Upstart Chinese Telecom Company Rattles Industry as It Rises to No. 2

In this article, Kevin O'Brien talks about Chinese telecom company winning an important contract in Scandinavia, battling such competitors as Ericsson and Nokia. According to O'Brien, the company has won acclaims for its innovation, competence, and low cost structure. As a result, currently it has one of the highest sales in the industry and continues to gain market share.

This article is very interesting since it shows how innovation is possible in an economy, which is not fully market-based. It also shows how China successfully goes through transition allowing for enough freedom for companies to innovate.

Down in the dumps

This article talks about general problems in the ex-communist economies . The author states that almost half of the citizens in those countries still feel that they had been better off in 1989 than now. In addition, according to the author "east Europeans face higher taxes, bigger debts, less public spending, lower pay and fewer jobs"; in the meantime, they do not have the same shock-absorbers as in the west.

Debate on Creating Jobs, Without Raising Deficit

President Obama has decided to shift his focus from health care to the growing unemployment problem the United States is currently facing. The Obama Administration is under increasing pressure from lobbyists to increase stimulus funding for those unemployed. However they are also facing pressure from government organizations to cut spending and get the federal budget under control. More and more people, including Republican representatives, are asking 'where are the jobs?' It will be interesting to see if the Obama Administration will be able to create jobs for the unemployed while curtailing government spending.

Austerity has helped Hungary to survive the recession—so far

For those who have read "Globalization and Its Discontents," this article would be a very good example of the IMF policies. In summary, it talks about cutting the government spending as a measure of combating recession in Hungary. Such an approach, contractionary in its nature, may seem very controversial. However, everything becomes clear, when the author mentions the IMF loan and the IMF requirement to keep budget deficit within 3.8% of GDP.

In reality, this IMF policy is not aimed to help out the Hungarian economy, but to support foreign-owned banks and the financial sector in general. Meanwhile, cutting government spending may have dire effects on the economy in the long run and can cost quite a few jobs.

Deflation in Japan: The Curse of Defeatism

Japan along with the rest of the world is facing an economic downturn. They are experiencing a severe deflationary problem. The new government, as well as the Bank of Japan seem to not be concerned with tackling this problem. Prices are falling and according to the Bank of Japan, may continue to fall for the next two years. This will cause the burden of Japan's debt to increase as well as cause firms and households to reduce spending. Japan also has high interest rates which does not help this situation out. The article concludes with guidelines for Japan to get out of this spiral.

Pigou Gets His Recognition

This article give history and discusses the importance of economist Arthur Cecil Pigou. His views are very applicable in today's economy. Pigou was the premier economist to consider social costs (today termed 'externalities') and how they should be considered in weighing the costs and benefits of a project. Pigou introduced the idea of marginal external cost which in tern founded the idea of a "Pigouvian Tax." Pigouvian taxes are being used in different forms today such as taxes on emissions from businesses.

Current day economist, Greg Mankiw, is a fan of Pigou and even started an informal Pigouvian Club. The article also briefly discusses how Obama is a Pigouvian whether he knows it or not.

Reading this article will give you a good picture of the pivotal economists in the last 100 years.

The Gloves Go On

This article gives an overview of the poverty, inequality, and growth numbers in China, India, and Brazil. China appears to be the best in terms of reducing poverty rates. For example, in 1981, 84 percent of Chinese population lived below the poverty line. In 2005, only 16 percent lived below this line. Even though the number is still very high, the progress made by China is very impressive.

India did relatively good job in reducing poverty. It also achieved high rates of economic growth and a better equality. The Gini coefficient decreased from 35.1 to 33.4 in 14 years (lower number indicates a more equal distribution). Brazil was not successful at all. The Gini coefficient remained high, the poverty rate decreased, but to a much smaller extent, and the average growth rate was relatively low. The author stresses out that both Asian countries should learn some lessons from Brazil.

Dubai banks given extra liquidity

A follow up with whats going on in Dubai with the debt extension. The central bank of the UAE is willing to provide liquidity to UAE banks and foreign banks operating in Dubai. Take a look at the article

A Grim Outlook on Benefit Taxes

Medicare and social security will eventually go bankrupt and leave all those who paid in without benefits. There has been recent talk especially by Senator Harry Reid of putting a surcharge on Medicare payroll taxes for those who make over $200,000. This in effect would increase taxes for the wealthy even more with them paying like 12 or 13 times more than lower-income workers. This would hurt the economy and decrease productivity because of the reduced incentive to make money since it will just be taxed away. 

The author make a very interesting point about the long term effects of increasing taxes: "For high-income workers (earning the equivalent of $500,000 in today's dollars) the combined Medicare and Social Security tax has been growing at about 6% per year for 33 years. Another 50 years of such growth in entitlement taxes versus, say, 3% per year growth in income, means that two-thirds of a high-income earner's pay will go toward Medicare and Social Security. Assuming federal and state tax rates stay "reasonable" at 45% or so of income, the rich will have to borrow money in order to meet their total tax burden." 

U.S. IPOs Have Little International Flair

This wall street journal article discusses the recent increase in the issuance of United States IPOs along with the fact that other foreign companies have gone public but are not listing in America. Big foreign companies are going public and only a slight few are choosing to list in America. Just this year almost a 140 Chinese companies went public but only 10 went to list on American exchanges.  It has been a long time since the United States have led in the world of IPOs. Other countries are developing with growing economies and do not need America like they once did. 

South Africa moves out of recession

South Africa has moved out of recession with its .9% growth of its economy. It is the end of the negative growth in the last 17 years. S. Africa has suffered from economic contractions for the last nine months. South African dependency on global demand, job losses and South African firms failure would be prevented from a sharp recovery.

