Greece's Agonized Cry to Europe

Article Link:

http://www.nytimes.com/2015/01/27/opinion/greeces-agonized-cry-to-europe.html?hp&action=click&pgtype=Homepage&module=c-column-top-span-region&region=c-column-top-span-region&WT.nav=c-column-top-span-region



As winners of the Greek election, all eyes are on Alexis Tsipras and his left-wing party Syriza. Alexis Tsipras has promised to not follow the austerity regime set up by the Germans anymore. The party  also wants to continue reforms mean't to lowering the country's debt and maintaining Euro as their currency. With them winning the Greek elections, questions about Greece's status in EU have sprung up.

A significant majority of Greeks are no longer willing to sacrifice everything in order to pay off their debts. Greece has suffered from extremely high levels of unemployment and its economy has shrunk significantly during this period. If Greece is forced to keep following the austerity regime against it's wish then it might default on it's debt and abandon the euro which would result in broad negative economic impacst throughout Europe further destabilizing it.

Mr. Tsipras, on his part has promised to continue reforming Greece's economy, making the upper class pay their taxes and ending corruption, nepotism and cronyism in the country. The deadline for Greece's current bailout program is on Feb 28. It would be welcoming if the European leaders decide to extend the program as a way of showing support for Greece's new government as a way of showing their cooperation with the country.

Russia receives Junk Status

http://money.cnn.com/2015/01/26/investing/russia-credit-rating-junk/index.html?iid=SF_BN_River

S&P has rated Russia's credit as junk.

This verdict will make it harder and very expensive for Russia to get loans. As Russian bonds have lost the investment grade, investors will have to sell their current Russian bonds.

Economic sanctions and oil down slide has worsened the economic situation of Russia. The Russians had expected that oil would sell this year over $100 a barrel but the it is currently being sold for $45 a barrel.

Russia's central bank has hiked the interest rate by five times to strengthen the ruble. Thus, this is a clear indication that Russia is facing a financial crisis.

Russia's central bank has claimed that it will fund an emergency loan of $545 million to protect the deposits. However, Russia will then have to protect itself from inflation.

Russia's currency has plunged by 40% of it's value against the USD and S&P expects an inflation of 10%.

Is Venezuela on the Verge of Collapse?

Venezuela has been on an economic downturn since the death of Hugo Chavez. After his death, Maduro took over using the economic crisis as the platform for his campaign. However, not much has changed, and the extreme drop in oil prices has not helped the oil-reliant economy.

OPEC has refused to cut oil production, hurting the Venezuelan, Russian, and Iranian. Currently Venezuela is spending more than oil revenues are bringing in, and it is hurting them. The government is subsidizing food costs, oil costs, and have limits on the number of items a consumer can purchase at the store. Inflation is over 60%.

Venezuela is about to default on its loans. And is going to be about $5 billion under budget. It is estimated that their economy is expected to shrink by about 7%. There is a thriving underground black market that is helping people get goods and currency in USD that they cannot get in stores. The future looks bleak. The Maduro government will not take responsibility and keeps blaming The United States and it's allies for the problems its facing, when in reality it is the fault of the government for spending too much on it's citizens.

The government needs to take control of the situation before it becomes much worse, but with the uncertainty of oil prices, there may some time before their economic system improves.

http://www.thedailybeast.com/articles/2015/01/26/is-venezuela-about-to-collapse.html

Firefighters for sale.....

In light of what we discussed in class today:

http://usnews.nbcnews.com/_news/2011/12/07/9272989-firefighters-let-home-burn-over-75-fee-again

http://www.nbcnews.com/id/39535911/ns/us_news-life/t/no-pay-no-spray-case-firefighters-threatened/#.VMaVIy42eIs

Pope Calls for More Market Regulation

http://www.nytimes.com/reuters/2015/01/11/business/11reuters-pope-markets.html

Pope Francis has been the center of attention on a lot of issues social, economic and otherwise.   In this case he has taken an economic stance.  Based on his faith and reading of old teachings, he believe that there needs to be more regulation of financial markets.  The way wages are set, with bonuses and huge salaries, are bread from greed and speculation in food commodities under minds work towards ending hunger across the world.  His statements have conservative Catholics calling him a Marxist while he argues that he is simply relaying what the bible tells us.  Given the changes that face economic systems and the choices that they have to make in order to maintain a certain equilibrium and fight economic disparity, maybe Pope Francis should be listened to.  Large salaries may be more than just a show of greed but large disparity in salaries only serves to increase the gap between economic classes.  If a system would like to avoid economic outcomes such as increased poverty, more regulation may be the way to go.  Having more steady food prices would also allow for better across the board access to food products, although ending world hunger may not result so easily it would be a step towards a healthier lower class, which in turn could lessen the reliance of many lower class individuals on state provided care and, in the long run, be a step towards evening the economic playing field.

