This article was based on a new study by economists at Harvard University and the University of California, Berkeley on social mobility in America. According to their findings, America may not be socially less mobile than it was 40 years ago, despite its dramatic increase in income inequality. The researchers reported that the correlation between parents' and children's income and the odds that a child born into the bottom fifth of the income distribution will climb all the way up to the top fifth have not changed much over the years. "In 1971, a child from the poorest fifth had an 8.4% chance of making it to the top quintile. For a child born in 1986, the odds were 9%." Their results have caused a huge stir, not only because their findings run counter to public perceptions, but also because cross-country analyses have suggested that there is an inverse relationship between income inequality and social mobility (a phenomenon that has become known as the "Great Gatsby" curve").
The article went on to provide some explanations for this case. One, social stratification might take time to become entrenched. Second, even as income gaps have widened over the past 30 years, other barriers to mobility, such as discrimination against women and blacks, have fallen. Third, the correlation between vast wealth accruing to the top 1% of the population and the ability of people to move between the rest the income ladder may be small.
http://www.economist.com/news/united-states/21595437-america-no-less-socially-mobile-it-was-generation-ago-mobility-measured
Sunday, February 2, 2014
Friday, January 31, 2014
Corporate Sponsors Faulted for Sochi Participation
Multi-National Corporations (MNCs) are having a problem with protests because of their sponsorship of the Olympics in Sochi. Coke, McDonald's and other corporations are not boycotting Sochi because they know it will bring in lots of profits. Russia's anti-gay laws have created a lot of protests and backlash.
Some Americans would like MNCs to highlight this homophobic problem because it could make a difference and shine a light on the problem but they have decided not to. What is surprising is that Coca-Cola, the oldest Olympic sponsor usually has a good record on gay rights in the U.S. Yet they are going against their values for the Olympics.
The Olympics gets thousands of international viewers that can bring in profits yet this human rights debate has put 10 major corporate sponsors in an awkward position. This has changed the focus of the games, and has reflected poorly on the companies willing to participate. But what are the incentives?
http://america.aljazeera.com/articles/2014/1/31/olympics-sponsorsfaultedforgoingtosochi.html
Some Americans would like MNCs to highlight this homophobic problem because it could make a difference and shine a light on the problem but they have decided not to. What is surprising is that Coca-Cola, the oldest Olympic sponsor usually has a good record on gay rights in the U.S. Yet they are going against their values for the Olympics.
The Olympics gets thousands of international viewers that can bring in profits yet this human rights debate has put 10 major corporate sponsors in an awkward position. This has changed the focus of the games, and has reflected poorly on the companies willing to participate. But what are the incentives?
http://america.aljazeera.com/articles/2014/1/31/olympics-sponsorsfaultedforgoingtosochi.html
Thursday, January 30, 2014
Proposed overhaul at the EU
It has been a long time coming, but the overhaul is finally here. Like the Volcker Rule in the United States, the European Union released proposals today that would limit the likelihood that big banks will again endanger the financial system with the kind of behavior that brought on the financial crisis. This is just the first step though. Some, like the Finnish, were expecting a more drastic change. But ultimately have hopes of creating a universal bank for the EU to use. This hopeful article seems like a reassuring step in the right direction for large economic institutions.
http://dealbook.nytimes.com/2014/01/29/e-u-bank-proposal-arrives-but-late-to-the-party/?_php=true&_type=blogs&ribbon-ad-idx=11&rref=business/international&module=ArrowsNav&contentCollection=International%20Business&action=keypress®ion=FixedLeft&pgtype=article&_r=0
Wednesday, January 29, 2014
Fed Again Cuts Monthly Bond Purchases
On Wednesday, the Fed announced that it would cut another $10 billion in monthly bond purchases, referencing "growing underlying strength in the broader economy" for its decision. It is also "likely"that there will be another pullback at the next meeting in March. However, there will be no change in the benchmark short-term interest rate which will remain near zero.
This announcement comes amidst the recent economic turmoil in emerging markets. Turkey and South Africa's currencies declined sharply in value due to fear of insufficient monetary protection against a foreign investment pullback. As a result of this, the US stock market readjusted downward, with the Dow falling 1%. On the other hand, the Fed's reduced bond purchases is contributing to the global shift in investments as people prepare to take advantage of greater returns from higher interest rates in the US.
Tuesday, January 28, 2014
Income Inequality in the U.S. Means Princes Don't Go After Cinderellas
A new working paper conducted by the National Bureau of
Economic Research argues that Americans are more likely to marry someone who is
economically similar as they are. This tendency is called, “positive
assortative mating.” According to census data from 1960 to 2005, it also appears
that the odds of people who have the same education level increased by 12
points.
Interestingly, the authors used the Gini coefficient to
compare to their marriage model. From 1960 to 2005, “the Gini coefficient in
the United States increased to 0.43 from 0.34, representing the dropping share
of income controlled by poor families.” Ultimately, if people married randomly,
without considering education or economic levels of each other, the Gini
coefficient would have been “significantly lower.” It appears that who we marry
does actually impact society at large.
Monday, January 27, 2014
Deflation in the Euro Zone
Deflation in the Euro ZoneThis article discusses the possibility of prices lowering in the Euro Zone and addresses the concerns of the deflation. Although prices are still on the rise, the possibility of that ending soon is high. Some of the effects of deflation are already in action and some are not. The author explains the effects and how they are relevant to citizens today. The author also concludes that "The only institution that can prevent disinflation from turning into deflation is the European Central Bank. But that institution is staying on the sidelines, observing and doing nothing. " This reflection poses the question of when the European Central Bank will take action and discontinue simply observing.
