No Representation without Taxation

This article from the Economist looks at a behavioral argument for higher taxes. The article examines and summarizes a paper from Yale University on the subject of how higher taxes could help poor countries get better governments. Many countries in Africa have relatively low % of GDP as taxes in comparison to Europe and the United States. As a result some of these African countries receive foreign aid to close that gap. However, the paper argues that much of this money is pocketed by corrupt politicians. The behavioral aspect showed that citizens in these countries were less upset that money they MIGHT receive was stolen but were shown to be infuriated when their taxes were pocketed. Because of this idea, the conclusion of the paper suggests that if a country has higher taxes they will typically have a more politically engaged public ensuring that their taxes are being spent properly.

Do you agree or disagree with the paper presented by the article? Why or why not?

Source: http://www.economist.com/news/finance-and-economics/21642199-behavioural-argument-higher-taxes-no-representation-without-taxation

Fall in Eurozone Prices Inflames Fears of Deflation

Fall in Eurozone Prices Inflames Fears of Deflation

According to the article consumer prices have been falling since the past couple of months in the 19-country Eurozone which has led to fears among some economists of a sustained period of falling prices that could possibly result in economic stagnation and higher jobless rate and deflation. However, some economists feel that falling prices are an advantage for consumers and are actually helping many European countries to become internationally competitive.

Those economists who fear this trend of falling prices believe that when price declines consecutively then there is a tendency  for consumers to constantly delay buying products in hopes of prices decreasing even more. So as a result, consumer spending decreases, companies revenue also decreases which results in these companies facing pressure to dismiss workers or reduce wages. This all leads to a never ending circle of declining economic activity.

This is why the European Central Bank has recently decided to create a bond buying program, in the hopes of stimulating the Eurozone economy and nudging inflation closer to its target of just below 2 percent.

http://www.nytimes.com/2015/01/31/business/eurozone-inflation-unemployment.html?_r=1

Our Trade Policy is Insane?

http://www.huffingtonpost.com/rep-alan-grayson/our-trade-policy-is-insan_b_6462714.html

In this article Representative Allen Grayson, Congressmen from Florida's 9th District expresses his views on the current Trade Policy that our country has.  He believes that there is too much exporting and not enough importing of goods.  He states that the country has had a trade deficit of over $140 billion ever since NAFTA was enacted 20 years ago.  Americans are buying goods and services from oversees and with the money that other countries make they buy American assets, a double loss of jobs and higher national debt.  This he named Fake Trade and claims it hurts middle class Americans and needs to be stopped.  He calls for the creation of a Trade Deficit Policy and not just a Trade Policy in order to counteract this Fake Trade and its effects.

In order for this to happen the government would have to intervene and make more rules concerning the amount of trade that both comes into and goes out of the country, meaning negotiations with foreign nations as well as greater regulation of trade.  Given the current reliance on goods and services produced outside of the country its a possibility that this could negatively effect American businesses that rely heavily on imports for production or for profit.

This Is a Great Jobs Report Across the Board

With employers adding 257,000 new job positions in the past several months, the unemployment rate has increased by .1%. This increase is not negative. The increase in jobs enticed Americans to participate in the labor force and a greater portion are holding onto their jobs. Wages in the market are also increasing. “To attract and retain quality workers, firms are starting to have to offer raises that are higher than inflation.” With the strength of the job market increasing, individuals are looking for politicians to keep up with this trend going.

