Argentina's Deadly Storms

Argentina has recently experienced torrential downpours that have claimed a significant number of lives and have caused large electricity blackouts in major cities. Moreover, the storms are yet another result of what the author calls "chaotic urbanization" and a lack of infrastructure funding. The city of La Plata, where 51 residents were killed by the downpours last Tuesday, was built at a natural drainage point. La Plata and the capital city, Buenos Aires, lack adequate drainage systems causing water to rise quickly in downtown areas. Argentina struggles to attract foreign direct investment that could fund infrastructure improvement projects because of its history of default. Adding to this problem is the high rate of inflation; argentines exchange and spend their pesos quickly, causing banks not to have enough money to fund the large loans necessary for building infrastructure.

http://www.economist.com/blogs/americasview/2013/04/argentinas-deadly-storms

Corruption in education - in light of what we discussed in class on Friday 4/5

I was pleasantly surprised when I opened up one of the Croatia news portals this morning to find Croatian professors in handcuffs (check out the photo). Here is an article in the English language: http://pmnewsnigeria.com/2013/04/05/dozens-arrested-in-croatian-university-bribe-case/. It seems that faculty in the area of economics have been very busy engaging in market activities. I guess they have learned something during their graduate school training. Or, maybe they have bought them as well.

It seems that some of the problems of corruption in education are not unique to Croatia, but rather prevalent in the post-socialist Eastern European countries: http://www.setimes.com/cocoon/setimes/xhtml/en_GB/features/setimes/features/2013/04/04/feature-02

ESPN a throw in on the Disney deal?

http://www.freeforpsp.com/free-wallpapers/movies/200911/10292.html

ESPN the worldwide leader in sports was once a throw in on a deal that allowed Disney to acquire the rights to ABC. About 20 years later the giant that is ESPN makes up about 60 percent of the cash flow that Disney has now. This company has come back in the past few years and became the first company to make affiliate fees work, which are fees to air their broadcasts on different networks. It is crazy to see a company that was once a unwanted throw in on a larger deal become something that Disney could have never imagined would be their cash cow.

A new flu: Deadly, however it moves, avian flu H7N9

Source: http://www.economist.com/blogs/analects/2013/04/new-flu

A pork butcher in the People's Republic of China was killed by an avian flu not previously seen in humans called H7N9. Previously only transmitted to birds, scientists confirmed that the flu can now jump from birds to mammals. The WHO said that there is still no evidence of human-to-human transmissions as all of the human's family members are not infected.

The article discusses in optimism how management in China is dealing with the H7N9 much better than it did with the SARS pandemic. Now, over a million in China now talk about it rather it being kept top secret. When the SARS pandemic occurred, it was not handled well which led to its spread to other regions as East Asia, the rest of Asia, and even the Western world.

Record Unemployment Rates in Euro Zone

The Euro Zone is going though some very difficult times, especially with the recent news regarding capital controls in Cyprus. Well, these troubling times are affecting the job market. The unemployment rate hit 12 percent after the first two months of the year, which is a record high. Cutting government spending and raising taxes - especially in Greece - has taken its toll. With less government spending, the job market gets hit and the demand for goods and services decreases. Greece is the country with the worst unemployment, 26.4 percent last recorded in December, and the youth in Greece are truly suffering with the unemployment rate rising all the way to 58.4 percent. Spain comes in second, with the overall unemployment reaching 26.3 percent in February.

The link below outlines unemployment rates all over the Euro Zone and some underlying reasons for the high percentages.

Link: http://www.nytimes.com/2013/04/03/business/global/unemployment-in-euro-zone-reaches-a-record-high-of-12-percent.html?pagewanted=2&hp&_r=0

Despite Difficult Times, Board Members Pay Increasing for Top Banks

Despite the financial crisis, board members at the top banks in the US have seen their pay increase. The article cites specific boards and the massive paychecks these board members are getting, although it "essentially being a part-time job." Goldman Sachs board members have seen their pay increase 50 percent since 2008. Board members at Goldman are expected to see their compensation increase once again after a very strong year in 2012. Goldman Sachs board members are lucky because they receive the highest pay among the nations top banks, with Morgan Stanley's board right behind them. The average pay of Citigroup's board is $315,000, which is a 64% increase from 2008.

Click the link below to get more details.

