Oil and Gas Boom 2014:Jobs, Economic Growth and Security

http://www.forbes.com/sites/davidblackmon/2014/02/20/oil-gas-boom-2014-jobs-economic-growth-and-security/

Recently, there has been a lot of negative press and feelings towards the oil and gas industries because of the negative impact they have on the environment.  However, these industries have created many jobs since the Great Recession, especially in Texas.  Texas' unemployment rate has outperformed the national average and created almost half of the new jobs in the United States, most of them in the oil and gas industries.  In addition, other industries benefit indirectly from the success of the oil and gas industries, such as shipping, which transports oil and gas.  They also increase national security because the United States does not have to depend on middle eastern countries to supply these commodities.  Eventually, politicians will have to decide whether the environment or jobs and national security are more important.

Japan's economy grows at slower pace, raises stakes for Abenomics

http://www.reuters.com/article/2014/02/17/us-japan-economy-gdp-idUSBREA1F0XF20140217

Japan's economy grew at a much slower speed than expected at the end of last year and this challenged policymakers in Japan to accelerate in consumption and exports to boost Japanese economy. Japan grew 0.3 percent in the fourth quarter and this value is well below the median estimate for a 0.7 percent increase. Many economists expect that growth will accelerate in the current quarter as shoppers buy more goods before the tax hike. But, what's more worrying is sluggish exports despite long-expected impact of a weak yen on boosting external demand. Export growth has remained sluggish over recent quarters, partly reflecting softer demand in Asian markets though some of it also underlined the shift by Japanese companies of their manufacturing plants to offshore centers.

Scottish Independence: Threat to Default on Scottish Share of UK Debt

In September 2014, the people of Scotland will vote yes or no on the question of independence.  It has been a long road, with Yes Scotland (the group promoting independence) consistently embarrassing itself.  Recently, the leader of the Scottish Nationalist Party, Alex Salmond, has voiced that a post independent Scotland would have a currency union with the UK.  The British Chancellor of the Exchequer, George Osborne, has rejected the notion that the UK would enter a currency union with an independent Scotland.  Salmond has called this rejection a bluff and furthermore said that if there was no currency union, Scotland would simply not take their share of the debt with them following independence.  The news article states that doing so would increase the mortgage of Scottish homeowners by over $8,500.  What the article is forgetting though is the various other problems an independent Scotland would face if they did not take their fair share of the debt.  First, doing so would cause investors to be doubtful that Scotland could pay off any debt whatsoever.  Essentially, the Scottish government could not be trusted to pay off any debt since it had given up the responsibility to pay off its fair share of the UK debt.  This point could certainly be argued regarding the logic by saying "Scotland is a new country.  That debt is UK debt, not Scottish."  To investors, that would appear as just an excuse to get out of the debt.  Another problem is that the UK would be less willing to help start up an independent Scotland.  While present Scotland has its own parliament, it doesn't have nearly as many powers as a US state has.  The UK is still very much centralized, with most power being centered in London.  As such, an independent Scotland would have to get start up equipment and information from the UK.  Scotland can certainly do this by itself, but the costs would be very high and a post independent Scotland would already be worse off anyway considering it would have to raise taxes to fund the predicted Scottish budget.  If it had to cover the startup costs by itself, those taxes would be even higher, and or the Scottish government would have to borrow money at higher interest rates.

http://www.telegraph.co.uk/news/uknews/scotland/10648683/Alex-Salmonds-debt-threat-would-cost-Scottish-households-5200-a-year.html

THE EURO and the European ECONOMY-

http://www.economist.com/blogs/economist-explains/2013/11/economist-explains-10

This is a great article that talks about the relative strength of the Euro which is defying the trends in the European Economy, It is a couple months old, however it is still valid. I think we were just talking about the Euro in class, and I think this article should be an interesting read for all those baffled by the strenght of the Euro.