Link to Article

Shady business practices display awkward political relationships in London

Banking giant HSBC has helped wealthy clients all over the world to evade millions of pounds of taxes for the UK government in a scam that was leaked in 2007 but not prosecuted yet by the UK government.
HSBC bank has admitted so far that it was accountable for past control failures but that it systems for keeping track had been fundamentally changed. Although offshore accounts are not officially illegal, having them for the purpose of tax evasion is considered illegal, and HSBC is currently being prosecuted for facilitating tax evasion in France, US, Belgium and Argentina but surprisingly not the UK.
One could assume that this may have something to do with the man in charge of HSBC at the time, Stephen Green, who was made a Conservative peer and appointed to the government. Lord Green was made a minister eight months after HMRC had been given the leaked documents from his bank. He served as a minister of trade and investment until 2013. He told the BBC: "As a matter of principle I will not comment on the business of HSBC past or present."
The Treasury minister David Gauke defended Lord Green's appointment on BBC's Radio 4. "I am not aware of any evidence that suggests that Lord Green was involved in this sort of activity", but said he did not know whether anyone asked him about HSBC prior to his government appointment. But Ms Hodge said: "Either he didn't know and he was asleep at the wheel, or he did know and he was therefore involved in dodgy tax practices. "Either way he was the man in charge and I think he has got really important questions to answer."

The end of low-pay puzzle?

http://www.economist.com/blogs/freeexchange/2015/02/americas-labour-market

This article explores the status of job creation in the US as of February 6th, or last Friday. The economy has increased about 257,000 jobs in January which was higher than expectations. There were also revisions to employment statistics in December and January in which employment was higher than it was thought to be. Although the unemployment rate increased slightly, reaching 5.7%, it shows signs of an increasing labor force not necessarily a decline in jobs. Capital Economics mentioned how the economy is at it's strongest pace of job growth since 1997 from the creation of 1 million additional jobs in the last three months. Another interesting factor in this article is about wages, One wouldn't typically think that wages had increased over time since most of the jobs created are lower wage. Data shows that the average hourly wage increased 0.5% in January after declining in December.

Anxiety and Interest Rates: How Uncertainty Is Weighing on Us

    This article primarily talks about the expansion in current United States economy and the uncertainty that is accompanying it. The major cause of expansion, recently, has been technology. The article confronts some of the fears that people with moderately high incomes have in the modern economy. The anxiety and uncertainty is pertaining to technology taking over jobs. For example, a college professor (tenured or not) has job uncertainty due to massive online course tradition. Computerized legal research tools are diminishing demand for lawyers and legal workers.
The article argues that even though consumer confidence indices have been increasing, that does not take into account the long run. In light of the article, the technological boom is expected to cause profits only for the elite rich.




http://www.nytimes.com/2015/02/08/upshot/anxiety-and-interest-rates-how-uncertainty-is-weighing-on-us.html?ref=economy&abt=0002&abg=1

"Three Letters: J-O-B-S" and the Latest Job Numbers

http://www.economist.com/blogs/freeexchange/2015/02/americas-labour-market

The job numbers are starting to make sense. At least, that's what the Economist says. An important characteristic of this job reports is that the economy has created the most jobs since 1997. However, the population was way lower back then anyway, so I'm not sure if they are comparable. None the less, read the summary and tell me what you guys think.

Obamacare penalty payers ask, 'Where's my refund?'

http://money.cnn.com/2015/02/05/news/economy/obamacare-tax-refund/index.html?iid=SF_BN_River

Many tax filers were subject to a tax for not having health insurance, and many of them are claiming that their tax refunds are taking longer than usual to arrive. Some believe that their refunds are being delayed because they don't have insurance and have not signed up for public health care. This could make the Affordable Care Act, as well as Obamacare, even more controversial than it already is. If it is discovered that the IRS is intentionally holding these refunds, it would likely create a huge mess for the Obama administration. It will be interesting to see if spending trends change at all due to potential delays in the receiving of checks. It will also be interesting to see how this will affect the use of the health insurance program over the next year if enough people hear about the story.

How everything could go wrong for Uber

http://www.businessinsider.com/how-everything-could-go-wrong-for-uber-2015-2?op=1