Link: http://dealbook.nytimes.com/2013/03/31/pay-for-boards-at-banks-soars-amid-cutbacks/?hp

Bank of Japan set to launch war on deflation

Japan's new Prime Minister Shinzo Abe has made the central bank's 2% inflation target a top priority.  He wants to drive down the value of the currency in order to get consumers to spend more and save less.  Some skeptics, and even Abe, acknowledge that this will be a difficult target to reach before the deadline.  Economists are especially worried about the sustained downward pressure on wages in Japan.  The central bank has already increased its bond-buying program and there are fears of political backlash over stoking a currency war.  Japan already has the highest debt-to-GDP ratio in the world and in January they announced a $117 billion government spending program.
http://money.cnn.com/2013/04/03/news/economy/bank-of-japan/index.html?iid=HP_River

Large companies in the US have grown faster than small companies

http://www.businessweek.com/articles/2013-04-03/large-companies-have-grown-faster-than-small-ones

According to the article, ever since the recovery from the recession, large companies have grown faster than small companies. The big companies have, on average, incrased employment by 7.5% compared 4.9% increase by small businesses. 

There are 3 main reasons for this: 1. Most construction companies are small businesses. They suffered greatly in the housing market crash and are still struggling, 2. The big companies had greater cash reserves to face the huge credit crunch which followed the recession. Therefore, they were not hurt so badly, 3. Big companies also cater to international markets and since the value of the USD declined, it helped in increase of exports. 

Game of Thrones Premiere Sets Piracy Record

This article reports that the TV show "Game of Thrones,"was the most pirated show in 2012. The city with the most illegal downloads was London, and the country with the most illegal downloads was the US. While Hollywood is peaking its concern about piracy, HBO's programming president sees it as a sign of success. He's taking this high demand as a compliment, and said in an interview that it didn't negatively impact their DVD sales. The co-creator of the hit show agreed, but said if viewers could pay just 99 cents for their download rather than illegally watching it, the show could pay for a few more "dragon scenes."

Do you think HBO is being too lax about piracy? What do you think would happen to the entertainment market if piracy laws were more strict?

http://money.cnn.com/2013/04/02/technology/game-of-thrones-piracy/index.html?iid=HP_LN

Why Does Greenland's election have global impact?

No one typically pays much attention to Greenland.  There are so few people that live there, so they typically do not have much global impact.  Their most recent election, where only 30,000 people voted, could create an export market for metals used in electronics that could really boost many other countries economies.  This potential export is due to the fact that many ice caps in Greenland are melting making rare-earth metals more easily extractable.  Many of these metals are used in computers and tvs.  The government, depending on who wins, will lift bans on mining Uranium which is typically mixed with these other metals.  Is the government holding down their economy but currently not allowing these metals to be mined?

http://www.economist.com/blogs/newsbook/2013/03/economist-explains-why-greenland-election-global-implications

Balancing the Economy: Bottoms Up

With China being considered one of the largest economic forces in the world, their statistical data is now being questioned.  Many countries outside China have always chosen to take their GDP, inflation rates, growth rates, etc with a grain of salt.  Now two economists from Morgan Stanley have decided to try to find their own data to estimate these statistics.  They are finding that the governments estimates are significantly off.  The government has left out major portions of the economy including online shopping and gaming, etc. This has major economic impact across the globe.

http://www.economist.com/news/china/21574503-consumption-china-may-be-much-higher-official-statistics-suggest-bottoms-up

US economy ekes out 0.4% growth in fourth quarter

http://www.bbc.co.uk/news/business-21969730

The Department of Commerce said the US economy grew faster than expected in the last quarter of 2012. It was estimated that the growth would be 0.1%, but thanks to increased investments in plant and equipment the growth rate was 0.4%. However at the moment the figures are lower than they were in the previous quarter. The defence spending  and government expenditures were cut which hurt economic output. The revision of DGP did not have an impact on the overall economy. During the October-December quarter showed that the home sales were rising and the labor market was improving. Chief investment officer of Harbor Advisory said that the economy is improving. According to last year’s rate, the investment bank was expecting US GDP to increase by 2.2%. Last week the US Federal Reserve said that stimulus measures are still needed. The Fed is buying $85bn a month of Treasury bonds and mortgage backed securities so the borrowing costs for households and businesses are lower. The Fed also wants to see long term trend of falling unemployment.   

Jobless Claims Rise Slightly

This  article discus the amount of americans filing for unemployment benefits this year.

