http://blogs.wsj.com/economics/2014/12/12/u-s-wealth-is-near-a-record-yet-racial-gap-has-widened-since-recession/
"U.S. Wealth Is Near a Record, Yet Racial Gap Has Widened Since Recession"
Wealth inequality has grown at a faster rate than the economy since the Recession. To be fair, the rich were not heavily leveraged like the middle class with their mortgage debt. Middle class Americans were not investing but paying off their years of dis-saving. Of course, paring this growth with a cut in the estate tax is probably bot conducive to overall inequality.
Let me know what you think.
Saturday, March 28, 2015
Fears of a new global crash as debts and dollar’s value rise
http://www.theguardian.com/business/2015/mar/28/rising-dollar-debt-fears-global-economic-crash
This article discusses the effect the rising value of the dollar is having on other countries worldwide. In particular, it notes that it's hurting a number of mid-sized economies that have recently begun/were projected to soon begin major development (South Africa, Brazil, etc.). It also discusses the longer term effects of quantitative easing, including a 40% increase in money borrowed by developing countries. Also stated is the debate/attempts of smaller countries to bring this problem to the floor of the UN, which were rebuffed under the claim that it was the wrong forum (and that that was what the IMF was for). All in all, it is interesting to see the repercussions he implementation of quantitative easing has had on the global economy and begs the question of whether or not it stopped or just delayed economic crises.
This article discusses the effect the rising value of the dollar is having on other countries worldwide. In particular, it notes that it's hurting a number of mid-sized economies that have recently begun/were projected to soon begin major development (South Africa, Brazil, etc.). It also discusses the longer term effects of quantitative easing, including a 40% increase in money borrowed by developing countries. Also stated is the debate/attempts of smaller countries to bring this problem to the floor of the UN, which were rebuffed under the claim that it was the wrong forum (and that that was what the IMF was for). All in all, it is interesting to see the repercussions he implementation of quantitative easing has had on the global economy and begs the question of whether or not it stopped or just delayed economic crises.
Rising House Prices Responsible for Rising Inequality
This article
argues against a recent book on income inequality. According to the author of
the book, in the long run the rate of return on wealth exceeds economic growth.
Over time, this increases inequality as the share of national income going to
those who own capital (the rich) rises, while the portion going to labor
(everyone else) falls.
On the other
hand, Rognlie argues against it. First, he says that the rate of return on
capital declines in the long run due to law of diminishing returns. Second, not
all investments have increasing rates of return. That is, rates of return on
assets other than housing has been stable since 1970.
So, what is
your take on the argument? And, if housing is the real source of inequality
then what policy do you think should be put in place.
Link
Link
Patching Up the Social Safety Net
Mr. Friedman wanted to privatize social security because the poor were not able to put enough money towards benefits for retirement. He also says that programs funded for the poor were seen as charity and that they would become unfunded and dissipate. Every program except Medicare and Social Security is vulnerable. And now, we have turned to the rich to fund these programs. The United States has one of the best social insurances but it does a terrible job at closing the income gap and are losing political support. What do you think we should do in order to make social security program, or any program in the U.S., more worthy and dependable. How can remove the stereotypes associated with certain programs?
http://www.nytimes.com/2015/03/18/business/patching-up-the-social-safety-net.html?ref=economy&_r=0
http://www.nytimes.com/2015/03/18/business/patching-up-the-social-safety-net.html?ref=economy&_r=0
Japan nears deflation as consumer prices stop rising
http://www.bbc.com/news/business-32081871
The article notes that annual inflation in Japan has reached zero in February, moving away from their central bank's target of 2%. Economists noted that this news has put pressure on the Bank of Japan to employ expansionary monetary policy to offset falling oil prices in order to continue to steer the Japanese economy toward recession following heavy recessionary periods since the Asian Financial Crisis of 1997. The article further notes falling deflation and increasing wages, leading to a hypothesis of "good deflation" as consumer confidence should increase, in turn increasing demand recovery on the domestic side.
This article poses an interesting monetary challenge: traditionally, inflation has been seen as a sign of recession or depression, given that prices of products are dropping, denoting a lack of growth in wages or macroeconomic product. However, low inflation can potentially offset prices rising beyond points of affordability or otherwise artificially high price points, and can be relatively harmless if coupled with strong economic vitals in other sectors. Nonetheless, this will be a factor on which to keep an eye as it could indicate a negative growth trend in the Japanese economy, which could, in turn, knock-on to markets in Asia and the world in general given other indicators of global economic lag, such as recent figures coming from Europe indicating possible double/triple-dip recession.
The article notes that annual inflation in Japan has reached zero in February, moving away from their central bank's target of 2%. Economists noted that this news has put pressure on the Bank of Japan to employ expansionary monetary policy to offset falling oil prices in order to continue to steer the Japanese economy toward recession following heavy recessionary periods since the Asian Financial Crisis of 1997. The article further notes falling deflation and increasing wages, leading to a hypothesis of "good deflation" as consumer confidence should increase, in turn increasing demand recovery on the domestic side.
This article poses an interesting monetary challenge: traditionally, inflation has been seen as a sign of recession or depression, given that prices of products are dropping, denoting a lack of growth in wages or macroeconomic product. However, low inflation can potentially offset prices rising beyond points of affordability or otherwise artificially high price points, and can be relatively harmless if coupled with strong economic vitals in other sectors. Nonetheless, this will be a factor on which to keep an eye as it could indicate a negative growth trend in the Japanese economy, which could, in turn, knock-on to markets in Asia and the world in general given other indicators of global economic lag, such as recent figures coming from Europe indicating possible double/triple-dip recession.