Uber is the most valuable private tech company in the world right now. In January, the company worked out a $1.6 billion convertible-debt round with Goldman Sachs, bringing the total amount of money Uber has raised since its 2010 launch to more than $4 billion and valuing the company at more than $41 billion. But Uber isn't infallible. The company has competitors, it's working through regulatory battles, and it relies on independent contractors. Is Uber revolutionizing the transportation industry? It is easier to become an Uber driver than it is to be a taxi driver. Taxi drivers have to pay a large sum of money to get a medallion and are difficult to get. Uber may be the future, but will it last? In the article it mentions the nightmare scenarios that Uber has been facing recently. Uber has faced protests by its own drivers claiming they are barely making minimum wage. Also, Uber drivers are a major liability for this multi-billion dollar company. The company promises to do detailed back ground checks on their drivers, but there has been many cases of assault as of recent and even vehicular manslaughter. The government is cracking down on the regulatory loopholes that have helped Uber operate. They are also being crackdown on abroad as well. These are just some of the issues Uber has faced, but another one could be Google's self-driving car. Google is actively seeking its own car hailing technology. Will this be fatal to Uber in the long run?

American Spending

http://money.cnn.com/2015/02/08/investing/stocks-market-lookahead-consumer-spending/

Recent events have made it clear that the US economy is seeing better days. Oil price have risen by 7%, and 257,000 jobs were added in January which was more than expected. Despite the new faith in the economy the American consumer is still not spending which could affect the stock market and the growth of the economy.

The American consumer might be frugal because of fear of another recession but there might be other issues that is holding them back. For example, there might be job insecurity because of jobs going to guest workers. Moreover, because of the widening gap between the rich and the poor, consumers after all may not have as much spending power as all the money is in the hands of select few. This increasingly seems to be the case since politicians are actively discussing income inequality, and proposing “inclusive capitalism.” 

Oil Traders will tell you the market conditions are near perfect for them

Oil traders see good in future with "near perfect conditions". Oil traders are comparing the current market to the year after the 2008 oil crash. Traders with significant storage space haven't been more confident in the market since 2009. "I haven’t been more positive about trading conditions since 2009," said Torbjorn Tornqvist, head of trading house Gunvor, one of the world's largest independent oil dealers, told Reuters. Traders with the access to storage are buying today at $58 per barrel and looking to sell it down the line fore $65+.

Experts are predicting the "winners" of the market as the ones with access to the most storage. Since 2009, oil majors have increased storage capacity and transformed refineries into storage holding their advantage. With Europe almost at capacity more barrels are being transported into U.S. The U.S with a lavish amount of storage capacity, traders with a recognizable presence here are expecting record profits. 

http://www.businessinsider.com/r-best-party-mood-for-oil-traders-since-2008-price-crash-2015-2 

The struggles of Zimbabwe's small firms

http://www.bbc.com/news/business-31113329

This article describes Zimbabwe's economic plight as a nation since losing its booming tourism industry. It states that there are "3.5 million...unregistered small firms" such as the examples used in the article. In a country with just over 14 million people, that's a bit absurd. The article describes the abandonment of the Zimbabwean dollar in 2008 due to massive inflation, Mugabe's seizing of white-owned farms in the early 2000s (what led to the lack of tourism), and the desire for small businesses to register under the belief that their paying taxes will help the economy.

All in all, it provides a small but potent insight into the country's current economic situation/future.

My Radio shack store will be fine

http://money.cnn.com/2015/02/05/news/companies/radioshack-franchises/index.html?iid=SF_BN_RiverRadio shack has been prevalent in the news lately. Many signs show that the company is near its end. Yet, some remain optimistic that not all is lost in this article Ira Brezinsky describes how he store will survive. He has maintained loyal customers by solving their technical issues rather than just offering low prices. He is confident that even if the name of the store changes. He will be able to maintain his stores. As 20%  of the stores are owned by individual franchises it will be interesting to see how things play out.

European Central Bank toughens its stance on Greece

Over the past few years, we have seen the Greek economy struggle and things are about to get even harder for Greece.  This is because the European Central Bank has decided to restrict any sort of financing to the country's banks; this action sent Greek shares in a downward spiral.  The European Central Bank will not be accepting anymore Greek government bonds as a form of collateral which makes it even more expensive for Greek banks to access cash.  This announcement sent the Greek stock market down 6% and Greek bank stocks declined even more at 16%.  The whole financial crisis in Greece does not seem to be getting better anytime soon.  Greece will have to look to international lenders for money because the ECB is not willing to provide the funds necessary to help Greece.  It will be interesting to see how this action affects the Greek economy and the Eurozone as well.

article link: http://www.bbc.com/news/business-31142437

The US Job Market Is On Fire

http://www.businessinsider.com/january-jobs-report-2015-2

In this article the US's job growth for the month of January is detailed.  In the January, the US added 257,000 shrinking the unemployment rate from 5.7% to 5.6%.  Additionally, reports from November 2014 and December 2014, were also corrected when the number of jobs added in each month grew by 70,000 and 77,000.  November marked the strongest single month for job growth since 1997.

