While globally the downturn of the economic tide has affected many nations, countries like Argentina, Turkey, Ukraine, and Thailand might have another factor to blame for their current economic instability: their national governance. While the macroeconomic dilemmas have not gone away in these countries, they were foreseeable and some countries have been meeting them and have returned to somewhat financial normalcy. The article goes onto describe the role of governance in the countries above and how these countries need to begin to look inward if they hope to make it out and not fall of the track of progress altogether.
This article brings up a good point about how sometimes in the aftermath of economic downturn the government will still attribute poor conditions to economic factors even if they no longer have a bearing on the situation. Is there a point to doing this other than trying to keep the population calm or save the government's image because they are failing at correcting the problem? In so, is there a way to correct these governments without violence or upheaval?
http://www.nytimes.com/2014/02/09/business/international/why-emerging-markets-should-look-within.html?_r=0
Saturday, February 8, 2014
Workers Face Police Gunfire Amid Unrest in Cambodia
There has been several serious protests going on in Phnon Penh, Cambodia. Phnon Penh of Cambodia is where many garment manufacturing companies are located. Most of these companies are owned by Chinese, Korean and Indian clothing companies. Military police officers fired on protesters who demand higher wages. Last Friday, they killed three people. Most of those workers work in garment factories and their average wages are around 140 USD per month. But recently, they were underpaid. (The garment workers currently receive a monthly minimum of $80.) The garment workers are demanding a doubling of their monthly wages, (“We condemn the act of violence against the monks, against the workers who are demanding the minimum wage of $160,”) and they have been at the forefront of growing protests against Mr. Hun Sen’s authoritarian government. On Sunday, tens of thousands of people rallied to demand that he step down.
http://www.nytimes.com/2014/01/04/world/asia/cambodia-protests.html?_r=0Time for a ceasefire
Time for a ceasefire: Technology and fresh ideas are
replacing classroom drill—and helping pupils to learn
Being competent in
mathematical skills is important for any real world job, from service to
management positions, and so this correlation makes sense. Technology, being
the current leading sector in the worlds growing economies, have given means to
new strategies to teach math in schools that better equip students for today’s
real world jobs, moving away from “drill” teaching and towards a problem-solving curriculum.
It is interesting
to look at the data shown in this article and relate it to a countries GDP.
With the exception of China, the countries with the lowest average PSI in math
scores in 2012 ranked higher in GDP in 2012. For example, The US had the lowest
PSI in math scores but ranked first in GDP (similar results with Britain and
Germany). America, during the American “math wars” of the 1980s, implemented
this new view on teaching math. This may show that the math curriculum used is
more important to prepare students for real world jobs than mastering “drill”-type
math problems. Conrad Wolfram’s argument that new technology makes rote
procedures, such as long division, obsolete. Therefore, a curriculum that caters
to today’s world which allows students to solve equations and visualize
mathematical functions is better preparation for real world situations. Estonia,
who ranked fourth in average PSI in math scores and 103rd in GDP in
2012, will start pilot lessons built around open-ended problems which have no
single solution. It will be interesting to see, if Estonia continues this
program, if their GDP rises in the future. I agree with Andreas Schleicher’s
point that it is still important that students master rote procedures for
problem solving and mental arithmetic. These foundational mathematical skills
are important to master so they can be applied to real world problem-solving. In
conclusion, this change in the educational system is beneficial only if
traditional practices are not lost with it.
Other sources: http://databank.worldbank.org/data/download/GDP.pdf
Federal Reserve Continues to Reduce Their Monthly Bond-Buying despite weak job report
The jobs report on Friday
was disappointing, which makes people questioned whether the economy lives up
to the forecast, yet Federal Reserve officials will continue to reduce
bond-buying. In January, the purchase amount was lowered to $65 billion and
officials want to cut it to $55 billion at their next meeting in March.
Fed Chairwoman Janet
Yellen will have to explain these contradictory signals next week, when she
testifies before Congress on the outlook for the economy and monetary policy.
Regarding the bond-buying program, Mr. Rosengren said: "We should be
fairly slow moving until we get a better assessment of the economy's
performance.”
Another challenge facing
Ms. Yellen is to explain how the unemployment rate and expected short-term
interest rates. The Fed has said it wouldn't consider raising rates until the
unemployment rate declined to 6.5%, but the unemployment rate has fallen much
faster than officials expected over the past year. Many officials believe the
Fed can still keep rates low because inflation is well below target.
I agree with Fed sticking
to its policies. According to the article, he job report on January could be
affected by the harsh weather. As November and December are holiday season, the
job reports for these months can inflated due to the growth of retailer sales.
Thus, we could not expect January to do as well. Overall, the economy is still
growing and head to the right direction, and lower bond-buying by nearly 15% is
still bond-buying.
ECB's bond-buying plan referred to Europe's top court
http://www.bbc.co.uk/news/business-26080410
The European Central Bank is being taken to the European Court of Justice to determine the legality of the ECB's Outright Monetary Transactions (OMT) program. What is interesting that the article points out is that the OMT program allows the ECB to buy unlimited amounts of a country's debt if investors pull out. However many legal experts worry that this violates the ECJ's ban on the ECB funding governments.
The piece of news that really brought me to this article is that the OMT program has not even been used yet. Simply advertising the existence of the plan and its possible implementation has been enough to help calm turbulent markets since 2012. The nature of the ECJ and how it goes about coming to its rulings is of particular interest in this case. A legal expert from the University of London said, "practically speaking, the court is not an independent organisation but is pre-disposed to interpret legal questions in the interest of the European Union."
Given that the existence of the OMT program has been used to stabilize markets and that the ECJ is expected to take up to 2 years to make a ruling, it seems that the OMT program is a case of the ECB influencing the market without direct monetary policy. The question is whether the ECJ is allowing the success the ECB has had with stabilizing markets to influence its decision in a way that will have negative consequences down the line. Should the ECJ declare the OMT program unlawful it could unsettle all the work that has been done under the assumption that OMT was a possibility. On the other hand should it be allowed it opens up a dangerous door where countries in the European Union can go to the ECB and request that the bank buy their debt when times get tough, something that isn't sustainable at all.
