Inflation in Moldova

Moldova is currently in the midst of an energy crisis. Prices of energy have been rising and Moldova receives almost all of their energy supply in gas supplied by a Russian company, however only 67% of their gas needs are being satisfied. Because of this Moldova's parliament declared a state of emergency to secure more. Negotiation attempts with the Russian company have been made but were unsuccessful. Moldova even accused Moscow of intentionally undersupplying them but Russia denies doing anything intentionally. The state of emergency allows Moldova to look towards other European countries for their energy supply. The rising energy prices combined with the global supply chain issues and pandemic recovery has resulted in rising costs for most products in the economy. Food prices have been effected the most rising by 8.3% compared to the 6.7% inflation rate. This was unexpected by the National Bank of Moldova and they are scrambling to react appropriately. The inflationary pressures are on the demand side so they have raised their interest rate from 4.65% to 5.5% to discourage borrowing and encourage savings. They do not expect a quick recovery and fear the inflation rate may exceed 10%. Moldova relies heavily on foreign aid and are again looking for outside assistance to  stabilize them through this crisis.

https://www.euronews.com/2021/10/22/europe-s-energy-crisis-moldova-declares-state-of-emergency-over-gas-prices

Australia and Climate Change

Australia, a nation among the developed, is currently one of the most prime advocators of coal and fossil fuels. Prime Minister Scott Morrison, from the Liberal Party, is a conservationist who is still stuck in the past with supporting and subsidizing coal mining and fossil fuels extraction.

He has only recently agreed to attend the UN Climate Conference in Scotland, and that was not without criticism from Queen Elizabeth II and mocking from a billboard in Times Square.

Australia is currently the largest exporter of coal and has suffered among the most from wild fires. But still, Australia doesn't have any concrete plans for working towards curbing climate change, whereas other developed nations all have pledged in some manner to reduce emissions by 2050, or even 2030! The Liberal Party and the National Party have used coal as their political agenda.

And as much as I hate to say this, because I am from India, Adani, one of India's largest industrialist, is looking to invest in Australia to build the world's largest coal mine. And the current Australian government is ready to provide subsidies for this investment to happen.

Australia, is like a black mole, because it is becoming the sole reason for negating other developed nations' climate change efforts. It is not only slowing other countries' efforts, but also pulling their efforts because only when everyone work together does any real change take place quickly.

Article: https://www.nytimes.com/2021/10/21/world/australia/australia-coal-fossil-fuel-carbon.html

Interest rate cuts in Turkey

Turkey has been suffering with severe inflation, where people are complaining and crying about how they will feed their children if the prices keep rising. While this is happening, Turkey’s central bank announced a bigger-than-expected interest rate cut. Opposition parties and the people are really concerned and questioning the independence of the central bank. Opposition leaders have condemned this action. Meral Aksener, head of the country’s third largest opposition party, called it “an irrational decision made by a frivolous government through an unqualified bureaucrat.” With all this going on, Lira has hit an all time low with this action. It is now at 9.49 against the US dollar. This year alone, Lira has lost 20% of its value. Import companies were already at a verge of bankruptcy when the Lira was at 8 against the US dollar, now it is even harder to continue business and pay off debt. This interest rate cut has triggered a chain reaction and caused a shift in related economic behaviors. This entire situation is reminding people of the inflationary cycle that gripped in the 1990s. Signs indicate that turkey is going towards a breaking point. When the inflation is already 5 times the target value, interest rate cuts don't make sense. It will eventually increase the long term interest rates. This action is a lot of risk and not consistent with the macro economic fundamental. Is the central bank really independent in Turkey or the people claiming it to be influenced by the ruling party is true. 

source:

https://www.aljazeera.com/economy/2021/10/21/as-turks-wrestle-with-inflation-central-bank-cuts-rates-again

Scrapped Plans for Free Community College in the U.S.

 In the U.S. Congress, the passage of the 2 major infrastructure bills has been halted as internal debates inside the Democratic party continue. A major concern by one of the senators is the enormous price tag of the larger bill of $3.5 trillion. In these debates, there are concessions being made to substantially lower the spending in this bill to make it more palpable for more fiscally conservative members.

One of the major pieces of this bill that has now been taken out is the spending allocated for free community college. This section would have guaranteed paid community college for people of color and low income to have a chance at higher education. However, this piece of legislation will be cut out to ensure that the rest of the bill can pass with all Democrats on board.

In my opinion, this was one of the most important pieces of this bill as higher education is extremely important for future prosperity of the United States. More well educated workers can encourage more businesses to keep their operations in the US as they can better guarantee the quality of their products. This can also lead to more innovative products to be invented domestically to give US companies an advantage in the global market. There are societal issues that could have been addressed as well. Income discrimination is a fundamental problem in the United States as systems in place make it harder for people of color to climb up in the social hierarchy. One of those systems is in our education as it is one of the best ways to climb out of poverty. Higher levels of education ensures better employment and higher wages to provide for their families. But the extremely high price for higher education has only raised the barrier to entry. Without free community college, there will be no incentive for the free markets to correct this market failure as there is no economic benefit in doing so.

Credit: https://www.nbcnews.com/politics/congress/democrats-abandon-free-community-college-white-house-warns-social-safety-n1281939

How Banks will Respond as Interest Rates Rise

As the economy is getting back to pre-pandemic levels we are going to see the interest rates rise fairly quickly by the time 2022 rolls around. There is going to be an extremely large change in mortgages over the coming months, but the question is just how big?

