Labor Market Measures

           The Fed has been waiting for both inflation to increase and the unemployment rate to decrease before raising interest rates, and now one of those is in line. The October jobs report showed that the U-3 unemployment rate, the major jobless indicator for economists, has fallen to 5%. This is the lowest that that indicator has been since April of 2008. Similarly, the U-6 rate, which measures the jobless people in addition to those who are marginally attached to the workforce or employed part time, has decreased 0.2% to 9.8%. Like the U-3 unemployment rate, this is the first time this rate has resembled a single digit number since 2008. Because of these changes, the gap between the jobless rate (U-3), and the broadest measure of unemployment (U-6), is now the smallest it has been since 2008. This is a great sign because it shows that the slack of the labor market if finally starting to be reduced, something the Fed has been waiting for. Since there is less slack this will allow us to better interpret the U-3 unemployment rate as the unemployment rate for the whole economy. Along with this is the 313,000 increase in the labor force reported last month. In the past Yellen has been concerned about those who are working in part-time position, but would prefer full time positions. In the past year, this "slack" has also decreased. This decline marks the biggest shrink shrink in this indicator since 1994. All in all, these macro indicators are great signs of economic recovery and will further persuade Yellen and the rest of the Fed to raise rates. 

Source: http://www.bloomberg.com/news/articles/2015-11-06/one-of-yellen-s-most-important-labor-market-measures-now-looks-a-lot-better

Oil slides as dollar jumps; down 4 percent on the week

http://finance.yahoo.com/news/crude-oil-prices-edge-oversupply-015359400.html

Since US dollars is the main currency used in the global oil market. The exchange rates between US dollar and the currency of oil import countries affect the oil price a lot. If Federal Reserve increase the interest rate which will make US dollar stronger, it will force lots of oil export countries such as Russia increasing interest rate too. All those interest rate changes will influence the global market like the number of trades or difficulty of importing and exporting.

US Hiring Surges as Eyes turn to the Fed

Unemployment has fallen down to 5.0% in October and jobs increased by 268,000.  This is a strong sign for the U.S. economy.  Also the average hourly wage rose by 9 cents up to $25.20.  The FOMC is looking for the economy to move towards full employment and inflation to be at 2% before they decide to raise interest rates.  Interest rates haven't been risen since 2006.  With continued strong job growth for the U.S. economy by December, Janet Yellen has signaled that the Fed may finally raise interest rates.  The President of the Fed in Chicago stated that his two most important criteria for increasing the interest rates are strong wage growth and inflation moving to 2%.  The meeting that will decide if interest rates will increase is in mid-December. So wage growth, inflation, and job growth from November will also be taken into account for the big decision.  If they keep increasing like they did in October, we might finally see a increase in interest rates.

http://www.wsj.com/articles/u-s-employers-add-271-000-jobs-1446816737

World-Wide Economic Decline in Trade

The top 20 most developed nations have slowed slowdowns in economic growth recently. This is mainly from high tariffs and trade barriers. Roberto Azevedo, a director-general from the World Trade Organization stated, “The number of trade-restrictive measures that have been introduced remains a cause for concern.” Free trade is a concept far from reality as trade restrictions have continued to tighten throughout the globe.  It is essential that all developed nations come together to discuss these affairs. In 2015 some of the most powerful nations will all come together in Turkey at a summit called the G20.  The G20 includes countries that control much of the world trade such as the United States, Germany, United Kingdom, Russia, China, and Brazil. The summit aims its focus on how to eliminate trade barriers throughout the world.

World trade is shrinking as volumes of imports fell -1.6% in the first quarter of 2015. This was largely due to the slowdown in growth and output of China and other emerging markets. The volume of world trade increased in 2010 by 13% but forecasted growth rates show a slowdown in growth to as little as 2.8%. The main reason behind this lag in growth of world trade is due to a Eurozone that continues to show weak output and growth. Tension between Russia and Ukraine and what some will call the “Greece Crisis” strike as other important playing factors when it comes overall decline in world trade. China, being one of the largest economies in the world, had a slowdown in industrial output. It seems that multiple underlying problems are resulting in the overall decline in world-wide trade. Until there is a common ground between developed and emerging nations world trade will continue to shrink.

http://money.cnn.com/2015/11/05/news/economy/economy-world-trade-g20/index.html?iid=SF_LN

When a 127-Year-Old U.S. Industry Collapses Under China's Weight

The New York based company, Alcoa Inc. has been churning out the lightweight metal used in everything from beverage cans to airplanes for the past 127 years and was a symbol of U.S. industrial might. Alcoa’s decision to eliminate 503,000 metric tons of smelting capacity accounts for about 31 percent of the U.S. total for primary aluminum, but less than one percent of the global total. A global glut has driven prices down by 27 percent in the past year, rendering American operations unprofitable and accelerating the pace of the industry’s demise. Aluminum is down 19 percent this year to $1,501 a ton on the London Metal Exchange. Plants overseas usually have the advantage of lower labor costs, cheaper energy expenses and weaker domestic currencies that favor exports to the U.S.. China probably will account for 55 percent of global aluminum production this year, up from 24 percent in 2005, according to Harbor research. The U.S. has gone in the opposite direction: from 2.5 million tons in 2005 to 1.6 million in 2015, it said.
The decision made by Alcoa Inc is based on the increase in production of aluminum by China. They are able to supply for aluminum because of the cheap, available labor. The weaker Chinese currency means these products are favored exports for countries, such as the U.S., with more buying power to purchase the goods as exports.