Friday, February 7, 2014
http://money.cnn.com/2014/02/07/news/economy/january-jobs-report/
This article discusses job growth and unemployment rates from January 2014. Although there was job growth, it was a lot less than expected. The new report was a "disappointment and weak". Although it was not a success, economists state that it is not a disaster either.
The article also discusses how the unemployment rate is the lowest in 5 years, which was also not as low as expected. This may be because of Americans leaving the work place.
It is interesting how numbers are not the only aspects to the economy. It is more than just unemployment rates, it is also how many are in the work force. It will be interesting to see what economists have to say about the numbers for February.
This article discusses job growth and unemployment rates from January 2014. Although there was job growth, it was a lot less than expected. The new report was a "disappointment and weak". Although it was not a success, economists state that it is not a disaster either.
The article also discusses how the unemployment rate is the lowest in 5 years, which was also not as low as expected. This may be because of Americans leaving the work place.
It is interesting how numbers are not the only aspects to the economy. It is more than just unemployment rates, it is also how many are in the work force. It will be interesting to see what economists have to say about the numbers for February.
Thursday, February 6, 2014
The Olympics: A Costly Feel-Good Moment
The host country spends so much on the Olympics, however, the tourism does not make up for the amount they spend. There is not enough tourism in the two weeks to cover the costs the host has spent. Countries that host the Olympics should not be looking for an economic success. The Games are becoming more and more expensive because the hosting countries want to out-do the previous host. One of the reasons that the countries want to host is because it makes them feel good.
www.nytimes.com/2014/02/06/business/economy/the-olympics-a-costly-feel-good-moment.html?ref=economy&_r=0
www.nytimes.com/2014/02/06/business/economy/the-olympics-a-costly-feel-good-moment.html?ref=economy&_r=0
Locus of Extremity: Developing Economies Struggle to Cope with a New World
http://www.economist.com/news/finance-and-economics/21595485-developing-economies-struggle-cope-new-world-locus-extremity
With low interest rates in America, many investors turned to developing nations and the BRICS to invest their money. However, with the Fed talking about tapering its bond purchases and the American economy strengthening, investors will slowly begin turning back to American financial markets. This is bad news for the developing economies, who have been gaining from the low interest rates in America. Countries such as Turkey and India have been trying to hold off raising their interest rates but can no longer afford to do so. In addition, their currencies are falling rapidly against the dollar. Economists have coined the term the "fragile five" for Turkey, India, Brazil, Indonesia, and South Africa. The countries that were once investing hot-spots are now facing difficulties as their central banks struggle to stabilize their currencies and interest rates as America recovers from the financial crisis.
With low interest rates in America, many investors turned to developing nations and the BRICS to invest their money. However, with the Fed talking about tapering its bond purchases and the American economy strengthening, investors will slowly begin turning back to American financial markets. This is bad news for the developing economies, who have been gaining from the low interest rates in America. Countries such as Turkey and India have been trying to hold off raising their interest rates but can no longer afford to do so. In addition, their currencies are falling rapidly against the dollar. Economists have coined the term the "fragile five" for Turkey, India, Brazil, Indonesia, and South Africa. The countries that were once investing hot-spots are now facing difficulties as their central banks struggle to stabilize their currencies and interest rates as America recovers from the financial crisis.
Sochi or bust for Russia
http://www.economist.com/news/briefing/21595428-conspicuous-dazzle-games-masks-country-and-president-deepening-trouble-sochi
The glitz and glamour associated with the olympic games are masking Russia's deep seeded issues. In the article, the author highlights the similar situation Russia was in when it hosted the 1980 Moscow Olympics. While major governmental and social changes have occurred, economically speaking, the country is in a familiar position.
After having modest economic growth in 1980, Russia's regime began to crumble. One of the biggest reasons for the collapse was a reliance on oil and other imports. At that time gas and oil made up roughly 67% of all exports. Today gas and oil make up 75% of Russia's exports. Furthermore, the country lacks domestic production and relies very heavily on imports.
These parallels led the author to conclude that Russia is in a very unstable economic position. How the olympic games will effect them is unknown, but it is known that hosting is more expense than ever. The cost on the country is estimated to be $50 billion.
The glitz and glamour associated with the olympic games are masking Russia's deep seeded issues. In the article, the author highlights the similar situation Russia was in when it hosted the 1980 Moscow Olympics. While major governmental and social changes have occurred, economically speaking, the country is in a familiar position.
After having modest economic growth in 1980, Russia's regime began to crumble. One of the biggest reasons for the collapse was a reliance on oil and other imports. At that time gas and oil made up roughly 67% of all exports. Today gas and oil make up 75% of Russia's exports. Furthermore, the country lacks domestic production and relies very heavily on imports.
These parallels led the author to conclude that Russia is in a very unstable economic position. How the olympic games will effect them is unknown, but it is known that hosting is more expense than ever. The cost on the country is estimated to be $50 billion.
Wednesday, February 5, 2014
The Economist: Tactless tapering
Tactless tapering (Article)
The Fed's recent tapering has had its effects on the US economy
but the issue seems to come with the effects on other nations. Willem Buiter,
the chief economist at Citi bank, says the Fed has not said a thing about the effects
tapering has had overseas and that they have displayed bad manners in doing so.
The governor of the Reserve Bank of India
(RBI) would like to see more co-operations between the central banks. Because
the US is such a big country with such big influence around the world the
leaders of the other world banks would like more interaction with the US Fed in
order to better plan monetary policies.