Here were Wall Street's expectations, via Bloomberg:

• Nonfarm payrolls: +230,000
• Unemployment rate: 5.6%
• Average hourly earnings, month-on-month: +0.3%
• Average hourly earnings, year-on-year: +1.9%
• Average weekly hours worked: 34.6

Hopefully, this continued growth will create some optimism for the US and world economies.  However it will be interesting to see how the strength of the dollar and the continued decline of oil prices will effect February's unemployment rate.  

How long does Russia's economy have?

Russian GDP is expected to shrink by 5% this year and inflation has soared to 15%. Russia's currency, the ruble, is also getting crushed trading near record lows. Russia's growing violence and conflict and Ukraine could lead to new international sanctions as well. Russia's survival is dependent on how fast it burns through its remaining excess of foreign currency. Last year alone the country spent $134 billion strengthen the ruble.

Philip Uglow, chief economist at MNI Indicators, states Russian reserves could sink to a critical level six months from now. This is not a good sign for a country who also has to worry about servicing over $600 billion in foreign debt, most in private companies and banks.

Russia, I believe is encountering a similar problem that Venezuela had faced back in September. Venezuela had to pay back foreign debt and was struggling to maintain inflation of the currency. Venezuela has now reached an economic crisis. I believe Russia is in a better situation then Venezuela. Russia's cash buffer could keep the nation afloat for a little longer while they try to straighten out foreign affairs as well as come up with a way to strengthen the currency and consolidate the countries debt.

http://money.cnn.com/2015/02/08/news/economy/russia-economy/index.html

Don't Despair: Global Growth Shows Health Lead By the US

http://www.bloomberg.com/news/articles/2015-02-08/don-t-despair-as-global-growth-shows-signs-of-health-led-by-u-s-



    The economy seems to be showing signs of growth even with record lows in bond yields and sliding inflation. The United States seems to be plowing the way for change as cheaper oil and cash and currency are providing uplift. With gas prices being at half of what they were last year makes for growth in household spending. The world economy is expected to grow too at around 3.6 percent this year. This is the fastest pace seen since 2011. The United States is also seeing an increase in the value of the dollar leaving other countries of the world eager to experience the same benefits. The US employers have also taken on more then a million new workers since November. This has lead to a lowering of unemployment rates and a boost in consumer confidence.

America's Labour Market: The End of the Low-Pay Puzzle?

http://www.economist.com/blogs/freeexchange/2015/02/americas-labour-market

This article discusses the idea that more jobs are being created in the country.  He talks about how there is still a high unemployment level, but this is alright because it is because more jobs are being created, not because people are not finding work.  The article also discusses how wages for lower skilled jobs (the jobs that were being created) have increased since December.  The author states, "At the end of December 2013, Congress refused to re-authorize legislation that provided very long-term benefits to the unemployed.  Overnight, in some states the maximum time that you could receive unemployment benefits dropped from 73 weeks to 26 weeks.  Almost all states experienced a big drop."  The author later goes on to explain that because of this, more people are willing to go out and find work for lower wages because it is better than not receiving anything.  Personally, I think that this is good because it almost forces individuals to go out and find a job, rather than staying on unemployment for long periods of time.

Greece: Greenspan predicts exit from euro inevitable

http://www.bbc.com/news/business-31249907

The article discusses the views of former Federal Reserve Chariman Alan Greenspan that Greece will not be able to remain a part of the Eurozone for long. He does not think it likely that Greece will be able to renegotiate its bailout successfully, especially with the views of the new government. He echoes the sentiment that there are many structural problems with the current arrangement of the Eurozone's monetary union and that nothing short of full political integration will make the region successful.