http://www.bloomberg.com/news/articles/2015-11-03/when-a-127-year-old-u-s-industry-collapses-under-china-s-weight

Yellen: Rate hike next month is 'live possibility'

The Federal Reserve may be closer than ever to hiking interest rates for the first time in nearly a decade after Fed Chair Janet Yellen told Congress Wednesday that a move at its meeting next month is "a live possibility."
Yellen's remarks came a day after leading Republican presidential candidate Donald Trump asserted that the Fed has kept rates low as a political favor to President Obama, a charge White House officials dismissed. With another GOP debate scheduled next Tuesday, the question of whether the Fed boosts rates at its final meeting before the 2016 election year could continue to serve as a political football despite the Fed's status as an independent agency.
The Dow Jones industrial average extended losses after Yellen began her testimony, falling as much as 80 points, before partly recovering later in the day.
Although economic and job growth has slowed recently, Yellen told the House Financial Services committee the economy is performing well. But a decision on whether to hoist rates at the Fed's Dec. 15-16 meeting will depend on economic reports in coming weeks, she said. Her comments put outsize significance on the government's employment report Friday.  Payroll gains of around 200,000 could go a long way toward solidifying expectations for a rate increase while a total significantly below that would mark the third straight month of weak advances and could make the move unlikely.
Economists expect 182,000 employment gains, a total that Barclays Capital says would be enough to allay Fed concerns and raise the odds of Fed action. Economists expect the 5.1% unemployment rate to fall to 5%, which is close to full employment.

 http://www.usatoday.com/story/money/business/2015/11/04/federal-reserve-janet-yellen-testimony-financial-regulation/75148442/

10 More States Try and Legalize Marijuana

In the past couple of days there has been a big hype over legalization of marijuana in Ohio, which ultimately came down to voters opting not to legalize it. There vote wasn't because they don't want it legalized, but more so because they rejected the way the market would be regulated and operated.

Moving forward, 10 more states have now made a push for the legalization of marijuana (Nevada, California, Massachusetts, Michigan, Arizona, Vermont, Maine, Florida, Missouri and Rhode Island), all of which want to have it legalized for recreational use, except Florida who only wants it legalized for medical use. Given the reoccurring theme of this in the past couple of years, it seems as if moving forward this year will be a "watershed" for the industry and various states. In the various states there have been notable influential backers supporting the movement, such as Sean Parker co-founder of Napster, who is behind the California movement and is assisting in backing the ballot for the movement.

Overall it will be interesting to see how the voting and legislation holds up in the various states because this marijuana initiative could bring a lot of money, jobs, and industry into the American economy. The movement could help rebuild cities, such as Detroit, if Michigan were to vote yes as well as other places across the country.

http://money.cnn.com/2015/11/04/news/marijuana-legalization-2016/index.html?iid=ob_article_hotListpool&iid=obnetwork

U.S. Wins First Libor-Rig Case as Ex-Rabobank Traders Convicted

http://www.bloomberg.com/news/articles/2015-11-05/u-s-wins-its-first-libor-rigging-prosecution-in-n-y-jury-trial

Anthony Allen and Anthony Conti were both guilty on all counts in the charges against them regarding the Libor manipulation. Both are ex-traders for Rabobank Greop. The Libor (London interbank offered rate) is tied to more than $350 trillion in loans and securities around the world. There have been other cases around this subject. Tom Hayes was given a 14 year sentence for Libor manipulation by a London judge. The U.S. has charged 13 people involved with four pleading guilty. In England there is another case in which 6 brokers are accused of helping Hayes whihc is currently under way.

Evidence against the accused includes emails, instant messages, and recorded phone calls. This evidence played a major role in convincing the jurors. Rabobank was fined over $1 billion by U.S., U.K., and Dutch authorities for their role in the Libor manipulation. 7 Rabobank traders have been charged in the U.S.

Keystone XL's strategy (not talking about the beer)

TransCanada Corp. through the Keystone XL project has been looking to create an oil pipeline in the U.S. that would bring 830,000 barrels of oil a day from Canada into Nebraska and then on to the Gulf Coast refineries, but they have been waiting on President Obama for seven years to approve the project. Recently, the company has asked Obama to hold off on making a decision. Many people speculating that they are waiting to see if a Republican will take office in 2017 and approve the project. Even if Obama does kill the project, a GOP in office will quickly reinstate and approve it. Environmentalists are calling for Obama to finally reject the project, but it seems as though that won't make a difference depending on who gets elected.
Democrats have been against the project because of environmental concerns, specifically global warning. Republicans, however, are focused on the benefits that this project would bring, such as thousands of jobs and allowing us to import oil from our own country rather than from Venezuela and the Middle East. Yesterday, TransCanada's shares were up 1.5%.

http://www.reuters.com/article/2015/11/05/us-transcanada-keystone-state-idUSKCN0ST2VX20151105#QMxK9HArrtwPMhvG.97

The Shifting App Market

https://hbr.org/2015/11/the-changing-economics-of-app-development

App invention has become huge in our generation and is a marketplace of over 3 million different apps. 1600 submissions are submitted everyday to Itunes by companies and people wanting to introduce their ideas to the market place. This has made the market over-saturated where successful products (apps) and developers only make it if they have expensive and well planned marketing plans.