Cross-border financial flows from the US
are extremely large and because the majority of the US's foreign liabilities
are held in the dollar the international liabilities fall when the dollar falls
at home. It seems as if the Fed only cares about the immediate needs of the US
but, this plays both ways with other international central banks. Since the
other banks are not as big as the US Fed they do not have as big of an effect elsewhere.
We should see some concern come from the
Fed in the near future as many of the other central banks are upset. We can expect
to see some kind of meeting/discussion with the other banks to try and get on
the same page as US Fed.
China Sets Clean Air Targets
We all know about the rising pollution in China and this article talks about their future plans on reducing the pollution. In the next three years they want to reduce the toxic emissions by 25 percent. This will be a major impact on how things are operated in China. It will be interesting to see how it affects our trade and outsourcing with them as they are looking to make major changes.
Google Reaches Deal to Settle European Antitrust Case
Google had been accused of using its dominance in the market share of internet search in Europe to promote its own products. This is a concern of keeping a competitive market in Europe, which Google had almost completely taken over. In this settlement, Google agreed to give prominence to rivals in its promoted search results for the next five years. Joaquin Almunia, The European Union's competition commissioner, said that this decision was not likely to change, even though some of Google's competitors are not satisfied. They believe that this agreement still allows Google to lead in profit from advertising and from searches. Also, they are concerned that Google will not hold themselves accountable to these changes.
http://www.nytimes.com/2014/02/06/technology/google-reaches-tentative-antitrust-settlement-with-european-union.html?hp
http://www.nytimes.com/2014/02/06/technology/google-reaches-tentative-antitrust-settlement-with-european-union.html?hp
Obamacare! An impartial 3rd party gives us some unbiased data
http://www.economist.com/blogs/democracyinamerica/2014/02/obamacare-and-employment?fsrc=scn/fb/wl/bl/grimprognosis
The affordable healthcare act is an extremely interesting and contorversial topic. It has dictated all the actions of the democrats and the republicans in the past 3 years. People supporting Obamacare(which by the way is another name for it) love the overall idea and justify it by pointing put to other countries that have universal health care. However just as Hayek had said, a government planned program will require immense amount of information. As such this program has a lot of loopholes which this article exposes.
The law of compounding numbers says that a .1% growth will help double the economy standard of living in 70 years, and obamacare seems to be making a rather bug dent in the future1 growth of the economy.
Having said that republicans have not come up with a better solution, but an interesting idea they cam e up with is discussed in the article.
The affordable healthcare act is an extremely interesting and contorversial topic. It has dictated all the actions of the democrats and the republicans in the past 3 years. People supporting Obamacare(which by the way is another name for it) love the overall idea and justify it by pointing put to other countries that have universal health care. However just as Hayek had said, a government planned program will require immense amount of information. As such this program has a lot of loopholes which this article exposes.
The law of compounding numbers says that a .1% growth will help double the economy standard of living in 70 years, and obamacare seems to be making a rather bug dent in the future1 growth of the economy.
Having said that republicans have not come up with a better solution, but an interesting idea they cam e up with is discussed in the article.
Tuesday, February 4, 2014
Factory, construction spending data hint at slowing economy
This article discusses how the U.S manufacturing activity has slowed down in the last month. Economists have argued it is mainly due to the frigid temperature and expect a rebound in the next couple months. Bad weather has hurt more than just the U.S manufacturing industry, but also U.S auto sales. This includes Ford Motor Co, General Motors Co, and Japan's Toyota Motor Sales.
http://www.reuters.com/article/2014/02/03/us-economy-construction-idUSBREA120X320140203
Walmart vs. Amazon
This article looks at the business ventures of super brand Walmart and its attempts over the recent years to combat a change in consumer buying habits. The article summarizes some of the challenges that Walmart has faced and the bad name they get for employee relations. In 2009 the brand got a new CEO with a plate full of problems to sift through. First, the brand over-estimated their growth potential on international soil. They opened 14M square feet, compared to a planned 22-23M square feet over the past year. International markets did not receive these superstores with open arms. Internationally, consumers tend more towards smaller convince stores, close to home. Secondly, Walmart has been adjusting to a new superstore competitor, Amazon. With no bricks-and-mortar store front, some might say Amazon has a disadvantage, but that has not prevent to be the case. Consumer's shopping habits tend more towards online purchases, both domestically and internationally. Amazon sets themselves apart by offering Prime membership to customers, which offers free shipping on prime items. Amazon has noted a shift in shopping trends from electronics and speciality purchases, to everyday goods such as diapers and detergent, making it a large competitor to Walmart.
So, what will Walmart do? They have looked at plans to make stores smaller to fit better into towns, and close-by shopping habits, as well as acting as their own middle man. What I mean by this is that consumers can go online to Walmart.com and select all the items they need, pay online, and go to a store for pick-up. The only problem that arrises is Walmart's supply chain that took them years to develop and implement. Walmart has low prices because of how they distribute the products, with tight delivery schedules and packaging regulations for distributors.
While this idea is a valid attempt to combat online competition, it is going to be hard to implement. I believe that Walmart needs to take a critical look at how they run their business and make changes from the bottom up. While they should attempt the online order fulfillment in stores, they should not bank on this as their saving grace. I know many people who would be more inclined to spend suggested retail at a store where the employees are respected and valued, rather than three cents less than suggested retail at a store that limits employee mobility.
So, what will Walmart do? They have looked at plans to make stores smaller to fit better into towns, and close-by shopping habits, as well as acting as their own middle man. What I mean by this is that consumers can go online to Walmart.com and select all the items they need, pay online, and go to a store for pick-up. The only problem that arrises is Walmart's supply chain that took them years to develop and implement. Walmart has low prices because of how they distribute the products, with tight delivery schedules and packaging regulations for distributors.
While this idea is a valid attempt to combat online competition, it is going to be hard to implement. I believe that Walmart needs to take a critical look at how they run their business and make changes from the bottom up. While they should attempt the online order fulfillment in stores, they should not bank on this as their saving grace. I know many people who would be more inclined to spend suggested retail at a store where the employees are respected and valued, rather than three cents less than suggested retail at a store that limits employee mobility.
