Closing the Gap: Unemployment in America

Although the unemployment rate has fallen drastically since the start of the recession, it is clear that there is still a lot of work to be done on the economy.  One of the reasons that the unemployment rate is so much lower is that the labor participation rate is lower as well.  This is not only because of people temporarily stopping their job searches but also because baby boomers are beginning to retire and some people have been unemployed so long that they have permanently stopped looking for jobs.  As workers are unemployed longer, recruiters stop looking to them as possible new hires.  However, paying attention the unemployment rate is still important.  Economists are now saying that the labor supply in America will never return to what it once was.  This means that our economy is operating much closer to its potential and that we are using more of the available labor and capital.  That being said, it is important to get long-term out of work employees back into the labor market.

http://www.economist.com/news/finance-and-economics/21596529-americas-labour-market-has-suffered-permanent-harm-closing-gap

Venezuela: A Country on the Road to Economic Change

Venezuela is a present day example of a country on the road to economy change and at this point it seems to be head toward the revolutionary version. A country divided, a government combining a democratic mandate with thuggery, and an opposition that is increasingly radicalized all support this line of thinking. Mr. Maduro, the current leader, is facing an economy that has been damaged by years of mismanagement of the oil market (much of the revenue from this market has been sucked up by corruption or diverted to unsustainable social programs and subsidies to allies) and a hostile private sector which is making basic goods, like toilet paper and cooking oil, scarce. It is not a surprise that the Venezuelan citizens have resorted to protest in the streets. And how does Maduro response? By taking a page out of the totalitarian handbook: armed activists on the streets, media blackouts and the arrest of opposition leader Leopoldo López on trumped-up charges.  This only provokes the protestors, causing further violence, and continues to weaken the economy.

Is there anything that Maduro can do to gain control? The article says that Maduro needs to realize that his strategy of dividing Venezuela is only deepening its misery. To rectify this situation he needs to unify his country. In addition, Maduro needs to get the armed gangs off the streets, allow the media to report what is going on, release Leopoldo López, and enter into proper dialogue with Henrique Capriles, another leader of the opposition. Without this his regime forfeits its claim to being democratic. Moreover, to calm the Venezuelan citizens he needs to come up with a plan to reverse the economic direction of the country or else even the poor will withdraw their support for Maduro. Is there still time left for Maduro to fix things and remain in power or is Venezuela already past the point of no return? 

http://www.economist.com/news/leaders/21597900-dialogue-not-repression-way-nicol-s-maduro-save-his-government-and-his

Ukraine's Financial Future

As hostility and confrontations between Russia and Ukraine continue to develop, the latter is put at greater risk of experiencing severe economic problems. Russia has promised to stop providing discounts for natural gas exports on April 1 and a 15 billion dollar loan to Ukraine has been indefinitely suspended. The European Union has pledged up to a 15 billion dollar (11 million euro) loan to the newly-formed government and John Kerry recently announced approval for the United States to loan up to 1 billion dollars in loan guarantees to Ukraine. However, Ukranian officials say that at least 35 billion dollars in loans and credits will be needed to ensure that the country does not default in the next two years.

As an emerging free market, Ukraine has struggled to create a corruption-free open market. The country's trade deficit is currently rooted in its dependence on natural gas imports from Russia, and the country's struggle to recover from the worldwide financial crisis in 2008 have resulted in low growth rates, inflation, and devaluation of the currency.

As a transition economy that is now undergoing new transitions, Ukraine is at risk of defaulting on previous and future loans from international creditors. Knowing this risk and the tenuous situation that Ukraine's economy is in at the moment, could Russia use their political and economic advantages against Ukraine by forcing further dependence on Russia's natural gas exports and economic credits? Or will international monetary organizations and other countries wield their own advantages and cover the deficits that Ukraine will face in the event that all economic and political ties are cut from Russia?

Article: http://www.nytimes.com/2014/03/06/world/europe/ukraine.html?hpw&rref=business&_r=0

Additional source: http://www.economist.com/blogs/freeexchange/2014/03/ukraine-and-russia

Russian markets plunge as Putin tightens Crimea grip

So for those living in a hole for the last week, Russian forces have invaded the Crimean Peninsula in the Ukraine.  Russian justifications were to protect the Crimean population from some unknown enemy (there was no violence on the level experienced in Kiev prior to the Russian invasion).  While the US and her allies are very unlikely to resort to military means, they will use economic threats to get Russia to pull out.  Seemingly as a result of the likelihood of economic pressures, the Russian ruble fell to historic lows when compared to the dollar.  Furthermore, four countries have suspended preparations to attend the G8 meeting in Sochi this year.  There have also been threats to expel Russia from the G8 and the World Trade Organization.  Things have slightly calmed down without a gun being fired.  For a country like Russia, economic sanctions will work, yet it is not going to be American sanctions that will bring Russia to its knees; the European countries must step up to the plate and put economic sanctions on Russia.  Russia has been more dependent on the EU for selling oil and gas, EU not so much.  They got by without Russian gas for almost half a century.  Only European sanctions can create the desired effect and force Russia to pull out of the Ukraine.
http://www.reuters.com/article/2014/03/03/us-ukraine-crisis-idUSBREA1Q1E820140303