Climate Change Changing Economies
Climate Change Changing Economies
This article takes a look at the externalities of climate change. We are all feeling the effects of the "polar vortex". The short-term impacts include a decrease in American output. The impacts in the long-run are often harder to formulate. The article looked specifically at nations that have higher average temperatures, such as nations in the Caribbean, and the implications they face when temperatures raise an average on one degree Celsius. While the correlation between average temperature and GDP may not be entirely valid, there is a relationship, and likely a third factor contributing to these changes. The article suggested diseases such as malaria being more predominant in the countries that have higher average temperatures as well as lower GDPs. I am interested in the possible link between types of economic systems that are present in countries with higher average temperatures and the relation, if any, to GDP.
This article takes a look at the externalities of climate change. We are all feeling the effects of the "polar vortex". The short-term impacts include a decrease in American output. The impacts in the long-run are often harder to formulate. The article looked specifically at nations that have higher average temperatures, such as nations in the Caribbean, and the implications they face when temperatures raise an average on one degree Celsius. While the correlation between average temperature and GDP may not be entirely valid, there is a relationship, and likely a third factor contributing to these changes. The article suggested diseases such as malaria being more predominant in the countries that have higher average temperatures as well as lower GDPs. I am interested in the possible link between types of economic systems that are present in countries with higher average temperatures and the relation, if any, to GDP.
Paranoia of the Plutocrats - Paul Krugman
In short, Paul Krugman expressed his annoyance about Plutocrats whining.
As mentioned by many articles recently, the raising of income inequality is becoming a popular topic, and it seems to be one of the priorities of Obama's term of office. Krugman wrote income inequality leaded to "stagnant wages despite rising productivity, rising debt that makes us more vulnerable to financial crisis. It also has big social and human costs. There is, for example, strong evidence that high inequality leads to worse health and higher mortality" (the reference to inequality is not accurate to the topic because it is not income inequality but just inequality - which includes racial component). However an interesting reaction he pointed out is this creates a whiny class of rich people.
It is true that under Obama's term, rich people are getting less and that they would have gotten more if Romney had won. Thus they criticized, complained about the policies and the regulations that the government was enforcing upon their benefits. They are whiny because a pinch of their wealth was taken away from them and they weren't used to it. And they excused themselves by saying they were creating jobs, making the economy better and they deserve more (while, according to Krugman, what they really did was to take advantages of weak regulations rather than adding real value to the economy - interesting point of view).
In the end, Krugman supported what Obama was doing, in short, saying screw the plutocrat's complaints.
I quite agree with Krugman. I think great businessmen don't get work up over something like regulations, they find the real opportunity/future to invest in (like Warren Buffet). Comparing to other economic system, the U.S.'s system seems to be the most effectively lenient system already, so if they ever complained, it is because they have been spoiled for so long. And it also seems to me that the rich are getting more and more selfish since objectively their wealth only grow a little slower than they used to be. After WW II, U.S. also fell into depression but the rich were fine with increasing tax then. Now, even though they are richer, they complain.
http://www.nytimes.com/2014/01/27/opinion/krugman-paranoia-of-the-plutocrats.html?ref=opinion
Restoring the Pacific Through International Trade Laws
This is an interesting article talking about protecting the Pacific Ocean. It talks about the importance of this resource to trade and businesses around the world. It states a major issue of over fishing in the Pacific and gives a couple facts on it. It is interesting how they are taking the idea of the importance for the Pacific with trade to attack this situation. The article raises some interesting points and is a pretty good read.
Economic Shifts in U.S. and China Batter Markets
According to the article, a major reason for the growth of developing countries is the the rise of China as an economic super power and the Federal Reserve stimulating the economy. However with China's economy faltering a little bit and and the Fed has caused a widespread ripple effect resulting in investors fleeing even far off places like Buenos Aires and Istanbul with the most affected being the countries that predominantly depended on China for raw materials and are experiencing political instability.
The Fed's decision about not supporting the bond buying stimulus programs that were keeping interest rates low. So the countries that were depending on these low interest rates might possibly see an increase in the price of borrowing and cause further damage to their economies.
http://dealbook.nytimes.com/2014/01/24/a-worldwide-market-slump-gains-traction/?_php=true&_type=blogs&ref=economy&_r=0
Sunday, January 26, 2014
Ukraine crisis: Opposition rejects offer of PM post
http://www.bbc.co.uk/news/world-europe-25900267Ukrainian leadership refused to enter into a trade agreement with the EU in December of last year, which spurred protests in the capital and in other cities around the country. The decision behind not joining EU was because of the significant pressure from Russia. This was initially an economic issue because the agreement would have allowed Ukraine to eliminate trade barriers with EU countries. Russia in order to influence the deal warned Ukrainian government of canceling contracts and agreements set up by two countries. While, this would have been harmful to Ukraine's initial growth and unemployment, in a long run, it would have been beneficial as Ukraine would have been able to trade goods and services on the open market and become independent from Russia.
Furthermore this standoff between the government and opposition revealed corruption and significant abuse of power at the top of the governing body. As the protests progressed it has become a fight for more transparency of Ukrainian government and freedom from politico-criminal nexus that occupied the government. The West has been discussing an option of freezing accounts of politicians and oligarchs, who were proven to be involved in corrupt activities. Neither the EU or the US have done so yet, which points to a strong lobbying influence.
Ukraine is facing a very difficult challenge. Young generation of educated and democratically-minded people made it clear that they want the future full of economic opportunities, and free and fair government.