The number of Americas filing for their first week of unemployment benefits rose last week, suggesting a stall in what has generally been a steadily if slowly improving job market. Analysts were expecting 335,000 people to have filed for unemployment benefits but turned out to be a figure of 341,000, an increase of 16,000. With so many articles claiming job growth in america, this doesn't seem to follow the trend. 

http://money.cnn.com/2013/03/28/news/economy/unemployment-benefits/index.html?iid=SF_E_River

One in four U.S. firms in China report data theft

http://money.cnn.com/2013/03/29/news/china-data-theft/index.html?iid=SF_E_LN

According to a survey conducted by the American Chamber of Commerce in the People's Republic of China, more than one in four U.S. businesses operating in China have experienced the breach or theft of proprietary data or trade secrets. To many American businesses in China, the risk of data breaching is rising. This poses a serious obstacles for foreign businesses in China along with rising labor costs and slow economic growth. Also, it is worth mentioning the tensions between China and the U.S. over the issues of cyber-security and computer hacking after China was accused of being behind a number of cyber-attacks on US firms. I think it will be interesting to see how this is going to affect the economy in China in terms of foreign investment.

Unusual Good News From Inflation

This article gives a fascinating look at consumer spending based on CPI data and how it works alongside lesser-known PCE data. Consumption has shown a "resilience" despite the recent tax increases and higher gas prices. Personal consumption is estimated to grow at 3% annual rate during the first quarter. The article goes on to explain CPI versus PCE. PCE is personal consumption expenditures which is calculated monthly and is used to calculate real consumer spending. The article explains the math in depth, but the short of it is that using the PCE index rather than CPI adds 0.7% growth without inflation to real consumption and real incomes. The Fed considers the PCE index superior to CPI data because PCE reflects the cost of living more accurately. Because of the recent the divergence of CPI and PCE (usually at 0.3%, currently 0.7%), this has slowed core CPI inflation to below mandated levels. The problem with this is that it causes higher real interest rates. Unfortunately, actual inflation does not affect real rates, but rather the consumer's interpretation of CPI (expected inflation), so with this
       In all, the inflations expectations working with PCE have validated the current monetary policy, which is great for real incomes and spending.

http://www.economist.com/blogs/freeexchange/2013/03/divergence-between-cpi-and-pce-prices

2 Chinese Cities Move to Cool Overheated Housing Market

http://www.nytimes.com/2013/04/01/world/asia/2-china-cities-move-to-cool-overheated-housing-market.html?_r=0


Many economists claim that China's current growth is unsustainable. It seems that some Chinese politicians are paying attention. Both Shanghai and Beijing have undertaken new measures to prevent potential housing bubbles. These restrictions include legislating that unmarried individuals can buy only one residence, increasing the minimum downpayment on property purchases, and a new capital gains tax on owners selling a residence. Future policies include bank reform regarding loans, mortgages, and credit. Part of the government's concerns consist of not only economic downturn but also social instability between the rich and poor. With soaring property prices all over the country, these policies appear sensible. 

Hollande Wants 75% Tax on Rich

France's President Francois Hollande proposed a 75% tax while campaigning last year. his controversial proposal was rejected by the French judiciary, however Hollande has not given up the fight. Holland's original proposal was an income tax of 75% on salaries over 1 million euros. Now Hollande is calling for businesses that pay out salaries over 1 million euros to pay the tax, rather than having the burden fall on the individual. Despite France's struggling economy Hollande seems committed to making reforms, but this slightly altered tax proposal seems destined to be rejected again. 

Unfashionable for 30 years, industrial strategy is roaring back

View the article here.

Industrial strategy is making a comeback in Britain. Over the last 30 years British politicians have been hesitant to back firms and industries, instead letting the market rule. This period of inactivity followed several unsuccessful attempts at industrial strategy. However, more recently industrial strategy is back on the table. Britain's chancellor of the exchequer, George Osborne, has pledged to "back sectors that are global successes," promising £1.6 billion of state cash to automotive, agri-tech, and aerospace firms. His plan also included tax relief incentives for high-end television and animation firms. In 2008 Peter Mandelson, a current member of parliament, was appointed as the Labour party's business secretary where he approved loans to many nuclear and automotive firms and assisted technology start ups, proclaiming that it was time for ministers and markets to mix. At first others were skeptical of Mandelson, but this month marks the publishing of the governments 2nd "sectoral vision." This vision was of the aerospace sector and included plans for a £2 billion technology institute. 