The Worldwide Wobble

http://www.economist.com/news/leaders/21595900-world-economy-will-have-bumpy-2014-recovery-not-yet-risk-worldwide

This article discusses the future of the world economy and how it will not be stable. 2013 was a year of rapid growth in the world economy, but that is not predicted for 2014. There have already been significant losses in January. Many believe the economy is now fragile and worry about what could happen next. Although economists have predicted some bleak outcomes, they could not always be correct, and this article states not to be pessimistic. It will be interesting to see how the major world actors will play a role in these predictions and if the economy will continue to be as unstable as they say.

Study Finds Greater Income Inequality in Nation’s Thriving Cities

The larger and more vibrant cities in the United States have more income inequality than the smaller cities. This could be because of the industries that are in the cities. The technology and finance cities are going to have higher incomes than the cities that have transportation or warehousing sectors. The lower income cities are mostly located in the Midwest and South. President Obama said that he would raise the minimum wage to reduce the inequality. Many mayors are also trying to lower the income inequality. They could do this by raising the taxes on the higher income people and also creating incentives like better schools and cheaper housing.

http://www.nytimes.com/2014/02/20/business/economy/study-finds-greater-income-inequality-in-nations-thriving-cities.html?ref=economy&_r=0

Why Hasn't Japan's Massive Government Debt not Wreaked Havoc(yet)?

http://wallstreetpit.com/102203-why-hasnt-japans-massive-government-debt-wreaked-havoc-yet/

   One of the most surprising graphs I saw while in class was one that showed the debt to GDP ratio of several OECD countries. While the USA and Britain certainly had high ratios, the Japanese had debt that comprised 219% of GDP, an almost comically massive number, and based on what I've learned in economics, totally unsustainable. So the question I'm hoping to answer is why has Japan not descended into chaos, or at least had issues with its credit rating or balance of trade?
   There are a number of factor in the Japanese economy that make it very different to most Western countries. Chief among these is the incredibly high domestic savings rate. Within Japan this is used by banks and government institutions to purchase government bonds and securities, allowing it to fund and service the massive debt. In addition to having an economy capable of handling much more public debt than most, in 2007 and onward Japan received a massive influx of foreign purchases of short-term government securities, further enabling the government to maintain such high debt levels. Such activity was motivated by the financial crisis and the relative stability of Japanese securities compared to those in Western markets.
   However, all of this, the high saving and foreign investment is only a short term measure. For Japan to really address the problem more serious measures must be taken, and political pressure is mounting in Japan for something to be done. While it seems incredibly unlikely that Japan is going to go into some kind of economic disaster as as results, something must happen eventually.

   My question is what? Will Japan have its usually bulletproof credit rating downgraded? Will taxes be raised to avert disaster? Japan seems as prepared as anyone to tackle such a massive problem, but it remains unclear whether it will happen before serious consequences arise.
 

The Economic Impact of The Olympics

The Olympic games in Sochi are expected to be the most expensive games in history. This came as a surprise to me after hearing all of the reports of the unfinished buildings and dangers that the visitors are facing. Many people believe that the games are a great opportunity to boost the economy of the host city, but that is not the case for Sochi, or Russia as a nation. The article estimates these games costing in  excess of $50 Billion. The reason for this might have stemmed from the 2008 Summer games in Beijing, which took the world by storm and set an standard for entertainment. But the costs of the games has far outweighed the revenues. Some experts think that Sochi may not benefit now, but they will be known for their participation as a host city and historically this has drawn companies into emerging economies to open their businesses. Whether or not this happens in Sochi, I guess we will have to wait and see. The olympic games are known for creating employment, while it may be short lived, it does seem to lower national levels of unemployment. Russia has a very tight labor structure and unemployment is very low to begin with, so we have not seen any remarkable change, simply because there is not room for change.

Fed Sets Rules for Foreign Banks

The Federal Reserve approved new standards for foreign banks that will require the biggest to hold more capital in the U.S. Under the rules, foreign banks with U.S. assets greater than $50 billion would have to maintain more loss-absorbing capital than some other countries require, potentially forcing them to raise additional equity or debt for their U.S. units. The banks must have enough capital and liquidity to survive a credit crunch.