The state-of-the-union address: "Middle class economics"

In the State of the Union address, President Obama discussed his focus on income inequality. The gap between the rich and poor has been widening, as the middle class population is shrinking. President Obama is worried that this trend could damage the overall economy. His focus is on middle class economics. The goal is to help working families’ feel more secure. To achieve this goal there is talk about raising the taxes of the rich to support the poor. President Obama wants “tax reforms that protects and strengthens the middle class, lowers rates, simplifies the system, levels the playing field, and eliminates unfair and inefficient loopholes.” Republicans believe this will hurt investment and jobs. Instead they suggest cutting taxes will benefit the economy. Republicans recommend other policies that will help with income inequality, other than raising taxes.

Link to article

Will Oil Uncertainty Present an Investing Opportunity?

http://www.foxbusiness.com/investing/2015/01/25/will-oil-uncertainty-present-investing-opportunity/

The article above discuss the issues of failing oil prices and how they have affected several nations in the United Arab Emirates. Though we as American have thoroughly the low gas prices, investors in the UAE are terrified. As oil prices fall to 60$ a barrel, many investors question whether the UAE economy can continue to grow. This has caused the stock for oil prices to fall. Investors have begun selling their stock however, should they be concern this early? The UAE profited largely when oil was 100 a barrel. This created a flourish of cash within the government. As of now there has been no sign of reduce growth. I think the best thing for investors would be to wait and see if prices began to recover rather than making an immediate decision.

Obama: No greater threat to future than climate change

In President Obama's State of the Union speech last Tuesday he stated that no challenge poses a greater threat to future generations than climate change. 2014 was the warmest year since record keeping began. In Obama's State of the Union speech he claims that the last 14 of the 15 years have been the warmest years on record. The United States needs to make a commitment in order to reduce greenhouse gas emissions and curb global warming. Even though the United States has made a strong commitment to cut back on greenhouse gasses it still remains the second greatest polluter, behind China. Both China and the United States account for over one third of global greenhouse gas emissions. Since the United States and China have made strong commitments towards cutting greenhouse emissions, other nations are now stepping up and taking the same steps. Countries are warn worldwide that if these climate changes continue to be an issue it will cost governments around the world more than $100 billion a year. In all we need to take more drastic moves in order to cut our greenhouse emissions. This will not only benefit us, but also our future generations. In all we as a whole need to come together and think of the future of our planet.

http://www.cnn.com/2015/01/21/us/climate-change-us-obama/index.html

Wealth effect in europe

The ECB plans to purchase 60 billion euros’ worth of a combination of government bonds, debt securities issued by European institutions, and private-sector bonds, each month from March until at least September 2016. The ECB seems to be hanging its hat on the expectation that this action is going to increase inflation, which will translate into job growth, which will in turn stimulate the economy. I’m not so sure that is the transmission mechanism. I think the real transmission mechanism will be if the ECB is able to introduce enough liquidity into the system to drive up asset prices, and through the process of driving up asset prices, drive interest rates down further. This would reduce borrowing costs for businesses, which would improve profitability and encourage them to hire more workers.
http://www.businessinsider.com/qe-wealth-effect-in-europe-and-us-2015-1

Here's What Could Happen If Apple's watch Flops Like Google Glass

http://www.businessinsider.com/heres-what-could-happen-if-the-apple-watch-flops-like-google-glass-2015-1

With Apple joining in the smart watch market, forecasters have predicted that the watch could move 60 million units in the first year equalling $21 billion in revenue.  However, a recent survey says that the percent of respondents who said they would buy the watch fell from 10% to 7%.  This has raised the question of what will be the impact if the Apple watch fails miserably like Google Glass.  However if the smartwatch fails it will not be the end of the world.  The predicted sales of 60 million units will only cover 10% of apples projected revenue for the 2015 fiscal year.  Additionally, with the launch of the latest iPhone, the projected sales for these smartphones could make up for the possible fail of the watch.  The growing demand for iPhones only make the launch of the smartwatch a bonus.  While the success of the watch is still in question, Apple and its investors should not be worried if the watch does not meet expectations.