The market, however, has shifted away from the big developers and the "middle-class" (regular everyday people) have begun to produce apps which are taking over the market.  To support this claim, over 20,000 different app developers have produced revenue streams of right around $100,000 while most developers in general only make around $500 per app they produce suggesting profitability is spread out among producers and not all centralized into one large company. Also 45% of the app industry revenue has come from companies outside the top ranked apps in 2015.

What makes this market so tough, however, is the "Ghost app" phenomenon. Only 5% of apps account for 92% of the total app downloads. This means that 95% of apps are ghosts and will never be used by the market. On top of this, an average app usage goes down 85% after a 60 day period making app revenue for businesses short lived even for popular apps.

In our generation, many people have become entrepreneurs by relying on this market place. While the opportunity for profitability is definitely there, there is also the risk that your app will become one of the 95%.

How would you approach the app industry and how do you think this market is worth investing into? How do you become a big fish in the big pond of the app industry?

The Savings Controversy

In recent years, there has been the constant question of whether we should be saving or spending in regards to helping ourselves and the economy. Furthermore, with interest rates so low, economists are urging people to borrow money instead of saving. Saving may be decreasing aggregate demand since there is less money going into the overall flow, and thus the economy would be contracting. Some extremists may even argue that by saving your money you're depriving other of employment because you're contracting the economy. This whole notion is know as the "paradox of thrift"

On the other hand, savings is constantly being encouraged by the government, with incentives such as tax breaks on pensions. Also, saving is absolutely necessary for expenses such as college and later retirement. Additionally, it is commonly know that savings are imperative in leading to investment which helps stimulate the economy and further growth. 

Evidently, it is a difficult concept to juggle in terms of what is the right thing to do. Usually, when one sector is running a deficit, the other must be experiencing a surplus and vice versa. This is true within an economy, as well as globally with economically related countries. The article discusses how causality is the main issue in producing this effect. When the economy is good, tax receipts increase and unemployment benefits decrease. When the economy is in a slump, the opposite effects happens. Furthermore, it is important for economic analysts to be able to differentiate between the cyclical stages in order for the economy to know how to respond in terms of policies, etc.

Overall, the important takeaway is that we are constantly debating between what we want. We don't want too little and we don't want too much. We want our savings to be spread out instead of lumped into the same couple of areas. In terms, of consumer spending, it is imperative that individuals save! The overall economy should be more concerned with what mode to be in rather than the  individual consumer. 

http://www.economist.com/blogs/buttonwood/2015/10/economics

Chinese Manager of Highflying Funds Is Arrested in Insider Trading Case

http://www.nytimes.com/2015/11/03/business/international/xu-xiang-zexi-insider-trading-arrest-china.html?ref=international&_r=0

The billionaire owner of one of the country’s most successful investment firms has become the latest victim of China’s crackdown on corruption in the financial industry, arrested on charges of insider trading.

The arrest on Sunday of the fund manager, Xu Xiang, nicknamed Big Xu, followed what could easily have been an American story line. Mr. Xu and his relatives have a combined fortune of $2.2 billion, according to the Shanghai-based Hurun Report, which tracks the wealth of China’s richest people.

Separately, the police in Shanghai arrested three people in relation to an investigation into a high-frequency trading firm suspected of manipulating futures trades to make a profit of more than 2 billion renminbi, or $316 million, according to a Xinhua report.

Greek Education Tax Folly

The Left-wing Greek government is in hot water concerning a taxation plan that seriously backfired. Based more on rhetoric and idealogical grounds, the implications of placing a 22% value added tax on private schools were obviously not considered. The idea was to simultaneously raise government revenue via plutocracy-targeting, rather than methods that would impact the common people. As with many programs, they people it was supposed to help actually become the ones paying the price.

The Greek education system is full of many types of private school, like technical, arts, eventing, etc. This tax cause massive price increases that forced many families out of the system. It was actually rather common for lower to middle-inclose families to prioritize education and pay the price for a better future. Because they could not handle the price increase, they moved to the already overcrowded public school system. This amplified problems there and cause many private schools to shut down, creating thousands more unemployed.

This shows that consumption isn't always in line with the socio-economic stratification assumed to be correlate. Also, as a policy maker, it is extremely important to consider the implications of a specific policy. Often - especially with "Robin Hood" policies - the ones who you are trying to help are often the ones who will ultimately bear the costs.