Fed Chairwoman Janet Yellen said the rules are necessary to protect the global financial system and put U.S. and foreign banks on equal footing. However, there is a disagreement with the Fed about the appropriateness of the new policies. Foreign banks have criticized the move, saying the requirements could conflict with home-country regulations and force them to withdraw from the U.S.

http://online.wsj.com/news/articles/SB10001424052702303945704579391244050104458?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702303945704579391244050104458.html

Worsening U.S. Divorce Rate Points to Improving Economy

The number of Americans getting a divorce has risen over the last three years. In 2012, about 2.4 million Americans filed for divorce. Divorce has a social and emotion impact, but there are also broad economic effects. Divorce contributes to the formation of households, increasing the demand for housing, appliances, and overall spurring the economy. It is also encouraging women to enter the labor force.

The increase in divorces has led to an increase in household formation. In the past four years, about 5.3 million households have been formed. There has been a great demand for condos, apartments, and furnishing. When divorce occurs, it often results in an increase in demand for housing by creating two households.

The increase in divorce did not occur until after the recession. During the recession, many couples chose to stay together. Either because their homes were underwater or one or both were unemployed. Before the recession, it is the home of a married couple that contains their largest assets to divide. When the recession hit, the value of housing decreased and a married couples assets shrunk. The recession itself caused great financial losses, divorce would just add to this loss.

http://www.businessweek.com/news/2014-02-18/worsening-u-dot-s-dot-divorce-rate-points-to-improving-economy

Yes, the Wealthy Can Be Deserving

Havard Professor Gregory Mankiw again raises the issue about compensation of the wealthy across many fields in society today. First he uses Robert Downey Jr's $50 million compensation for his role as Iron Man in the Avengers blockbuster as an example of income well deserved, even in the public's opinion. However, in some cases, such as in the finance industry, it is more difficult to see why CEOs are so highly compensated; Mankiw argues that the decisions they are responsible for making have significant monetary value for shareholders, employees and stakeholders.

He adds that their compensation is subject to taxes as high as 33.8% that can serve as a redistribution effort by the government to fund public services/goods.

A billion-dollar daily shot in the arm for the American economy

New supplies of oil and natural gas will equate to about $1 billion dollars a day. Experts estimate that energy production accounts for 2.2% of GDP.  New sources of oil and natural gas have created a new opportunity for an industrial revolution.  Expert Clay Jenkinson claims the new technology that is reaching deep oil deposits have created more than just an oil boom, it has sparked an industrial revolution. The also argues that while fracking for oil and natural gas  can bring great prosperity to any region it is located, it must be managed responsibly so to prevent negative externalities to the region. If the technique of fracking can be mastered, and risk to surrounding water supplies and other natural resources minimized, could fracking be more of a blessing than a curse?

http://www.exxonmobilperspectives.com/2012/08/17/a-billion-dollar-daily-shot-in-the-arm-for-the-american-economy-2/?gclid=CISKn4Pm0bwCFa9FMgod0lQA6Q&gclsrc=aw.ds

VW work council says will pursue labor representation at U.S. plant

While Volkswagen's determined to involve their employees in decisions, their employees seem determined to not have the United Auto Workers union involved in the future Chattanooga work council.

As the United States is, as a rule, rather unwelcoming to labor unions, it may not be a surprised that the existing workers would also be unwelcome to the current Union option.  However, the German System that Volkswagen comes from is contrastingly very welcome to the idea of unions and cooperation between employees and management, as we learned in class this previous week.

So it would be interesting to see how Volkswagen and plant employees come to a compromise.

Read the article Here

Cold Calculations: The Economics of Snow

(Click here for article)

This has been an extremely harsh weather with constant snow and negative temperatures. Not only is it dangerous be exposed to these kind of conditions but  the decisions we make while experiencing this weather can also be harmful to us. Poorer people have a decision to make between food and comfort and typically they pick comfort. With these extremely cold temperatures gas bills sky rocket leaving less income for things like food. Being malnourished in this extreme weather only makes it more dangerous for people to be exposed to the extreme cold. The rich do fine in the cold buying more food while cranking up the thermostats.