Friday, March 27, 2015
How American Frackers Plan to Beat OPEC
The American oil industry is under pressure as oil prices continue to fall. There has already been a dramatic drop in the price of a barrel. What once cost $105 last year is rounding out around $50 now. With that has also come job loss and the downsizing of corporations. However new problems are arising for the American oil industry. Saudi Arabi, the lead member of the OPEC cartel is taking a difference stance on this soft spell. Instead of decreasing production to boost fuel costs they have decided to increase production. This is thought to be an attempt to undercut American prices and dominate the market. Saudi Arabian oil drilling process is considerably less expensive then the US and they are able to produce barrels for around 10 dollars. This being said American oil industry CEOs remain unconcerned about this issue. One CEO states "we made plenty of money when barrels cost $100, we will make plenty of money when they cost $50.)
http://finance.yahoo.com/news/how-american-frackers-plan-to-beat-opec-143601751.html
Russia's Saving Grace
http://www.bloomberg.com/news/articles/2015-03-25/with-hotline-to-kremlin-nabiullina-turns-from-ruble-to-economy
On December 16, 2014 the Russian economy was falling rapidly. Investors and speculators were hoping for the central bank to intervene to abate the impact of the crashing ruble. Governor Nabiullina chose not to intervene. Like the US, the Russian central bank is supposed to be independent from the government, but it is documented that Putin exerts strong influence. Since December 16th, the ruble has stabilized and come back 19% against the dollar. This is not Nabiullina's first major decision. The article noted that in the past, Nabiullina was able to convince Putin to accept market solutions instead of imposing capital controls.
It will be interesting to see if her latest decisions will give her more autonomy in formulating policy for the Russian economy. Additionally, I want to see how the Russian economy responds this calendar year. What do you think?
On December 16, 2014 the Russian economy was falling rapidly. Investors and speculators were hoping for the central bank to intervene to abate the impact of the crashing ruble. Governor Nabiullina chose not to intervene. Like the US, the Russian central bank is supposed to be independent from the government, but it is documented that Putin exerts strong influence. Since December 16th, the ruble has stabilized and come back 19% against the dollar. This is not Nabiullina's first major decision. The article noted that in the past, Nabiullina was able to convince Putin to accept market solutions instead of imposing capital controls.
It will be interesting to see if her latest decisions will give her more autonomy in formulating policy for the Russian economy. Additionally, I want to see how the Russian economy responds this calendar year. What do you think?
Thursday, March 26, 2015
Potential Housing Market Crash?
This article debates whether the housing market is on pace
to crash again. The housing market is once again booming, and investors wonder
if they need to be worried. Homebuilders
have been reporting solid earnings and related companies such as Home Depot and
Lowes are approaching all-time highs.
There are also some housing exchange-traded funds who are at their
highest point since 2007. There
has been a drastic increase in people researching estimates for their homes,
which is a sign the market may becoming speculative again.
However, mortgage rates are expected to increase, which will
decrease the demand for buying houses.
Also, younger generations are trending toward living at home for longer
periods of time or living on a rent basis. Banks have also tightened their credit,
so there should not be another subprime meltdown. The author concludes that he doesn’t believe there will be another
crash, but it is still worth paying attention and keeping tabs on.
http://money.cnn.com/2015/03/25/investing/housing-bubble-homebuilders/index.html
Wednesday, March 25, 2015
Gender Gap in Education Cuts Both Ways
http://www.nytimes.com/2015/03/11/business/gender-gap-in-education-cuts-both-ways.html?ref=economy&_r=0
Last week the Organization for Economic Cooperation and Development — a collective think tank of the world’s industrialized nations — published a report about gender inequality in education, based on the latest edition of its PISA standardized tests taken by 15-year-olds around the world.
The gender gap in math persists, it found. Top-performing boys score higher in math than the best-performing girls in all but two of the 63 countries.Test scores in science follow a similar.
But these are hardly the most troubling imbalances. The most perilous statistic in the O.E.C.D.’s report is about the dismal performance of less educated boys, who are falling far behind girls.
Last week the Organization for Economic Cooperation and Development — a collective think tank of the world’s industrialized nations — published a report about gender inequality in education, based on the latest edition of its PISA standardized tests taken by 15-year-olds around the world.
The gender gap in math persists, it found. Top-performing boys score higher in math than the best-performing girls in all but two of the 63 countries.Test scores in science follow a similar.
But these are hardly the most troubling imbalances. The most perilous statistic in the O.E.C.D.’s report is about the dismal performance of less educated boys, who are falling far behind girls.
Deadlines Near as Greece and Germany Seek a Consensus on Debt
Tensions within the European Union are rising because Greece has failed to propose a plan to pay off their debts. As the strongest economy in the EU, Germany does not want Greece, the weakest economy in the EU, to bring them down. Other European Union nations want to resolve Greece's debt issues before lending them any more money. So far Greece has not shown any attempts to pay off this debt. Even the European Central Bank has cut Greece off from borrowing.
Link to Article
Link to Article
US consumer prices rebound in February
This article summarizes the on-goings of the U.S. economy. In particular, it focuses on the 0.2% rise in the price levels for the month of February. This is a new trend compared to the three consecutive months of declines. Gas prices rose by 2.4% in February, after falling 18.7% in January. As usual, oil prices remain volatile and the strong dollar continues to put pressure. The fed has indicated that they will be increasing interest rates, while the dollar value rises against the euro and yen, as those economies cannot keep up. It is expected that the strong dollar will keep inflation stable in the near future, while also making imports cheaper.
US consumer prices rebound, underlying inflation firming
U.S. consumer prices rebounded in February as gasoline prices rose for the first time since June, and there were also signs of small increase in underlying inflation pressures, which could keep a June interest rate increase on the table.
http://www.cnbc.com/id/102529573
http://www.cnbc.com/id/102529573
The middle class is on the decline in every state ... in size, anyway.
http://money.cnn.com/2015/03/24/news/economy/middle-class-smaller/index.html?iid=HP_LN
Since the year 2000, middle class households have decline in every state. As many state populations continue to grow, it's shocking to believe that only 51% of population is in the middle class, compared to the 70's when 61% of the households were in the middle class. Wisconsin had the largest drop of 5.8% while Wyoming on decreased by .3%. So which class are American household migrating towards? Actually, many have made their way to upper middle class. Signs are showing that our nation is becoming richer as the lower class also decrease by 3%. It will be interesting to see if this trend continues and what effect it will have on future policies.