China's Slowdown - From a Very Big Base

http://www.economist.com/blogs/freeexchange/2015/01/chinas-slowdown

Recently, the Chinese government released statistics about the performance of the economy in 2014. The article discusses how a lot of the focus has fallen on China's fall in growth rate from previous years, resting at 7.4% (the lowest in 24 years), and 0.1% short of the government's target for growth. However, the article also suggests that focusing only on this may be a little myopic since there is also good news to be had.

While, China's growth has certainly slowed to a degree, the larger size of its economy means that it is still generating high levels of demand, even with a lower growth rate. Another concern has been that a large percentage of China's growth has been driven by investment (48.3% of GDP in 2011), and relatively lower consumption. However, consumption as a share of GDP has been rising recently, albeit relatively slowly. The second thing worth paying attention to is that real wage growth in the previous year was faster than the growth rate of the economy (8%), with rural wages growing faster than urban wages.

The article ends by noting that there may be errors in the data due to the way the government reports it, so these numbers are difficult to double check. Also, the strength of China's economy will be tested in the coming year with property investment expected to weaken. The IMF cut its forecast for China's 2015 growth to 6.8%, even lower than 2014. 

Britain's Elderly: Wealth of Generations

http://www.economist.com/blogs/freeexchange/2015/01/britains-elderly

This article discusses the current situation revolving around Britain and the pensioners of Britain.  The article talks about how those citizens who have gotten pension are a protected class with a lot of benefits.  First, these individuals do not have to pay national insurance and they receive free benefits like bus travel and cable access.  The article also goes on to talk about how, even though this class has a lot of benefits, they are in fact in a worse situation than the working class because they do not have disposable income.  The article then goes on to talk about how even though these pensioners are in a worse place when it comes to disposable income, they are in a better position when it comes to private income.  The article ultimately shows readers how currently, in Britain, there is an issue with income distribution and they question whether or not they should give benefits to those pensioners or other classes.

US and India Strike a huge Deal

The U.S. just unlocked billions of dollars in FDI with India after a deal was struck between president Obama and Minister Modi. The two countries reached an understanding on two issues that, despite a groundbreaking 2006 agreement, had stopped US companies from setting up reactors in India and became one of the major irritants in bilateral ties. The new deal resolved differences over the liability of suppliers to India in the event of a nuclear accident and US demands on tracking the whereabouts of material supplied to the country, US ambassador to India Richard Verma told reporters. This new deal will open up an excellent alternative for the U.S. As china become increasingly difficult to deal with India serves as a healthy alternative to FDI and manufacturing for the U.S. Although it has been slow paced economic process for India the New Minister has promised to increase India's FDI in the near future and has already began to do so through new bills and laws promoting foreign relations.

http://www.businessinsider.com/the-us-and-india-just-unlocked-billions-of-dollars-in-trade-2015-1

A Quiet Revolution in Helping Lift the Burden of Student Debt

http://www.nytimes.com/2015/01/25/upshot/a-quiet-revolution-in-helping-lift-the-burden-of-student-debt.html?action=click&contentCollection=Business%20Day&region=Footer&module=MoreInSection&pgtype=article&abt=0002&abg=0

As college gets more expensive every year, we look to find a solution to student loan debt. Clinton originally created an income based program- IBM - but students were not aware of this program and therefore, were not taking advantage of it. Then in 2007, the program was modified and the terms for repayment were better. The program basically made it impossible to default on your loans because you paid a percentage based off of your monthly income and after a certain number of years, your debt would be forgiven. In 2010, Obama then made IBR even more generous. The problem that still lies within this program is that no one really knows about it or what it is or how it works. But basically, in the long run the federal government is going to take over the states in American higher education. Could there be a better alternative to helping students with their student loan debt or is the government on the right track?

Inclusive Capitalism

http://www.nytimes.com/2015/01/21/opinion/can-capitalists-save-capitalism.html?_r=0

Despite the decisive victory of free-market capitalism over a planned economy, income inequality is a persistent problem in a capitalist economy. According to the article, income inequality may result in insufficient aggregate demand. Moreover, insufficient purchasing power of people in the bottom tier of income distribution may threaten the survival of corporations and the top 1 percent as they lose profit making opportunities. To overcome the problem, economists and politicians alike are proposing a modification of the current economic system of market capitalism to “Inclusive Capitalism.” Inclusive capitalism is intended to counter income inequality by restraining the accrual of wealth at the top and providing the ones at the bottom with equal economic opportunities to make the economic system sustainable. The article further details the ways in which inclusive capitalism could be implemented. The article also informs us of the constant need for economic systems to evolve and adapt in order to address new and arising economic and social problems. 