The article continues about the effects the cold weather has on increased school closings. As all OWU students have experienced days where it is certainly questionable if we should be having class, students from other schools are not falling behind while enjoying their day(s) off. An increased focus on the cold weather outside takes away everyone's focus from the classroom, teachers and professors included.

The parable of Argentina: There are lessons for many governments from one country’s 100 years of decline

This article discusses the potential Argentina had in 1914. At that time, the country enjoyed higher GDP per capita than France, Germany, and Italy, as well as higher growth rates than the US. The author blames Argentina's failure to add value to their commodities (such as making their high-quality beef into "Argentine steak") as a large factor. Also, throughout the 20th and 21st centuries, Argentina has been plagued with extremely populist policies, combined with lots of governmental mismanagement and crony capitalism.

Chile and Uruguay have both been able to pull ahead of Argentina because they embraced more free market policies in the 1970s and 1980s. "Children from both those countries—and Brazil and Mexico too—do better in international education tests." Cristina Fernández, current President of Argentina has been embracing similar policies as her predecessors, taxing imports and agricultural exports. The article also points to the overall Argentine political system and weakness of its institutions as leading reasons why its economy has yet to emerge to its potential. The author concludes by offering the lesson learned by Argentina: "good government matters." The article points out some of the things we have discussed in class. How large of a role should the government play? Are there effective ways to eradicate corruption? 

http://www.economist.com/news/leaders/21596515-there-are-lessons-many-governments-one-countrys-100-years-decline-parable

The pressure on companies from activist shareholders continues to grow

"Shareholder activism" is a way in which shareholders can influence a corporation's behavior by exercising their rights as owners. An activist shareholder may attempt to put public pressure on a corporation's management to address financial, social or management issues. The article gives scenarios of numerous activist shareholders such as Carl Icahn, Dan Loeb, Nelson Peltz and Bill Ackman using this strategy of activism to somewhat "control" the corporations. According to the article, the activists' growing influence has many causes, such as the rule changes which have given shareholders more voting power and made institutional investors cast their votes more thoughtfully, and the advancement in social media that has allowed activists to mount a campaign with more ease.
On one hand, activists' critics with strong assumption that activists are profit-oriented people, have stated that activists encourage firms to do things that boost their share price in the short run but harm their long-term performance. On the other hand, the article suggests that there has been no empirical proof that activists focus only on short-term growth of corporations. Critics on this side of the story argued that activist shareholders should not be viewed negatively. To them, activists are "governance intermediaries" that find under-performing firms and offer their managers and institutional shareholders "concrete proposals for business strategy through mechanisms less drastic than takeovers."
Then the question is, which side is accessing shareholder activism without bias?

http://www.economist.com/news/business/21596556-pressure-companies-activist-shareholders-continues-grow-anything-you-can-do

School Snow Days a Challenge for Low-Income Parents

For most people snow days are fun but for working class parents it is not as relaxing.  When both parents work or do not have sick or vacation benefits they have to find day care services for their children.  People without paid time off, single parents or hourly wage earners get hit the hardest with school snow days. School is a safe and reliable place for children to be, and thus some schools were kept open during the winter storms. Especially because some people's homes lost power and heat, they could even get sick if they were home.

http://america.aljazeera.com/articles/2014/2/13/school-snow-daysachallengeforlowincomeworkingparents.html

Class in America: Mobility, measured

This article strongly reflects concepts in the article written by Julie Isaacs that we read this past week. The authors reference a new study suggesting that, “America may be no less mobile a society than it was 40 years ago.” Although a large portion of data tested did not result in much change from data tested years ago and even “challenges several smaller recent studies that conclued that America had become less socially mobile,” the study did find a connection between social mobility and different regions across America. Ultimately, they found that social mobility is higher in places with strong educational institutions, families, and senses of community belonging. 

http://www.economist.com/news/united-states/21595437-america-no-less-socially-mobile-it-was-generation-ago-mobility-measured