Since the year 2000, middle class households have decline in every state. As many state populations continue to grow, it's shocking to believe that only 51% of population is in the middle class, compared to the 70's when 61% of the households were in the middle class. Wisconsin had the largest drop of 5.8% while Wyoming on decreased by .3%. So which class are American household migrating towards? Actually, many have made their way to upper middle class. Signs are showing that our nation is becoming richer as the lower class also decrease by 3%. It will be interesting to see if this trend continues and what effect it will have on future policies.
Monday, March 23, 2015
Asia’s About to Spawn a New Tiger Economy: Good Morning, Vietnam
PricewaterhouseCoopers have announced that they believe Vietnam will be one of the worlds fastest growing economies until 2050. The news comes at a time where China's growth is slowing and production there is becoming more expensive. Some firms like Samsung and Intel are investing plenty of money because of cheaper production costs. It is estimated that GDP will grow in Vietnam for years to come.
However, there are some issues. Banks in Vietnam are not the best and some could fail. The work being provided is very labor intensive and does not require much education. While it will be better for the people of Vietnam, it is not fully a step in the right direction. The government needs to make sure it takes all the right steps to ensure that its country takes advantage of these growth opportunities to give its citizens a better life. Interesting read.
http://www.bloomberg.com/news/articles/2015-03-22/asia-s-about-to-spawn-a-new-tiger-economy-good-morning-vietnam
However, there are some issues. Banks in Vietnam are not the best and some could fail. The work being provided is very labor intensive and does not require much education. While it will be better for the people of Vietnam, it is not fully a step in the right direction. The government needs to make sure it takes all the right steps to ensure that its country takes advantage of these growth opportunities to give its citizens a better life. Interesting read.
http://www.bloomberg.com/news/articles/2015-03-22/asia-s-about-to-spawn-a-new-tiger-economy-good-morning-vietnam
Sunday, March 22, 2015
April Fools?
Seattle’s minimum wage increased from $9.47 an hour to $11 starting April 1. The judge claims there is no evidence of negative impacts of such a decision and thus went against local franchise owners’ objections. The owners tried to reclassify franchises as small businesses since, they claim, they operate like small businesses more than as a large national chain. But workers claim franchises have resources small businesses do not have. Furthermore, Seattle is raising the minimum wage to $15 an hour by 2017 for large businesses.
Do you believe franchises should be viewed as small businesses? Even if they are, do you believe they should increase wages?
Another blog entry spoke about the Walmart increase in wage. Do you think this is related to what is happening in Seattle?
Germany new 30% rule for women on boards
In early March, the German parliament passed a new law that would require the largest companies in Germany to name women to 30% of seats on non-executive boards. This would increase the quota to 50% by 2018. Furthermore, many big companies in Germany have already met the quota while others severely lack representation of women on their boards. Smaller companies in Germany also have certain binding targets to increase the number of women on their boards. The quota also applies to senior leadership positions. Critics of the new law say that companies may give unqualified women positions to satisfy the requirements. On the other hand, people have said the new law does not do enough to fix the gender imbalance on boards. Norway has the best record for women since nearly 36% of board members are women. This is a stark contrast in Japan where only 3% of women are hold positions on boards but it is well known that female labor participation rate in Japan tends to be very low.
http://money.cnn.com/2015/03/06/news/women-boards-germany-30/index.html
http://money.cnn.com/2015/03/06/news/women-boards-germany-30/index.html
Mobile Payments: Unfriending cash
http://www.economist.com/news/finance-and-economics/21646802-facebook-enters-booming-market-mobile-payments-unfriending-cash
On March 17th, Facebook announced that in America its instant-messaging app will soon allow users to send each other money just as easily as texts and photos. All they need to do is link their debt cards to their Facebook account, tap on a dollar sign in the app, type in the amount, and press send.
Snapchat has also recently entered the market for free person-to-person (P2P) payments with a service called Snapcash. However, Facebook's service differs in the fact that it does not make instant payments. The money arrives after a few hours, or in some cases, even a few days. This is because money is not transferred between accounts managed by the social network but through conventional payment channels from one bank account to the other.
Facebook's new offering if proof that technology firms are moving onto banks' turf. Other examples include Apple's SmartWatch, Google's Softcard, and South Korea's Naver. If Facebook was to expand its offering internationally and make payment instant, the impact could be huge, especially because it would be able to overcome some of the logistical and regulatory challenges that banks face when serving customers across borders.
Do you think that technology firms and their payment apps will begin make banks more obsolete? What kind of impact do you foresee this technology having on an international scale?
On March 17th, Facebook announced that in America its instant-messaging app will soon allow users to send each other money just as easily as texts and photos. All they need to do is link their debt cards to their Facebook account, tap on a dollar sign in the app, type in the amount, and press send.
Snapchat has also recently entered the market for free person-to-person (P2P) payments with a service called Snapcash. However, Facebook's service differs in the fact that it does not make instant payments. The money arrives after a few hours, or in some cases, even a few days. This is because money is not transferred between accounts managed by the social network but through conventional payment channels from one bank account to the other.
Facebook's new offering if proof that technology firms are moving onto banks' turf. Other examples include Apple's SmartWatch, Google's Softcard, and South Korea's Naver. If Facebook was to expand its offering internationally and make payment instant, the impact could be huge, especially because it would be able to overcome some of the logistical and regulatory challenges that banks face when serving customers across borders.
Do you think that technology firms and their payment apps will begin make banks more obsolete? What kind of impact do you foresee this technology having on an international scale?