The Economics of Evil Google

http://krugman.blogs.nytimes.com/2013/03/23/the-economics-of-evil-google/

Paul Krugman makes an interesting case about the dilemma Google faces.
He argues that the use of search engine illustrates a unique model where they have high-intensity users and low-intensity users with differing willingness to pay.
Normally, the willingness to pay would be distributed so that the firm can just choose to maximize profit by setting price equal to marginal cost, but in this case, the firm only faces high fixed cost and almost zero marginal cost.
Due to the nature of the internet search engine, Google cannot price discriminate, and therefore, it must determine how best to extract the most profit in order to keep up with the high fixed cost.
Krugman concludes that this model more readily resembles models for utilities and envisions the public ownership of internet search engines.

OH educators train how to handle shooters

http://www.sfgate.com/news/article/OH-educators-train-how-to-handle-shooters-4398033.php

In a program designed after the Sandy Hook Elementary shootings that killed 20 students and six staff members in December, 24 Ohio educators received firearms training through a 3-day pilot program organized by the Buckeye Firearms Association. The program taught participants strategies for reacting to school shooters through the use of model guns with plastic pellets while playing roles in gunman scenarios based on real-life situations. The 24 educators selected to participate were among more than 1,400 applicants. The article went on to assess whether arming teachers is the best way to stop mass murders. Do you think arming teachers will solve the problem? Or will this just make kids afraid of their teachers?

Home sales hit highest rate in 3 years

In February, previously owned homes reached an annual rate of nearly 5 million, which is the strongest pace in over three years.  This is up 10% from last year, and is a positive force in the economy.  A decline in the unemployment rate, a drop in foreclosures, and low mortgage rates are causing this change.  The median sale price for homes as $173,600, which is up 12% from last year.  There was also an increase of homes put on the market, but the supply of homes is still tight.

http://money.cnn.com/2013/03/21/news/economy/home-sales/index.html

Jobless claims rise slightly

http://money.cnn.com/2013/03/28/news/economy/unemployment-benefits/index.html?iid=SF_E_River

According to the article, the government said 357,000 people filed for unemployment benefits last week, up from 341,000 the week prior. Economists were expecting a modest decrease in the number of people to have filed for unemployment benefits. However, we should not read too much into this, given the volatility in these figures, particularly around the Easter and Passover holidays. Besides, compared to the massive 660,000 weekly claims  for unemployment benefits during the height of the recession, 357,000 is still a heart-warming figure which can reassure many souls that we are on the right track to recovery.

U.S. economy climbs off the mat

http://money.cnn.com/2013/03/28/news/economy/gdp-report/index.html?iid=SF_E_River

According to the government's third and final report on the fourth quarter of 2012, the US economic growth was weak at the end of 212 but still better than previously expected. Many factors played a role in this surprising increase: stronger construction activity, stronger exports. However, on the flip side, due to the fear of the fiscal cliff cut back in the fourth quarter, businesses began to cut back on inventories of goods. And the government also reduced spending in defense (these two factors eliminated nearly 3 percentage points of growth from GDP). But anyway, the worst economic hit of the fiscal cliff was avoided. And growth appears to be fairly solid so far this year -- thanks to a strong housing recovery, improved hiring by businesses, and a pickup in car sales and consumer spending. Things finally are looking better now.

One in four U.S. firms in China report data theft

http://money.cnn.com/2013/03/29/news/china-data-theft/index.html?iid=SF_E_LN

According to the American Chamber of Commerce in the People's Republic of China, more than one in four US businesses operating in China have experienced a breach of proprietary data.  Over 40% of American businesses in China worry about data security and 53% say that the risk is static.  This report adds tension to the US and China over the issues of computer hacking and cyber-security.  At the end of last year it was reported that rising labor costs and slower economic growth in China were the greatest risks for foreign companies.  Recently an American company found a major group of computer hackers who were linked to the Chinese government.  The Chinese government denies this and claims to be the victim of many cyber attacks which originate from the US.   

Political Economy Analysis of Valve’s Management Model

As promised in class today, here is the link to the article about the company called VALVE and its cooperative style of management. Interesting for students of economic systems and history of economic thought.

The article is written by an in-house economist who is studying the system that Valve is practicing.