Yellen Begins Her Reign at the Fed

Today, Ms. Yellen, the new chairwoman of the Federal Reserve gave her first major speech under her new title. Many expected that a woman taking the position would cause a radical shift, but her sentiments gave the air of continuity rather than departure. She stated that she will continue policies that cut back on bond buying, a major emphasis of her predecessor, Ben S. Bernanke. Yellen also encouraged an increase in communication with investors and the public. She feels that communication and transparency enhances the power of monetary policy. This seems to be a favoring toward a completely informed society to me! One of the key elements to a successful and efficient market. While the economy is still a bit bruised by the collapse of the housing bubble, Yellen seems optimistic that the Fed has the power to change the current economic situation. As she was making her speech, it seemed that investors let out a sigh of relief and magically the stocks began to rise. This seems like the Fed is off to a great start!

http://www.nytimes.com/2014/02/12/business/yellen-testifies-in-congress-on-economy.html?ref=economy&_r=0

Keep the door open: How Europe Nearly Lost Ukraine - But May Yet Regain It

http://www.economist.com/news/europe/21595957-how-europe-nearly-lost-ukrainebut-may-yet-regain-it-keep-door-open?zid=307&ah=5e80419d1bc9821ebe173f4f0f060a07

This article takes a look at the reasons for the mass protests that erupted in Ukraine in November and continue till this day. It also talks about the economic implications of Ukrainian transition to the new government for Ukraine, Russia and EU. 

Article makes a good point that Russia made a stronger stance for keeping Ukraine away from EU, while EU did little to support Ukrainian people and to bring the country on board. The protests and uprising of the people gave EU another opportunity to bring Ukraine to the table of negotiations and free it from Russia's gridlock. The issue here, that article doesn't point out, is that the government in power will do everything in their power and beyond to secure their assets and power. The reason behind this is the fear of the president along with other politicians and oligarchs of facing the confiscations of assets and trials for criminal activities and corrupt practices. 

Article makes a valid point that the best time for a reform and a new agreement with EU might be during the two weeks of the winter Olympics in Sochi, when Putin will be too preoccupied with his own problems (as we know there are a lot of issues concerning security and poor planning). Additionally, Europe's task here is to not only promote the agreement but also to tie the hands of corrupt politicians and businessmen by freezing their international accounts and blacklisting them, thus prohibiting them from entering other EU countries. These actions would shut off the oxygen of financial support that is necessary for the president to keep his colleagues quite and for funding lobbying efforts in the US and EU against the opposition. If EU sets this example then the hope is that US and other countries will follow the same path. 

Industry and Congress Await the FCC Chairman's Next Moves on Internet Rules

http://www.nytimes.com/2014/02/10/business/economy/industry-and-congress-await-the-fcc-chairmans-next-moves-on-internet-rules.html?ref=economy&_r=0

During his time as the Federal Communications Commision's chairman, Tom Wheeler was able to accomplish much in the means of mobile phone communications. The FCC's initial rules to maintain an open internet, by that meaning companies that control the internet cannot determine who gets the internet. This restricts internet providers from charging different prices for different kinds of content. In last the federal appeals court invalidated those rules created by the FCC. Many republican members of congress told the FCC that it does not have the authority. Though in an interview friday, Wheeler stated that the Open Internet Order was not thrown out by the court and the FCC in face does have the authority.

During a period of vast technological growth and internet based companies worth billions, the means of how consumers purchase digital goods has so far been used openly and has little restriction. Though that freedom probably will not last long as congress and the FCC work to change internet laws. This will certainly affect those tech giants who are used to providing costumers with open internet that does not restrict content.

Will Saving on Health Care Hurt the Economy?

While the government is concerning about the expansiveness of Health Care program, the article raised an issue about Health Care and the economy:

 

Binyamin talked about how the recession has affected negatively on Health Care industry. In particular he mentioned the health care payroll grew at 1.4% - 1 percentage point lower than the annual average in the decade fore recession. Price was also rising more slowly. According to him, this slow growth pulled back the economy by first, cutting the employment in health care industry, and second, cutting the spending in everyone's pocket. He especially made an argument about how inflation is good for the economy (of course his intention was referring to the health care inflation - thus he was making the point that the low inflation in health care was affecting negatively to the economy). He referred that some economist thought :"We’re spending less on health care because we’re spending less on everything."