Lagarde says IMF to co-operate with China-led AIIB bank
Christine Lagarde, the International Monetary Fund Chief, has voiced her support of the new China-led AIIB (Asian Infrastructure Investment Bank), stating that IMF would be delighted to cooperate with this venture. The bank, established in 2014, has already gotten 30 members and the backing of some strong economies like Germany, England and Italy. Mrs. Lagarde also believed that the World Bank would likely to cooperate with AIIB. On the other side, the US has voiced its criticism of England for backing the venture, stating it serves as "a lever for China to extend its influence over the region".
In my opinion, the ground of United States's concern is ambiguous, and other countries supporting this newly formed bank could actually open up a lot of investments projects for countries in Asia, especially countries with not as developed infrastructre that desperate needs capitals. With or without the bank, China influence on the region is more or less already established. This looks more like a knee-jerk reaction from the US than actual concern.
Source: http://www.bbc.com/news/business-32007090
Thursday, March 19, 2015
Fed Governor Questions the ownership of Physical Commodities
Federal Reserve Governor Daniel Tarullo has raised concerns on whether investment banking institutions such as Morgan Stanley and Goldman Sachs should be allowed to own physical commodities. He believes that this practice exposes the banking institutions to non traditional risks and thus breaches "the wall between banking and commerce."
Mr. Tarullo's concerns arise from the 1999 Gramm-Leach- Bliley law. This law ended the separation of investment and deposit-taking firms. This law grandfathered commodities that Morgan Stanley and Goldman Sachs had before 1997.
Mr. Tarullo thinks that these two firms should be treated just like all other bank holding companies, as these two companies were securities firms until they became bank-holding companies during the 2008 crisis.
"While the Fed can't change laws, it can make commodities ownership more onerous for banks by requiring them, for example, to hold more capital or disclose more information about the activities."
Amid Fed and lawmaker pressure and declining commodity prices,Wall Street firms have been exiting the physical commodities business.
Mr. Tarullo's concerns arise from the 1999 Gramm-Leach- Bliley law. This law ended the separation of investment and deposit-taking firms. This law grandfathered commodities that Morgan Stanley and Goldman Sachs had before 1997.
Mr. Tarullo thinks that these two firms should be treated just like all other bank holding companies, as these two companies were securities firms until they became bank-holding companies during the 2008 crisis.
"While the Fed can't change laws, it can make commodities ownership more onerous for banks by requiring them, for example, to hold more capital or disclose more information about the activities."
Amid Fed and lawmaker pressure and declining commodity prices,Wall Street firms have been exiting the physical commodities business.
Wednesday, March 18, 2015
Puerto Rico's Governor Proposes 16% Value-Added Tax
Recently, the Governor of the U.S. Commonwealth of Puerto Rico proposed a 16% Value-Added Tax. This tax would see the dissolving of an income tax as well as the deductions and credits that go along with it. Puerto Rico has heavy debt and its economy has been near or in recession standing for the past 8 years. Governor Alejandro Garcia Padilla sees the poor economic situation's cause as the failure to collect a significant amount of Puerto Rico's taxes.
This value-added tax looks to charge based on consumption not productivity or income. As a result, getting around paying this tax is near impossible. Under this system Padilla hopes to lower the debt the island has taken on and increase tax revenues.
What issues or benefits can you see if this proposed tax reform is passed?
Who does it harm or benefit? Puerto Ricans or Visitors to the Island?
Source:http://www.reuters.com/article/2015/03/09/usa-puertorico-tax-idUSL1N0WB2HX20150309
This value-added tax looks to charge based on consumption not productivity or income. As a result, getting around paying this tax is near impossible. Under this system Padilla hopes to lower the debt the island has taken on and increase tax revenues.
What issues or benefits can you see if this proposed tax reform is passed?
Who does it harm or benefit? Puerto Ricans or Visitors to the Island?
Source:http://www.reuters.com/article/2015/03/09/usa-puertorico-tax-idUSL1N0WB2HX20150309
Tuesday, March 17, 2015
Following the money
A strategic rivalry has been ignited between the United States and China involving the AIIB (Asian Infrastructure Investment Bank). Traditional US allies have backed China in creating this new bank that will help develop infrastructure in Asia. Britain, France, and Germany have all shown desires to be founding members of the bank, while some US allies have stayed true to the US. Some believe China is trying to side step the United States as the IMF is going through reform in the United States Congress. The United States also has control over the World Bank, so for China to be in control of it's own development bank would be huge. China is having difficulties securing funding for it's infrastructure projects, a problem that resulted from it's huge economic rise over the past few years.
This could show the fall of the United States power over other nations.
http://www.economist.com/news/asia/21646629-development-finance-helps-china-win-friends-and-influence-american-allies-following-money
This could show the fall of the United States power over other nations.
http://www.economist.com/news/asia/21646629-development-finance-helps-china-win-friends-and-influence-american-allies-following-money
Housing starts collapse but it's not the end of the world
Amidst much hope for a recovering economy February marked one of the roughest months for real-estate in a long time. During the month of February housing starts fell 17% to an annualized pace of 987,000 widely missing expectations according to business insider.com. Although housing starts fell by 17% building permits increased 3% to a pace of 1.092 million which exceeded estimates.
Although this is a negative sign for the economy one can not ignore the winter the eastern half of the United States has faced this winter. With Boston and much of New England experiencing record breaking snowfall we could only expect a standstill in production. It is a good sign that although the weather would slow down building starts, building permits did increase by 3%. I would take this information with a grain of salt. I believe once spring commences we will see a large pickup in housing starts throughout the United States as well as a rebound in the real estate market in the coming months.
http://www.businessinsider.com/february-housing-starts-march-17-2015-3
Although this is a negative sign for the economy one can not ignore the winter the eastern half of the United States has faced this winter. With Boston and much of New England experiencing record breaking snowfall we could only expect a standstill in production. It is a good sign that although the weather would slow down building starts, building permits did increase by 3%. I would take this information with a grain of salt. I believe once spring commences we will see a large pickup in housing starts throughout the United States as well as a rebound in the real estate market in the coming months.
http://www.businessinsider.com/february-housing-starts-march-17-2015-3
Monday, March 16, 2015
Federal Debt
The FOMC is going to start increasing its target Federal Funds rate in the near future. The likely result is that investors, who have become accustomed to an environment in which they can't buy risk-free assets unless they agree to earn virtually nothing on them, will start looking for a higher yield. That means that as the U.S. Treasury issues more debt and rolls over existing obligations, the price it has to pay will start to rise.