The High-Wire Act Called Conversion

This article published in The New York Times, discusses how real estate developers have learned to be cautious in evaluating and purchasing properties due to the downturn. One of the most recent headline purchases was the Carlton House in New York which has been purchased for $164 million. Extell development company is in the process of remodeling the interior and exterior. The penthouse will be listed at $65 million. However, the most popular units of the 64 available are the 2 bedrooms listed at $4-5 million. Roughly 40% on the units are in contract currently and I see this as a good sign of economic recovery since these lavish and expensive units are being spoken for so quickly.


http://www.nytimes.com/2013/03/31/realestate/the-high-wire-act-called-conversion.html?_r=0&adxnnl=1&pagewanted=all&adxnnlx=1364584113-bxaXTYiD/4Ve429fBxOphg

Major Insider Trading Arrest

The FBI arrested Michael Steinberg, a senior portfolio at SAC - the highly reputable and now highly controversial fund of billionaire Steven Cohen. This might be a major development in taking down Steven Cohen, who some say is the ultimate target of the SEC. The timing of the arrest comes right after Mr. Steinberg got back from a vacation in Florida with his family, who are still in Florida and were not present when arrested at his apartment in New York.

The article details Mr. Steinberg's affiliation with another SAC employee who was arrested for similar charges.

Link: http://dealbook.nytimes.com/2013/03/29/sac-capital-manager-arrested-on-insider-trading-charges/?ref=business

Cyprus video

This New York Times video offers insight into the financial crisis that is occurring in Cyprus right now. The video shows the long lines outside banks and bank ATMs and includes interviews of business owners, who detail the troubles that are occurring because of the tax on certain accounts. Also, the video portrays Russians and the affects of Russian money being hidden - for tax reasons - in Cyprus. The interviews illustrate the fear of a lot of citizens, the anger they have for how the EU is dealing with this crisis, the frustration of the wealthy Russians not taking more of the burden, and also inside views of how the crisis should really be handled. Supermarkets are full, lines in banks are long, and fear is a consistent in each citizen. Will this most recent debacle ruin the Euro, or at least make Cyprus leave the Union?

Link: http://www.nytimes.com/2013/03/29/business/global/cyprus-banks.html?ref=world

Bright Young Things

In an effort to expand their market, Victoria’s Secret has started a new line. This line aims at middle school aged girls and is named Bright Young Things. The models recruited for this brand are young girls and the phrases illustrated on the undergarments read: Call me and Kiss me.

These marketing strategies are assumed to be catchy for young teenage girls and are expected to further boost the sales of the 6 billion dollars business. This article quotes the Victoria’s Secret CFO saying that young girls want to look ‘cool’ like college girls and this is what their brand for schoolgirls called PINK caters to.

The new line called Bright Young Things has received a lot of criticism from parents who claim that young teens are being sexualized in the fashion industry.  

Link: http://www.thedailybeast.com/articles/2013/03/25/victoria-s-secret-launches-beachwear-line-for-teens.html

Equal Rights

As most of you have probably seen on Facebook, the issue of equal rights have swept across social media. Igniting debates on equal right profile pictures and statuses. The issue of equal rights and same-sex marriage has hit Supreme courts. Proposition 8, a constitutional amendment that banned gay marriage, is the debated issue. Pro and anti-Prop 8 groups have been debating each other non-stop. Personally, I have seen some Facebook posts hit up 50+ comments, all debating the issue of equal rights. According the article, support for equal rights is growing. However, what brought this article to my attention was how big of a "chess piece"  this has become for politicians. Many politicians, even President Barack Obama, have seen a greater support because of his pro-equal rights view. What do you all think of: 1) Equal rights? The article says we "youngsters" are the most liberal. 2) The ethics of using your stand on this issue for political power?

http://www.economist.com/blogs/democracyinamerica/2013/03/gay-marriage-and-supreme-court

Bringing Mod Cons to the Slums

The continent of Africa has the highest rate of urbanization, and the highest number of informal settlement residents. The UN predicts 1.2 billion people will live in these slums by 2050. Students from the University of Stellenbosch have created the iShack to give the high and growing amount of slum-dwellers safe, sustainable, environmentally friendly access to basic needs. The roof of the iShack (improved shack) is designed to collect rainwater, three indoor lights, a mobile phone charger and an outdoor light are powered by a solar panel on each shack, the windows allow better ventilation and air flow within the shack and sunlight heating, the walls are painted with fire-retardant paint (since most deadly fires are started with kerosene lanterns, the cheapest form of light), and bricks provide solid floors.
The house adds up to $300. This price doesn't seem much to us, but it could take years for slum residents to save up that much. The article goes on to explain the effort to find companies who are attracted to this challenge and encourage their participation in the housing market for the poor, as it is "a giant market."
What are some challenges you see in this iShack beyond its expensive price?