Do you see any more lessons here?

http://www.economist.com/news/europe/21677382-left-wing-government-aimed-new-tax-rich-it-hit-poor-instead-greece-reconsiders

With influx of new apartments, rent increases slowing in Denver

In the third quarter in the past few years, apartment rents in Denver have risen by and average of $67, this year rates are only up by $27. This slow down of rent increases is due to the fact that more and more apartment buildings are going up in the Denver Metro area. More supply equals more competition, and as a result, landlords are having to lower their rates in order to stay competitive with the new buildings. Especially now when there are more apartment vacancies daily.

This is a very classical example of supply and demand in its simplest form. My question is, if rates are starting to slow, why are vacancies rising?

Link: http://www.denverpost.com/business/ci_29042930/denver-apartment-rents-slow-increase-influx-new-inventory

Consumer Spending Slowing

American consumer spending has increased by its smallest margin since January this year.  The cause of this it is suspected to be slowing job growth and economic uncertainty overseas.  Personal spending increased by only .1% in September.  The personal savings rate did however increase from 4.7% to 4.8%.

http://www.wsj.com/articles/u-s-consumer-spending-rises-0-1-in-september-1446208382

Major oil companies unveil the damage of $45 crude

It was a bruising day for Europe's energy sector Thursday, with the full extent of the pain caused by low oil prices being laid bare in a series of earnings reports. Anglo–Dutch multinational Royal Dutch Shell  reported a loss of $6.1 billion, compared with a gain of $5.3 billion for the same quarter a year ago, a decrease of 70 percent. This included a large $8.2 billion write-off due to a downward revision of its oil and gas price outlook and also a decision to halt projects in Alaska and Canada.
The Video is very helpful and only 5 min.
Link:

http://www.msn.com/en-us/money/markets/major-oil-companies-unveil-the-damage-of-dollar45-crude/ar-BBmzbTW?li=AA4Zjn

China to End One-Child Policy, Allowing Families Two Children

From the 1970's the Chinese Communist Party has enforced that couples were only allowed to have one child.  However, this policy on Thursday has been changed to allow Chinese couples to have two children.  This came from the fear of the aging population jeopardizing the amount of economic growth China would be able to achieve.

Even though this gives Chinese citizens a heightened sense of freedom and choice about their personal lives, the party is unsure how quickly the birthrate will go up in the near future.  It will go up certainly, but by how much no one is certain.

Restrictions were lessened in 2013 allowing couples to have two children if one of the parents were an only child.  However, many couples declined the offer to have another child because of the expense and the pressure to raise children in a highly competitive atmosphere.  With that being said only 12% people eligible to have a second child took advantage of it.  

When asked about the new policy that came out this morning, some people were happy, but most of the society was either ambivalent or adamant that they would not be having a second  child.

Currently 1/10 of the population of China is over 65.  However, by 2027 this is expected to rise to 15% and to 20% by 2035.  Consequently, due to these vast increases in retired individuals there will not be enough working people during those years to support them according to the numbers now.

I agree with Mr. Liang when he says, "“It’s not just a problem of whether you permit ordinary people to have one or two kids. It’s about returning their reproductive rights to them,” Mr. Liang said in a telephone interview from Shanghai. “In over 200 countries and regions around the world, which of them nowadays controls people’s reproduction like this?”

Do you think this policy will be effective for China? 

http://www.nytimes.com/2015/10/30/world/asia/china-end-one-child-policy.html?hp&action=click&pgtype=Homepage&module=first-column-region&region=top-news&WT.nav=top-news&_r=0

Fed Keeps Interest Rates Near Zero, but Says Economic Indicators Remain Strong

The Federal Reserve announced that it still isn't ready to raise interest rates. This is the 7th year where short-term interest rates are near zero. However in the announcement, it left open the possibility that the Fed could raise the rates in December during their final meeting of the year.

They said even though job growth had slowed, other economic indicators that go into the interest rate were strong. Also, the Fed said they weren't as concerned about the global economy as they were in their last meeting in September. The decision to keep rates near zero was supported by nine of the 10 members of the Federal Open Market Committee.

This most recent statement indicated that Fed officials are still fairly confident that the labor market will continue to improve and inflation will rise. Those factors are what impacted the Fed to say there could be an increase in rates in the near future. If the rates are raised, they would be raised slowly, as to minimize economic disruptions.

Now, the big question is will the Fed actually raise rates at their last meeting of 2015, which takes place December 16 and 16. After all of these months of speculation, do you think it will finally happen? Or will there be another excuse to keep them near zero?

http://www.nytimes.com/2015/10/29/business/economy/fed-interest-rates.html?ref=business&_r=0

Sick of dealing with the daily traffic congestion on the road? Soon you may not have to.

Since the creation of the automobile, overly-congested roadways have caused copious amounts of pollution in major cities across the world. Ultimately, this increase in pollution ultimately led to a widespread awareness of environmental protection reforms across the globe. To help combat the problem, SkyTran, a NASA Space Act company, has been developing what will come to be known as a sky taxi.

By the end of October this year, the company hopes to debut an “aerial mass transit system featuring cars that magnetically glide 20 to 30 feet above the ground along elevated tracks” (Kavilanz) in Tel Aviv, Israel. Initially, just one car will run on the transit path of about 900 feet; but soon, more cars will be assimilated into the debut system. After the debut of the system in Israel, SkyTran also hopes to expand to other countries around the world including the United States.

