 9.49 against the US dollar. This year alone, Lira has lost 20% of its value. Import companies were already at a verge of bankruptcy when the Lira was at 8 against the US dollar, now it is even harder to continue business and pay off debt. This interest rate cut has triggered a chain reaction and caused a shift in related economic behaviors. This entire situation is reminding people of the inflationary cycle that gripped in the 1990s. Signs indicate that turkey is going towards a breaking point. When the inflation is already 5 times the target value, interest rate cuts don't make sense. It will eventually increase the long term interest rates. This action is a lot of risk and not consistent with the macro economic fundamental. Is the central bank really independent in Turkey or the people claiming it to be influenced by the ruling party is true. 

source:

https://www.aljazeera.com/economy/2021/10/21/as-turks-wrestle-with-inflation-central-bank-cuts-rates-again

Scrapped Plans for Free Community College in the U.S.

 In the U.S. Congress, the passage of the 2 major infrastructure bills has been halted as internal debates inside the Democratic party continue. A major concern by one of the senators is the enormous price tag of the larger bill of $3.5 trillion. In these debates, there are concessions being made to substantially lower the spending in this bill to make it more palpable for more fiscally conservative members.

One of the major pieces of this bill that has now been taken out is the spending allocated for free community college. This section would have guaranteed paid community college for people of color and low income to have a chance at higher education. However, this piece of legislation will be cut out to ensure that the rest of the bill can pass with all Democrats on board.

In my opinion, this was one of the most important pieces of this bill as higher education is extremely important for future prosperity of the United States. More well educated workers can encourage more businesses to keep their operations in the US as they can better guarantee the quality of their products. This can also lead to more innovative products to be invented domestically to give US companies an advantage in the global market. There are societal issues that could have been addressed as well. Income discrimination is a fundamental problem in the United States as systems in place make it harder for people of color to climb up in the social hierarchy. One of those systems is in our education as it is one of the best ways to climb out of poverty. Higher levels of education ensures better employment and higher wages to provide for their families. But the extremely high price for higher education has only raised the barrier to entry. Without free community college, there will be no incentive for the free markets to correct this market failure as there is no economic benefit in doing so.

Credit: https://www.nbcnews.com/politics/congress/democrats-abandon-free-community-college-white-house-warns-social-safety-n1281939

How Banks will Respond as Interest Rates Rise

As the economy is getting back to pre-pandemic levels we are going to see the interest rates rise fairly quickly by the time 2022 rolls around. There is going to be an extremely large change in mortgages over the coming months, but the question is just how big?

According to the Mortgage Bankers' Association, there is going to be approximately a 33% decline in mortgage originations. This is due to the fact that they also predict that interest rates will rise to 4%. Interest rates right now are sitting around 3%. The interest rates are going to increase drastically in a very short period of time according to their projections. They also project that this will result in a 62% decrease in refinances. 

Due to a large decrease in mortgages being taken out, lenders are going to have to look at other options to make up some of this lost revenue. One of the suggestions made by Marina Walsh was for these lenders to focus more on their servicing business. 

Source: https://www.cnbc.com/2021/10/18/real-estate-mortgage-originations-will-drop-33percent-in-2022-as-interest-rates-rise.html 

China's Power Shortage

 China is undergoing a rough economic patch at the moment. Their steel mills are having power cuts, property companies are purchasing less construction material, and the country is also under more floods as of recently. China is still growing but at a slower rate than they were last year from 4.9 percent to 7.9 percent. China's industrial output has not been very good as it put up numbers last quarter more similar to when the pandemic first hit. 

The Chinese government has recently put a limit on energy use. This is stemming from concern with climate change and also income inequality in China. This has backlashed on China as the industrial side of the country is short on power and now burning coal, which goes against one of the reasons they have for limiting energy use in the first place.

https://www.nytimes.com/2021/10/17/business/economy/china-economy-gdp.html

Retail Sales Rise in September Better Than Expected

 https://www.usnews.com/news/economy/articles/2021-10-15/retail-sales-rise-in-september-better-than-expected

As we get closer to the holidays, it is expected to see rises in retail sales. This article discusses how retail rates rose by 0.7% in September which was higher than expected. After a 0.9% increase in August, economists predicted a drop of about 0.2% due to consumers being "skittish" about the delta variant and the rising inflation. One of the top contributors were food and gasoline. Gasoline sales were up 38.2% from a year ago and food service establishments saw an increase of 29.5%. They suspect that this is due to students returning to school and workers returning to the office played a role in the increase in gas sales and food sales. With people returning to work, it likely means that most of those people will be going to food establishments for lunch, thus increasing the sales. 

The article goes further to discuss how it is expected that sales increase into October with the spending for Halloween and then holiday shopping. It continues to be somewhat of a concern as to how the economy will perform during the holiday months due to the delta variant, labor and material shortages, and rising prices for many products. The reach of the coronavirus has proved to be more pervasive than expected earlier this year which has resulted in global supply chains which has been one of the biggest unexpected results. Additionally, this has caused bottlenecks of key components used across the economy from housing to auto production and has, in turn, raised prices.

What do you think will happen with retail sales with the supply shortages and the holidays being impacted by covid?

Americans were kidnapped in Haiti

 This morning American missionaries were kidnapped somewhere in Haiti. Seventeen people including children snatched by gangsters. One of the kidnapped messaged for help n a WhatsApp group. This happened in Port-au-Prince, the capital of Haiti. Haiti is the poorest country in the western hemisphere. Thousands of people leaving their homes in recent months and seeking safety at the U.S. border. In July of this year, the country’s president Jovenel Moise was assassinated in his home. With the government divided and the economy cratering, most of Port-au-Prince has fallen to armed gangs. In this chaos, kidnapping became a huge business. Men, women, and children were snatched at gunpoint for a little as a hundred dollars. At least 328 people were kidnapped in the first eight months of 2021, according to UN data. In my opinion, the UN should send the military to Haiti in order to stop this chaos.