ECB unveils massive QE boost for eurozone

article link : http://www.bbc.com/news/business-30933515


President Mario Draghi of the European Central Bank has declared that the ECB plans to implement quantitative easing in the Eurozone economy.  The ECB will pump approximately 1.1 trillion Euros into the hurting European economy.  The ECB will spend 60 billion euros on bank bonds each month until September of 2016.  Quantitative easing in theory will increase the supply of money which will keep interest rates low and encourage people to borrow money.  The borrowing of money will hopefully enable people to spend more money which will allow the economy to grow.  The ECB states that the interest rates will be maintained at 0.05%.  This low interest rate will encourage people and businesses to borrow from financial institutions, meaning that these people have more money to spend and pump into the economy.  Many economists in Europe believe that the quantitative easing plan has be prolonged far too long and that finally implementing this plan will help bring the European economy out of an economic slump.  Despite the amount of economic issues in Europe, it will be interesting to see how this plan will affect the European economy and its financial sectors in the future.

US jobless claims fall from 7-month high

http://www.cnbc.com/id/102356246

The number of Americans filing new claims for unemployment benefits fell last week from a seven-month high, pointing to continued improvement in labor market conditions.

Initial claims for state unemployment benefits slipped 10,000 to aseasonally adjusted 307,000 for the week ended Jan. 17, the LaborDepartment said on Thursday.

That reversed the bulk of the prior week's increase which had pushedclaims to their highest level since early June. The rise was dismissed by economists as "noise" given that claims data is difficult to adjust for seasonal variations around the Christmas and New Year holidays.

Economists polled by Reuters had forecast claims falling to 300,000last week. The prior week's data was revised to show 1,000 more claims received than previously reported.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, increased 6,500 last week to 306,500, taking it above the 300,000 mark for the first time since September.

The claims data covered the week during which the government surveyed employers for January's nonfarm payrolls.

Despite the gyrations in claims and the four-week average rising 7,750 between the December and January payroll survey periods, there is little doubt that the labor market is tightening.

Employment gains have exceeded 200,000 in each of the last 11 months, the longest stretch since 1994, and job openings are near 14-year highs. In addition, the ratio of unemployed people for every job opening is the lowest since early 2008.

The claims report showed the number of people still receiving benefits after an initial week of aid increased 15,000 to 2.44 million in the week ended Jan. 10.

Our economic system enriches the most powerful at the expense of the 99%

http://www.theguardian.com/public-leaders-network/2015/jan/20/economic-system-enriches-most-powerful-oxfam

Oxfam calculates that by next year, for the first time, the wealth of the richest 1% of the world’s population will overtake that of the remaining 99%. This is shocking proof, if more were needed, that away from all the theory and hot air about inclusive growth, our current system is wired to do exactly the opposite: to enrich the most powerful. Either we fix this now in a controlled way or it will fail later, with unknowable but probably chaotic consequences. Political instability and violence should give us greater reason now to tackle inequality, poverty and exclusion, rather than fresh excuses not to. [....]Inclusive growth should allow the poorest people in our societies to gain a greater share of the pie at the expense of the richest. Inclusive growth should result in more and better paid jobs, and good quality services for everyone, particularly in health and education. [...] To reach the most marginalised people in our societies it is crucial to have effective welfare systems. [...] “Extreme inequality isn’t just a moral wrong. It undermines economic growth and threatens the private sector’s bottom line. All those gathering at Davos who want a stable and prosperous world should make tackling inequality a top priority.”

Eyes on Fed after ECB, other bank stimulus moves

http://finance.yahoo.com/news/eyes-fed-ecb-other-bank-230353763.html



              The European Central Bank (ECB) recently released a rather larger stimulus package this past week to help boost their own economy. This stimulus however has begun to effect potential policies here in the US. This stimulus effects the Feds plan to raise interest rates by the middle of this year. A policy that is out of sink with what is going on in the rest of the world. Even though the US seems to becoming out of economic turmoil there is still a stong sense of Global Central Policies. The raising of interest rates in the US could effect foreign economies who are putting in to place expansionary policies. This would make commodity prices even higher and add to the threat of global deflation. I think the Fed needs to take into account GCP and how changes will effect other countries  before making any new policies.