The goal of this project is to help alleviate the environmental implications that pollution has created by replacing automobile transportation with a more environmentally sustainable transportation mechanism. The taxis run solely on magnetic alleviation technology in which electromagnets produce the lift and force to propel the cars forward. Not only is this technology more environmentally-friendly, it is also cheaper and simpler to build than railroads and subways, and can be installed in a matter of days.

Not only will this new mode of transportation help with reducing the carbon footprint has left on the world; but it will also allow developing countries to have a more sustainable mode of transportation that they can actually afford. That being said, do you think that the introduction of a mass transit system of transportation in developing countries will help them to better establish themselves in the global marketplace? Will this be able to allow them to move from that of a developing country to that of a developed country? Furthermore, what implications do you think this will have on the automobile and railway industries?

Link: http://money.cnn.com/2015/10/23/smallbusiness/skytran-air-taxis/

Japan’s Struggling Economy Finds ‘Abenomics’ Is Not an Easy Fix

Over the past few years and tracing back Japan has been a country under constant contraction, whether it is often or takes a while. So essentially it is very difficult to gauge an economy which is no volatile. It is very difficult to analyze an economy that is again going towards a contraction, so what are to say about this instance?

Three years ago the new Prime Minister Shinzo Abe had proposed to end this constant state of recession and move towards a more stable situation. Under his time the central bank intervention was at an all time high and was policy to induce the economy. However; this over time was not the best policy to implement either because many analysts conclude that Japan has been on a track of deceleration which is a major contribution to its current state.

Taking Advantage of Corporate Taxes

In Europe multiple investigations are being conducted involving corporate tax laws. The week of October 22^nd, 2015, in Luxembourg and Netherlands, the European Commission ruled that subsidiaries of multinational corporations in the two countries were paying too little of corporate tax. Multinational corporations such as Starbucks and Chrysler received these light tax deals because these countries were trying to enhance foreign direct investment through “state aid.”

            After a proper investigation it was found that these multinational companies were taking this low corporate tax rates as preferential treatment. According to the article one of Chrysler’s chairman, John Elkan, sits on the board of The Economist’s parent company. These two multinational companies ended up underpaying corporate taxes at unfair amounts.

            The European commission is currently conducting similar investigations on Amazon and Apple. Lawyers believe that if multinational corporations have a choice between taxes and court they will always choose taxes. In conclusion these multinational corporations were gaining an advantage by gaining a low corporate tax rate. As the European commission investigates the situation, I believe that the shift in corporate taxes in Europe will even the playing field of multinational corporations in Europe.

http://www.economist.com/news/finance-economics/21676785-corporate-tax-europe-set-change-european-commission-attempts-outlaw

$68-billion California Bullet Train Project Likely to Overshoot Budget and Deadline Targets

The monumental task of building California's bullet train will require tunneling through the geologically complex mountains north of Los Angeles. State officials say the tunnels will be finished by 2022 — along with 300 miles of track, dozens of bridges or viaducts, high-voltage electrical systems, a maintenance plant and as many as six stations. A Times analysis of project documents suggests however, that deadline and budget targets will almost certainly be missed — and that the state has underestimated the challenges ahead. A confidential 2013 report by the state's main project management contractor, New York-based Parsons Brinckerhoff, estimated that the cost of building the first phase from Burbank to Merced had risen 31%, and the total cost of the project would rise approximately 5%. Bent Flyvbjerg, a University of Oxford business professor and a leading expert on megaproject risk, said the lagging schedule, litigation, growing costs and permit delays arising so early in construction are warning signs that even more delays and higher costs are imminent 
This article provides insight into the difficulties of central planning. Specifically, it illustrates the undesirable consequences of having insufficient information necessary for the state to produce the system in an efficient manner.

http://www.latimes.com/local/california/la-me-bullet-train-cost-final-20151025-story.html

Wifi calling... What does this mean for our phone bills?

AT&T and Verizon have pensioned the FCC to start testing wifi connected calls for cell phones. Though there are currently apps that allow you to call using a wifi connection on iOS devices, you can only do so however if the person you are calling has the same app. What this new wifi calling feature will do is when you're connected to a wifi hotspot and make a phone call, it will use the wifi signal instead of accessing your data usage. So what will this latest innovation mean for the network industry? Will prices for wifi hotspots go up or will there just be an abundance of them? And will consumers be able to reduce their data usage plans? If you're always connected to wifi theres no real need to pay the $100 a month for the XXL data usage plan!http://www.theverge.com/2015/10/25/9611746/verizon-wi-fi-calling-feature-seeks-fcc-approval

Corporate tax scandals in Europe

Luxemburg and the Netherlands were recently ruled to have provided government "subsidies" to subsidiaries of multination corporations within both country's respectively. According to the rules of the EU, such state sponsored subsidy's are illegal and the European commission have ruled that they each paid 20-25 million Dollars less than what they both owed. Both Countries have resorted to appeal this decision because they feel that this will deter investment in the future. tax avoidance is a major issue in the international community whereby multinational firms attempt to shift their business to countries where they feel they will be taxed a lesser amount. While this sounds well and good, there are certain particulars to this case that made the commission question the validity of the exchanges going on. Upon close examination, the commission found that there was a manipulation in the amounts for which different subsidiaries of the same MNC were found selling goods to one another, basically a change in the transfer prices that wasn't adding up in both countries. While there were undervaluations on both ends, MNCs essentially worked a way around the system in order to pay a fraction of the tax that they were supposed too.