To be clear, absent a highly unlikely economic catastrophe, interest rates are expected to remain at historically low levels for a considerable time to come. That said, as they rise, the consequences for the federal budget are fairly dramatic.
http://www.cnbc.com/id/102499815
Industrial Zone Shifts East in Europe
The industrial zone of Europe once coined the "blue banana" has shifted over to Germany. The "blue banana" encompassed England to Italy, through the Netherlands and West Germany. A more modern term, the "golden football" reflects the shift on the industrial zone with a Germany centered location. With this shift the former communist nations joined the EU in 2004 and are partially the reason why the shift occurred. These nations are now manufacturing cars and some machinery while before they were only suppliers of raw material.
As a result of this shift a number of countries are experiencing loss of trade, while "golden football" countries are experiencing increases. Some of the reasons explained by the article state a change in type of businesses in some companies. For example England has shifted towards more business services than industrial. What are some other reasons you believe this shift has occurred? What are the implications of this shift for Europe?
Source:http://www.nytimes.com/2015/03/17/business/international/industrial-zone-shifts-east-in-europe.html?ref=international&_r=0
As a result of this shift a number of countries are experiencing loss of trade, while "golden football" countries are experiencing increases. Some of the reasons explained by the article state a change in type of businesses in some companies. For example England has shifted towards more business services than industrial. What are some other reasons you believe this shift has occurred? What are the implications of this shift for Europe?
Source:http://www.nytimes.com/2015/03/17/business/international/industrial-zone-shifts-east-in-europe.html?ref=international&_r=0
Will Hillary Clinton Follow Democrats on Capital Gains?
http://www.nytimes.com/2015/03/14/upshot/will-hillary-clinton-follow-democrats-on-capital-gains.html?ref=economy&abt=0002&abg=1
"In a debate in April of that year, Mrs. Clinton said she would not raise the capital gains rate above 20 percent “if I raised it at all.” At the time, the top rate was 15 percent, as a result of the Bush tax cuts. Ms. Clinton’s position was in line with the economic policies of Bill Clinton’s administration, which called for much higher tax rates on wage income than capital income for high earners. In 1997, Mr. Clinton signed a law that cut the top capital gains tax rate from 28 percent to 20; in 1993, he had raised the top tax rate on ordinary income from 31 percent to 39.6 percent, and imposed aMedicare tax on high earners that effectively pushed their top tax rates above 40." ..."Economists tend to advocate lower taxes on capital on the grounds that investors are more likely to be driven away by high taxes than workers are, and because much capital income is subjected to corporate income tax before the capital gains tax is applied."
"In a debate in April of that year, Mrs. Clinton said she would not raise the capital gains rate above 20 percent “if I raised it at all.” At the time, the top rate was 15 percent, as a result of the Bush tax cuts. Ms. Clinton’s position was in line with the economic policies of Bill Clinton’s administration, which called for much higher tax rates on wage income than capital income for high earners. In 1997, Mr. Clinton signed a law that cut the top capital gains tax rate from 28 percent to 20; in 1993, he had raised the top tax rate on ordinary income from 31 percent to 39.6 percent, and imposed aMedicare tax on high earners that effectively pushed their top tax rates above 40." ..."Economists tend to advocate lower taxes on capital on the grounds that investors are more likely to be driven away by high taxes than workers are, and because much capital income is subjected to corporate income tax before the capital gains tax is applied."
Sunday, March 15, 2015
Turkey's lowering currency
The cost of imported goods is rising because of the falling
currency, which is causing inflation to rise. As the Turkish central bank is
determine to stabilize the currency the president Mr. Erdogan is desperate for
growth to increase since and election is approaching. There has been an ongoing
battle between the central bank and Erdogan because of contradicting views and
accusations, but the facts still show a declining currency due that may have
some influence of Mr. Erogan ideas.
American Class Perceptions
http://blogs.wsj.com/washwire/2015/03/15/american-class-perceptions-weather-economic-storm/?mod=WSJ_hp_LEFTTopStories
"American Class Perceptions Weather Economic Storm"
Two take-aways from this article
1) Most Americans continue to see themselves as middle-class or within reach of middle class status
2) Most Americans do not understand inflation or the perception of what real income level needed to be in the middle class changed (I think they might both be true)
The article re-asked segments of American society where they think they are in the economic distribution, and how they felt about the state of the middle class in general.
"American Class Perceptions Weather Economic Storm"
Two take-aways from this article
1) Most Americans continue to see themselves as middle-class or within reach of middle class status
2) Most Americans do not understand inflation or the perception of what real income level needed to be in the middle class changed (I think they might both be true)
The article re-asked segments of American society where they think they are in the economic distribution, and how they felt about the state of the middle class in general.
Saturday, March 14, 2015
Growing Size of Firms May Help to Explain Rising Inequality
The article relates income inequality with rising size of
firms. As firms grow bigger they can achieve economies of scale that allow
their workers to be more productive resulting in higher pay. Therefore, at big
companies a bathroom cleaner and a top executive should have higher pay than
their counterparts in smaller firms. However, the benefits of scale are not
shared equally among all workers as there is a rising gap in wages of top
executives from the bottom as the firm size increases. Thus, only the senior
workers enjoy benefit of scale because of their skill sets. Moreover, the number
of workers employed by 100 biggest firms rose by 53% between 1986 to 2010 resulting
in greater wage disparity, and income inequality.
One solution the article proposes is to spur competition
by removing barriers to entry to smaller firms. This will distribute workers to
smaller firms which will reduce income inequality, and boost economic growth.