http://www.bbc.com/future/story/20130325-bringing-mod-cons-to-the-slums/1

FDIC vice chairman opposed to big, complex banks

The video below details how the vice chairman of the FDIC, Thomas Hoenig, is against big, complex banks. He explains at the point Bear Sterns was bailed out they were one of the top five biggest investment banks and the intricacies inside the bank were so complicated that it took a toll on the U.S. and world economy. Hoenig is not against big banks, but rather banks that are complex and so powerful that they can bring down an entire economy, like the crisis of 2007/2008.

Jamie Dimon, CEO and chairman of JPMorgan, believes that bigger banks are better for business.

Link: http://www.nytimes.com/video/2013/03/15/business/100000002119957/a-strong-voice-against-big-banks.html

Rescuing Cyprus's Economy

In this video talk by The Economist, a correspondent explains the deal to bail out Cyprus's economy. He outlines the restructuring that will occur in the banking sector, in which many uninsured large deposits will be lost. This will have a strong effect on businesses, who now do not know how much money they still have in the bank. Depositors in the eurozone as a whole will likely respond strongly because of these loses and uncertainty. Questions are raised about the idea of the euro, because with the instability of the economies of some countries means that a euro in countries such as Cyprus are not worth the same as a euro in places like Germany. It will be interesting to see how another bailout affects the reactions of eurozone countries that are bailing out countries, and how they will vote to change the economic rules and regulations of the region.

http://www.economist.com/multimedia?bclid=1242934274001&bctid=2252701826001

Solar power has record year despite bankruptcies

http://money.cnn.com/2013/03/14/news/economy/solar-power/index.html?iid=SF_E_Highlight

Last year there were 3.3 gigawatts of solar power installed, which can power about 500,000 homes.    This is an 76% increase from 2011.  This has been credited to the decrease in price of solar panels, stable tax incentive, and better financing options.  This industry currently employs 119,000 people which is a 13% increase from last year and the industry expects even more growth next year.  One of the main reasons for this decrease is that there have been major investments in manufacturing capacity, particularly by the Chinese.  As prices continue to fall, smaller and less efficient companies are being kicked out.  This is being compared to the beginning of the auto industry when there were dozens of companies and it was then narrowed to the Big Three.

Well Before Summer, Hamptons Luxury Real Estate Is Scorching

This article published in the New York Times discusses the revamped demand and increasing pricing of homes in the Hamptons. The author discusses the opportunities that real estate companies are facing in this area. Although home buyers/ renters are not as quick to jump on deals they are still wiling to shell out a large sum of money for their summer homes. Also, there are options available for those who are not multimillionaires and billionaires. In my opinion, I feel like this spending on summer homes is a good indicator that the wealthy are ready to come out of their cautious spending that the recession has laid on them.

http://www.nytimes.com/2013/03/24/realestate/another-pricey-summer-season-in-the-hamptons.html?_r=0&adxnnl=1&pagewanted=all&adxnnlx=1364255032-zyZHZfSwTh2gCgeYZFXarQ

Dell going private?

http://www.economist.com/blogs/schumpeter/2013/03/dell

In a recent turn of event Michael Dell has decided he is going to try and take the company Dell, for which his namesake states, is going to try and go private. They would be helped by a company named Silver Lake and also Microsoft to try and make the company private. This has come to the disgruntlement of shareholders and other firms trying to buy up the company such as Blackstone, and Carl Ichann. These groups are trying to keep the company public to try and appease the shareholders. It will be interesting to see what ends up happening in this situationand who gives in first.