The Urdu Rate of Growth

http://www.economist.com/news/asia/21596554-slowly-lights-may-be-coming-again-urdu-rate-growth

This article describes the current state of the economy of Pakistan. Electricity shortages, among other problems, is one issue that Nawaz Sharif, the Prime Minister of Pakistan, has promised to fix. The article says that the electricity shortages are caused by a "circular debt." In this circular debt, private power firms do not produce as much as they could because the state purchaser does not always pay the firms. The state purchaser does not always pay the private firms because electricity consumers do not always pay the state purchaser. The privatization minister of Pakistan suggests private investors being allowed to take over these state-run energy firms that are criticized for being overstaffed and poor financial control.

The article goes on to say that an even bigger problem for the Pakistani economy is the source of energy. As of now, Pakistan is heavily reliant on imports of oil and natural gas. Pakistan spends $14 billion a year on oil imports. The Pakistani government plans to bring in natural gas from Iran, but this plan will most likely not come into fruition if the U.S., the largest donor to Pakistan does not support the move. Is the U.S.'s ability to effectively prevent trade between Iran and Pakistan justifiable?

Inequality v. Growth

This article is largely about the relationship between inequality, growth, and redistribution. Although it is not easy to define this relationship, the author begins a discussion. As we have learned in class, lower inequality is often linked with generally higher growth rates, such as Sweden or Germany, for example. The author speculates the impacts of inequality in relation to growth. High levels of inequality could “impair growth if those with low incomes suffer poor health and low productivity as a result.” The author cites a recent paper finding that, “governments in more unequal countries redistribute more and rich economies do more than poor ones.” While this isn’t necessarily true for every economy, it is powerful to understand that, “differences in inequality across rich countries are mostly down to the generosity of redistribution.” Additionally, households with low income are less likely to invest in education, which further drags down such potential growth. It will be imperative for governments to find a balance between redistribution and inequality for future growth.

http://www.economist.com/news/finance-and-economics/21597931-up-point-redistributing-income-fight-inequality-can-lift-growth-inequality

Job Clubs for Millenials

Job clubs are increasing in the U.S. Jobs clubs are to help the unemployed with emotional and professional support while looking for jobs.  There are about 10,000 job clubs in the country.  These clubs used to be run by older people who had a decade of professional experience but now it seems like people in their 20s are making their own clubs. Job clubs have been specific for underemployed workers which is a big concern for post-college people.

http://america.aljazeera.com/watch/shows/real-money-with-alivelshi/Real-Money-Blog/2014/2/27/jobs-clubs-for-millennials.html

Largest Bitcoin Exchange files for Bankruptcy

The MtGox bitcoin exchange, formerly the worlds largest crypto currency exchange officially filed for bankruptcy protection on Thursday. This announcement comes only days after the exchange went offline due to technical troubles that prevented customers from making transfers. Some reports say that the site went down after a reported $350 million in bitcoins was stolen due to a security glitch.

This news has created downward price pressures on bitcoin to the extent that it's now trading for a little over half of its all time high of $1000 in November 2013. Only time will tell if bitcoin can hold up to these events.

Why Greeks Are Overworked While Germans Go Home Early

As we learned in class, Germans have a constitution that lay out economic goals, including full employment.  In a study posted by IEE, they discuss how the workers in South European countries put in more hours than in those in North European countries, such as Germany.  But the article goes on to discuss how while in Spain unemployment changed dramatically during the recession, in Germany it was the hours worked while unemployment remained low.

The study, while trying to indicate that South Europeans are harder workers, might instead indicate that these countries have something they could learn from German practices.  As German GDP per working hour, while the lower end of Northern countries, is still higher than the best measure in Southern countries.  So perhaps it is not working hard that can necessarily bring a country out of a slump, working smart might be the way to go.

Read the Article Here

Valuing the long-beaked echidna

http://www.economist.com/news/finance-and-economics/21596943-setting-price-nature-useful-exercise-up-point-valuing

This article examines how economists are adapting to environmental needs. No longer do economists follow Adam Smith's model that says nature is unlimited in its resources. The problem that economists now face is how to place numbers on resources such as the long-beaked echida, clean air, or fresh water. In order to change policy decisions, economists are attempting to allocate numerical values to parts of the natural environment the same way manufactured goods are given numerical values.