In Housing, Big Is Back (Not Counting the Extras)
http://www.nytimes.com/2014/01/26/business/in-housing-big-is-back-not-counting-the-extras.html?ref=business&_r=0
There is now a rebound in the housing market as more and more people start to buy luxury homes. After the recession there was a stall in house sales, but wealthier people are now beginning to buy more expensive and more lavish houses. However, the lower end of the market, the cheaper houses, are still stagnant. Home loans have also increased as wealthier buyers are selling their homes and receiving loans to buy larger ones with added features such as an additional kitchen for food preparation and a media room. In addition, potential buyers are also opting to build their own houses. There is now high demand for expensive homes but low supply, so many buyers are finding building their own house less expensive. They also have more options to customize their house for their needs.
There is now a rebound in the housing market as more and more people start to buy luxury homes. After the recession there was a stall in house sales, but wealthier people are now beginning to buy more expensive and more lavish houses. However, the lower end of the market, the cheaper houses, are still stagnant. Home loans have also increased as wealthier buyers are selling their homes and receiving loans to buy larger ones with added features such as an additional kitchen for food preparation and a media room. In addition, potential buyers are also opting to build their own houses. There is now high demand for expensive homes but low supply, so many buyers are finding building their own house less expensive. They also have more options to customize their house for their needs.
Experts are arguing that the current energy trade laws in the U.S. are hindering the domestic energy boom. America's Energy Advantage, a group supporting protectionist policies, likes the idea of restricting the exportation of liquid natural gas. But some say that they are misguided in their attempts to control their market share. The article goes on and explains that without those exports, many industries suffer because the demand for production goods like steel decreases. Policy makers should be warned that if these protectionist policies remain,we run the risk of missing the opportunity to improve the lives of U.S. citizens through economic growth in the energy industries.
http://www.exxonmobilperspectives.com/2014/01/02/a-clarion-call-for-free-trade-and-a-warning-if-we-fail-to-heed-it/
http://www.exxonmobilperspectives.com/2014/01/02/a-clarion-call-for-free-trade-and-a-warning-if-we-fail-to-heed-it/
Starbucks Just Sold $1.4 Billion in Gift Cards. What Did It Do With That Cash?
According to Bloomberg Businessweek, coffee giant Starbucks sold $1.4 billion last quarter in gift cards and people putting money on their Starbucks app. The increase undoubtedly resulted from many people buying gift cards for family and friends during the holiday season. The article says that Starbucks has already began to invest some of these earnings into high-grade corporate bonds, Treasury notes, and certificates of deposit that mature in three to 12 months. The author goes on to discuss how much Starbucks has been investing recently. It says, "In the past four quarters, Starbucks has made $146 million on interest alone—or 8 percent of total profit." This article is an interesting look at how Starbucks has been able to market its app and gift cards so well, while at the same time using the earnings wisely and investing in the future.
http://www.businessweek.com/articles/2014-01-24/starbucks-just-sold-1-dot-4-billion-in-gift-cards-dot-what-did-it-do-with-that-cash#r=nav-r-story
http://www.businessweek.com/articles/2014-01-24/starbucks-just-sold-1-dot-4-billion-in-gift-cards-dot-what-did-it-do-with-that-cash#r=nav-r-story
Argentina’s Currency Falls Sharply Against the Dollar
The Argentinean peso fell by more than eight percent to
against the dollar on Thursday. This is
the largest decline since the 2002 financial crisis, and fear of inflation has
seen a sharp increase. The peso has been
gradually losing strength in the past months, but officials insist this plunge
is a result of the economic forces coming together. At the end of business Thursday, the peso
closed at $7.75 to the dollar. The
government has decided not to utilize their reserves as much in an attempt to
tighten currency controls and not allow reserves to contract. Some residents have also started buying
dollars on the black market to capitalize on a better purchasing rate. Another main concern is that imported
products will cause inflation to increase since they are more expansive. The shift in Argentina’s economy has also
started to raise concerns in surrounding Latin American countries. While not as drastic, currencies has also
weakened and the stock index is depleting.
http://www.nytimes.com/2014/01/24/world/americas/argentinas-currency-falls-sharply-against-the-dollar-stirring-inflation-fears.html?ref=americas
Social Responsibility Weighs Heavy on Economic Chieftains at Davos
Many political leaders think that wealth should distributed equally among the people. Pope Francis even agreed to this. He believes that humanity should be served by the wealth and no ruled by it. Other politicians agree that those that are wealthy should shared among those that are not. Once you used your wealth for the necessities, then the left over wealth should do to the philanthropies. Others believe that it is unfair for the redistribution of wealth.
http://dealbook.nytimes.com/2014/01/25/social-responsibility-weighs-heavy-on-economic-chieftains-at-davos/?_php=true&_type=blogs&ref=international&_r=0
http://dealbook.nytimes.com/2014/01/25/social-responsibility-weighs-heavy-on-economic-chieftains-at-davos/?_php=true&_type=blogs&ref=international&_r=0
Saturday, January 25, 2014
The future of jobs: The onrushing wave
http://www.economist.com/news/briefing/21594264-previous-technological-innovation-has-always-delivered-more-long-run-employment-not-less
This article from The Economist discusses the the affects of technological advancements on employment an equality. The article describes how John Meynard Keynes predicted in 1930 that the improvements in technology would result in "technological unemployment." For the most part the 20th century proved Keynes to be wrong in his prediction of "technological unemployment." Rather than replacing labor, new technologies provided more jobs for a growing population. So, why should we be concerned about income inequality or unemployment due to technological advancements?