What do you think?
Lending to poor farmers: Seeding the market
http://www.economist.com/news/finance-and-economics/21646267-non-profit-proves-rural-collectives-make-safe-and-profitable
The article begins with a short story about a man named Mr. Foote, founder of Root Capital, who quit his job as a Wall Street analyst and lent $73,000 to a coffee co-operative in Guatemala that has since expanded to 25 countries in Latin America, Africa, and Indonesia. Essentially, Mr. Foote's business is lending to the owners of small farms in poor countries. An estimated 450 million of these smallholdings exist worldwide, providing a subsistence-at-best income for more than 2 billion of the poorest people on the planet.
Mainstream finance has largely ignored this group of 2 billion people. They face hardships including poor land quality, lack of infrastructure, and a constant threat of extreme weather. The lack of access to credit for working capital and investment makes these hardships worse.
Both microcredit outfits that deal in tiny loans as well as businesses such as Mr. Foote's, which deal in larger loans, are proving that the poorest of the poor can be perfectly responsible borrowers. In fact, the company says that less than 3% of its loans go bad.
Mr. Foote's loans come with free advice and training in how to best use the money, increasing productivity as well as income for the various farmers. The money also protects the farmers from having to sell their wares cheaply to the first available buyer. More than half of Mr. Foote's borrowers see their income increase by at least 20% a year after receiving a loan; it rises by over 50% for nearly a third of them.
Mr. Foote's company offers credit and technical advice to roughly 550 borrowers. In February, its portfolio of loans reached $100 million for the first time. The cumulative total of loans the company has made since 1999 is expected to pass $1 billion later this year. Mr. Foote's company has capitalized on the growing enthusiasm for sustainably farmed or organic goods among consumers in the rich world. The company itself is a non-profit. Foote believes that since the company has proven itself as viable, private investors will buy in. Most of Foote's company's loans of $350,000 or more (roughly 25% of its portfolio) are profitable at interest rates of no more than 13% per year.
I found this article to be both interesting as well as inspiring. I feel that it attests to the potential of economics on a global scale while demonstrating work towards income equality through investments and loans.
The article begins with a short story about a man named Mr. Foote, founder of Root Capital, who quit his job as a Wall Street analyst and lent $73,000 to a coffee co-operative in Guatemala that has since expanded to 25 countries in Latin America, Africa, and Indonesia. Essentially, Mr. Foote's business is lending to the owners of small farms in poor countries. An estimated 450 million of these smallholdings exist worldwide, providing a subsistence-at-best income for more than 2 billion of the poorest people on the planet.
Mainstream finance has largely ignored this group of 2 billion people. They face hardships including poor land quality, lack of infrastructure, and a constant threat of extreme weather. The lack of access to credit for working capital and investment makes these hardships worse.
Both microcredit outfits that deal in tiny loans as well as businesses such as Mr. Foote's, which deal in larger loans, are proving that the poorest of the poor can be perfectly responsible borrowers. In fact, the company says that less than 3% of its loans go bad.
Mr. Foote's loans come with free advice and training in how to best use the money, increasing productivity as well as income for the various farmers. The money also protects the farmers from having to sell their wares cheaply to the first available buyer. More than half of Mr. Foote's borrowers see their income increase by at least 20% a year after receiving a loan; it rises by over 50% for nearly a third of them.
Mr. Foote's company offers credit and technical advice to roughly 550 borrowers. In February, its portfolio of loans reached $100 million for the first time. The cumulative total of loans the company has made since 1999 is expected to pass $1 billion later this year. Mr. Foote's company has capitalized on the growing enthusiasm for sustainably farmed or organic goods among consumers in the rich world. The company itself is a non-profit. Foote believes that since the company has proven itself as viable, private investors will buy in. Most of Foote's company's loans of $350,000 or more (roughly 25% of its portfolio) are profitable at interest rates of no more than 13% per year.
I found this article to be both interesting as well as inspiring. I feel that it attests to the potential of economics on a global scale while demonstrating work towards income equality through investments and loans.
Seattle Restaurants
http://www.seattlemag.com/article/why-are-so-many-seattle-restaurants-closing-lately
Seattle just set a new minimum wage requirement of $15 for all employees, and it seems this among other factors is having a major effect on restaurants in the area. While the article does discuss location and other factors in restaurant closures, this doesn't seem to go too far beyond the norm (as the article states, throughout the country roughly 60,000 restaurants open each year and 50,000 close) for shutdowns. The only real new factor is the wage increase requirements, which make the average small restaurant unprofitable due to labor costs.
This is interesting too in that it provides some data on restaurant shutdowns that translates to Delaware as well -- namely that the ones that survive are based primarily on establishing a group of regulars. Considering how many restaurants in Delaware go in and out of business, with Hamburger Inn and a few others surviving consistently, this likely explains the majority of the restaurants around here.
All in all, the new minimum wage in Seattle already seems to be having an effect (as people close restaurants before they become unprofitable), and the good and bad effects in the future are something worth watching.
Seattle just set a new minimum wage requirement of $15 for all employees, and it seems this among other factors is having a major effect on restaurants in the area. While the article does discuss location and other factors in restaurant closures, this doesn't seem to go too far beyond the norm (as the article states, throughout the country roughly 60,000 restaurants open each year and 50,000 close) for shutdowns. The only real new factor is the wage increase requirements, which make the average small restaurant unprofitable due to labor costs.
This is interesting too in that it provides some data on restaurant shutdowns that translates to Delaware as well -- namely that the ones that survive are based primarily on establishing a group of regulars. Considering how many restaurants in Delaware go in and out of business, with Hamburger Inn and a few others surviving consistently, this likely explains the majority of the restaurants around here.
All in all, the new minimum wage in Seattle already seems to be having an effect (as people close restaurants before they become unprofitable), and the good and bad effects in the future are something worth watching.