This, however, is very unlikely to happen given the views of the member nations. In addition, it does not appear that the ECB is willing to renegotiate the terms of the bailout that was provided to Greece. The article does suggest that the fallout of Greece leaving the Eurozone would be more manageable now than it was in 2010. The newly elected government in Greece insists that it will be sticking to its promises and has stated that they will seek a loan from the ECB and not a bailout. It remains to be seen if the ECB is willing to cooperate on this. 

Economic Plan Is a Quandary for Hillary Clinton’s Campaign

http://www.nytimes.com/2015/02/08/us/politics/economic-plan-is-a-quandary-for-hillary-clintons-campaign.html?hp&action=click&pgtype=Homepage&module=first-column-region&region=top-news&WT.nav=top-news&_r=0

The most dilemma Mrs. Clinton is facing during her campaign is how to solve the income inequality problem without punishing the rich too much. Several principles she is expected to implement are to include standard Democratic initiatives like raising the minimum wage, investing in infrastructure, closing corporate tax loophole and cutting taxes for the middle class. There are also new ideas, such as providing incentives to corporations to increase profit-sharing with employees and changing labor laws to give workers more collective bargaining power. The objective is to bring equal opportunity back to America, the land of American dream. However, i do not agree in giving the poor and middle class more money, instead the government could provide the population with education in finance management. If people don't know how to manage their money, the more money they have, the deeper debt they would acquire.

Anxiety and Interest Rates: How Uncertainty Is Weighing on Us

This article is talking about interest rates within the US and how technology such as the internet are taking away certain jobs and it is effecting employment. It is very odd that with interest rates being so low that Americans are still saving a large percentage of their incomes and this is due to low consumer confidence and the uncertainty of the future. With inefficient markets this anxiety of Americans is being amplified and causing many to take action with their assets when no action is actually needed. The current credit expansion is creating wealth illusions when we really need to come up with an insurance plan for whatever does loom ahead. What do you think could be done to help with this financial/asset anxiety?

http://www.nytimes.com/2015/02/08/upshot/anxiety-and-interest-rates-how-uncertainty-is-weighing-on-us.html?ref=economy&abt=0002&abg=0

The Shrinking American Labor Union

http://www.nytimes.com/2015/02/08/business/the-shrinking-american-labor-union.html?ref=business&_r=0

24.2%: private sector union membership rate, 1973

6.6%: private sector union membership rate, 2014

“The causes of falling union participation are hard to pinpoint but may be attributed to several factors, including the pressures of global trade, technological change, the shift away from domestic manufacturing and a tougher stance against unions from government and corporate leaders.”

The Enforcer - How the ECB can dictate to the Greek government

According to the article, the European Central Bank has disallowed the Greek government and Greek banks from putting up their own government bonds as collateral for loans from the ECB, dissolving a waiver previously granted to the Greeks despite being in junk bond status and having technically already been disallowed from this practice. This served as a warning shot to the potentially volatile and new Greek leftist, anti-austerity government, trying to prevent the new government from demanding a renegotiation of terms of debt and austerity in exchange for payment of debts incurred by the government. As a result, the new Greek government will be heavily reliant on Emergency Liquidity Assistance with its harsher array of terms and conditions, effectively giving over more control of the Greek economy to planners at the ECB.

The ECB, the central bank for all nations sharing the Euro as a currency, finds itself in a precarious position, significantly of its own making. The Greek sovereign debt crisis sparked the pan-Euro debt crisis, nearly causing the currency to collapse due to the heavy debt burdens of generally smaller, less-producing nations, such as Greece, Cyprus, and others, with the crisis nearly causing a crisis of confidence in larger nations with larger GDP, such as France. The ECB, mostly controlled by the solvent Germany, forced heavy austerity in exchange for financial rescue to keep the monetary status quo. Since then, the Euro crisis has been in a sort of suspended animation. This decision is an effort to keep the Euro at status quo on a trans-national scale to prevent wholesale collapse of either Greece or the Euro.