According to recent research, even in countries where employment is increasing, real wages have been stagnant since the 1980's. This is a result of increased automation. Increased automation results in substituting capital for labor, so the owners of capital gain a larger share of income. Along with automation, workers are also at risk of being replaced by cheap labor. Jobs that are at the greatest risk of being automated are ones that require repetitive behaviors, that can be done by computers or robots. Jobs that are not easily automated, referred to as cognitive jobs may be reduced into less responsibilities as a result of data-processing technology.
The article goes on to predict that increased technology and automation will, in fact, increase inequality, but not necessarily unemployment. As many jobs are replaced by capital, the number of "emotive jobs" such as yoga instructors will increase.
My question: If emotive jobs are a legitimate replacement to jobs being losed to capital, how should education systems change in order to prepare the next generation for these jobs?
This article from The Economist discusses the the affects of technological advancements on employment an equality. The article describes how John Meynard Keynes predicted in 1930 that the improvements in technology would result in "technological unemployment." For the most part the 20th century proved Keynes to be wrong in his prediction of "technological unemployment." Rather than replacing labor, new technologies provided more jobs for a growing population. So, why should we be concerned about income inequality or unemployment due to technological advancements?
According to recent research, even in countries where employment is increasing, real wages have been stagnant since the 1980's. This is a result of increased automation. Increased automation results in substituting capital for labor, so the owners of capital gain a larger share of income. Along with automation, workers are also at risk of being replaced by cheap labor. Jobs that are at the greatest risk of being automated are ones that require repetitive behaviors, that can be done by computers or robots. Jobs that are not easily automated, referred to as cognitive jobs may be reduced into less responsibilities as a result of data-processing technology.
The article goes on to predict that increased technology and automation will, in fact, increase inequality, but not necessarily unemployment. As many jobs are replaced by capital, the number of "emotive jobs" such as yoga instructors will increase.
My question: If emotive jobs are a legitimate replacement to jobs being losed to capital, how should education systems change in order to prepare the next generation for these jobs?
Financial Regulation
In the aftermath of the financial crisis, it has been written that credit cycles, boom and bust etc are all inevitable. As such it has been suggested that government should set financial markets free and let them feel the effects on their own.
The author of the article begs to differ, he says rather than giving up on regulation, regulators should try and focus on the timing of regulation.
They also recognize the fact, banks will always try and innovate over regulation, unless a law is passed setting the reserve requirements at 100%.
However the two authors differ over how to regulate and what regulations will be effective.
http://www.economist.com/news/finance-and-economics/21595010-welcome-burst-new-thinking-financial-regulation-inevitability
The author of the article begs to differ, he says rather than giving up on regulation, regulators should try and focus on the timing of regulation.
They also recognize the fact, banks will always try and innovate over regulation, unless a law is passed setting the reserve requirements at 100%.
However the two authors differ over how to regulate and what regulations will be effective.
http://www.economist.com/news/finance-and-economics/21595010-welcome-burst-new-thinking-financial-regulation-inevitability
Rice Cultivation Changing in Vietnam
Rice cultivation has been a staple of the Vietnamese economy ever since the country declared its independence from France in 1945. Environmental stress on the region has led to nutrient deficient rice that has hurt the the capacity for Vietnamese farmers to export their rice; it seems as though, for many, rice cultivation, no longer remains a source of viable income. Another layer to the issue is the government and economic structure. Most of the rice is purchased by the state-owned farms with ties to corporate firms. There is also an incriminating lack of farmers on the very powerful Vietnamese Food Association, and push-back from state-owned rice exporters who don't want to make any changes that would diminish their profits. This is exacerbated by the fact the new constitution passed last November which continues to call for the state-owned enterprises to remain a central fixture of the Vietnamese economy.
The new GE: Google, everywhere
The new GE: Google,
everywhere
With a string of deals the internet giant has
positioned itself to become a big inventor, and reinventor, of hardware
Google’s popular search engine and
Android cell phone stemmed from a push to develop more services that everyone
would use daily from Larry Page, Google’s chief executive. Google has a growing
range of products and services, from developing wearable gadgets like Google
Glass to their increased interest in investment for products such as Nest Labs
sophisticated thermostats and smoke detectors. Google, similar to General
Electric’s growth from the industrial and financial boom, develops its business
through an emphasis on data. Google has been profitable from innovative
engineering based on collecting data to make physical devices more intelligent
and appeal to todays, and tomorrows, consumer. The process of using data in the
engineering development process of products came about in the industrial
industry. Google uses this fundamental step in business along with continuous
innovation to keep up with competition and consumer demand. Google’s business profits
from collecting data to create new products. In order to collect data beyond
Google’s current sources, such as the Android phone and its search engine, it
is looking into investing in companies with strong data resources and talent.
Last week Google said it would pay $3.2 billion in cash for Nest Labs’
thermostats and smoke detector, which would help Google’s hardware
business. This offer has made some
skeptical for more than the large price tag. Google has grown tremendously in
the past few years and has become very diverse in their business. Google has
gained profits from recent expansion, however some are worried that the company
is too diverse. Another issue that the company faces is data-privacy. So far
Google has been able to sustain its user confidence and if they are able to
continue to do so I believe Google will be able to handle its quick expansion.
The technology industry as a whole has
been expanding rapidly and so keeping up with competitors who are also creating
innovative products and services will make or break Google. Small companies are
able to thrive with the advancement of the Internet and increased accessibility
of new technologies, making it easy for smaller companies to enter into
competitive industries.