Abu Dhabi to 'assist' Dubai World

Dubai is going through debt problems. Dubai World is $59bn in debt has started to disappoint many investors in Dubai. Asian and European banks has quickly distanced themselves from Dubai. Shares on the Hang Seng Index in Hong Kong dropped steady to 3.45 percent after the morning session and down 765.28 points to 21,445.13 due to panic. Dubai will have to suffer a lot because of a lot of panic after the news and due to others reaction to the news.

Honduran economy faces challenges

The economy of Honduras has been suffering for a while and now they hoping for some change after upcoming elections. People are hoping that the new government can help fix the long done damage to the Honduran economy whereas Manuel Zelaya is boycotting the upcoming elections repeatedly.

European Confidence Improves to Highest in 14 Months

This article mainly states that European confidence improved in November to its highest level since the collapse of Lehman Brothers. It suggests that the recovery of the EU is moving forward. Consumer sentiment index rose from 86.1 to 88.8 in November. The author points out that the euro-area economy slowly recovers from its worst recession in 60 years mostly due to numerous bailouts and decreased interest rates.

Dmitry Medvedev's Building Project

The article discusses attempts by the Russian government to modernize the economy. The Russian president expressed recently his concern with strong dependence on natural resources, corruption, and rent-seeking. Now, he is planning on putting resources into various nanotechnology projects.

Even though the idea seems to be right, it is highly unlikely that Russia is going to reach desirable results any time soon. The author believes that unless the political system is reformed, there simply won't be incentives for the government to modernize the economy because it would definitely cut into politicians own profits.

I believe that the situation as we observe it now is not only the result of corrupt actions of the government, but also the result of incompetent transition to a market economy. The infamous "shock therapy" and rapid privatization created the severest inequality in the country, which resulted into concentration of monopoly power, corruption, and more importantly into the draining of human capital. Consequently, the level of innovation in Russia is very low, and the government does not provide any incentives for companies to innovate.

Unfortunately, I don't think that there is a quick remedy that would improve the situation somehow. The country needs reforms both in political and economic systems that if done right require a great amount of time. Still, I agree with the author that the political and, to say more precisely, judicial system should be reformed first to provide basis of institutions on which a market economy could be built.

Bernanke Warns of Risks in Push to Revamp Fed

This article discusses how Chairman of the Fed Ben Bernanke is warning politicians to take a step back from bank regulations and allow the central bank to do its job.  Does the Fed function as a political entity or a bank trying to make a profit?

Beijing Plans to Continue Its Stimulus Next Year

In this Wall Street Journal article China's plan to continue its stimulus into 2010 is discussed. Despite issues or concerns about the plan on the economy, the Chinese government will continue with their same stimulus. Accordingly, "the Politburo of China's Communist Party met Friday to discuss economic policy for next year, and decided it will 'maintain the continuity and stability of economic policies, and continue to implement the proactive fiscal policy and loose monetary policy.'" The Politburo promises for more economic growth and efficiency by leaving room for a few changes within the next year. But the real issue is that there has been nothing done for long term sustainable growth, only short term. A few Chinese economists are also voicing concerns about this plan wasting investment money. There are is much that needs to be done in order for China to prosper in future years. 

An Economist's Invisible Hand

At the Heavenly Models home for deceased economists, an award is being presented to the resident whose work best explains financial crises, global warming, and other pressing issues of today. The favored candidates include John Maynard Keynes, the patron saint of stimulus programs; Hyman Minsky, an American disciple of Mr. Keynes who warned about the dangers of financial deregulation; and Milton Friedman, the late Chicago economist. (Mr. Friedman's free market principles are out of vogue, but Federal Reserve Chairman Ben Bernanke recently took his advice on how to prevent depressions by pumping money into the economy.)

Obama should dine with Singh more often

Why are US-India relations important for many years to come?

This article was published in the NewYork Times on the eve of the Obama's state dinner with the Indian Prime Minister- Manmohan Singh. The article talks about the importance of US's relations with India especially in comparison to the US-China relations.
The US-China trading relationship is gigantic but very one-sided. America's imports from China are 4.5 times its exports to China. On the other hand, America's trade with India is small but growing. However it is more balanced than not when compared to that of China. Indian exports to USA are only 25 percent larger than U.S exports to India. Moreover, India is more open to FDI than it was before which is a postive sign for the near future.
What America's partnership with India does is to balance out the politics and trade in the Asian region. India is indeed the largest democracy in the world. However, America cannot afford to ruin its relations with China. The only way to tackle its one-sided trade affair with China is to look for alternatives, and India provides a perfect one.

The Lehman Crisis: An Unhappy Anniversary

One year after the collapse of the Lehman Brothers, many are still discussing the causes and impact of the financial crisis that has crippled our economy. The roots of the crisis, lay in the real-estate debacle, where CEOs of major financial institutions failed to control risk and over-leveraging in real estate and real-estate related assets. As a result there was a huge exodus from private capital to safe Treasury securities, paralyzing capital markets, freezing lending, and send risk premiums on corporate and personal debt to record highs. The Feds definitely shoulder some of the blame for not anticipating the crisis, however they should receive some credit for their immediate response. There is dire need for a reform to establish procedures for winding down and liquidating large, troubled nonbank financial institutions. It is critical that we learn from our mistakes and prevent such an event from occurring in the future.

O.E.C.D. Cautious in Economic Forecast

This article discusses a particular role China has had in the recession. China has helped pull many OECD countries out of a recession, mostly due to easy bank lending and their large stimulus package. These things have allowed China's economy to expand rapidly. However, it will still be a difficult journey toward sustained growth. Growth is expected to be stuck at a low level for a while due to high debt levels. Still, hopefully this growth trend in China will contribute to an eventual full recovery.

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.