http://www.economist.com/news/finance-and-economics/21642210-how-european-central-bank-can-dictate-terms-greek-government

US Job market booms as recovery accelerates.

http://www.bbc.com/news/business-31167969

This article gives a summary of the jobs added figures for the month of January. This is the 11th consecutive month for the US has added more than 200,000 jobs per month, the best streak since January. It's getting clearer and clearer that the US is approaching full recovery, as Obama stated in his State of Union address that the US has added more jobs than Europe, Japan and all advanced economies combined. The unemployment rate is at 5.7% now, as more people are now actively ,seeking jobs. While the numbers are positive and the Fed as stopped buying bonds vigorously, there's still 'easy' money, explained by the low interest rates. It is anticipated that the Fed will raise interest rates slowly in 2015. One revealing statistic from the article is that right now between ages 16-64, 76.5% are employed, while in mid 2008 it was 81%. 

Unemployment for January

http://money.cnn.com/2015/02/06/news/economy/january-jobs-report-257000/index.html?iid=SF_E_River

US unemployment for january slightly increased to 5.7%. This increase is viewed as a positive since it means more people are looking for jobs now that employment has been higher, showing a “confidence in the job market.” The article provides a graph showing the number of jobs available each month since January 2014. Several concerns, however are present in large companies: the strong dollar and fall in oil prices that may cost American workers their jobs in the energy sector are two of the main concerns. A positive is the wage gains growing steadily.

How can this affect mobility, such as it is explained in the article for lecture reading?

Money Voted as Top Stressor for Americans

According to a recent study, 90% of Americans report that their stress level regarding money has remained neutral or even increased despite the recent improvement in the economy.  Also, 75% report having been stressed out about their financial situation within the last month.  Top sources of stress regarding money include unexpected expenses, saving for retirement, and paying for essential things such as food and housing.  The study suggests that a household income of $50,000 seems to be the threshold for how much stress one will experience, as the gap between the stress levels of those below and above $50,000 is increasing.  The article also suggests that stress over money is contributing to unhealthy lifestyles, such as increased intake of tobacco and alcohol.   I can see why people are stressing over retirement since no one can rely on receiving much social security in the future, but why hasn’t improvement in the economy decreased some of the stress across America?

http://money.cnn.com/2015/02/04/pf/money-stress/index.html?iid=SF_PF_River

Chinese Firm Challenges the State, and Wins?

http://www.economist.com/news/business/21642188-alibaba-runs-regulatory-ruckus-love-rocks

No one would call China a free market or anything close to capitalist, but one firm has recently challenged the oversight of the State Administration for Industry and Commerce (SAIC) and seems to have come out close to victorious. Alibaba, China's largest e-commerce firm, it notorious for being ardently opposed to copious entanglement with the government and Communist Party. Jack Ma, the chairman, has stated that he wants the firm to be regarded as a global player, and he has opened up relationships with American groups in order to encourage more transaction. The latest brawl with regulatory institutions has been over a document from last July that cites that Alibaba is not doing enough to fight fake goods sold through its sites. The document was conspicuously not released until after Alibaba's initial public opening on Wall street, and now they face mounting class-actions suits in the United States. This would be enough to shut up almost any Chinese firm, but Mr. Ma has continued to challenge the regulators ruling and even denounce the document as false. After sitting down with officials from SAIC, Mr. Ma has somehow convinced them to retract the document, citing that it was only the minutes from that meeting last summer. And still Mr. Ma doesn't call himself  a "red capitalist".

The internet has caused a lot of problems for Communism, and I believe that this is certainly not going to be the last altercation the State has with firms over what to do with emerging industries. These conflicts are a signal of the creeping capitalism that may be the Communist Party's undoing if they fail to fuel their booming development. But I think they'll run out of coal before that.