According to the Mortgage Bankers' Association, there is going to be approximately a 33% decline in mortgage originations. This is due to the fact that they also predict that interest rates will rise to 4%. Interest rates right now are sitting around 3%. The interest rates are going to increase drastically in a very short period of time according to their projections. They also project that this will result in a 62% decrease in refinances. 

Due to a large decrease in mortgages being taken out, lenders are going to have to look at other options to make up some of this lost revenue. One of the suggestions made by Marina Walsh was for these lenders to focus more on their servicing business. 

Source: https://www.cnbc.com/2021/10/18/real-estate-mortgage-originations-will-drop-33percent-in-2022-as-interest-rates-rise.html 

China's Power Shortage

 China is undergoing a rough economic patch at the moment. Their steel mills are having power cuts, property companies are purchasing less construction material, and the country is also under more floods as of recently. China is still growing but at a slower rate than they were last year from 4.9 percent to 7.9 percent. China's industrial output has not been very good as it put up numbers last quarter more similar to when the pandemic first hit. 

The Chinese government has recently put a limit on energy use. This is stemming from concern with climate change and also income inequality in China. This has backlashed on China as the industrial side of the country is short on power and now burning coal, which goes against one of the reasons they have for limiting energy use in the first place.

https://www.nytimes.com/2021/10/17/business/economy/china-economy-gdp.html

Retail Sales Rise in September Better Than Expected

 https://www.usnews.com/news/economy/articles/2021-10-15/retail-sales-rise-in-september-better-than-expected

As we get closer to the holidays, it is expected to see rises in retail sales. This article discusses how retail rates rose by 0.7% in September which was higher than expected. After a 0.9% increase in August, economists predicted a drop of about 0.2% due to consumers being "skittish" about the delta variant and the rising inflation. One of the top contributors were food and gasoline. Gasoline sales were up 38.2% from a year ago and food service establishments saw an increase of 29.5%. They suspect that this is due to students returning to school and workers returning to the office played a role in the increase in gas sales and food sales. With people returning to work, it likely means that most of those people will be going to food establishments for lunch, thus increasing the sales. 

The article goes further to discuss how it is expected that sales increase into October with the spending for Halloween and then holiday shopping. It continues to be somewhat of a concern as to how the economy will perform during the holiday months due to the delta variant, labor and material shortages, and rising prices for many products. The reach of the coronavirus has proved to be more pervasive than expected earlier this year which has resulted in global supply chains which has been one of the biggest unexpected results. Additionally, this has caused bottlenecks of key components used across the economy from housing to auto production and has, in turn, raised prices.

What do you think will happen with retail sales with the supply shortages and the holidays being impacted by covid?

Americans were kidnapped in Haiti

 This morning American missionaries were kidnapped somewhere in Haiti. Seventeen people including children snatched by gangsters. One of the kidnapped messaged for help n a WhatsApp group. This happened in Port-au-Prince, the capital of Haiti. Haiti is the poorest country in the western hemisphere. Thousands of people leaving their homes in recent months and seeking safety at the U.S. border. In July of this year, the country’s president Jovenel Moise was assassinated in his home. With the government divided and the economy cratering, most of Port-au-Prince has fallen to armed gangs. In this chaos, kidnapping became a huge business. Men, women, and children were snatched at gunpoint for a little as a hundred dollars. At least 328 people were kidnapped in the first eight months of 2021, according to UN data. In my opinion, the UN should send the military to Haiti in order to stop this chaos.

LA port to open round the clock to tackle shipping queues

As Christmas approaches, businesses especially small to midsized businesses are getting concerned due to the global supply chain issue since most of them do not have huge warehouses to store goods. As retailers rushed to restock their inventories from Asia, the shipping system struggled to keep up. As a response, the Port of Los Angeles in California, one of the largest ports in the United States, will start operating 24 hours a day to handle more goods at night after a similar move by the nearby Long Beach port.
            So how did this happen? The Covid-19 pandemic is definitely at the bottom of the problem. As the center of manufacture, China exports around $2000 billion every year. The shutdowns of factories and ports in China led to shortages of children's toys, timber, new clothes, and pet food in the U.S. and elsewhere, while also pushing up consumer prices. What made the situation worse is that the shortage of labor in the U.S. resulted in the lack of lorry drivers and port staff to unload and deliver the goods when ships reach the ports. Therefore, containers are getting stacked up and ships are getting congested in ports. For example, on one day in September, a record 73 ships were forced to queue outside for a berth in the Los Angeles port. It had to move 30% more shipping containers than usual in August, while Long Beach moved an extra 23%. The shortage of drivers also means that there is a delay in returning empty containers for re-use, which further exacerbates the situation because it not only drives up the shipping fees that businesses have to pay but also causes a longer-than-usual delivery period of the goods.
            Besides major ports picking up night shifts to reduce their empty container stocks with the help from Walmart, UPS, FedEx, Samsung, The Home Depot, and Target, the White House has been making attempts to tackle the supply chain problem in general. Early this year, a Supply Chains Task Force was established and a Port Envoy was appointed to find remedies for the disruption. Not to mention the effort that the Biden administration put into passing the $1tn (£730bn) infrastructure bill which includes investments in improving the logistics of ports in the United States.
 