The article states that there are two types of value that nature provides - use value and non-use value. Use value parts of nature include water and bees, which both provide resources used by humans. Non-use parts of nature do not necessarily provide resources to humans, but humans still value them. An example of a non-use part of nature cited in the article is a lion. People value lions because they are "charismatic." The article notes that use value goods that produce a good or resources are often easier to place a numerical value. The article also notes that when  market values are affected by nature, a numerical value of nature can be derived. Third, surveying people about how much they value certain aspects of nature is a way to place numerical values on non-use aspects of nature. The article concludes by recognizing that economics will never be able to completely capture the value of nature.

Shots called, now what?

http://www.economist.com/blogs/easternapproaches/2014/02/ukraines-new-dawn

This articles discusses Ukraine's situation post revolution. People won the independence from corrupt dictatorial regime but whether they won a better life fully independent of Russia is still to be seen. The article discusses control of resources in the hands of a very small elite, consisting of oligarchs and politicians. Former President Yanukovych was one of the leading faces behind the extension of his political career to benefitting his personal business goals. But after the events of last week consisting of violent clashes between protesters and police the reality of the political situation in Ukraine has been revealed to the global community. That reality includes Kremlins influence in the domestic policymaking of Ukraine.

Article asks several important questions, such as what will happened to Russian bail-out package, which has been feeding president's regime? The other question posed is the oil prices and just a general partnership between Russia and Ukraine. It will take years before Ukraine will be strong enough independently to withstand Russia. Therefore, people of Ukraine have to elect the right leaders and become part of the process of rebuilding institutions that will help the country to develop economically. It s a very bright day in the life of the country and its people but the future is still very uncertain.

Abe's Reflationary Policies Aren't Cutting It

Widely hailed for his standout economic policies, Japanese prime minister Shinzō Abe has gone about weakening the yen in order to promote exports and reduce the widening trade deficit. Alas, while Abe's logic is sound, the numbers suggest that the trade deficit still stands at a solid ¥2.79 trillion ($23.7 billion), and export growth, while rising, is still far outstripped by import growth. This has rendered Japanese companies pessimistic about the future barring further stimuli, and the national bank seems likely to comply. So, what's to be done? At some point, the inflation will have to yield to common-sense concerns about any kind of currency devaluation. Much of the task ahead is psychological: Abe wants to convince firms that the economy is sufficiently stable, such that they can grow and export more. Bolstering tariffs seems like another common-sense endeavor. But the government also has to be reasonable with which industries it decides to burden with tariffs: in the wake of the Fukushima disaster, the country's had to bump up fuel imports to compensate for lost nuclear energy production. Perhaps if the Abeites can find a way to bring about economic stimulus without trashing the yen--through careful taxation strategies, among other things--a decent solution to the export crisis can be achieved.

Netflix to Pay Comcast for Smoother Streaming

Netflix has agreed to pay Comcast to ensure that their movies and television shows stream smoothly to Netflix customers. Lately congestion in the internet has been a negative factor causing interruptions for customers trying to stream Netflix movies and TV shows. This deal will make Comcast the dominant provider of broadband in the U.S, especially after their purchase of Time Warner Cable. It took a while for Netflix to cave in and pay someone else for this service, but it will more than likely ensure their rising dominance as well. It is said that they are going to compensate the middlemen internet providers who were providing this service for Netflix before. This deal is huge for Netflix after they said that if providers don't interconnect with its servers its business and operating results could be adversely affected because of increased cost. The financial impact of this deal is still unclear and only time will tell if the effect will be great.http://online.wsj.com/news/articles/SB10001424052702304834704579401071892041790?mod=WSJ_hp_LEFTWhatsNewsCollection

Can Scotland be independent of the Britain ?

A recent discussion in England is whether Scotland should separate itself for Britain. Currently although being part of England, Scottish don't have the right to vote for the government in London, thus the benefit of having a representative government is taken away from people. However, forming an independent state is not something simple. 

A survey carried out by Korn Ferry questioned 29 chairmen of 32 FTSE100 companies. The survey shows that two- thirds of FTSE 100 chairmen believe that Scottish independence would be bad for the British business. It also shows that 86 % believed it would be bad for business if the UK left the EU. 

On one hand, Chairman of Standard Life worries independence would threaten the loss of its UK tax exemption rights, which negatively affect its pension business, BP chief executive warned uncertainties for energy sector, chief executive of J Sainsbury warned higher food prices and chairman of Orion Group worries his recruitment business would have to move out of Scotland due to uncertainties. 

On the other hand, Royal bank of Scotland said it could adjust and continue doing business on both sides and TSB Bank said its issue was not related to the independence debate. 

Previous survey of 33 retail chairmen also showed concerns about higher costs for consumers due to higher costs in the supply chain and extra administration.