First it is about the program. It has been growing too large too fast, I think. Government has spent ~5% of GDP in 1960s to 17.4% of GDP in 2009. This, of course makes the whole industry blossom, and increase the employments in Health care industry drastically. However, what is the output come out from that spending? If the population's health quality is not increasing at same pace, government probably have spent too much, there're probably more doctors and nurses and hospitals and meds than needed. Thus, it is time to cut back on those that's unnecessary (just like how the stock market was inflated due to irrational behavior of investors and it had to correct itself by a down turn). It may not look good in short term, but in long term, a more stable and effective health care system is better than an inflated one. 

And secondly I want to mention something about that health care inflation. We're spending less on health care may be because we are taking good care of our health because it is very expansive to pay for health care in the U.S. Really ... spending a lot on health care is not something to be proud of Mr. Appelbaum.

http://www.nytimes.com/2014/02/09/sunday-review/will-saving-on-health-care-hurt-the-economy.html?hp&rref=opinion&_r=0

U.S. Jobs Data Improves, but Weak Exports May Hurt Growth

http://www.nytimes.com/reuters/2014/02/06/business/06reuters-usa-economy.html 

 This article talks about how the general outlook of the labour market has gotten better. It does this by telling us that the number of Americans filing new claims for unemployment benefits has gone down. While all this seems like good news, the article says that it's not all good news.
   It goes on to tell us about how exports for the fourth quarter of 2013 have been at their lowest since October 2012. This is bound to put a damper on the governments predictions, and some analysts say it could affect the growth by a much as half a percent.
   The adverse/extreme weather conditions seem to be a big reason for the slump in exports. Factory had slowed down and retailers had low output. However, the article says there was increased hiring in the private and services sector.
    Overall, the articles depicts a somewhat rosy picture of the future of the US economy. What do you guys think?

Switzerland: Passed Referendum to Limit EU Immigration

In Switzerland, a referendum passed that would limit the amount of immigration coming from the European Union.  While Switzerland is not in the EU, it does have treaties with the EU.  One of those treaties grants freedom of movement to and from Switzerland (almost akin to the freedom of movement within the EU).  This referendum will likely put an end to that freedom of movement.  The cause for this movement seems to have been a result of that freedom of movement, for that has also caused reactions throughout the other EU member states, yet Switzerland is free to cancel some of those treaties whereas the EU member states would have a difficult time restricting immigration laws since it could violate EU laws.  This referendum will have repercussions; as an EU MP said, "If Switzerland suspends immigration from the EU, it will not be able to count on all the economic and trade benefits it is currently enjoying. We will not allow ... cherry-picking."  At the end of the article, there seems to be a counter to the statement, "Swiss voters generally have a history of voting down proposals that they feel could hurt their country's economic success story or threaten its competitiveness."  This statement seems apparent, for Switzerland is one of the best examples of a direct democracy, a system that thus far seems to have worked for Switzerland despite the glaring flaws of a such a system on a large scale.  The question now is, how negative of an impact will this referendum have on the Swiss economy?  It might be that in order to negate the full power of any economic "sanctions" from the EU, the immigration limits will appear negligible in comparison to the current immigration rates.

http://www.reuters.com/article/2014/02/09/us-swiss-vote-immigration-idUSBREA180H220140209

College Athletes Petition to Unionise

Five football players from Northwestern recently petitioned the National Labour Relations Board to let the wildcats form a union. The NCAA has recently been under a lot of scrutiny because of the unfair treatment they give Athletes. They have been known as being like a dictatorship and this is the case for a lot of non-profit organizations. The Northwestern players are petitioning for health and safety. They say that players who suffer incapacitating injuries can lose their scholarships and face huge medical bills. In order to win this petition the NLRB must see the students as university employees. The most recent case like this denied Brown University graduate students to unionize even though they were paid for their teaching duties in 2004.