Credit: https://www.bbc.com/news/business-58901777 
            https://www.bbc.com/news/business-58895246

3 US-based economists win Nobel for research on wages, jobs

     A U.S.- based economist, David Card, won the Nobel prize in economics on October 11th for pioneering research about the labor force. The research showed how an increase in the minimum wage does not hinder hiring and immigrants do not lower pay for native born workers. Joshua Angrist and Guido Imbens shared the award with Card.

    In a study published in 1993, Card looked at what happened to jobs at Burger King, KFC, Wendy's, and other fast food restaurant called Roy Rodgers when New Jersey raised its minimum wage from $4.25 to $5.05. Using restaurants in eastern Pennsylvania, Card and his late partner Alan Krueger found that an increase in the minimum wage had no effect on the number of employees. Card and Krueger's studies changed economists' views of wage laws. From the year of their study to 2000 less people agreed with the statement that minimum wage laws increase unemployment.

    Card and Krueger's research produced conclusions into why a higher minimum wage would not reduce employment. One conclusion was that companies are able to pass on the cost of higher wages to customers by raising prices. Also, if a company is a major employer in an area, it may be able to keep wages particularly low, so it could afford to pay a higher minimum without cutting jobs. Higher pay would attract more applicants, boosting labor supply. Their research deserved an award and made a huge impact on other economists. It is too bad that Krueger died in 2019 and was not able to share the award.

    Card also found that an rush of immigrants into a city does not cost native workers jobs or lower their earnings. Card studied the labor market in Miami when Cuba allowed their citizens to leave in 1980. The 125,000 people who left Cuba resulted in a 7% increase in the Miami's workforce. However, Card discovered no negative effects for Miami residents with low levels of education. Some work even showed that increase immigration can have a positive impact on income for people born in the country.

     Angrist and Imbens won their half of the award for working out the methodological issues that allow economists to draw conclusions about cause and effect according to strict scientific methods. They figured out to isolate the effects of things like an extra year of school that enabled researchers to draw clearer conclusions about cause and effect, even if they are unable to control factors they way scientists in a lab can. For example, Imbens published a paper found out that a basic income prize of $15,000 did not have much effect on a person's likelihood to work.

    

Source: 3 US-based economists win Nobel for research on wages, jobs (apnews.com)

Is Poland going to exit the European Union?

 Last Thursday,  Poland’s Constitutional Tribunal ruled that parts of EU law are incompatible with the country’s constitution, undermining the legal pillar on which the 27-nation bloc stands. After this controversial court ruling, 100,000s rallied in support of  European Union Membership. In more than 100 towns and cities, demonstrations took place and even abroad. This shows the strong opinion of the people who really support EU and want to stay a part of it. On 10/10/21, people came out with banners saying "we are staying". The opposition party in Poland right now said that the ruling party wants to leave the European Union so that they can violate democratic rules without being accountable to anyone. People are however fearing that how Brexit suddenly happened when no one anticipated it, Polexit might happen as well. The ruling party has said that people who are protesting are protesting against the constitution. While the Prime Minister accepted and welcomed the court ruling, he said he has no intention of leaving the European Union and the party said that his idea of 'Polexit' is an invention of a weak opposition that has no other ideas. The European Court of Justice said that it is violation of the European Union law for Poland's new regulation of appointing Supreme Court Justices. While Poland is in a a tussle and the people vs government are of different opinions, the outcome can be either too damaging to Poland or the matter can die down. But if 'Polexit' has chances, it might be very big for European Union and the effects can be anywhere from good to bad. It would be hard to anticipate how this would affect the economy.

September Jobs Miss Economists Estimations

U.S. employers in the month of September hired less workers than expected as supplemental unemployment benefits expired.

The unemployment rate fell to 4.8% as nonfarm payrolls increased by 194,000 workers in September. 

Economist were expecting the addition of 500,000 new jobs and an unemployment rate of 5.1%.

The labor market is far from what we want as an economy but it is also far from total devastation. As COVID begins to go in our rear-view mirror, we can have optimism going forward on the labor market. President Biden commented on the September unemployment rate as “progress”. 

The September report was the first since the $300 per week supplemental unemployment benefits that expired early September on the fifth. This is an influential factor that need to be thought about when interpreting Septembers statistics. Other factors that are influential in Septembers statistics are increasing vaccine mandates in workplaces and the Child Tax Credit which pays families up to $3,600 per child per year. 

Noticeable job gains and losses were :

Leisure and Hospitality (+74,000)

Business Services (+60,000)

Retail Trade (+56,000)

Local Government Education (-144,000)

State Government Education (-17,000)

  

Optimism going forward is essential in this job market for the economy as progress is underway with more to come. Even as targets are missed, the economy’s job market is sloping upwards. 

Article : https://www.foxbusiness.com/economy/jobs-nonfarm-payroll-report-september-2021.amp

Why the latest series of Facebook leaks is more politically potent

 Facebook, the biggest social media platform in the world may finally be held accountable for their “two-faced” toxicity. Frances Haugen who was a previous worker at Facebook just testified highlighting Facebook’s “moral bankruptcy” and Facebook downplaying its adverse impacts on teenage depression and ethnic violence.