Social Responsibility
“I ask you to ensure that humanity is served by wealth and not ruled by it.” This was how Pope Francis's message ended at this year's economic Forum which has ha numerous sessions about how to achieve a worthy life and true happiness. This forum is the yearly gathering of the "chieftains of industry" who listen to economists from around the world and schmooze with each other. However, this idea of social responsibility and the rich sharing their wealth is a topic this year that has received mixed feelings. Some are all for helping out the less fortune but others aren't too keen on this idea of redistributing the wealth. They find it unfair that they have to take money out of their pocket no matter if its willingly or forced. So I ask, do we have a responsibility to help out the less fortune? Should we all contribute an equal amount or should people who are better off (aka the rich) contribute more?
Social Responsibility Weighs Heavy on Economic Chieftains at Davos
Social Responsibility Weighs Heavy on Economic Chieftains at Davos
Why Wage Growth Is Poised To Take Off
An Economist Explains Why Wage Growth is Poised to Take Off
In this article, Economist Paul Ashworth predicts that the wage growth is about to pick up. His new research suggest that the current rates of wage and price inflation may be low, but the dwindling slack in the labor marker will cause a rise in wage inflation in 2014. His prediction is based on the historical Phillip curve relationship. He predicts the gap between the actual unemployment rate and the estimated longer-run equilibrium unemployment rate, would drive the growth rate of average earnings higher over the next couple of years.
http://www.businessinsider.com/wage-growth-poised-to-take-off-2014-1
In this article, Economist Paul Ashworth predicts that the wage growth is about to pick up. His new research suggest that the current rates of wage and price inflation may be low, but the dwindling slack in the labor marker will cause a rise in wage inflation in 2014. His prediction is based on the historical Phillip curve relationship. He predicts the gap between the actual unemployment rate and the estimated longer-run equilibrium unemployment rate, would drive the growth rate of average earnings higher over the next couple of years.
http://www.businessinsider.com/wage-growth-poised-to-take-off-2014-1
The Populist Imperative
Paul Krugman talks about two of the biggest problems faced by economic societies, namely unemployment and income inequality. He feels like at the very least one of these issues should be made the cornerstone of any government. He then goes on to explain how income inequality and unemployment are linked and how trying to resolve one of these issues could help alleviate the other. Krugman also feels that running a deficit to remedy the unemployment issue should be a no issue and is glad President Obama has picked to deal with unemployment while putting the deficit issue on the back burner a little bit.
It was an interesting take on the situation, and if I were to only go of based on the article I would be inclined to agree with Krugman. Why do you guys think?
http://www.nytimes.com/2014/01/24/opinion/krugman-the-populist-imperative.html?ref=paulkrugman&_r=0
It was an interesting take on the situation, and if I were to only go of based on the article I would be inclined to agree with Krugman. Why do you guys think?
http://www.nytimes.com/2014/01/24/opinion/krugman-the-populist-imperative.html?ref=paulkrugman&_r=0
Obama Agenda: Income Inequality
President Barack Obama
plans to make income inequality a focus of his January 28 State of the Union
address. While Democrats agree that the White House is focused on the right
objective, many are talking about the same issue in different ways. They want
the conversation to focus on opportunity and the middle class when addressing income inequality.
A survey by Pew
Research Center/USA Today shows that more than 60% respondents say the gap between the rich and everyone
else has grown in the past 10 years. However, twice as many Democrats as Republicans
said "a lot" or "some” when answering the question how much the
government should reduce the gap.
Even though market
distribution of income can be modified by the tax system and by the provision
of social services, the possible solutions are to increasing the minimum wage
and to improve economic viability. The question is the government would increase federal minimum wage to how much.
Why don’t they just let the economy work??
Friday, January 24, 2014
Markets Fall Around the World
Today, stock markets around the world fell in response to disappointing economic news and forecasts coming from emerging markets, especially China, and less-than-expected home sales numbers from the United States. Many of the world's markets have benefited from China's continued growth and the subsequent rise of other developing nations, but as China's growth has slowed and several currencies (especially the Argentine peso) have experienced severe devaluation in these first few weeks of the year, investors have become worried about the value of the money they have in markets outside of highly industrialized nations.
Some researchers and market strategists have attempted to assuage fears by saying that these fluctuations are all part of the normal market and business cycles, but others worry that the fluctuations may be too severe for investors to remain confident in the value of their money, especially given the tenuity of the global economy since the recession. If I were an investor in Chinese markets, I would worry about the slowing growth in the manufacturing sector, especially in light of the precedent that Japan set. Without sufficient investment in other aspects of the economy, China, which has leaned on its manufacturing sector for so long, may struggle to sustain growth if the sector falters.
http://dealbook.nytimes.com/2014/01/24/a-worldwide-market-slump-gains-traction/?_php=true&_type=blogs&hp&_r=0
Some researchers and market strategists have attempted to assuage fears by saying that these fluctuations are all part of the normal market and business cycles, but others worry that the fluctuations may be too severe for investors to remain confident in the value of their money, especially given the tenuity of the global economy since the recession. If I were an investor in Chinese markets, I would worry about the slowing growth in the manufacturing sector, especially in light of the precedent that Japan set. Without sufficient investment in other aspects of the economy, China, which has leaned on its manufacturing sector for so long, may struggle to sustain growth if the sector falters.
http://dealbook.nytimes.com/2014/01/24/a-worldwide-market-slump-gains-traction/?_php=true&_type=blogs&hp&_r=0
Germany and its Energy Revolutions
http://www.economist.com/news/europe/21594336-germanys-new-super-minister-energy-and-economy-has-his-work-cut-out-sunny-windy-costly
The article from The Economist talks about Germany's ambitious energy industry transformation project. Dubbed the Energiewende, the project is a series of timetables to switch the German electricity grid to at least 60% renewable sources of energy by 2050, with an accompanying drop of nearly 90% in greenhouse gas emissions compared to 1990. The new Super Minister of Energy and the Economy Sigmar Gabriel is financing this massive transformation by guaranteeing " not only 20 years of fixed high prices for solar and wind producers but also preferred access to the electricity grid." As a consequence the price of energy in Germany is rising yearly, unlike the United States where energy prices are falling due to the fracking boom.