Thursday, March 12, 2015
U.S. Banks Pass Stress Tests, Some With an Asterisk
Bank of America, the nation’s second-largest bank by assets afterJPMorgan Chase, passed only provisionally and could still fail later this year if it does not fix deficiencies that the Fed identified. The Fed said that Bank of America stumbled this year because it had shown weaknesses in its internal controls and in how it had projected losses and revenue in the tests. Citigroup passed this year, a result that will come as relief to its top managers, who faced criticism after the Fed failed the banking giant in 2014 for having a deficient disaster plan.JPMorgan, Goldman and Morgan Stanley had to change their plans to pay out capital to pass the tests. After the stress test results came out, Morgan Stanley announced a plan to buy back $3.1 billion of common stock. “Today’s actions reflect the hard work of our employees over the last several years as we have been executing our strategic priorities,” James P. Gorman, Morgan Stanley’s chief executive, said in a statement.
Tuesday, March 10, 2015
Car Hub Project to Spur Philippine Manufacturing
http://www.bloomberg.com/news/articles/2015-03-10/car-hub-project-to-spur-philippine-manufacturing-southeast-asia
Philippines, one of Asia's fastest growing economies is aiming at becoming the region's car production hub. And to achieve this the Philippines will offer tax breaks to 3 automakers.
However, car makers will need to meet the minimum production levels of 40,000 vehicles fully built in the country to be eligible for the tax breaks.
The tax breaks will be implemented by the CARS(Comprehensive Automotive Resurgence Strategy) program. The CARS program is projected to save around $17 billion in import costs by 2022. This program will benefit both the government and the private sector.
"The Philippines is seeking to replicate Thailand's success in building its auto industry, betting that a young workforce and its biggest economic boom since the 1950s will lure companies such as Volkswagen and AG."
The Philippines government is also increasing its spending on road & airport development and maintenance, as this will increase FDI and could lead to a growth by 8%.
The Philippines claim of not competing with Thailand in car production but have a vision of being the regional mass producer. Do you think the CARS program will be a successful model?
Philippines, one of Asia's fastest growing economies is aiming at becoming the region's car production hub. And to achieve this the Philippines will offer tax breaks to 3 automakers.
However, car makers will need to meet the minimum production levels of 40,000 vehicles fully built in the country to be eligible for the tax breaks.
The tax breaks will be implemented by the CARS(Comprehensive Automotive Resurgence Strategy) program. The CARS program is projected to save around $17 billion in import costs by 2022. This program will benefit both the government and the private sector.
"The Philippines is seeking to replicate Thailand's success in building its auto industry, betting that a young workforce and its biggest economic boom since the 1950s will lure companies such as Volkswagen and AG."
The Philippines government is also increasing its spending on road & airport development and maintenance, as this will increase FDI and could lead to a growth by 8%.
The Philippines claim of not competing with Thailand in car production but have a vision of being the regional mass producer. Do you think the CARS program will be a successful model?
“The Dollar is Crushing Other Currencies”
The U.S. dollar has appreciated significantly, now at a 12
year high against the euro and an 8 year high against the yen. This is deemed mostly as a result of
the U.S.’s superior emergence out of the recession compared to most of the
world. People planning to travel
internationally or purchase foreign produced goods in the near future welcome
the news, since foreign goods become relatively cheaper when the dollar appreciates. However, investors have a different
reaction. Companies who rely on
sales in international markets will experience poor currency translation, which
will hurt their overall revenue. Investors
are expecting the companies to present weak quarterly reports because of this,
and are selling their stocks now. Also,
American companies, such as Ford for example, will find it tough to compete
with foreign manufacturers, since their cars are now relatively expensive due
to the appreciation of the dollar.
Is this good news, or do the negatives outweigh the positives?
http://money.cnn.com/2015/03/10/investing/strong-dollar-pros-cons/index.html?iid=HP_LN
Oil Prices
http://www.economist.com/news/business-and-finance/21646096-price-oil-has-bounced-recovery-some-way-dead-cat-bounce
Recently, because of the high demand for oil, the prices have increased dramatically. According to the article, some of the factors causing the spike in the oil prices are temporary. Also according the the article, Americans are wanting more and more gas guzzilling cars. Because of the demand for these gas guzzilling cars, there will be a surge in demand for energy, but not for awhile. The article concludes with the idea that it will be at least 5 months before oil prices become stable again.
Recently, because of the high demand for oil, the prices have increased dramatically. According to the article, some of the factors causing the spike in the oil prices are temporary. Also according the the article, Americans are wanting more and more gas guzzilling cars. Because of the demand for these gas guzzilling cars, there will be a surge in demand for energy, but not for awhile. The article concludes with the idea that it will be at least 5 months before oil prices become stable again.
Sunday, March 8, 2015
Brazil curbing inflation.
Brazil's stalled growth is causing high inflations. Despite political opposition the countrys president, Rousseff, is cutting spending and raising taxes in order to lower the deficit. The article mentions another issue that I wrote about in a blog entry: The Petrobras corruption scandal. The currency is also falling to a low. How will Brazil recover from this “trip?” Will they be able to move on and regain their growth?
http://www.bbc.com/news/business-31744918
US economy adds 295,000 jobs in February
According to the article, this February marked the longest streak of the U.S economy generating more than 200,000 jobs per month since 1994 at 12 consecutive months. Situation has been getting more and more positive, as unemployment rate drops down to 5.5% compared to the peak of 10%. Additionally, average wage has also rose slightly. All in all, the labor market in the U.S has been getting better and better, alongside other good economic signals of a recovery.
In my opinion, i know many economists and market players are still highly skeptical of this recovery but for the past year or so the economy has been steadily climb up, employment rate decreasing at a stable rate and there have been more positives every day. The stronger dollar, while also being a byproduct of weakened yen and euros, are also a good indicator of U.S economy getting back on its feet. I think we can expect the U.S economy to return to the way it was in a few years given its current rate, and I don't think the same mistake in 2008 would reappear anytime soon.