For many years there has been suspecting of the negative impacts that social media has on young adults, but never any means of proving it, but now Haugen has released corporate documents to prove of Facebook’s ignorance. She proved that Facebook did research that showed there was a relationship between Instagram use and teens’ suicidal thoughts and eating disorders. Facebook still ignored their findings and still prioritized sending teens this content that elevated their anxiety. In 2018 another person outed Facebook for releasing data used for political profiling for Donald Trump’s campaign.  Mark Zuckerberg did apologize for this and agreed to a settlement with America’s consumer protection agency. Although Facebook did have a 5 billion dollar settlement for their 2018 data leak, no laws have been changed to hold accountable tech bosses for their poor behavior.

How is congress going to take action to control tech bosses? It is hard to say if they will come out with a law soon to protect social media users, but the hope is that this will trigger more whistleblowers to come out about these major issues. If anything there is a hope that Congress will at least focus in on protecting children online. Congress could strengthen the Children’s Online Privacy Protection Act that protects children under the age of 13, and raise that age. Legislative proposals are also taking aim at marketing and design features that cause social media to be so addictive for the young.

There is a high chance that there will be many more leaks for the social media powerhouse. Facebook’s vice president of policy and global affairs defended the company and expressed that they took down 49m posts last year that violated policies on terrorism and hatred. In 2021, there is little to no privacy with 70% of the US population owning a social media account. Facebook has violated so many people’s privacy, can no longer count on privacy either.

https://www.economist.com/united-states/facebook-flounders-in-the-court-of-public-opinion/21805344

TSMC and Sony considering joint chip factory, Japan gov't to help -Nikkei

 Ever since the start of the Covid-19 pandemic in early 2020, there has been plenty of shortages and problems with supply chain management, none more so in the Chip industry. The shortage rightly named the "Global Chip Shortage", has caused major price hikes in several industries, mainly the automotive and computer industries. The largest producers of these chips are located in Taiwan and are called "Taiwan Semiconductor Co. LTD." have been having trouble keeping up with the demand and have been falling behind in production, i.e supply. 

To combat the high demand, TSMC has teamed up with one of the biggest electronic companies in the world, Sony, in Japan to jointly build a microchip factory. The plant is going to be built in Southern Japan and will produce chips for automobiles, cameras image sensors, and other various products which have been affected by the global chip shortage. The operations are hoped to start in 2024, but as of now there is no further information has been provided.

The reasoning behind this partnership is very interesting to me as it shows a newfound sign of economic partnership between the two East Asian countries. TSMC has been concerned with the longevity and concentration of its chip-making in Taiwan, as China has not ruled out their use of force over this island which they technically have control over. On the other hand, Japan and its officials are worried about the supply chain stability of its various industries, as it has the biggest automotive company in the world, Toyota, and due to this chip shortage, they have been forced to cut production. Either way, you look at this situation, both counties could benefit from this joint production and find new economic growth and political allyship.

Source: https://www.reuters.com/technology/tsmc-sony-eye-joint-chips-factory-japan-govt-help-nikkei-2021-10-08/

The pandemic changed the trajectory of America’s overdose and suicide crises

 The pandemic has been tough for many people during this pandemic, suicides have decreased about 5%, while those numbers dropped during the pandemic the drug overdose epidemic increased about 30%. This is very surprising because prior to the pandemic these trends were highly correlated. One reason for this massive increase in overdoses is the increasing popularity of fentanyl, “Preliminary data indicates that, while heroin overdose deaths dropped in 2020, deaths involving fentanyl grew exponentially”. Another reason for the increase in overdoses is the COVID restrictions that states placed that caused people isolate themselves. There has been no proven theory to describe why these trends suddenly diverted from each other. Economists have come up with theories to explain one of the trends individually, but have not found any evidence to explain the split. 

Something to note is that although there is no theory to explain why trends diverted from each other, British researchers have said that this is because suicide experiences a disaster shock. British researchers have found evidence that following a disaster such as Hurricane Katrina the suicide rate decreased in the short run and then resumed exponentially in the long run. The researchers are worried that the decrease in suicide rates is just temporary and that the trend in the long term will follow closely again with the overdose rate. 

source: https://www.vox.com/policy-and-politics/2021/8/12/22619913/covid-19-us-suicides-drug-overdoses-2020-fentanyl

North Korea Accepts Medical Supplies

 As of Thursday, North Korea began accepting medical supplies again from the world health organization. It is currently unknown as to whether or not there has been or is an outbreak currently in North Korea. The acceptance of this aid has been long overdue as North Korea had the aid in route to them but then rejected it at the last minute. North Korea was also excepting many other types of medical supplies from outside the country but that was all rejected when the borders were sealed off when cover was deemed a national threat. Up to now North Korea has also denied the entrance of any outside vaccine into the country as well which also posses questions again at the country handling of covid and if there has been any significant outbreaks within the country. All in all it will be interesting to see with North Korea allowing for health supplies to come into the country if that will open the door for any big pharmaceutical companies to get in and and find a way to get rights at supplying the country with their medical supplies. Another interesting thing to look at will be the state of North Korea with covid and if they will ask for more outside assistance if the virus becomes too bad to handle. 

Polexit

Poland's top court ruled on Thursday, that some of the European Union's articles were "incompatible" with the Polish Constitution, which prompted fears of Poland exiting the Union. Pro-EU-membership Poles organised a protest against the ruling and leaving the bloc.