The new system (new government, new currency, new policies, new administration, etc.) probably will cost a lot more than the benefit of being independent. It may cause to the opposite effect of synergies, in which both UK and Scotland will be worsen off by more than just short term cost. Although the matter was brought up, I think this is rather impossible. However, it is possible that some political policies may change regarding the relationship between UK and Scotland

http://www.ft.com/cms/s/0/757b884c-9be6-11e3-afe3-00144feab7de.html#axzz2uBmeK16S

EU Approves Sanctions on Ukraine

There has been a lot of violence in Ukraine in the past week due to findings about some of its leadership, and sanctions had been made against them.  These sanctions include asset freezes, visa bans for those responsible, and a ban on exports while the ban on arms was dropped.  The EU officials said it was not likely that the Ukraine's top leaders would be hit with sanctions right now, but if the situation continues to worsen, more leaders will be sanctioned.




http://online.wsj.com/news/articles/SB10001424052702304914204579394461852462306

Losing Momentum in the "Fast-track" to Trade

This article discussed the importance of the United States’ participation in the global economy and Obama’s current policies as consistent with free trade and global partnership.  Since his first term, Obama has made more progress in developing trade deals with the EU.  The progress made with the administration thus far also brings a new face to what the United States is capable of bringing to the global market.  What complicates these improvements is the current Congressional disputes.  Unfortunately, the President cannot simply pass such policies without the “fast-track” system in Congress, due to amendments being added.  However, speculation is that after the return from the mid-term break, Congress will back the fast-track system and approve trade agreements.  Such deals on the table result in an approximate $600 billion increase in the world’s output, with nearly a third accruing to the US.  Potential benefits could result in a decrease to education and healthcare.  With much more delay, officials fear a loss in momentum and resulting progress being lost.  Opposition to the fast-track policy could dismantle agreements, and Obama’s delay in progress may actually increase the inequalities of the global trade system. 

http://www.economist.com/news/leaders/21596934-barack-obamas-unwillingness-fight-free-trade-expensive-mistake-how-make-world

European Union Imposes Sanctions Against Ukraine

In the past week, there has been terrible violence in Ukraine. The rebels began protesting against the government because many figures are deeply involved with serious criminal organizations. The government began to respond violently which resulted in many casualties for both parties. As an attempt to end the violence, the European Union voted on Thursday to impose sanctions against those who are responsible for the violence in Ukraine. The sanctions have been approved that include a travel ban to the countries that make up the 28-nation bloc and the freezing of assets held in European countries. The European Union has stated the sanctions will target "those responsible for human rights violations, violence and use of excessive force." Because many of the Ukrainian government officials that have been engaging in corrupt activities spurred the protests, the United States has already cancelled the visas of the individuals responsible. The main goal is to find a peaceful solution to the protests and sanctions could further include restricting Ukrainian imports on items such as firearms, ammunition, vehicles equipped with water cannons, and anti-riot protection gear for government officials. It is encouraging to see the European Union get involved hopefully can bring a peaceful solution to the violence.

http://abclocal.go.com/kgo/story?section=news/national_world&id=9438879

Economics of Food Subsidies

In the past food subsidies have been the go-to method of ensuring that citizens in developing countries in developing countries. However, it is difficult for many of these governments in developing countries to maintain these subsidies, and the money can often go to the wrong people. Studies have shown that food vouchers may be a more viable option for these developing countries. Researchers at the International Food Policy Research Institute composed a new paper that analyzed the results of an experience that World Food Programme had conducted in Ecuador. The study found handouts to be the least effective. They were three times as expensive as voucher in boosting calorie intake by 15%, and four times more costly in enriching the quality of diet. The vouchers encouraged Ecuadorians to buy healthier foods because of the restrictions on the vouchers.

http://www.economist.com/news/finance-and-economics/21596987-why-food-vouchers-are-policy-worth-considering-developing-countries-feeding

Global Banking

http://www.economist.com/news/finance-and-economics/21596960-avoid-another-crisis-fed-further-fragments-global-finance-inglorious

This article talks about a new rule that the Fed has implemented towards foreign banks. They now must meet the same standards for capital and liquidity as American banks. The Fed sees this as a necessity for the global banking system. Foreign-owned banks previous leaned on their "parents" for support but now this rule will change how they must operate.

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

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

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

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

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

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

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

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

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

THE EURO and the European ECONOMY-

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

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

The Worldwide Wobble

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

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

Study Finds Greater Income Inequality in Nation’s Thriving Cities

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

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

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

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

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

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

The Economic Impact of The Olympics

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

Fed Sets Rules for Foreign Banks

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

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

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

Worsening U.S. Divorce Rate Points to Improving Economy

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

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

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

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

Yes, the Wealthy Can Be Deserving

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

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

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

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

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

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

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

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

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

Read the article Here

Cold Calculations: The Economics of Snow

(Click here for article)

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

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

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

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

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

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