ECB Executive Gives Warning Over Weakened European Union

On Thursday, the European Central Bank launched its 1.1. trillion economic stimulus plan but a top official, Benoit Coeure, warned that unemployment and low growth have threatened the structure of the European Union.  Futhermore, Coeure has encouraged governments in the EU to speed up economic reform since the bank itself cannot generate lasting growth.  The ECB will reiterate this point when they hold talks with the finance ministers on Monday.  Even with record low interest rates, the EU economy has not seen much improvement.  In the stimulus plan, the ECB will buy about 60 billion in bonds each month from EU banks until September 2016, in what is called quantitative easing.  Lowering the cost of borrowing should hopefully stimulate banks to lend and encourage EU businesses and consumers to spend more.  This strategy has been used in the US and Japan and appears to have worked.

http://www.bbc.com/news/business-30966499

The Moral Heart of Economics

http://economix.blogs.nytimes.com/2011/01/25/the-moral-heart-of-economics/?_r=1

Most of this article discusses the morals behind/associated with economics. It also discusses the freedom associated with various economic systems and the private rights of individuals/amount of decisions they have. "Improvements in welfare occur when there are improvements in utility, and those occur only when an individual gets an option that wasn’t previously available. We typically prove that someone’s welfare has increased when the person has an increased set of choices." Overall, the article argues that any system of economics should be able to provide more choices for individuals; because of this, it increases not only the individual's quality of life but also is a moral science.

UK car production increasing again

http://www.bbc.co.uk/news/business-30945288

Investment in car production facilities in the UK of over £7 billion and the added popularity of premium cars abroad over the past two years helped sales boost to 1.2% in 2014.The British Society of Motor Manufacturers and Traders (SMMT) states that “demand for premium brands, such as Jaguar Land Rover, had helped boost annual sales […]”. However, overall number of vehicles exported fell.  In the article, Mike Hawes, SMMT´s chief executive, states that "[…] the industry has overcome various challenges, including slower than expected EU recovery and weakness in some global markets.", which makes a 1.2% growth in UK car manufacturing, although a relatively small figure, representing a successful year when placed in context.

National Governments Battle the Europe Union Over Energy

http://www.economist.com/news/europe/21639577-european-union-heads-battle-national-governments-energy-only-connect

The EU has made it clear once again that the free flow of energy between member nations is a top priority, but the energy commissioner, Maros Sefcovic, has run into several hurdles from national governments and Russia. The flow of gas has currently been reduced in Eastern Europe due to the continuing conflict between Russia and Ukraine. Flow from Ukraine to Slovakia has been reversed to meet demand in Ukraine. Several smaller EU-members have also been hurt as supply lessens across Europe because of their limited access to pipelines. Last year Russia proposed a pipeline (South Stream), but it was ruled illegal because the same Russian company would both run the pipeline and own the gas going through it. Now the EU is scrambling to build legal ones with connecting electricity cables in the same area, but it is running into resistance because of internal corruption (including Russian influence that often halts infrastructure) and obstinate behavior from national governments. Many provide energy through state-owned companies and do not want possibly cheaper energy coming in from their neighbors. In the mean time the commission is also battling Gazprom (Russian gas company) over abusing single market rules in vulnerable states.

I believe that the situation will work out in favor of the EU as far as Russia goes because of their currently weakened state from falling gas prices. Now is the time to prosecute the companies that have obviously been manipulating the market in Eastern Europe. As far as making EU members play nice on inter-connectors, those who are currently obstinate will stay obstinate because they know its risky for nationalized industries. There would have to be a EU set price index for the inter-connectors to work like they should.

South Korea growth hits six year low in fourth quarter

According to the article, in Q4 of 2014, the fourth largest economy in Asia and critical U.S. trading partner, South Korea, experienced a significant drop in GDP growth rates, to 0.4% from Q3's 0.9%. This fell well short of projected Q4 growth of 2.7% due to falling infrastructure spending and a drop in the quantity of South Korean exports. This drop in spending was due to weakening tax revenues cutting the tax base available for investment. This below-projection data may force the South Korean central bank, the Bank of Korea, to continue cutting interest rates, when it next meets in February. (http://www.bbc.com/news/business-30945571)

This could have wider implications for the economies of southeast Asia and be an indicator of economic problems to hit the region. The region has grown rapidly in terms of GDP since about 1985, and only recently appears to be slowing in terms of economic growth: China and Japan have both posted less-positive economic indicators, and economists have indicated concerns over the stability of the tax base in southeast Asia, in addition to various economic bubbles, which could lead to collapsing confidence in the regional economy, stunting continuing growth and leading to longer-term economic headaches for economic planners in the region.