Basically, the court rejected the idea that the EU has power over national legislation in some judicial areas. The fears of Poland leaving the  EU has been building up for years already, and this is the latest in those line of fears. Many Poles do not want Poland to leave the bloc and hence the massive protests.

Even the EU does not want Poland to leave the bloc, and they do not support the court's ruling. The European Court of Human Rights, that has no relation to the EU, has alleges that one of the judges appointed in the Polish court, was done so illegally. And moreover, tensions are rising against the current Polish government regarding it's top court consisting of mostly judges who would stand in favor of the ruling party.

The Prime Minister of Poland says that Poland being a part of the EU is important, and will not leave the bloc, but they're only words and anything could happen, especially in these obvious circumstances. With the post-Brexit effects Britain is facing right now, it is safer for Poland to stay in the EU for a couple more years, if not decades, and properly plan it out and plan out for the unforeseen too.

Article link: https://www.bbc.com/news/world-europe-58863680

The China Effect

It is no doubt at this point that China plays huge role in the global economy, and its internal issues send a ripple throughout the economies of other countries as well. Located at an epicenter of trade, and a hub for supply chains, the global economy may yet again face another crunch.

The most recent factors indicating this is the cash crunch at the China Evergrande Group. While its $300 billion plus in liabilities makes it a big deal for note holders, the real economic fallout for the world was always going to be contained so long as China’s central bank kept liquidity ample and regulators prevent any “Lehman moment.” 
But a power crunch curbing production in the factory to the world — that’s clearly going to send some shock waves through the global economy. Many companies located within the US have already been struggling due to so much of their manufacturing being present within China-- inclusive of small and big companies such as Nike, Apple and Tesla too. This may also indicate slower growth in China too.

After the pandemic, the world has already faced a huge low and hardships within supply chains. These factors suggest that companies should begin diversifying their supply chains, perhaps bring them more local/domestic, as to avoid such problems. It will be interesting to see what happens from here.

Consumers Ramped Up Spending in August as Inflation Remained Elevated

 

In August, personal spending increased by 0.8 %. Personal income increased by 0.2% which reflects the increase in wages and federal government’s distribution. However, some states ended their pandemic related supplemental payments. During the peak of covid, consumers spent less on airline tickets, hotels and dining outside, and now they have accumulated substantial savings and furthermore, are benefitting from increase wages and abundance in job openings. Chief Economist at RSM US LLP, Joe Brusuelas, thinks that the demand for the next 2 to 3 years should remain strong as the growth continues well above the long-term trend. He also thinks that due to the excessive demand supply shortages may create some hurdles. Such as, global chip shortage has adversely affected the auto industry as well as the tech industry. To be more specific, Ford paused their production due to chip shortage, as well as Apple Inc. as they are overdue for a new MacBook Pro, but due to supply chain issues they have pushed back the launch. The biggest source of U.S. economic growth and the main tool for rapid recovery from the pandemic is consumer spending, and the economy expanded from 6.3 % in the first quarter to 6.7% in the second quarter. Consumers avoided purchases of vehicles which may reflect high prices and low inventories. However, according to University of Michigan’s survey, the consumer sentiment index increased from 70.3 in August to 72.8 in September.  Analysts expect that consumers are to spend more during this holiday shopping season than last year, since consumers were not able to shop during the pandemic. In addition, consumers are also booking in advance for the upcoming months.

 

Thus, if the consumer demand exceeds the supply of the good and services, an example of this would be chip shortages, the price would increase, and if this goes on inflation would increase.

 

 

Cambon, S. C. (2021, October 1). Consumers ramped up spending in August as inflation remained elevated. The Wall Street Journal. Retrieved October 1, 2021, from https://www.wsj.com/articles/consumer-spending-personal-income-inflation-august-2021-11633027180?mod=hp_lead_pos4.

China's tensions with Taiwan

China has again said it will reunite Taiwan with the mainland. Tensions ramp up further between Beijing and the government of Taiwan. President Xi Jinping told a communist party gathering that such a move would happen peacefully and said Chani could never tolerate any form of separatism. Taiwan has responded by saying, “it is a sovereign nation and its people will decide their future”. This speech was made just before the national day of Taiwan. Compared to the speech, which was made in July, it had a soft tone. Xi Jinping said that he wants to see a peaceful reunification. People from Taiwan have been witnessing what’s been happening in Hong Kong for the past few years. The suppression of political freedom and freedom of speech. Nearly 90% of Taiwanese people reject the one country two system framework. Beijing sees Taiwan as a province that has to be handed back to the motherland. In my opinion, the Chinese president wants to become a national hero of the country in rejuvenating the Chinese nation. He is still to compete in his second term next year. Thus this achievement would give him a big advantage in upcoming elections.  

Coronavirus in DR Congo: How funds went missing

 https://www.bbc.com/news/world-africa-58834108 

There has been poor management of the covid funding that the IMF gave Congo last year. Only $6m of the $363m Covid funding provided by the IMF has been publicly accounted for.

 DR Congo is one of the 50 countries across the globe that has failed to fully vaccinate 10% of their population [ this is a target that was set up by the World Health Organization (WHO)].

Some estimates suggest that 0.1% of the country's 89 million people have been vaccinated.  According to WHO, more than 57,000 people are known to have contracted the virus and 1,086 of them have died. 