Monday, February 3, 2014
Goldman CEO Blankfein Earns $23 Million in 2013
Goldman Sachs Group, Inc. awarded its chief executive officer, Llyod Blankfein a compensation package of $23 million in salary and bonuses for 2013. This definitely is a large compensation package that some might question that he deserved such a generous package. Mr. Blankfein's compensation package is on par with other CEOs compensation in the investment banking firm. James Dimon, the CEO at Morgan Stanley was awarded a compensation package of $20 million in 2013. Both CEOs received compensation packages that increased from their 2012 earnings because their firms each saw over a 33% increase in their share price and beat the S&P 500 index.
The risk he takes as a CEO of the largest investment banking firm in the United States should be compensation with an income level in accordance. If we go through income determinants, he must meet and exceed expectations. He must have exceptional talent and ability as evidenced through Goldman's revenues of $34.2 billion and a net income increase 8% from 2012. So, when revenues of that amount are generated, Mr. Blankfein does deserve his compensation. In fact, his earnings for 2013 account for less than 1% of the total earnings for Goldman Sachs Group, Inc. Mr. Blankfein's acquired skills and effort can be seen as he steered the firm through the pitfalls of the financial crisis by steadily rebuilding relationships with investors and government regulators.
A private managing director of a New-York based compensation-consulting firm Johnson Associates, Alan Johnson, said that Mr. Blankfein's compensation is on par with how Goldman Sachs Group, Inc. performed. I believe his compensation is warranted and as a young adult interested in corporate management, it is encouraging to see top level executives compensated fairly.
http://online.wsj.com/news/articles/SB10001424052702303973704579353170299234620?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702303973704579353170299234620.html
The risk he takes as a CEO of the largest investment banking firm in the United States should be compensation with an income level in accordance. If we go through income determinants, he must meet and exceed expectations. He must have exceptional talent and ability as evidenced through Goldman's revenues of $34.2 billion and a net income increase 8% from 2012. So, when revenues of that amount are generated, Mr. Blankfein does deserve his compensation. In fact, his earnings for 2013 account for less than 1% of the total earnings for Goldman Sachs Group, Inc. Mr. Blankfein's acquired skills and effort can be seen as he steered the firm through the pitfalls of the financial crisis by steadily rebuilding relationships with investors and government regulators.
A private managing director of a New-York based compensation-consulting firm Johnson Associates, Alan Johnson, said that Mr. Blankfein's compensation is on par with how Goldman Sachs Group, Inc. performed. I believe his compensation is warranted and as a young adult interested in corporate management, it is encouraging to see top level executives compensated fairly.
http://online.wsj.com/news/articles/SB10001424052702303973704579353170299234620?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702303973704579353170299234620.html
The Weather Report
http://www.economist.com/news/finance-and-economics/21594252-economists-are-getting-grips-impact-climate-change-weather
This article discusses the economic impact of global climate change. It compares how developed countries are affected versus less developed countries, and it discusses the correlation between countries with higher median temperatures and their economic output. The article cites multiple studies that show there is a negative correlation between temperature and economic output. Melissa Dell of Harvard University, Benjamin Jones of Northwestern University and Benjamin Olken of the Massachusetts Institute of Technology found that for every 1 degree Celsius increase, GDP is 8.5% lower. They noted that this does not mean that if global temperatures raised by 1 degree Celsius, that GDP would would lower by 8.5% across the world. This shows that there are external factors causing lower economic outputs in areas where there also higher temperatures. Unfortunately, the article does not go into depth discussing possible factors that could be causing the decreased economic output.
The article also notes that the relationship between temperature and economic output is not linear. This means that an increase from 22 to 23 degree Celsius may not have an effect on economic output, but an increase from 35 to 36 degrees Celsius may have a significant affect on a country's economic output. Less developed countries typically rely more on agriculture for there economy, and agriculture is negatively affected by extremely high temps and droughts. Thus, less developed countries typically feel the impact of global climate change more so than developed countries.
I think the most effective way to examine the difference in how less developed countries and developed countries are impacted by global climate change is by studying two countries of different levels of economic development that have experienced similar weather patterns.
This article discusses the economic impact of global climate change. It compares how developed countries are affected versus less developed countries, and it discusses the correlation between countries with higher median temperatures and their economic output. The article cites multiple studies that show there is a negative correlation between temperature and economic output. Melissa Dell of Harvard University, Benjamin Jones of Northwestern University and Benjamin Olken of the Massachusetts Institute of Technology found that for every 1 degree Celsius increase, GDP is 8.5% lower. They noted that this does not mean that if global temperatures raised by 1 degree Celsius, that GDP would would lower by 8.5% across the world. This shows that there are external factors causing lower economic outputs in areas where there also higher temperatures. Unfortunately, the article does not go into depth discussing possible factors that could be causing the decreased economic output.
The article also notes that the relationship between temperature and economic output is not linear. This means that an increase from 22 to 23 degree Celsius may not have an effect on economic output, but an increase from 35 to 36 degrees Celsius may have a significant affect on a country's economic output. Less developed countries typically rely more on agriculture for there economy, and agriculture is negatively affected by extremely high temps and droughts. Thus, less developed countries typically feel the impact of global climate change more so than developed countries.
I think the most effective way to examine the difference in how less developed countries and developed countries are impacted by global climate change is by studying two countries of different levels of economic development that have experienced similar weather patterns.
Superbowl XLVIII's Big Victory for...US Customs and Border Protection
They won't be hoisting the Lombardi trophy this February, but the US Customs and Border Protection scored a major haul last week with their seizure of $21.6 million in counterfeit NFL merchandise ahead of Superbowl XLVIII. A striking move, especially since it's not every day that the Feds spend their resources toward ensuring that a private event goes off without a hitch. In this case, though, there's been massive worry about illicit activity centered around the annual event, from social media's widely-shared admonition against human trafficking to troubled rapscallion Justin Bieber's pot party plane.