What the article really does is underline the vastly different approaches that Germany and the United States have to their economies, the energy industry, and the future. The German people believe in the Energiewende but are less than pleased with the continually increasing cost of energy that accompanies it. The project overall reveals the LONG TERM nature of the thinking of the German government and its people. I believe that any kind of similar project would fail dismally in the United States. This is due mainly to the unwillingness of the American people to endure the unpleasantness of high energy prices for the long term goal of independence from nuclear and fossil fuels as a primary source of energy.
A project like the one Germany has undertaken requires a huge amount of organization and consistent enforcement by the government over a long period of time. While both the United States and Germany are successful capitalist countries with representative democracies, it is clear that the disposition and desires of the people serve as a constraint on what the government can or is willing to undertake. Will America's desire for short-term profit and cheap energy come back to hurt it in 40 years when Germany is almost entirely energy independent?
The article from The Economist talks about Germany's ambitious energy industry transformation project. Dubbed the Energiewende, the project is a series of timetables to switch the German electricity grid to at least 60% renewable sources of energy by 2050, with an accompanying drop of nearly 90% in greenhouse gas emissions compared to 1990. The new Super Minister of Energy and the Economy Sigmar Gabriel is financing this massive transformation by guaranteeing " not only 20 years of fixed high prices for solar and wind producers but also preferred access to the electricity grid." As a consequence the price of energy in Germany is rising yearly, unlike the United States where energy prices are falling due to the fracking boom.
What the article really does is underline the vastly different approaches that Germany and the United States have to their economies, the energy industry, and the future. The German people believe in the Energiewende but are less than pleased with the continually increasing cost of energy that accompanies it. The project overall reveals the LONG TERM nature of the thinking of the German government and its people. I believe that any kind of similar project would fail dismally in the United States. This is due mainly to the unwillingness of the American people to endure the unpleasantness of high energy prices for the long term goal of independence from nuclear and fossil fuels as a primary source of energy.
A project like the one Germany has undertaken requires a huge amount of organization and consistent enforcement by the government over a long period of time. While both the United States and Germany are successful capitalist countries with representative democracies, it is clear that the disposition and desires of the people serve as a constraint on what the government can or is willing to undertake. Will America's desire for short-term profit and cheap energy come back to hurt it in 40 years when Germany is almost entirely energy independent?
Walmart Fund to Support U.S. Manufacturing
Walmart is making a public push to buy American made products by establishing a $10 million fund that will reward new manufacturing processes, incentivizing American manufacturers to take on new projects and make them more efficient. This push is an attempt to bring production from overseas back into the United States. Walmart also announced that it will be increasing sourcing of American made products by $50 billion over the next ten years. Why does Walmart want to do this? Their incentive is that the income of their main customer base is not able to keep up with the cost of living, and they are hoping that bringing more jobs back to the United States will increase the income of more people, and not force them into intense competition in the market of inferior goods.
http://www.nytimes.com/2014/01/24/business/walmart-creates-10-million-fund-to-stimulate-american-manufacturing.html?ref=economy&_r=0
Why a Millionaire Wants a Higher Minimum Wage
Silicon Valley millionaire Republican Ron Unz wants a higher minimum wage but not for the right reasons. He believes that if the minimum wage rises enough that immigrants will lose their jobs and not continue to stay in the U.S. This will then discourage immigrants to even come to the U.S. in the first place. Which could then decrease welfare expenditures in the long run. His anti-immigrant perspective is under scrutiny, but he does have some valid points that are supported. For example the government pays billions to low-wage employees who are not able to get by on full-time salaries, passing the bill would decrease the money spent on these programs. He told the New York Times "doesn't it make more sense for employers to pay their workers than the government?"
http://america.aljazeera.com/opinions/2014/1/unz-california-minimumwagehike.html
Thursday, January 23, 2014
U.S. sees hurdles to China joining Pacific trade pact
The news article briefly tells how before the United States can consider expanding a Trans-Pacific free trade agreement--which would include the United States, Canada, Mexico, Japan, Australia, New Zealand, Singapore, Malaysia, Brunei, Vietnam, Chile and Peru--China has to agree to "move forward" on a bilateral investment treaty. The article focuses more on the free trade theme than the bilateral investment treaty, yet the prospect of a free trade agreement that would cover "40% of the global economy", which is not even including China, would make for an interesting future. If the US and the EU proceed with their free trade agreement, there would be an increase of a couple hundred billion dollars of trade. If the same hypothetically happened with the countries who would be affected by a Trans-Pacific free trade agreement, it begs the question how much the world will benefit.