Some of the challenges include the country's heavy reliance on the Covax Scheme*, an underfunded health system that is already wrecked by concurrent outbreaks of measles, Ebola, and cholera, mistrust in authorities, and conflict between the government and armed groups in the eastern region of the country. 

The country is plagued by corruption and this is not the first time that funds have disappeared.

 At least $240,000 went missing in the purchase of ambulances and vehicles for the health ministry's covid response.

 Two former health ministers have been arrested over corruption allegations in recent years - one is currently serving a 5-year jail sentence, and the other is free on bail and denies the allegations. 

Researchers say that the health ministry has used emergency situations and international funding "to pay bonuses to staff who are not normally well paid". The report says that the health ministry declined to reveal how many staff it paid or how much was paid in bonuses. 

*Covax scheme was created last year to ensure that covid vaccines are made available globally, with rich countries subsidizing costs for poorer nations. The scheme hopes to distribute enough vaccines to protect at least 20% of the population in low-medium income countries - starting with healthcare workers and the most vulnerable groups. (https://www.bbc.com/news/world-55795297)

Corruption in Moldova

     In 2014 it was discovered that approximately $1 billion was stolen from the Moldovan government in a scheme to clean Russian money. The huge amount lost had significant impacts on Moldova's economy. For context, their GDP at the time was just over $8 billion so when news of the scandal broke there was public outrage and nationwide protests. Foreign aid came to a halt and inflation spiked to nearly %10 in 2015.  Ever since the countries leaders have been focused on rooting out corruption. 

    They are not currently apart of the EU but are being considered. They neighbor EU members Romania and Bulgaria who have the most similar cultures too Moldova. However, Russia still has strong influence in Moldova and any current corruption is likely tied to them. In 1991 Moldova left the Soviet Union and has been slowly integrating with central and western Europe since. Becoming an EU member would mark in important milestone in this integration and be a huge benefit to the Moldovan people and economy.

What is the UK's inflation rate and why is the cost of living going up?

https://www.bbc.com/news/business-12196322 

Energy bills, grocery bills, and other household costs are increasing in the UK. Prices rose by an average of 3.2% over the last year and the Bank of England suspects that it could increase to above 4% by December and stay that high into the spring. Why is this happening? The demand for oil and gas has increased worldwide which has pushed the price up. This impacts household heating bills and businesses that run machinery, heat offices, and transport goods. The increases in costs for businesses are often then transferred over to consumers when they buy the products. 

There are supply shortages all across the world which are impacting countries everywhere. Bottlenecks have been occurring in building materials and computer chips which is increasing prices. The government is unwinding the support it gave businesses during the pandemic which has resulted in an increase in prices for those business's goods. Finally, businesses are struggling to find workers as a result of the pandemic and Brexit. This also makes it more difficult for businesses to meet demand and pushes costs up.

How will this change in the UK economy impact the United States? It likely will decrease the number of tourists going to the UK, thus decreasing demand which may allow for stabilization between demand and supply.

One TR Coin

 One TR Coin 

This article on the Economist talks about the issue of the debt ceiling which has been a big issue in the news. This article then talks about this very odd movement to combat the debt ceiling. This involves a loophole in legislation where we could apparently mint a coin with a value of a trillion dollars and it has to be made out of platinum. The idea is that we mint the coin and "pay it" to the federal reserve and this would allow us too still pay bills while the politicians argue over the debt ceiling still. Even more surprising to me at least this idea has support from Nobel Prize award winning economist Paul Krugman. 

While there is some mild support for this coin there are other obvious legal concerns. It would also undermine the Fed and create a situation where the Fed becomes more reliant financially on congress which I think is a terrible thing. The question however is would this be better then the government defaulting on its debt? I think while the effects of this coin wouldn't be great, it would be better then any outcome where the government defaults.  The effects of that would be felt throughout the world and would be devastating. So I think this coin should only be minted as an absolute last minute necessity to avoid that.

Social Media Monopolies

On Monday, October 4th, 2021, there was a social media outage. Facebook Inc's services went off for about 6 hours. This outage was one of the longest ever recorded in history. Facebook received 10.6 million, worldwide, complaints due to it. Once the problem was dealt with, all the apps went back to working faster than ever. Mark Zuckerberg commented "I know how much you rely on our services to stay connected with the people you care about." and then apologized for the outage. Mark Zuckerberg lost $6 billion due to the outage, depriving him of the 'Richest man in the world" title. Facebook Inc shares also went down by 4.9% on the same day as the outage.  

People and businesses worldwide were affected by this service. Facebook apologized for the disconnect and said it was due to a network issue. Facebook's direct quote was "faulty configuration change". This six-hour outage affected small businesses, bloggers, students, e-commerce, and essential communication. Some small businesses reported a loss in revenue as they struggled to get in touch with clients, while others have started to rethink their marketing strategies. 

Facebook Inc's services went down for all the apps which include WhatsApp, Facebook, Facebook Messenger, and Instagram. Facebook is slowly growing and becoming a social media monopoly. What we witnessed on Monday was one of the biggest consequences of monopolies. It was not just one social media app that went down. Snapchat and Twitter were the only other commonly used app that people were able to communicate on. This is why monopolies are troublesome for societies. Do you think that Facebook is growing into a social media monopoly? What other repercussions can occur due to this?  