So why do the Feds have their eyes on Superbowl-related treachery? $21.6 million is a staggering figure, and is surely just a fraction of the sum netted by counterfeiters. It's in the government's interest to inhibit evildoers in order to boost confidence in the market. Not only does the move deal a blow to fake merchandise producers abroad, which fits in with overall US trade policy interests, but increases American spending in American franchises. After all, what's more American than America?
So why do the Feds have their eyes on Superbowl-related treachery? $21.6 million is a staggering figure, and is surely just a fraction of the sum netted by counterfeiters. It's in the government's interest to inhibit evildoers in order to boost confidence in the market. Not only does the move deal a blow to fake merchandise producers abroad, which fits in with overall US trade policy interests, but increases American spending in American franchises. After all, what's more American than America?
Sunday, February 2, 2014
Etihad and Alitalia airlines announced future merger
Etihad Airways and Alitalia
announced that they are close to agreeing upon an investment deal to help the
troubled Italian airline. Though it may
take several more days, sources have revealed the investment deal could give
nearly 40% of the rights to Etihad Airways, an Abu Dhabi carrier that has
recently taken stakes in a few other European airlines. The Italian company, Alitalia, is facing
large sums of debt, has already been bailed out by the government, and is regarded
as one of the country’s most important assets.
The deal would be a strong base to get Alitalia back on their feet,
while also sparking the development of the firm’s employee base.
I found this article to be
rather interesting especially since there was a merger a few months ago between
American Airlines and US Airways. Since
their merger, both firms have profited.
Hopefully Alitalia will be able to get back on their feet, and Etihad
Airways will be able to generate strong business.
http://www.bbc.co.uk/news/business-26011191
Wal-Mart warns food stamp cuts to hit earnings
The part of this article that stuck me the most was that Wal-Mart will be cutting over 2,300 jobs and closing stores. Partially in response to this cut to Food Stamps, but more because their profits would drop. This is potentially an example of where a government pulling its involvement has hurt the economy, with workers losing jobs and forcing them to potentially pull even more money into other welfare programs like unemployment. Not because the workers were lazy, but because the firms would rather see workers unemployed than lose any amount of profits.
Read the article here
Read the article here
Mexico Surpassing Japan as No. 2 Auto Exporter to U.S.
After the enactment of NAFTA (North American Free Trade Agreement) in 1994, Mexican auto exports to the United States more than quadrupled between 1993 and 2013. Estimates reveal that Mexico is likely to take the top spot from Canada in 2015 with 1.9 million cars exported to the US. Japan has controlled one of the top rankings since the 1970s with Honda, Toyota and Mazda, but Mexico was able to surpass Japan making passenger vehicles and light trucks. However, interestingly enough, Mexico has seen much of this success due to producing cars like the Nissan Sentra and Honda Fit. More Japanese based auto firms are building production facilities in Mexico, due to the cheap labor and the benefits of NAFTA. It will be interesting to see if Mexico's auto industry continues to grow the way that it has been, or if it will level off as wages increase.
http://www.bloomberg.com/news/2014-01-31/mexico-surpassing-japan-as-no-2-auto-exporter-to-u-s-.html
http://www.bloomberg.com/news/2014-01-31/mexico-surpassing-japan-as-no-2-auto-exporter-to-u-s-.html
Class in America: Mobility, measured
This article was based on a new study by economists at Harvard University and the University of California, Berkeley on social mobility in America. According to their findings, America may not be socially less mobile than it was 40 years ago, despite its dramatic increase in income inequality. The researchers reported that the correlation between parents' and children's income and the odds that a child born into the bottom fifth of the income distribution will climb all the way up to the top fifth have not changed much over the years. "In 1971, a child from the poorest fifth had an 8.4% chance of making it to the top quintile. For a child born in 1986, the odds were 9%." Their results have caused a huge stir, not only because their findings run counter to public perceptions, but also because cross-country analyses have suggested that there is an inverse relationship between income inequality and social mobility (a phenomenon that has become known as the "Great Gatsby" curve").
The article went on to provide some explanations for this case. One, social stratification might take time to become entrenched. Second, even as income gaps have widened over the past 30 years, other barriers to mobility, such as discrimination against women and blacks, have fallen. Third, the correlation between vast wealth accruing to the top 1% of the population and the ability of people to move between the rest the income ladder may be small.
http://www.economist.com/news/united-states/21595437-america-no-less-socially-mobile-it-was-generation-ago-mobility-measured
The article went on to provide some explanations for this case. One, social stratification might take time to become entrenched. Second, even as income gaps have widened over the past 30 years, other barriers to mobility, such as discrimination against women and blacks, have fallen. Third, the correlation between vast wealth accruing to the top 1% of the population and the ability of people to move between the rest the income ladder may be small.
http://www.economist.com/news/united-states/21595437-america-no-less-socially-mobile-it-was-generation-ago-mobility-measured
Friday, January 31, 2014
Corporate Sponsors Faulted for Sochi Participation
Multi-National Corporations (MNCs) are having a problem with protests because of their sponsorship of the Olympics in Sochi. Coke, McDonald's and other corporations are not boycotting Sochi because they know it will bring in lots of profits. Russia's anti-gay laws have created a lot of protests and backlash.
Some Americans would like MNCs to highlight this homophobic problem because it could make a difference and shine a light on the problem but they have decided not to. What is surprising is that Coca-Cola, the oldest Olympic sponsor usually has a good record on gay rights in the U.S. Yet they are going against their values for the Olympics.