MNCS go through such complicated structures in order to avoid paying corporate taxes and it seems that the involvement of these respective governments is in question regarding how active a process they played in helping out such MNCs. Regardless, MNCs would rather prefer taxes than court dates.

http://www.economist.com/news/finance-economics/21676785-corporate-tax-europe-set-change-european-commission-attempts-outlaw

Abenomics Is Not Easily Fixable in Japan's Economy

Recently, in Japan, people are starting to question the policies of Shinzo Abe's "Abenomics", seeing as the Japanese economy has contacted numerously in the past few years. Abenomics describe the economics policies enacted during Abe's term as prime minister since 2012. They include fiscal stimulus, monetary easing, and structural reforms. The potential growth rate is around 0, so any small shock can put Japan into recession, according to the chief Japan economist at JP Morgan & Chase, Masamichi Adachi. Abe has been criticized for inappropriately raising the sales tax, which disincentivized people to spend money in the economy. In addition, Japan's GDP is the same as it was in the mid-1990s, according to the article. We also know that another thing that could possibly disincentivize workers and consumers is the fact of respecting your elders in Japan, which has a good underlying tone, but it also does not motivate people to work harder if they are younger, or produce more GDP for the economy. With more and more people skeptical of Mr. Abe's policies, he will have to change his policies in order to not have Japan recess even more. One proposal may be to implement more quantitative easing into the Japanese economy, as well as lower the sales tax, encouraging people to spend more into the economy. http://www.nytimes.com/2015/10/26/business/international/japans-struggling-economy-finds-abenomics-is-not-an-easy-fix.html?ref=business&_r=0

Is Tim Cook Right About the Level of Innovation in Apple Inc.'s iPhone 6s?

The improvement leaps Apple made from 6 and 6 plus to 6s and 6s plus were greater than the leaps from 5s to 6 and 6 plus, such as faster processors, quicker wifi connections, better camera resolution on both sides, among a few of the improvements. Overall, the design and look of the phone didn't really change. It is being talked about that Apple may move away from using LCD touch screens, that are used on all smartphones, not just Apple phones, and being incorporating AMOLED displays for the 2017 iPhone.

Apple has been coming out with a newer version of the iPhone about every two years, but because of the increasing pressure from their competitor, Android, Apple has almost doubled what they were originally spending on research and development. They may soon start releasing new models every year, and making them so that the older models become obsolete in order to keep market share. My biggest question about this strategy is that wouldn't doing all this every year, give incentive to customers to switch to Android, or any other phone for that matter, in order to keep costs low? Apple products are only compatible with other Apple products. If they remake new phones and items that go with only these phones, owning anything Apple is going to become more expensive than it already is. I can see this as providing incentives to consumers to switch to brands that are compatible with more than just their own products, and from different technology generations.

Link: http://www.fool.com/investing/general/2015/10/25/is-tim-cook-right-about-the-level-of-innovation-in.aspx

Rates May Not Be Our Biggest Concern

Although The Fed's decision regarding an interest rate hike is prevalent, its decision on how to reinvest money from matured Treasury bonds is just as prominent. Currently the Fed holds about $215 billion of Treasury bonds that are expected to mature next year, and $800 billion by 2018. Being that the bond market is experiencing a phase of volatility, the Fed's decision on how to reinvest these funds will have big implications on that volatility. Traditionally the Fed uses proceeds from matured bonds to purchase more primary market Treasury bonds; however, it would be wise for the Fed to reinvest its funds into bonds in the secondary market. Since the market expects rates to rise, there have been negative implications on bond liquidity, which would be eased by secondary market bond investing. By making an appearance in the secondary bond market the Fed would be fulfilling the role that banks have traditionally filled: which is currently suffering because of stricter regulations. Whatever the Fed ends up doing will have a large effect on the bond market. Where they decide to reinvest their money should be something that is publicized before being done so that it is not a shock to investors.

Source: http://www.bloomberg.com/news/articles/2015-10-24/fed-s-next-big-decision-may-not-be-about-rates-as-rollover-looms

Uniting Behind the Divisive ‘Cadillac’ Tax on Health Plans

The “Cadillac” tax is known to be the excise tax on high-cost health care plans, and the authors of the article, N. Gregory Mankiw and Lawrence H. Summers, strongly support this policy. They believe that every family should have health insurance to avoid “the risks of financial insecurity, personal bankruptcy, and forgone essential care” due to the expensive medical treatment. However, some people tend too much for insurance, which, as a result, they become too quick to look for professional medical care or easily accept any unnecessary tests or treatments by the treatment. This leads health spending to be beyond what is optimal.