Source: https://www.wsj.com/articles/facebook-instagram-whatsapp-experiencing-outage-11633363936

US Senators Agree to Extend Debt Ceiling to Avoid Default

 US Senators Agree to Extend Debt Ceiling to Avoid Default

https://www.bbc.com/news/world-us-canada-58835517 

The United States currently has a large deficit and in order to combat it has set a debt ceiling. Recently, the government has been threatening to default, which would cause the global financial system to spiral and put the US into another recession. The debt ceiling limits the amount of money that the government can borrow to bridge the gap between the amount of taxes it collects and the amount it needs for government programs. 

Recently, the Republicans are the ones calling for a hard debt ceiling in order to curb the Democratic agenda. However, when the Republicans were in charge of the government they constantly increased the deficit, putting the US into more debt. Despite their cries against it, they realized that in order to avoid economic catastrophe, they needed to extend the debt ceiling. They did so with less than two weeks to default. 

This instance does a great job of illustrating the polarization of American political parties. Each wants to spend money to benefit their party objectives, but will throw a fit when the other party tries to do so. I believe that US politicians need to look beyond party lines and do what is best for the greater good of the American people. 

Shortages in Germany

 Europe's most powerful economy has been facing major production shortages in recent months. Germany, which relies heavily on its automobile production, has seen drastic shortages in basic materials needed for production. These shortages include more than just microchips, which the rest of the world is short in as well. Germany is facing issues with other manufacturing inputs such as lumber, metals, plastics, and battery materials. 

Due to the shortages, German firms and officials are worried about a potential "bottleneck recession" if the supply chain is not reestablished soon. Due to the many orders for goods such as vehicles, prices have risen steeply, and at an unsustainable pace. Germany saw its highest inflation rate in three decades last August, and there is no end in site for this problem. Despite a small amount of firms moving production of inputs back into Germany or sourcing materials from a closer, more reliable location, most plants can not efficiently do this due to the costs that would arise. Although a new microchip plant is currently being built in Germany, production is still a long ways away, and when the factory is capable of producing, there is no guarantee they can source materials for production. 

Source: https://www.nytimes.com/2021/10/05/business/germany-economy.html

Lebanon's Dire Economic Situation

The middle eastern country has been in the spotlight ever since the tragic Beirut explosion in 2020. Some have said that it is a result of the current government's inability to properly govern the country. Unfortunately, the problems go deeper as the economic situation in Lebanon has become dire as shortages of goods have become more common.

To make matters worse, their currency has taken a historic tumble as it surpasses Venezuela in rate of inflation. Now, the Lebanese currency is losing value at a rapid pace making it harder to buy the already scarce goods. The currency crisis can be derived from the choice of pegging their currency to the US dollar. It brought confidence to investors early on but unsustainable as they had to borrow money to maintain the exchange rate of their weaker currency.

Ultimately, it is the responsibility of the government to properly take action. But the many crises converging will make it difficult for any politician to stop Lebanon from spiraling out of control.

Credit: https://www.npr.org/2021/09/28/1041334763/how-whatsapp-broke-lebanon 

Social Security Isn't 'Going Away'

 In 2015 Gallup conducted a poll and found that 66% of workers between the ages of 18-49 did not believe Social Security would be there when they retire. Social Security is a government-run program that is implemented to limit the market failure of information failure and income distribution. Information failure takes place because many people do not know how social security works/do not know they still need to save even though they will receive SS. Income distribution is needed because the retirees still need to receive some sort of compensation because they are not working anymore. 

SS works by replacing a percentage of your working income based on your lifetime earnings. The amount is more or less depending on your lifetime earnings and when you receive your benefits. If you wait until full retirement age, SS can replace up to 75% of your income for very low earners, 40% for medium earners, and about 27% for high earners. Every year you delay filing for your benefits, until age 70, this percentage gets larger. In SS you earn credits that qualify you to earn benefits when you retire. In 2021, you receive one credit for $1,470 up to a max of 4 credits annually. Although retirees receive compensation once they are retired and file for their benefits, SS was never supposed to be the only source of income for this demographic. 

“In 2021, $0.85 of every Social Security tax dollar you pay goes into a trust that pays monthly benefits to current retirees and their families, and to the surviving spouses and children of workers who have died. The remainder goes into a trust that pays benefits to people with disabilities and their families, and a small portion is used to cover the costs of managing the Social Security programs”. Recently The Treasury predicts the trust funds will be depleted by about 2023. The interest in these trust funds is not a major source of funding for these benefit payouts. Most of the benefits social security pays out are funded by taxes which are not expected to lower. When the benefits paid out exceed the taxes collected the SSA will cover the gap by dipping into the trust funds. Wallace states in the article that the government will need to make some sort of change in SS to adjust for benefits exceeding revenue. This is not uncharted waters for the government to alter SS, in 1983 Congress raised payroll taxes and cut benefits building up a larger fund reserve. I do not think it is very likely that social security will be gone by the time I retire or in the foreseeable future. SS is needed to help correct a market failure that would be apparent if it went away. Although a person is set to receive money when they retire they should start saving as soon as they can and put off filing for SS for as long as possible. By saving early and filing for SS later allows you to have the most money possible and makes the transition from working to retirement less stressful.

credit:

https://www.morningstar.com/articles/1060057/social-security-isnt-going-away

By Karen Wallace

Supply-Chain Crisis and the Effect it Could Have on the Economy

The supply chain is of the most crucial pieces of the economy, but even as we are experiencing a recovery after the pandemic, we are facing a new issue. Consumers are buying as much as ever before and this has pushed the supply chain to the breaking point. Mohammed El-Erian talks about a "stagflationary wind" that he says could blow the economy off course. He believes that economic growth rates are going to slow down quite a bit due to the fact that the global supply chain is struggling which will make it tough to keep up with demand.