Another hot topic regarding college athletes is if these players should get paid more than just the scholarship they receive. College football and basketball generated 4.7 billion in revenue in 2012-13 and these athletes didn't see any of that money, while the head of the NCAA makes 1.7 million. They can't even sign autographs for money without it being a violation and they could be ruled ineligible. The Coaches of these teams are typically the highest paid employees at their institutions and still student-athletes don't see any of that. Many people think that a full athletic scholarship is more than enough, but for some of the big name athletes I just don't think that is the case. This topic isn't going anywhere and college athletes petitioning to Unionize is just another step in the direction of reducing the NCAA's power.

http://www.economist.com/news/united-states/21595967-why-college-football-players-want-unionise-wildcat-formation

Comeback Kids

It's no secret that the job prospects for 20-somethings in America have been dismal recently. A notable 36%  of young Americans between the ages 18-31 have yet to move out of their parents' house. The global financial crisis is held culpable for the ill-fate of the millenniums. However, 2014 might be a welcomed change for those about to graduate. Hiring new graduates is expected to be the highest it has been in years. This hiring is spurred by private sector firms like Google and Brisitsh Airways, and by programs in the public sector such as TeachFirst. International Monetary Fund, encouraged by news in the US, Japan and EU, increased it global growth forecast from 3.6% to 3.7%. This growth may may afford those recent college graduates to flee from their childhood bedrooms and spring for a place of their own.

http://www.economist.com/blogs/theworldin2014/2014/01/youth-unemployment

Obamacare deadbeats: Some don't pay up

CNN reports that 20% of those that signed up for federal healthcare last year have not paid their first month’s premium. 2.1 million signed up to have their coverage begin on January 1^st, but they will not receive coverage if they miss the extended deadline.  The Texas-based insurer expected its payment rate to be in the high 80% range by its deadline. Insurers are pleased with the payment rates and experts say that there has been a huge uptick in payments in recent weeks.  Most people have until Friday to make their payments or their coverage will be terminated before it even started. I wonder how long it will take to sort out the glitches in the new system.

http://money.cnn.com/2014/01/30/news/economy/obamacare-premiums/index.html?iid=SF_E_River

Unemployment Rate Telling a Much More Hopeful Story

Although the official unemployment rate dropped to 6.6 percent in January 2014, some critics have noted the sluggish pace at which the economy is adding jobs. However, this article notes a significant 0.4 percent drop in the under-employment rate in January, which economists note as an encouraging factor in economic recovery.

The under-employment rate, also known as the "U-6" broader unemployment rate, dropped to 12.7 percent - the lowest rate in the past five years. And although the labor force participation rate is low at 63 percent, it has been moving upward. Looking at all of these factors, economists say that some workers may be leaving the workforce unwillingly or giving up on the job search, but that there are signs that people who have been under-employed are now employed full-time, people not actively seeking but wanting work are finding jobs, and that new jobs are being created.

This article points to positive trends which bode well for the economy in the short run. However, I fear that recent seasonal surges in employment within the housing construction market and manufacturing (a sector that many fear will slow down severely) may be giving an overly-optimistic forecast. Even if those two sectors have added jobs, the housing market has been recovering more slowly than anticipated, and the manufacturing sector may begin to decline even further than it already has, so in the long run, those jobs may be lost all over again. In the short run, though, I hope that the recent decline in unemployment and under-employment boosts consumer confidence and overall economic performance.

http://blogs.wsj.com/economics/2014/02/07/unemployment-rate-telling-a-much-more-hopeful-story/

Emerging Nations Need to Look Within

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

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=0

Time for a ceasefire

Time for a ceasefire: Technology and fresh ideas are replacing classroom drill—and helping pupils to learn

http://www.economist.com/news/international/21595476-technology-and-fresh-ideas-are-replacing-classroom-drilland-helping-pupils-learn-time

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 103^rd 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.

http://online.wsj.com/news/articles/SB10001424052702304450904579369240806035508?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304450904579369240806035508.html

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.

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.

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

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.  

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 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