Eurozone Nations Face Stronger Pressures to Lift Economies

http://www.nytimes.com/2015/01/23/business/international/ecb-unleashes-aggressive-stimulus-plan.html?action=click&contentCollection=International%20Business&region=Footer&module=MoreInSection&pgtype=article

European Central Bank plans to buy about $69 billion, of government bonds and other debt each month to stimulus the economy. They also plan to cut the interest rate it changes on loan to commercial banks from 0.15 percent down to 0.05 percent. The expected result is that there would be an increase in inflation and growth in individual countries.  Moreover, governments would also be given a share of any profit the Europe Central  Bank might make.  "Mario Moretti Polegato, president of the Italian shoemaker Geox, said quantitative easing could help restore a sense of optimism." Although, this is a great step the European  Central bank has taken to restore the economy, this alone, in absence of the government's stimulus policy, would no be able to change much of the situation i am afraid.

The Economics of Optimism

http://www.economist.com/news/finance-and-economics/21640361-debate-heats-up-about-what-goals-world-should-set-itself-2030

The article primarily focuses on which goals the world should set and achieve by 2030.  Bill and Melinda Gates proposed in their annual letter that "the lives of people in poor countries will improve faster in the next 15 years than any other time in history" and that the lives of people in poor countries "will improve more than anyone else's."  Sustainable Development Goals, or SDGs, is a United Nations initiative that is intended to be agreed upon by world leaders at the UN General Assembly in September.

SDGs are being directly contrasted with Millennium Development Goals, or MDGs, which the Gates' family strongly supported.  SDGs will replace MDGs as several of the eight MDGs have been achieved.  MDGs consisted of eight goals with 18 targets while SDGs are proposed to consist of 17 goals with 169 targets.

Many economists are arguing over whether the SDGs have too many goals and targets.  Some believe that "having 169 targets is like having no targets at all".  I feel that the number of goals should be reduced from 17 to 10.  I feel that this makes the SDGs more focusable and marketable.  Do you feel that the number of SDGs should be reduced or do you feel that the broader the set of goals and targets, the better?

Google is Becoming a Wireless Carrier

For years, Google has been preparing to offer wireless mobile service.  They currently design and sell phones online, make the most used mobile software in the world, and are capable of providing internet service with Google Fiber.  However, instead of paying for and putting up their own cell towers, they will use the networks of Sprint and T-Mobile to provide their service.  In return, Google is expected to pay $2 per gigabyte to those carriers, which will still allow them to provide very cheap service.  That being said, what would happen to AT&T and Verizon, who would lose market share and not benefit at all from Google customers?  Another interesting point in the article: if this happens, will Apple look into providing their own service with their iPhones?

http://money.cnn.com/2015/01/23/technology/mobile/google-wireless/index.html?iid=HP_River

Quantitative Easing in the Euro Zone

http://www.economist.com/news/finance-and-economics/21640371-policy-will-help-less-so-other-big-economies-better-late

Recently, there has been relatively low demand and falling prices in Europe causing "lowflation". The European Central Bank has tried many things to combat this deflation and low demand, including offering negative interests rates which also did not work. Months had gone by, and the ECB had decided to engage in quantitative easing. They plan on spending roughly 60 billions pounds, or $70 billion, for over two years to flood the money supply. The ECB has hopes that quantitative easing will help their recovery from the double-dip recession they have recently experienced. Their two channels in which QE will work is by the "signalling effect" (signalling to markets and firms to bring inflation closer to 2%) and the exchange rate (their hopes to strengthen the exchange rate since the serious weakening of it last spring). I think that by engaging in QE, the Euro zone could gain a little more strength in their economy and get them back on the upside of their current cycle.

Japan to be year late in hitting inflation target

http://www.bbc.com/news/business-30939747

According to the article, Bank of Japan's Governor expressed his opinion on Japan's goal of reaching 2% inflation would not be able to achived this year. Governor Kuroda thinks one more year is what Japan needs before reaching that level of inflation. One of the reasons for his deduction is the current low oil price that is affecting Japan heavily as the country does not produce any oil by itself but mostly importing. However he believes growth will soon to kick in and discussion about raising wages to match the expected level of price rise should be considered soon.