The Olympics gets thousands of international viewers that can bring in profits yet this human rights debate has put 10 major corporate sponsors in an awkward position. This has changed the focus of the games, and has reflected poorly on the companies willing to participate. But what are the incentives?
http://america.aljazeera.com/articles/2014/1/31/olympics-sponsorsfaultedforgoingtosochi.html
Some Americans would like MNCs to highlight this homophobic problem because it could make a difference and shine a light on the problem but they have decided not to. What is surprising is that Coca-Cola, the oldest Olympic sponsor usually has a good record on gay rights in the U.S. Yet they are going against their values for the Olympics.
The Olympics gets thousands of international viewers that can bring in profits yet this human rights debate has put 10 major corporate sponsors in an awkward position. This has changed the focus of the games, and has reflected poorly on the companies willing to participate. But what are the incentives?
http://america.aljazeera.com/articles/2014/1/31/olympics-sponsorsfaultedforgoingtosochi.html
Thursday, January 30, 2014
Proposed overhaul at the EU
It has been a long time coming, but the overhaul is finally here. Like the Volcker Rule in the United States, the European Union released proposals today that would limit the likelihood that big banks will again endanger the financial system with the kind of behavior that brought on the financial crisis. This is just the first step though. Some, like the Finnish, were expecting a more drastic change. But ultimately have hopes of creating a universal bank for the EU to use. This hopeful article seems like a reassuring step in the right direction for large economic institutions.
http://dealbook.nytimes.com/2014/01/29/e-u-bank-proposal-arrives-but-late-to-the-party/?_php=true&_type=blogs&ribbon-ad-idx=11&rref=business/international&module=ArrowsNav&contentCollection=International%20Business&action=keypress®ion=FixedLeft&pgtype=article&_r=0
Wednesday, January 29, 2014
Fed Again Cuts Monthly Bond Purchases
On Wednesday, the Fed announced that it would cut another $10 billion in monthly bond purchases, referencing "growing underlying strength in the broader economy" for its decision. It is also "likely"that there will be another pullback at the next meeting in March. However, there will be no change in the benchmark short-term interest rate which will remain near zero.
This announcement comes amidst the recent economic turmoil in emerging markets. Turkey and South Africa's currencies declined sharply in value due to fear of insufficient monetary protection against a foreign investment pullback. As a result of this, the US stock market readjusted downward, with the Dow falling 1%. On the other hand, the Fed's reduced bond purchases is contributing to the global shift in investments as people prepare to take advantage of greater returns from higher interest rates in the US.
Tuesday, January 28, 2014
Income Inequality in the U.S. Means Princes Don't Go After Cinderellas
A new working paper conducted by the National Bureau of
Economic Research argues that Americans are more likely to marry someone who is
economically similar as they are. This tendency is called, “positive
assortative mating.” According to census data from 1960 to 2005, it also appears
that the odds of people who have the same education level increased by 12
points.
Interestingly, the authors used the Gini coefficient to
compare to their marriage model. From 1960 to 2005, “the Gini coefficient in
the United States increased to 0.43 from 0.34, representing the dropping share
of income controlled by poor families.” Ultimately, if people married randomly,
without considering education or economic levels of each other, the Gini
coefficient would have been “significantly lower.” It appears that who we marry
does actually impact society at large.
Monday, January 27, 2014
Deflation in the Euro Zone
Deflation in the Euro ZoneThis article discusses the possibility of prices lowering in the Euro Zone and addresses the concerns of the deflation. Although prices are still on the rise, the possibility of that ending soon is high. Some of the effects of deflation are already in action and some are not. The author explains the effects and how they are relevant to citizens today. The author also concludes that "The only institution that can prevent disinflation from turning into deflation is the European Central Bank. But that institution is staying on the sidelines, observing and doing nothing. " This reflection poses the question of when the European Central Bank will take action and discontinue simply observing.
Climate Change Changing Economies
Climate Change Changing Economies
This article takes a look at the externalities of climate change. We are all feeling the effects of the "polar vortex". The short-term impacts include a decrease in American output. The impacts in the long-run are often harder to formulate. The article looked specifically at nations that have higher average temperatures, such as nations in the Caribbean, and the implications they face when temperatures raise an average on one degree Celsius. While the correlation between average temperature and GDP may not be entirely valid, there is a relationship, and likely a third factor contributing to these changes. The article suggested diseases such as malaria being more predominant in the countries that have higher average temperatures as well as lower GDPs. I am interested in the possible link between types of economic systems that are present in countries with higher average temperatures and the relation, if any, to GDP.
This article takes a look at the externalities of climate change. We are all feeling the effects of the "polar vortex". The short-term impacts include a decrease in American output. The impacts in the long-run are often harder to formulate. The article looked specifically at nations that have higher average temperatures, such as nations in the Caribbean, and the implications they face when temperatures raise an average on one degree Celsius. While the correlation between average temperature and GDP may not be entirely valid, there is a relationship, and likely a third factor contributing to these changes. The article suggested diseases such as malaria being more predominant in the countries that have higher average temperatures as well as lower GDPs. I am interested in the possible link between types of economic systems that are present in countries with higher average temperatures and the relation, if any, to GDP.
Paranoia of the Plutocrats - Paul Krugman
In short, Paul Krugman expressed his annoyance about Plutocrats whining.
As mentioned by many articles recently, the raising of income inequality is becoming a popular topic, and it seems to be one of the priorities of Obama's term of office. Krugman wrote income inequality leaded to "stagnant wages despite rising productivity, rising debt that makes us more vulnerable to financial crisis. It also has big social and human costs. There is, for example, strong evidence that high inequality leads to worse health and higher mortality" (the reference to inequality is not accurate to the topic because it is not income inequality but just inequality - which includes racial component). However an interesting reaction he pointed out is this creates a whiny class of rich people.
It is true that under Obama's term, rich people are getting less and that they would have gotten more if Romney had won. Thus they criticized, complained about the policies and the regulations that the government was enforcing upon their benefits. They are whiny because a pinch of their wealth was taken away from them and they weren't used to it. And they excused themselves by saying they were creating jobs, making the economy better and they deserve more (while, according to Krugman, what they really did was to take advantages of weak regulations rather than adding real value to the economy - interesting point of view).