On the downside, local economies will undoubtedly find themselves at a disadvantage. Barriers would no longer protect their goods, not to mention the huge black market in China. I wonder how the thousands to hundreds of thousands of workers in protected industries will react when they no longer have those protections in place?
http://www.reuters.com/article/2014/01/23/us-usa-china-trade-idUSBREA0M1LV20140123
On the downside, local economies will undoubtedly find themselves at a disadvantage. Barriers would no longer protect their goods, not to mention the huge black market in China. I wonder how the thousands to hundreds of thousands of workers in protected industries will react when they no longer have those protections in place?
http://www.reuters.com/article/2014/01/23/us-usa-china-trade-idUSBREA0M1LV20140123
Sales Climb as U.S. Housing Market Adjusts to Rates
For the first time in 5 months, the sales of previously owned homes climbed during December, capping the best year since 2006 and indicating that the real-estate market is starting to adjust to higher borrowing costs. This rise could be the cause of rising property values, a decline in consumer debt, as well as employment growth, predicting a rise in demand for new construction and improvements that would boost the GDP in 2014. Reflecting this growth in sales, the median price rose 9.9% between December 2012 and December 2013, with a 11.5% increase for all of 2013, according to reports. Mortgage rates have also increased to an average of 4.39% on a 30 year fixed mortgage.
Read the article here.
Read the article here.
Wednesday, January 22, 2014
China's Coercive Incentives
After a eight Chinese fishing boats were spotted in the lagoon of Scarborough Shoal, the Philippines sent a frigate to investigate the trespassing within the Philippines 200-nautical mile Exclusive Economic Zone. In response, China sent two civilian Maritime Surveillance vessels and an armed Fishery Law Enforcement Command ship to reinforce its sovereignty claim. China felt this action by the Philippines and attempted to use coercive economic incentives for the encroachment on China's sovereignty.
The Chinese government blocked hundreds of container vans of Philippine bananas from entering Chinese ports by claiming the fruit contained pests. This had a major affect on the economic system of the Philippines because it exports more than 30% of its bananas to China. Additionally, China began slowing inspections of papayas, mangoes, coconuts, and pineapples from the Philippines. Furthermore, Chinese travel agencies stopped sending tour groups to the Philippines, due to concerns for tourist safety. As a result of these coercive incentives, business leaders in the Philippines pressured the government to cease its confrontational approach in the Scarborough Shoal. Beijing and Manila eventually reached an agreement to pull out all vessels in the lagoon.
This is a great example of coercive incentives taken by a larger nation upon a smaller nation. China knew its imports of bananas from the Philippines were a large source of income for the country. By restricting that trade and advising Chinese travel agencies to avoid booking trips to the Philippines they effectively forced the Philippines' hand to honor China's expected sovereignty.
http://www.isn.ethz.ch/Digital-Library/Articles/Detail/?lng=en&id=150946
Martin Tobias
IBM top executives to forgo bonuses
The CEO of IBM, Ginni Rometty announced that senior management, as well as herself will be forgoing their bonuses this year. IBM has had declining top line and bottom line revenue this past year. Moreover, their efforts to expand in emerging markets have been met by bad timing as developing economies have experienced lower growth, and thus lower demand for IBM's goods and services.
Senior managements' decision to forgo bonuses sheds a more positive light on corporate America. Many other fortune 500 companies have laid off hundreds (if not thousands) of workers due to falling profits, but management still maintained the same level of compensation. This article shows that maybe corporate America does have a heart and soul, and that senior management at IBM understand their role as agents to shareholders, as well as leaders to thousands of employees.
Senior managements' decision to forgo bonuses sheds a more positive light on corporate America. Many other fortune 500 companies have laid off hundreds (if not thousands) of workers due to falling profits, but management still maintained the same level of compensation. This article shows that maybe corporate America does have a heart and soul, and that senior management at IBM understand their role as agents to shareholders, as well as leaders to thousands of employees.
Tuesday, January 21, 2014
First Major Retailer Starts Accepting Bitcoins
In what constitutes the latest milestone for internet-based currency Bitcoin, Overstock.com became the first major retailer to start accepting them as payment. Of note are two factors: that Bitcoin exists independently of any state regulation, and that this move, according to CEO Patrick Byrne, was driven largely by consumer demand. In an AP interview, Byrne made the audacious claim that his company was tapping into a new market, forging ahead of its competitors. It's uncertain whether or not market share is a sufficient impetus to drive retailers, of both the brick-and-mortar and e-commerce varieties, to follow suit.
The value of Bitcoin is derived from solving computationally-hard problems that yield a payout; a Bitcoin is henceforth defined as a history of transactions dating back to its creation as a reward by a central blockchain. Through this and numerous other protocols, inflation is kept in check. But its status as an international, anonymous currency commands a response from countries with widely varying and incompatible economic systems. While Norway, for instance, regards Bitcoin as an asset for legal purposes, China has banned institutions from accepting it as a form of payment, with the stated aim of protecting individual property rights.
While Overstock.com revels in its over $100,000 in Bitcoin sales from its first day of accepting them, other vendors may be less eager to jump on the bandwagon, although they're likely more afraid of running afoul of state regulators than oblivious to their potential stake in the Bitcoin market. A dichotomy appears to be emerging—between systems that regard virtual currency as merely an asset, and those wary of it as a possible threat to the integrity of their system—and the way these currencies are treated may further distinguish economic systems from one another.
Sources:
The value of Bitcoin is derived from solving computationally-hard problems that yield a payout; a Bitcoin is henceforth defined as a history of transactions dating back to its creation as a reward by a central blockchain. Through this and numerous other protocols, inflation is kept in check. But its status as an international, anonymous currency commands a response from countries with widely varying and incompatible economic systems. While Norway, for instance, regards Bitcoin as an asset for legal purposes, China has banned institutions from accepting it as a form of payment, with the stated aim of protecting individual property rights.