Japan's trouble in recent years has always been deflation, thus explaining why Shinzo Abe has been continuously trying to weaken the Yen to increase price level. I think the economic depression that happened last year was a surprising big hit to their economy, although I agreed with Shinzo Abe's approach and believe that Japan will soon reach their target of 2% inflation, although it might take longer than what Kuroda has anticipated.

Obama for equity

http://www.economist.com/news/united-states/21640351-barack-obama-tries-set-tone-2016-middle-class-economics

          The link above takes you to the article in Economist about Obama's recent exhibition of the intent to bring equity in the American economy. The most striking part of the article discussed what plans President Obama has for the taxation policies. Obama expressed enthusiasm regarding hiking capital gains tax on the top earners and closing a loop-hole which allowed capital gains tax to be avoided when the owner of an asset dies. The tax proceeds from the increased taxation are aimed at tax cuts for people with lesser incomes. Yet, interestingly, Republicans were more concerned about the impact this could have on investment and jobs. I personally think that the tax cut is a great idea and will not impact jobs as significantly as the Republics propose.

Brazil Raises Interest Rates to Help Curb Inflation

Brazil has increased their interest with the intention of having an aggressive rate of monetary tightening to stop high inflation. Bringing down the inflation will allow for more investment to take place in the country. Brazil’s central bank voted unanimously to increase the benchmark Selic rate to 12.25%.  They want to bring the 12-month inflation to 4.5% midpoint of the official inflation range by 2016. However the president administration plans on having many spending cuts and increases the price of electricity and bus transportation, which could counteract what the central banks plan is. 

http://www.nytimes.com/2015/01/22/business/international/brazil-raises-interest-rates-to-help-curb-inflation.html?src=busln&_r=0

What the Frack? The Importance of U.S. Institutions

http://www.foreignaffairs.com/articles/141203/robert-a-hefner-iii/the-united-states-of-gas

The author explains that those countries hoping to replicate the US's "fracking" revolution might be unsuccessful. Not because of the difficulty of developing the technology but, instead, because of certain institutions that are integral to the development of natural resources. The author makes the case that only the US's unique understanding of property rights--in addition to other important institutions-- made the fracking revolution an uniquely American experience.

I think that the author is correct, but what do you think?

Venezuela Poor Keep Faith in Maduro's Subsidies as Oil Plunges

Venezuela continues to feel the negative effects of low oil prices around the World. During the term of Hugh Chavez, oil companies were turned into state owned entities. During this time, Venezuela flourished with the then high prices of oil. The country also spent most of this money leaving little savings. After the death of Chavez, Nicolas Maduro took over and has his hands full with a horrific economic situation. This economic situation has been defined by superinflation, scarcity and uncertainty. Oil currently makes up 97% of Venezuela's hard currency earnings, so it is no surprise the country is suffering the way it is.
In the midst of all of this many have and would blame Maduro, however the poorest citizens of Venezuela are sticking with the president. One reason for their loyalty is Maduro's avoidance of cutting social programs. The country must do something soon to turn it around as they are predicted to default within the next year.

Source: http://www.bloomberg.com/news/2015-01-19/venezuela-poor-keep-faith-in-maduro-s-subsidies-as-oil-plunges.html

New Oxfam report says half of global wealth held by the 1%

http://www.theguardian.com/business/2015/jan/19/global-wealth-oxfam-inequality-davos-economic-summit-switzerland

A new report from Oxfam says that by 2016, 1 percent of the world's population will own more than the other 99 percent. We have noted the importance of income inequality several times in class and this article shows how bad it has become. Income inequality is bad for growth, crime, and governance and it has grown exponentially over the past 20+ years. It is important that world leaders take steps to lessen this inequality or there will be consequences. Oxfam has several suggestions for how to carry this out, including a heavier investment in health and education and higher taxes on corporations and the rich.

Brazil Relying on Taxes to Preserve Credit

http://www.bloomberg.com/news/2015-01-19/brazil-raises-taxes-by-7-5-billion-to-improve-confidence.html

Brazil is implementing a new tax package in hopes of staving off another downgrade in its credit rating.  Brazil, the largest economy in Latin America, is currently one level above junk bond rating, per Standard and Poor's.  This tax package is an attempt by Levy, the new finance minister, to increase global confidence in the Brazilian government. This tax package is going to impact an already distressed economy.  Growth has been relatively slow compared to Latin America, and this trend is forecasted to continue in 2015.  Additionally, inflation is a major concern for the country.  It is estimated to be at 6.67% in 2015 while growth is forecasted at a meager 0.38%.  The bleak economic conditions, paired with the deteriorating credit of the country is a major concern.