In the end, Krugman supported what Obama was doing, in short, saying screw the plutocrat's complaints.
I quite agree with Krugman. I think great businessmen don't get work up over something like regulations, they find the real opportunity/future to invest in (like Warren Buffet). Comparing to other economic system, the U.S.'s system seems to be the most effectively lenient system already, so if they ever complained, it is because they have been spoiled for so long. And it also seems to me that the rich are getting more and more selfish since objectively their wealth only grow a little slower than they used to be. After WW II, U.S. also fell into depression but the rich were fine with increasing tax then. Now, even though they are richer, they complain.
http://www.nytimes.com/2014/01/27/opinion/krugman-paranoia-of-the-plutocrats.html?ref=opinion
Restoring the Pacific Through International Trade Laws
This is an interesting article talking about protecting the Pacific Ocean. It talks about the importance of this resource to trade and businesses around the world. It states a major issue of over fishing in the Pacific and gives a couple facts on it. It is interesting how they are taking the idea of the importance for the Pacific with trade to attack this situation. The article raises some interesting points and is a pretty good read.
Economic Shifts in U.S. and China Batter Markets
According to the article, a major reason for the growth of developing countries is the the rise of China as an economic super power and the Federal Reserve stimulating the economy. However with China's economy faltering a little bit and and the Fed has caused a widespread ripple effect resulting in investors fleeing even far off places like Buenos Aires and Istanbul with the most affected being the countries that predominantly depended on China for raw materials and are experiencing political instability.
The Fed's decision about not supporting the bond buying stimulus programs that were keeping interest rates low. So the countries that were depending on these low interest rates might possibly see an increase in the price of borrowing and cause further damage to their economies.
http://dealbook.nytimes.com/2014/01/24/a-worldwide-market-slump-gains-traction/?_php=true&_type=blogs&ref=economy&_r=0
Sunday, January 26, 2014
Ukraine crisis: Opposition rejects offer of PM post
http://www.bbc.co.uk/news/world-europe-25900267Ukrainian leadership refused to enter into a trade agreement with the EU in December of last year, which spurred protests in the capital and in other cities around the country. The decision behind not joining EU was because of the significant pressure from Russia. This was initially an economic issue because the agreement would have allowed Ukraine to eliminate trade barriers with EU countries. Russia in order to influence the deal warned Ukrainian government of canceling contracts and agreements set up by two countries. While, this would have been harmful to Ukraine's initial growth and unemployment, in a long run, it would have been beneficial as Ukraine would have been able to trade goods and services on the open market and become independent from Russia.
Furthermore this standoff between the government and opposition revealed corruption and significant abuse of power at the top of the governing body. As the protests progressed it has become a fight for more transparency of Ukrainian government and freedom from politico-criminal nexus that occupied the government. The West has been discussing an option of freezing accounts of politicians and oligarchs, who were proven to be involved in corrupt activities. Neither the EU or the US have done so yet, which points to a strong lobbying influence.
Ukraine is facing a very difficult challenge. Young generation of educated and democratically-minded people made it clear that they want the future full of economic opportunities, and free and fair government.
In Housing, Big Is Back (Not Counting the Extras)
http://www.nytimes.com/2014/01/26/business/in-housing-big-is-back-not-counting-the-extras.html?ref=business&_r=0
There is now a rebound in the housing market as more and more people start to buy luxury homes. After the recession there was a stall in house sales, but wealthier people are now beginning to buy more expensive and more lavish houses. However, the lower end of the market, the cheaper houses, are still stagnant. Home loans have also increased as wealthier buyers are selling their homes and receiving loans to buy larger ones with added features such as an additional kitchen for food preparation and a media room. In addition, potential buyers are also opting to build their own houses. There is now high demand for expensive homes but low supply, so many buyers are finding building their own house less expensive. They also have more options to customize their house for their needs.
There is now a rebound in the housing market as more and more people start to buy luxury homes. After the recession there was a stall in house sales, but wealthier people are now beginning to buy more expensive and more lavish houses. However, the lower end of the market, the cheaper houses, are still stagnant. Home loans have also increased as wealthier buyers are selling their homes and receiving loans to buy larger ones with added features such as an additional kitchen for food preparation and a media room. In addition, potential buyers are also opting to build their own houses. There is now high demand for expensive homes but low supply, so many buyers are finding building their own house less expensive. They also have more options to customize their house for their needs.
Experts are arguing that the current energy trade laws in the U.S. are hindering the domestic energy boom. America's Energy Advantage, a group supporting protectionist policies, likes the idea of restricting the exportation of liquid natural gas. But some say that they are misguided in their attempts to control their market share. The article goes on and explains that without those exports, many industries suffer because the demand for production goods like steel decreases. Policy makers should be warned that if these protectionist policies remain,we run the risk of missing the opportunity to improve the lives of U.S. citizens through economic growth in the energy industries.
http://www.exxonmobilperspectives.com/2014/01/02/a-clarion-call-for-free-trade-and-a-warning-if-we-fail-to-heed-it/
http://www.exxonmobilperspectives.com/2014/01/02/a-clarion-call-for-free-trade-and-a-warning-if-we-fail-to-heed-it/
Starbucks Just Sold $1.4 Billion in Gift Cards. What Did It Do With That Cash?