China's Central Bank is Attempting to Initiate Growth

http://www.nytimes.com/2015/02/05/business/international/china-moves-to-free-up-money-in-its-economy.html?_r=0

Last year, China's GDP growth was 7.4%.  That was its lowest level since 1990.  Real estate and industry have been two sectors that have been hit exceptionally hard.  In an attempt to stimulate growth, the People's Bank of China enacted a policy that reduces the reserve requirement of Chinese banks.  This should increase lending, and it will be especially helpful to the two aforementioned industries.  The People's Bank of China lowered interest rates in November of last year.  They are attempting to spur growth in a clearly decelerating climate.  The article also noted that there are dramatic spending increases during the Lunar New Year.  That partially explains the timing of the decision, but the underlying fundamentals of the economy remain unchanged.  Expansionary policies have been implemented in a number of countries, so this problem is not isolated in China.  Although, it does appear that the People's Bank of China will be active in the coming months.

This is a very interesting issue.  First, Krugman has noted the issues facing the Chinese.  Without improvements in consumer spending and agile policy changes, China could be headed for a recession.  Additionally, this could heat up the currency debate.  A decrease in the value of the renminbi would make Chinese exports more attractive.  This would increase net exports and GDP, ceteris paribus.  What do you think?

Standard & Poor Settles Mortgage Securities Lawsuits For $1.5 Billion

Today the ratings agency, Standard & Poor, has settled a lawsuit after almost two years of litigation with the Department of Justice.  The Wall Street Journal has also reported that the Justice Department lowered the settlement figure and dropped their demand that S&P admit to violating the law, while S&P agreed to take back its claim that the lawsuit had been an act of retaliation against the downgrade of the US government debt from AAA in 2011.  The agency has agreed to pay $1.375 billion to US regulators after allegations that S&P knowingly inflated their ratings of risky mortgage bonds to encourage financial institutions to buy and sell financial products.  The bonds were blamed for the collapse of the US property market and the ensuing global financial crisis.  Half of the $1.375 billion will go to the federal government while the other half will go to the 19 states and the District of Columbia, who also filed lawsuits against the ratings agency.

http://www.wsj.com/articles/s-p-pact-hinged-on-trade-offs-with-justice-1422915828?mod=WSJ_hp_LEFTTopStories

Slump in Oil Prices Brings Pressure and Investment Opportunity

This article focuses on the company Resolute Energy, that was part of the big energy boom but is now unsteady, because they borrowed a lot of money and are having trouble getting it back. This trouble could lead to many layoffs and losses for investors as well as banks. When Resolute announced that they were buying land for oil investors came running. The problem was that the company had little knowledge of the cost associated with horizontal drilling. Getting money was easy in this industry until the plunge in oil prices occurred. Banks then started to cut down the size of credit line for the company and imposed new conditions for lending. All of this together caused their stock price to decrease. But Resolute like many other companies have come up with ways to pay their investors back. If there is still a need for oil these companies wont give up they will find new ways to get money and stay alive.

http://dealbook.nytimes.com/2015/02/02/slump-in-oil-prices-brings-pressure-and-investment-opportunity/?ref=business

Obama’s Plans for Deficit and Taxes Are Detailed on Eve of Budget Proposal

http://www.nytimes.com/2015/02/02/us/obama-budget-to-seek-to-stabilize-deficit-and-address-income-inequality.html?hp&action=click&pgtype=Homepage&module=first-column-region&region=top-news&WT.nav=top-news&_r=0

President Obama new budget for the next 10 years will be proposed on Monday, Feb 2nd 2015. This new budget, although does address stabilizing the current deficit, it focuses more on solving income inequality in the U.S with more tax policies that hit higher income classes and raising middle class income.

The proposal might be a trigger for a long debate between the President side and the Congress, or more specifically the Republican side which has been wanting a new President for a long while.

I personally feel that Obama's priorities are justified, as income inequality has become more and more of a glaring weakness that might not be better for the next few decades if we keep using the excuses of policies like these are killing the economy. Debt level should not be that much of a concern as it has been shown that projected debt will be manageable even until 2025 at 2.5% of gross domestic products. If once again the Republican side gains advantage, it would be great news for the minority rich of the country, and income inequality might be here to stay for much further.