Banking in Africa: Continent of dreams - Across Africa, banks are expanding. Their returns aren’t

Banks in Africa are expanding with the promise of increased interest rates, but the cost of building branches and investing in growth are keeping interest rates low.  The banking market in Africa is potentially vast, as almost half of the countries in Africa have less than 20% of the population holding an account at a formal financial institution.  Access to banks also varies vastly within countries.  Now there is a chance to reach out to poorer countries with banking opportunities due to technology such as prepaid cards and mobile banking which lower the level of GDP needed to make a profit.  African retail banks may be able to achieve a cost-to-income ratio of 30% whereas rich-country banks are usually happy to get a ratio of 50%.  The global financial crisis also contributed to the expansion of retail banking within Africa as opposed to international expansion.  As domestic and regional banks gain access to capital markets, will international banks like Goldman Sachs and Morgan Stanley who hold very little local presence be able to compete?  Some banks are now attempting to be an international presence while also offering retail- and corporate-banking services.  Do you guys think that this approach will work?

http://www.economist.com/news/finance-and-economics/21572768-across-africa-banks-are-expanding-their-returns-arent-continent-dreams

Health Care Report Card

This article the discusses the performance of the health care reform since its institution in 2010. The Republican party leaders have "vowed" to block money to carry it out or appeal it, however this is prior  to the institution of the largest part which will begin in January 1, 2014. The reform has expanded coverage, reined in healthcare costs, saved consumers money, and produced a better quality of care according to the article. I think that these signs are great for healthcare, but I hope they are sustainable through the implementation of the healthcare reform. I can only imagine that with the increase in patient care, standards will have to decrease to accommodate the sheer number of people that will begin receiving coverage. What do you think?

http://www.nytimes.com/2013/03/24/opinion/sunday/report-card-on-health-care-reform.html?src=me&ref=general

How Russia's Billionaire Oligarchs Got So Very Rich

http://www.businessinsider.com/what-is-a-russian-oligarch-2013-3

Modern Russia is infamous for being home to a slew of billionaire oligarchs, the majority of whom earned their wealth in the 1990s after the fall of the Soviet Union. This article details some of the recent history behind this small group of Russian businessmen. In the 1990s, the government implemented a program called 'loans for shares.' Companies provided loans to the Russian government in exchange for shares in state-owned firms. When the government defaulted on its debts, these companies kept their shares and were able to acquire many state-owned enterprises for incredibly cheap prices as the nation underwent massive privatization. One of Russia's most high-profile oligarchs, Boris Berezovsky, committed suicide this past week and much of his death has been centered around his dealings with fellow oligarchs.

It's pretty intriguing as to how certain people were able to take advantage of the swift and turbulent transition from a communist economy to market economy. In the ensuing chaos of the 1990s, traditional economic forces were replaced by sneaky financial transactions. Such a situation is unlikely to happen again in the near future. The Russian oligarchs were really in the right place at the right time.

Former Dictator returns to Pakistan

http://www.nydailynews.com/news/world/musharraf-returns-pakistan-elections-four-year-exile-article-1.1297757?localLinksEnabled=false

The former President of Pakistan, General Pervez Musharraf has returned to Pakistan to contest the upcoming Presidential elections. He came back to Pakistan after a period of 4 years. He left Pakistan in 2009 after losing the Presidential elections to the current President, Asif Ali Zardari.

Some background information: In 1999, the then General of the Pakistan Army, Pervez Musharraf, overthrew the democratically elected Government in a non-violent military coup. He declared himself the President and controlled the country till 2008. In 2008, Musharraf came under tremendous pressure to restore democracy and therefore, fair elections were supposed to take place. To contest the elections, Benazir Bhutto, the daughter of a former President, Zulfikar Bhutto, returned to Pakistan. However, she died during a bomb attack in one of her campaign rallies. Musharraf was accused of not providing her adequate security cover. Meanwhile, Benazir's husband, Asif Ali Zardari won the elections thanks to the sympathy factor.
Musharraf had several judicial probes, trials, etc.  pending against him in the courts of Pakistan. Surprisingly, the newly elected President Asif Zardari did not make Musharraf stand for trial but instead exiled him off to London. Some see this as a deal between the two but many disagree citing that Zardari did not want any internal conflicts to weaken the nation. Now that the Zardari government has become the first ever democratically elected government to complete a full term in office in the history of Pakistan, it is time for new elections.

Zardari still has the highest chances of winning, not because the people love him, but because the political opposition to the Government is very weak. Zardari has been accused of unfathomable amounts of corruption and is also accused of bad policies when it comes to the economy, national security, foreign relations, etc.  Despite this, the weak opposition may not manage to secure enough seats to win the election.

Musharraf's arrival may manage to change that setting, but not by a large extent. Though he may be looking at another stint at the President's office, his support has very visibly diminished over time.
Musharraf also faces extremely dangerous and high number of death threats from the Pakistani Taliban.

It would be interesting to see how the former Dictator's arrival changes the political landscape in the troubled nation of Pakistan.