Some firms prefer paying their workers in the form of health insurance rather than in cask because compensation in form of wages is subject to income tax and payroll tax, while employer-provided health insurance does not. As a results, workers end up with excessive health insurance and low wages. The Cadillac tax comes in and solves this problem by placing a tax on the excess of insurance cost above threshold, “$10,200 for individual coverage and $27,500 for family coverage.” This gives companies an incentive to reduce insurance and  pay more in wages. By increasing wages. firms are in an advantage in recruiting and retaining workers in the long run.

Link: http://www.nytimes.com/2015/10/25/upshot/uniting-behind-the-divisive-cadillac-tax-on-health-plans.html?ref=economy

VW to freeze promotions due to emissions scandal: report

http://finance.yahoo.com/news/vw-freeze-promotions-due-emissions-104248653.html
Now all the plans of Volkswagen are about how to cut cost including re-use as many parts as possible in the next generation of its popular Golf model and cut the  investment plan at its VW division in order to recover from the scandal as soon as possible. However, when VW's response for if they would have to cut jobs is "We are driving in thick fog at the moment." I think VW would not cut jobs. At least they did not cut jobs in China. I think one reason is that recent China cut the purchase tax from 10% to 5% for sub-1.6 liter cars. This announce boosted the sales of VW in China, and let VW feel the hope. Although VW is still in trouble, but I believe they will come back. 

How AB InBev Won over SABMiller

http://www.wsj.com/articles/sabmiller-ab-inbev-agree-on-deal-in-principle-1444717547

 This article deals with these two major beer companies and how Anheuser- Busch InBev paid 104.2 billion dollars to takeover SABMiller. This takeover will make AB InBev a powerhouse in the world beer market. There was a lot of behind the scenes talks and deals made in order for this deal to be approved by both sides. It began with AB InBev’s offer of 44 euros a share and a 3 billion dollar breakup fee if any problems happened with the deal. After this, there was a tiny mishap that happened with public shares by AB InBev. They made a public share proposal of 42.15 euros per share, which they thought they were backed up by investors, but they were not. This resulted in heated talks and a quick rejection of the share proposal. The chairman of SABMiller, Jan du Plessis, was an important piece that kept the deal intact and he helped achieve a better price for the company. The board of directors for SABMiller had many arguments and talks questioning whether to keep the 42.15 a share, because some of the big investors wanted to keep that price. But, Jan kept the board together and convinced them that he could get a better deal for everyone. Then, both sides decided it would be best if the meetings were more private, and this is where SABMiller negotiated the deal up to 43.50 euros a share. This increase in the share proposal made negotiations more serious and the big investors were backing up the deal. An example of this is how the Santo Domingo family, a major share holder of SABMiller, agreed to terms because of the increase in the cash component of the partial share plan. The terms were agreed upon, and the next step was facing antitrust scrutiny and officially closing the deal. It was estimated that the deal could take as long as a year to close. AB InBev will have to work with China and the U.S to get regulatory approval but once that is done, they will be a dominant power in the beer market. 

WSJ Survey: Economists Still See Fed Rate Increase in 2015

Sixty-Four percent of the economists surveyed say that the Federal Reserve's December 15th and 16th meeting will lead to an interest rate rise.  “The Federal Reserve has all-but-telegraphed a desire to begin raising rates by year’s end, and this is likely to be at their December meeting,” said Chad Moutray, the chief economist for the National Association of Manufacturers. In September, 84% of the economists said that the Federal Reserve would increase the interest rate, but global economic slowdown and the stock market tumbling were reasons not to do this. Janet Yellen stated that  to achieve the United States economic goals, t he interest rate will need to be raised. On the other hand, other economists believe that there is much less of a chance that the Fed will increase the interest rate this year because of continuing low inflation. Diane Swonk, the chief economist of Mesirow Financial thinks that there is a 50-50 chance that the Fed will raise interest rates in December. The Fed is also looking at the labor market as an indicator of when to raise the interest rate. The Federal Reserve saw the weakest back to back job growth in August and September, which was also cause fort he delay in the rate rise. Sean Snaith, an economist at the University of Florida, says that data will not justify a move until March. When do you guys think the Fed will raise the interest rates?
http://www.wsj.com/articles/wsj-survey-economists-still-see-fed-rate-increase-in-2015-1444312800

Starbucks, Fiat, and Illegal Tax Deals

The European Commission recently charged Starbucks Corp. and Fiat Chrysler Automobiles NV with illegal tax deals in the Netherlands and Luxembourg. Starbucks is ordered with paying 20-30 million euros (a drop in their bucket) in back taxes to the Netherlands, and Fiat must pay a similar amount in Luxembourg. Both companies plan to appeal this, claiming that proper investigation was not done properly, with significant errors, and they deny any illegal activity. They are not the only multinational corporations that have moved to the EU for tax breaks and may not be complying with the rules. Apple in Ireland has also received many tax breaks and an investigation will be happening there too.
EU is attempting to crack down as much as possible on the large corporations that are taking advantage of tax loopholes. The only way they will be able to enforce the rules more and prevent this from happening is by creating more legislation defining what is allowed and by actually enforcing it. They do not want the larger companies that are more powerful to have a greater advantage than the smaller and medium sized countries that don't get the same breaks. This investigation is setting off an alarm for other similar multinational corporations looking to do business abroad.

http://www.reuters.com/article/2015/10/21/eu-taxavoidance-idUSL8N12L1ZH20151021

Why hasn't America taken in more Syrian refugees?