According to Bloomberg Businessweek, coffee giant Starbucks sold $1.4 billion last quarter in gift cards and people putting money on their Starbucks app. The increase undoubtedly resulted from many people buying gift cards for family and friends during the holiday season. The article says that Starbucks has already began to invest some of these earnings into high-grade corporate bonds, Treasury notes, and certificates of deposit that mature in three to 12 months. The author goes on to discuss how much Starbucks has been investing recently. It says, "In the past four quarters, Starbucks has made $146 million on interest alone—or 8 percent of total profit." This article is an interesting look at how Starbucks has been able to market its app and gift cards so well, while at the same time using the earnings wisely and investing in the future.
http://www.businessweek.com/articles/2014-01-24/starbucks-just-sold-1-dot-4-billion-in-gift-cards-dot-what-did-it-do-with-that-cash#r=nav-r-story
http://www.businessweek.com/articles/2014-01-24/starbucks-just-sold-1-dot-4-billion-in-gift-cards-dot-what-did-it-do-with-that-cash#r=nav-r-story
Argentina’s Currency Falls Sharply Against the Dollar
The Argentinean peso fell by more than eight percent to
against the dollar on Thursday. This is
the largest decline since the 2002 financial crisis, and fear of inflation has
seen a sharp increase. The peso has been
gradually losing strength in the past months, but officials insist this plunge
is a result of the economic forces coming together. At the end of business Thursday, the peso
closed at $7.75 to the dollar. The
government has decided not to utilize their reserves as much in an attempt to
tighten currency controls and not allow reserves to contract. Some residents have also started buying
dollars on the black market to capitalize on a better purchasing rate. Another main concern is that imported
products will cause inflation to increase since they are more expansive. The shift in Argentina’s economy has also
started to raise concerns in surrounding Latin American countries. While not as drastic, currencies has also
weakened and the stock index is depleting.
http://www.nytimes.com/2014/01/24/world/americas/argentinas-currency-falls-sharply-against-the-dollar-stirring-inflation-fears.html?ref=americas
Social Responsibility Weighs Heavy on Economic Chieftains at Davos
Many political leaders think that wealth should distributed equally among the people. Pope Francis even agreed to this. He believes that humanity should be served by the wealth and no ruled by it. Other politicians agree that those that are wealthy should shared among those that are not. Once you used your wealth for the necessities, then the left over wealth should do to the philanthropies. Others believe that it is unfair for the redistribution of wealth.
http://dealbook.nytimes.com/2014/01/25/social-responsibility-weighs-heavy-on-economic-chieftains-at-davos/?_php=true&_type=blogs&ref=international&_r=0
http://dealbook.nytimes.com/2014/01/25/social-responsibility-weighs-heavy-on-economic-chieftains-at-davos/?_php=true&_type=blogs&ref=international&_r=0
Saturday, January 25, 2014
The future of jobs: The onrushing wave
http://www.economist.com/news/briefing/21594264-previous-technological-innovation-has-always-delivered-more-long-run-employment-not-less
This article from The Economist discusses the the affects of technological advancements on employment an equality. The article describes how John Meynard Keynes predicted in 1930 that the improvements in technology would result in "technological unemployment." For the most part the 20th century proved Keynes to be wrong in his prediction of "technological unemployment." Rather than replacing labor, new technologies provided more jobs for a growing population. So, why should we be concerned about income inequality or unemployment due to technological advancements?
According to recent research, even in countries where employment is increasing, real wages have been stagnant since the 1980's. This is a result of increased automation. Increased automation results in substituting capital for labor, so the owners of capital gain a larger share of income. Along with automation, workers are also at risk of being replaced by cheap labor. Jobs that are at the greatest risk of being automated are ones that require repetitive behaviors, that can be done by computers or robots. Jobs that are not easily automated, referred to as cognitive jobs may be reduced into less responsibilities as a result of data-processing technology.
The article goes on to predict that increased technology and automation will, in fact, increase inequality, but not necessarily unemployment. As many jobs are replaced by capital, the number of "emotive jobs" such as yoga instructors will increase.
My question: If emotive jobs are a legitimate replacement to jobs being losed to capital, how should education systems change in order to prepare the next generation for these jobs?
This article from The Economist discusses the the affects of technological advancements on employment an equality. The article describes how John Meynard Keynes predicted in 1930 that the improvements in technology would result in "technological unemployment." For the most part the 20th century proved Keynes to be wrong in his prediction of "technological unemployment." Rather than replacing labor, new technologies provided more jobs for a growing population. So, why should we be concerned about income inequality or unemployment due to technological advancements?
According to recent research, even in countries where employment is increasing, real wages have been stagnant since the 1980's. This is a result of increased automation. Increased automation results in substituting capital for labor, so the owners of capital gain a larger share of income. Along with automation, workers are also at risk of being replaced by cheap labor. Jobs that are at the greatest risk of being automated are ones that require repetitive behaviors, that can be done by computers or robots. Jobs that are not easily automated, referred to as cognitive jobs may be reduced into less responsibilities as a result of data-processing technology.
The article goes on to predict that increased technology and automation will, in fact, increase inequality, but not necessarily unemployment. As many jobs are replaced by capital, the number of "emotive jobs" such as yoga instructors will increase.
My question: If emotive jobs are a legitimate replacement to jobs being losed to capital, how should education systems change in order to prepare the next generation for these jobs?
Financial Regulation
In the aftermath of the financial crisis, it has been written that credit cycles, boom and bust etc are all inevitable. As such it has been suggested that government should set financial markets free and let them feel the effects on their own.
The author of the article begs to differ, he says rather than giving up on regulation, regulators should try and focus on the timing of regulation.
They also recognize the fact, banks will always try and innovate over regulation, unless a law is passed setting the reserve requirements at 100%.
However the two authors differ over how to regulate and what regulations will be effective.
http://www.economist.com/news/finance-and-economics/21595010-welcome-burst-new-thinking-financial-regulation-inevitability
The author of the article begs to differ, he says rather than giving up on regulation, regulators should try and focus on the timing of regulation.
They also recognize the fact, banks will always try and innovate over regulation, unless a law is passed setting the reserve requirements at 100%.
However the two authors differ over how to regulate and what regulations will be effective.
http://www.economist.com/news/finance-and-economics/21595010-welcome-burst-new-thinking-financial-regulation-inevitability
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