Sources: http://www.bbc.com/news/business-31768388
In my opinion, i know many economists and market players are still highly skeptical of this recovery but for the past year or so the economy has been steadily climb up, employment rate decreasing at a stable rate and there have been more positives every day. The stronger dollar, while also being a byproduct of weakened yen and euros, are also a good indicator of U.S economy getting back on its feet. I think we can expect the U.S economy to return to the way it was in a few years given its current rate, and I don't think the same mistake in 2008 would reappear anytime soon.
Sources: http://www.bbc.com/news/business-31768388
Thursday, March 5, 2015
Americans Aren’t Saving Enough for Retirement, but One Change Could Help
This article begins to explain how Americans aren't saving enough present day. The likelihood of running out of money during retirement is very high. Yes, they may have a large sum of money saved up, on average an average family will have about $104,000, to live the life that they are accustomed to living before retirement. In the article they suggests that working adults need to put more money aside in investments in order to be well supplied for retirement. In turn, they blame Wall Street for this struggle. But they are right. With Social Security funds pretty much disappearing then people are being forced to take the responsibility on their shoulders and invest and its inevitable. ""The goal: to get Americans to put their money in low-cost index funds." I agree.
http://www.nytimes.com/2015/03/04/business/americans-arent-saving-enough-for-retirement-but-one-change-could-help.html?ref=economy
http://www.nytimes.com/2015/03/04/business/americans-arent-saving-enough-for-retirement-but-one-change-could-help.html?ref=economy
Wednesday, March 4, 2015
Happiest Global Economies?
http://www.bloomberg.com/news/articles/2015-03-03/the-15-happiest-economies-in-the-world
This week Bloomberg calculated the "misery index". As one can assume, this composite index contains measurements from inflation to unemployment that cause negative utility to consumers. Thailand and Switzerland were deemed the least miserable countries. The United States placed eighth. Bloomberg credited unemployment as the reason that the United States did not "medal" in their rankings. Denmark also had a very strong showing in sixth place, followed by China. Denmark is forecasted to lead the world in GDP per capita this year at a whopping $67,619. Thailand's place at the top was surprising, but this was due to an unemployment rate of under 1%. Additionally, this low unemployment rate has failed to initiate inflation. If you are interested, Venezuela was ranked as the most miserable country.
I found the title of this article slightly misleading. It was titled "The 15 Happiest Economies in the World", but this ranking was based off of the lowest countries in the "misery index". This backward system appears to be ranking countries as the least worst. While I question the system, these figures can be extended to our study of growth as an outcome of an economic system. The traditional indicators do not capture well-being or happiness. For example Bhutan is using a gross national happiness index (GNH) as an indicator of progress in an economy. There definitely is room to explore factors that indicate genuine progress and well-being that are not captured by GDP. What do you think?
This week Bloomberg calculated the "misery index". As one can assume, this composite index contains measurements from inflation to unemployment that cause negative utility to consumers. Thailand and Switzerland were deemed the least miserable countries. The United States placed eighth. Bloomberg credited unemployment as the reason that the United States did not "medal" in their rankings. Denmark also had a very strong showing in sixth place, followed by China. Denmark is forecasted to lead the world in GDP per capita this year at a whopping $67,619. Thailand's place at the top was surprising, but this was due to an unemployment rate of under 1%. Additionally, this low unemployment rate has failed to initiate inflation. If you are interested, Venezuela was ranked as the most miserable country.
I found the title of this article slightly misleading. It was titled "The 15 Happiest Economies in the World", but this ranking was based off of the lowest countries in the "misery index". This backward system appears to be ranking countries as the least worst. While I question the system, these figures can be extended to our study of growth as an outcome of an economic system. The traditional indicators do not capture well-being or happiness. For example Bhutan is using a gross national happiness index (GNH) as an indicator of progress in an economy. There definitely is room to explore factors that indicate genuine progress and well-being that are not captured by GDP. What do you think?
China's big chess move against the U.S: Latin America
http://money.cnn.com/2015/03/04/news/economy/china-latin-america-relations-united-states/index.html
Over the past year, Chinese banks have increased their investments in Latin America by 71% and the country plans to double its trade volume with the region over the next decade. China has also helped to fund Argentina's nuclear power plant, Bolivia's first satellite, and more. This relationship is beneficial to Latin America and China because Latin American countries badly need cash and China wants more economic influence with countries near the U.S. However, there are some signs that the China-Latin America relationship is starting to strain. The demand for goods in China, paired with the end of the commodity boom is slowing economic ties, but China is committed to a long-term relationship.
I think it is important that the US invests more in Latin America. Over the last ten years, US investment in Latin America has gone down while investment in Asia has skyrocketed. It is important the US finds an appropriate balance between the two, so that we keep our allies closer to home.
Over the past year, Chinese banks have increased their investments in Latin America by 71% and the country plans to double its trade volume with the region over the next decade. China has also helped to fund Argentina's nuclear power plant, Bolivia's first satellite, and more. This relationship is beneficial to Latin America and China because Latin American countries badly need cash and China wants more economic influence with countries near the U.S. However, there are some signs that the China-Latin America relationship is starting to strain. The demand for goods in China, paired with the end of the commodity boom is slowing economic ties, but China is committed to a long-term relationship.
I think it is important that the US invests more in Latin America. Over the last ten years, US investment in Latin America has gone down while investment in Asia has skyrocketed. It is important the US finds an appropriate balance between the two, so that we keep our allies closer to home.
Saturday, February 28, 2015
Greek Energy Official Opposes Privatization
Greece has been worried about how they are going to finance their debts. Therefore, Greece has been trying to rebuild its economy to pay off creditors. Creditors are pushing for more privatization. Greece's energy minister does not want privatization in energy, which includes, public gas, state controlled electricity, oil and the power grid. However, stakes in these companies had already been promised to private bidders. “The Greek economic plan approved by eurozone finance ministers…promised not to roll back any privatization project already in the works.”
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