Since the start of the civil war in Syria, 12 million Syrians have been displaced from their homes. Of those 12 million, 4 million have sought asylum in other countries. Almost 2 million are in Turkey, 1 million in Lebanon, 650,000 in Jordan, and an increasing number of tens of thousands in Germany. How many has America taken in?: about 1500. Many point to America's fear of terrorism as one reason why this number is so low. The chairmen of the House Homeland Security Committee, Michael McCaul, stated, "I can't support a policy that would allow a jihadist pipeline into the United States" when introducing a bill that would reduce the number of Syrian refugees the government plans on admitting. Since 9/11 the vetting process of refugees and immigrants has grown drastically costing the US millions. The vetting process includes "multiple investigations of their biographies; biometric checks of their fingerprints and photographs; in-depth interviews by highly trained Department of Homeland Security officers; medical screenings as well as investigations by the National Counterterrorism Center and by intelligence agencies." Since 9/11, 750,000 refugees have been admitted into the US and only two have been arrested on terrorism charges. Should the US allow more Syrian refugees into the country? Is the fear of terrorism from Syrian refugees a justified and realistic reason to deny asylum seekers entry into the US?

http://www.economist.com/blogs/economist-explains/2015/10/economist-explains-13?spc=scode&spv=xm&ah=9d7f7ab945510a56fa6d37c30b6f1709

Directors Say Volkswagen Delayed Informing Them of Trickery

After the huge scandal that Volkswagen had, there was members on the board claiming that they didn't know anything about the company's emission cheating for two weeks after the top executives admitted the deception to American environmental officials.  Since September 18, Volkswagen stock value has dropped by a third.  With some of their cars emitted far higher levels of nitrogen oxide they were in trouble with the United States Environmental Protection Agency.  Stephan Weil, who is a board member and the prime minister of the German state lower Saxony learned of Volkswagen deception by watching the news.  Another board member, learned of this by reading about it online.  Around 11 million cars have the illegal software, which were mostly in Europe and the United States.  This lead to a huge amount of lawsuits against them.  There are shareholder that complained that Volkswagen didn't follow German law requiring it to publicize information that could affect the stock price.

http://www.nytimes.com/2015/10/24/business/international/directors-say-volkswagen-delayed-informing-them-of-trickery.html?ref=business

Rent-A-Cop: Private Security is Hollowing Out Nigeria's Security Forces

Private security is a big business in Nigeria, a state where there are constant bombings in the north, rampant sectarian violence and in which jihadist insurgent group Boko Haram operates. Companies and firms do not want to risk their employees' lives or litigation, so they hire private guards to carry out security precautions such as scan bags or guard entrances. For example, between 2007 and 2009, Shell spent $383 million, 40% of its global security budget, in Nigeria alone. It is estimated that there are over 2,000 private security companies in Nigeria.

Because they can't legally carry weapons, armed units are required to be hired from national forces, which can in turn breed indiscipline. Corruption permeates all levels of the armed units, making it difficult for private contractors to control those they hire. Private companies pay very well, which often incentivizes commanders to hire out their men and diminishes the capacity and effectiveness of the state's police and armed forces in protecting citizens. This privatization of public security can fuel conflict as companies arm different regions with corrupt armed units accused of human rights abuses and theft of oil. The new president of Nigeria, Muhammad Buhari, is pushing to cancel some security contracts and has been encouraging police to stop serving for rich politicians and firms.



http://www.economist.com/news/middle-east-and-africa/21674811-private-security-hollowing-out-nigerias-security-forces-rent-cop?fsrc=scn/tw/te/pe/ed/rentacop

A Change in Beverage Preferences 

 Recent studies have demonstrated the steep decrease in certain beverages high in calorie and sugar content, including sodas and fruit drinks. Many Americans are now focusing on a variety of drinks that contain diet formulations with low calorie and sugar numbers. As mentioned earlier, the calories consumed in beverage form is rapidly decreasing, with most of the change coming from soda and fruit drinks. Children are also drinking less milk, which demonstrates the fixation with calories that Americans now hold. Americans are opting for energy and sport drinks that have no calories but a long list of ingredients. These growing categories of energy and sport drinks are yielding sales, however they have not grown enough to compensate for the large decline on soda consumption. Big beverage companies are still investing in these types of beverages because they do hold future potential to yield greater profits. They are clearly a growing segment, so perhaps more time is needed for the beverages to fully compensate and take over the soda decline.

As Americans are starting to become more health conscious, I would think that they would be skeptical to not only calories, but also the list of questionable ingredients in the beverages they consume. Therefore, I do hold some doubt for the future of the sport and energy drink industry. I also think the article failed to mention new "health" drinks, such as all green drinks or coconut water. I believe that the sale of super health drinks will increase in the future due to not only a new health  attitude, but also to the increase in nutritional education Americans are now receiving.

 http://www.nytimes.com/2015/10/16/upshot/energy-drinks-are-popular-but-not-enough-to-replace-soda.html?ref=economy