While Overstock.com revels in its over $100,000 in Bitcoin sales from its first day of accepting them, other vendors may be less eager to jump on the bandwagon, although they're likely more afraid of running afoul of state regulators than oblivious to their potential stake in the Bitcoin market. A dichotomy appears to be emerging—between systems that regard virtual currency as merely an asset, and those wary of it as a possible threat to the integrity of their system—and the way these currencies are treated may further distinguish economic systems from one another.
Sources:
Monday, January 20, 2014
China's Economy Grows 7.7 Percent in 2013
China has second-largest economy in the world and its economy has been growing significantly for the last several decades. However, China's economic growth decelerated in the final quarter of 2013 and appears set to slow further. China's growth is still very high comparing to other countries like U.S, Japan or any European countries. But China's growth rate decreased abruptly from two digit rates of the previous decade. Slowdown of China's economic growth will cause job losses and increases the challenges faced by the ruling Communist Party as it tries to re-balance the economy away from reliance on trade and investment.
Obama’s Secret International Trade Treaty Caving on Environmental Protections
This article is about a free trade agreement the U.S. is involved in. The issue brought up is that in the agreement, it is possible some environmental standards may be broken. This is an ethical issue that the U.S. must decide on. Many environmentalists do not agree with the current agreements. Ethical issues like this one are brought up in business every day and is something the government and businesses struggle with on a daily basis.
Sunday, January 19, 2014
As Congress stalls, more jobless workers enter free fall
http://www.msnbc.com/msnbc/congress-stalls-jobless-fall
In early 2008, the US passed an emergency act giving benifits to the unemployed. Recently, congress has been unable to reach a decision on whether or not to extend these benefits. Until congress is able to reach a resolution, unemployed Americans will continue to lose millions in government aid. More specifically, "By the end of March, a total of 2.2 million Americans will have lost their unemployment benefits without a federal extension." As we've discussed during lecture, this is an example of policy affecting the economic outcome.
In early 2008, the US passed an emergency act giving benifits to the unemployed. Recently, congress has been unable to reach a decision on whether or not to extend these benefits. Until congress is able to reach a resolution, unemployed Americans will continue to lose millions in government aid. More specifically, "By the end of March, a total of 2.2 million Americans will have lost their unemployment benefits without a federal extension." As we've discussed during lecture, this is an example of policy affecting the economic outcome.
75 Economist Back Minimum Wage Hike
75 Economist Back Minimum Wage Hike (Article)
On Tuesday 75 economist backed the democratic proposal to raise the minimum wage to $10.10 over a three year time span. The bill known as the 'Fair Minimum Wage Act' would raise a full time minimum wage workers pay from $15,000 to $21,000 per year, which could bring a family of three above the poverty line. There would also be a raise in the base wage of workers who earn tips from $2.13 to $3.00 in one year and then gradually would be adjusted to match 70% of the federal minimum wage, which would be expected to reach that mark in six years. Critics say the raise in pay will cause a drop in the number of jobs and lead to a raise in the price of goods and services. Some studies have shown negative effects on jobs, while others have shown little or no effect on the amount of jobs. The bill is not expected to pass this year because some feel it will not make it through the house. We should hear more about this as midterm elections are coming up here in 2014.
On Tuesday 75 economist backed the democratic proposal to raise the minimum wage to $10.10 over a three year time span. The bill known as the 'Fair Minimum Wage Act' would raise a full time minimum wage workers pay from $15,000 to $21,000 per year, which could bring a family of three above the poverty line. There would also be a raise in the base wage of workers who earn tips from $2.13 to $3.00 in one year and then gradually would be adjusted to match 70% of the federal minimum wage, which would be expected to reach that mark in six years. Critics say the raise in pay will cause a drop in the number of jobs and lead to a raise in the price of goods and services. Some studies have shown negative effects on jobs, while others have shown little or no effect on the amount of jobs. The bill is not expected to pass this year because some feel it will not make it through the house. We should hear more about this as midterm elections are coming up here in 2014.
Thursday, January 16, 2014
Skills and Youth: All Hands on the Deck
Nowadays in developed countries, finding a job has become tougher for young people. Although full of hope and energy, the young, fresh out of college, might not have the right skills that the employers want. The McKinsey Center for Government reported that only two-fifths of the employers are confident that they would find enough qualified graduates for their entry level positions. Therefore, the real shortage might be the skills, rather than jobs. Mona Mourshed of McKinsey said that in order to better prepare young people for workplace, the old notion of education happens first and employment later needs to be ditched. Acquiring work experience while acquiring knowledge is indispensable. Affordable online resources are available for not only the young people to prepare themselves for work, but also the mid-career workers to advance their skills. Technology can be used as one's tool to get up to speed with the advancing job market.
Link: http://www.economist.com/news/international/21594350-how-cut-youth-unemployment-fast-changing-jobs-market-all-hands-deck
Link: http://www.economist.com/news/international/21594350-how-cut-youth-unemployment-fast-changing-jobs-market-all-hands-deck
No Such Turkish Delight
As if managing floods of refugees inhabiting their country wasn't enough, Turkey now faces allegations of corruption and bribery amongst government officials. As a country that is heavily reliant on foreign investments, this poses a significant problem for the Turkish economy. The question that the world is asking though, is what exactly went wrong? As of 2011, Turkey was marked nation of growth. Perhaps it was all a façade. Read more to find out about the Turkish economic downfall.
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