Brazil is an interesting case.  Its GINI coefficient is 52.7 according to the World Bank in 2012.  This is high compared to most other Latin American countries.  Will these taxes be at the expense of the poor due to the focus on specific products?  Also, the taxes could increase inflation in the short run.  The government is not able to focus on price stability due to the lack of credibility it holds in the bond market.  Furthermore, will Brazil be able to effectively implement taxes due to high levels of corruption?  In Dream Big, Jorge Lemann, a Brazilian investment banker responsible for the acquisition of Burger King and Anheuser-Busch, noted the corruption and uncertainty that permeates the Brazilian economy.  Brazil is forced to take strong action during this time of duress.

Swiss abandons Euro cap, franc soars

Click Here for article. 

The Swiss National Bank made a an erratic move to remove it's price cap for the Euro, which saw the franc go up as high 30% with respect to the Euro since the removal of the cap. This article very well explains the economics of such a removal and the parties affected. As the franc grew strong, foreign products are much cheaper for holders of Swiss francs however this situation is complicated for swiss exporters since their products will be too expensive for foreigners. Importing Swiss products will be very expensive now. Swiss watchmaker Swatch's share has fallen 15% since the removal of the cap, and money other swiss companies will also suffer. Currency broker Alpari also suffered losses after the remover of the cap. But, having said that, the Euro did recover a bit as it went from buying 1.20 francs to 0.8052 francs, and then went up to buy 1.04 francs.

Russia's Struggling Economy

http://www.economist.com/news/europe/21639557-russian-economy-will-take-long-time-recover-it-badly-needs-structural-reforms-it

Within the first two weeks of the New Year Russia struggled as “the rouble fell by 17.5% against the dollar” and oil, their main export, prices dropped. This drop in oil will potentially cause the real income to decline due and take over 10% off of the budget. Russian money reserves may only last a year in a half if this situation persist; Russians have also began to loose hope in the rouble and withdrew deposits. There is a lot of pressure for the rouble because of foreign currency markets and liquidity within banks. Recovery from the failing rouble will be slow because of the lack of resources and weak institutions within the country.  In the past, there has been growth within the county but now to move forward Russia must restructure and the economy.

Deflation in the US?

http://econ.st/1DIqLOT

An article in Espresso by the Economist commented on possible deflation occurring in the American economy with the now lower prices of fuel. I believe that some deflation is necessary and will give the overall economy more of a boost to grow growth and stabilize prices, possibly allowing more production to happen with less cost and increasing demand.

However, the article is right to point out that extended periods of deflation are bad because they cause consumers to hold off spending, anticipating lower prices. I think that lower prices in the short run is what is needed in order to keep things affordable in the marketplace, but that's just me.

Brazilian Central Banker Escapes Justice

http://www.bloomberg.com/news/2015-01-14/the-talented-mr-youssef-brazil-s-black-market-central-banker.html

Known as the “black-market central banker,” Alberto Youssef has been accused to be a part of the Petróleo scandal. This man lives a luxurious life thanks to Brazil's “slow” justice system, representing Brazil's economic potential being stunted by corruption and crime. He has been a player in Brazil's greatest scandals for the past 20 years. The article describes some of these scandals, including his career as a doleiro.  However large his impact, Youssef still claims he is just a small piece of the larger system of corruption. His lawyer describes him as “the link between all involved.”
Corruption has allowed many politicians, CEOs and more get away with breaking the law.

On a different note, Brazil suffers environmentally and cruelly mistreats their natives for the sake of economic growth.

Indonesia might become the largest economy of Southeast Asia

http://www.bloomberg.com/news/2015-01-13/indonesia-tops-southeast-asia-luring-new-factories-survey-shows.html

By 2019,  Indonesia will have 59 manufacturing plants set up, a 68% increase and this will lead Indonesia to surpass Malaysia and Thailand.

Indonesia is a mixed economy and revitalizing the economy has been one of the goals of the new Indonesian President Joko Widodo.

The President has been restructuring the fuel subsidies to increase budget for infrastructure, which should boost the economy. The government is also planning on starting a land bank to accelerate infrastructure projects.The Jakarta Composite Index (JCI) has also increased by 3% since the inauguration of the new President.

The British Chamber of Commerce predicts that investments in Indonesia will rise by 15% and the government will also cut permit procedures to make global trade easier.