Obama doubles down on "middle class" economics

http://www.politico.com/story/2015/01/barack-obama-economics-114793.html

As he did with the State of Union, Barack Obama has slowly been providing previews to his budget for 2015. In the past week, the latest details emerged: a one-time 14% tax on foreign earnings and a 19% yax on futureu corporate profits overseas to help pay for half a billion in infrastructure spending over six years. Obama has been spreading his message of "middle class economics" since he became president, but has increased his intensity since his parties' embarrassment in the November elections. Most of Obama's proposals have been met with swift opposition from the Republican Congress, especially his wish to end the sequester.

I think middle class economics are the best way to help the US economy. Although the economy has drastically improved over the last 5 years, wages have remained stagnant. It is important middle class families are helped because they have received very few benefits of the economic recovery.

What do you think is the most effective way to improve the US economy? :"Top down" economics or "middle class" economics?

The Economic Benefits of Paid Parental Leave

http://www.nytimes.com/2015/02/01/upshot/the-economic-benefits-of-paid-parental-leave.html?abt=0002&abg=1

The article discusses President Obama's push for paid leave for new parents and for people caring for ailing relatives to become national policy.  Obama said this policy would help increase the number of women in the work force and help middle-class families earn stable incomes.  Opponents of paid leave say it is an economic burden that can be expensive for businesses which do not need more mandates from the government on how to operate their enterprises.

The article continues by providing results from three states- California, Rhode Island, and New Jersey- that already have operational paid leave programs.  Economists have found that paid leave raises the probability that mothers return to employment later, and then work more hours and earn higher wages.  They also found that more people take time off, particularly low-income parents who may have taken no leave or dropped out of the work force after the birth.

The article concludes by saying that a paid leave law helps, but that it is not enough.  The article advocates for changes in public awareness and workplace culture.

I believe that paid leave for new parents and for people caring for ailing relatives goes beyond being economically beneficial.  Do you think paid leave for new parents and people caring for ailing relatives is economically beneficial?

Fed seen remaining patient with rates amid global turmoil

http://www.cnbc.com/id/102374975

The Federal Reserve is expected to signal it remains on track to begin raising interest rates later this year, as the central bank shows confidence that low inflation and rising risks from abroad have yet to derail the U.S. economic recovery.

The Fed's first two-day policy meeting of the year concludes on Wednesday, and policymakers will likely restate their "patient" approach to raising rates, while also voicing faith that the economy will continue improving.

Fed Chair Janet Yellen faces growing skepticism that the central bank can tighten monetary policy by mid-year, with a strengthening dollar and falling oil prices adding to worries that inflation readings remain too low for the Fed to begin hiking.

But U.S. central bank officials have argued that the drop in oil prices is a transitory factor that benefits U.S. consumers in the short run.

And with unemployment dropping and growth on track, Fed officials have indicated they will move forward with an initial rate hike in the middle or latter half of the year even if other closely watched measures such as wages remain weak.

U.S. Stocks Tumble

United States stocks tumbled today citing disappointing quarterly earnings and weak economic reports. The Dow Jones industrial average fell 365 points. The S&P 500 and Nasdaq composite also fell but not at the same magnitude as the Dow. In the midst of the growth of the U.S. dollar, the missed earning expectations were seen resulting from falling oil prices and economic issues abroad. It seems the U.S. has gotten through the majority of the effects of the Recession however issues in other countries have effecting the U.S. It will be interesting to see how long these oil prices stay this low and how it will effect further stock market rises and falls.

Source: http://www.wsj.com/articles/u-s-stock-futures-decline-1422365493?mod=WSJ_hp_LEFTTopStories

Strength of U.S Dollar

The U.S dollar seems to be on the uprise. After years with a slow economy, a dollar that was losing strength, the U.S dollar is up 20% against its major trading partners. Is this a sign that the economy is doing well or that other parts of the world are experiencing tough times of their own? One speculation is is that the dollar has seen a rise with the expectation of interests rates rising in 2015. A strong dollar is  good sign that America is heading in the right direction.


http://in.reuters.com/article/2015/01/23/usa-economy-jacklew-idINL1N0V211020150123

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