We are seeing the issues that the UK is experiencing with the shortage of petroleum they have. They are currently struggling to find drivers to transport the oil to the stations. This comes as a result of Brexit and not allowing men and women from other countries in the European Union to work in the UK. Another country that is struggling with energy shortages is China. In the northern part of China, they are being forced to ration power and shut down manufacturing plants.  As one of the busiest times of the year approaches, Christmas, China is trying to solve this issue.

In addition to the UK and China, several other countries are struggling with the supply chain. Car companies are shutting down automotive plants in Germany until 2022. Japan is struggling to get energy and materials to the island for a reasonable price. The price per shipping container has increased nearly 300% and in some extreme classes 600%. 

The economy is going to have to work quickly to fix the current supply chain issues. There is a threat of another worldwide recession if we are not able to fix the expansive supply chain crisis. I personally do not know exactly how to correct some of these issues, but I am intrigued to see how and when they are fixed, and if it is in enough time.

Source: https://www.theguardian.com/business/2021/oct/02/supply-chain-world-economy-energy-labour-transport-covid

Biden v Big Meat: Can the US tackle rising beef prices?

Ever since the economy reopened after the pandemic, consumers have been seeing a dramatic increase in their grocery bills, especially on the prices of meat, with beef up 14% since December 2020, pork by 12.1%, and poultry 6.6%. From computer chips to processed meat, the cost of living in the United States has been rising without a doubt. Unlike many products with rising prices, the increase in meat price is not solely due to the supply chain issue. Instead, many suspects that the dominant power over prices of the few big meat processing companies has in the meat market is at the core of the problem. The four giants in the industry are JBS, Cargill Meat Solutions, Tyson Foods, and National Beef Packing Co, which accumulates between 55% and 85% of the market.

The huge market shares not only gave the meat titans power over the selling prices to retails and restaurants but also over the buying price for livestock from farmers. Due to the soaring demand for stockpiling meat during the pandemic, wholesale meat prices soared but livestock prices fell, which gave big meat processing companies record-high profits and margins. Both farmers and consumers are hurt while the meatpackers are the only ones collecting dollars from the pandemic.

Despite practicing a “laissez-faire” economic system, the U.S. government has a history of imposing policies to regulate the meat market. The Packers and Stockyards Act passed by President Woodrow Wilson and the price ceilings on beef, pork, and lamb imposed by President Richard Nixon in 1973 both aimed to monitor and control the big meat processors. Similarly, the Biden administration made an attempt to boost the competition with the big players by pledging $500 million in federal loans and grants to help small meat processing businesses to enter and stay in the meat market. In addition, the administration inquired into "price-fixing" in the chicken-processing industry already.

Of course, there are some resistances to the government regulations from the meat-processing industry. The major processors say the administration is "scapegoating" them and has misunderstood the "fundamentals" of the market. Besides, they claimed that the rising prices are not due to consolidation, but labor supply issues that led to the decreasing abilities of meat processing factories to operate at a full capacity.

Credit: https://www.bbc.com/news/business-58659478

Vaccine Mandate

United Airlines fired hundreds of employees who are reducing to comply with the character’s vaccine mandate. To be specific, UA fired up to 593 unvaccinated employees, who chose not to get vaccinated when the airline mandated vaccines for all employees. Airlines report that they want to make sure that the working environment is as safe as possible. Unfortunately, 7 employees are suing United Airlines for this decision. Moreover, 4,300 pilots of American Airlines are unvaccinated. Pilot unions are asking the White House for exemption for the president’s vaccine mandate. Across the country some essential workers are protesting the vaccine mandate. Some experts said that this mandate may lead to critical shortage in essential workers. It is very hard to get everyone vaccinated, due to right of choice, religious exemptions. On the other hand, people do not want to put themselves or their family in danger. Many people die, suffer, because of COVID-19. In order to stop this disease, I think that everyone should be vaccinated. If people are against it, then they should always wear masks. Moreover, they should be tested a couple of times per week. 

 

Yellen warns delay in raising debt limit will slow economy

     United States Treasury Secretary, Janet Yellen, is urging lawmakers to raise the U.S. government's borrowing limit. If the debt limit isn't raised by October 18th, Yellen warns that credit in the U.S. would be impaired and the country would likely face a financial crisis and economic recession. Failure to raise the debt ceiling would likely raise interest rates. The debt limit restricts the amount of money the government can borrow. It is raised to deal with government spending and taxing decisions which we have seen these actions being used during this COVID-19 pandemic. Yellen is warning congressional leaders to not make a decision on this issue in the last minute, as it could cause serious harm to businesses and consumer confidence, negatively impacting the credit rating for the U.S. for years to come. Government officials hope that Republicans and Democrats can come together to fix the debt ceiling, but Republicans argued that Democrats could use their majority to pass the bill. 

    Extending the debt is just another log that is stoking the fire between lawmakers and the Federal Reserve. Chairman Jerome Powell came under fire from some Republicans complaining about the high and growing prices for goods and services. Even some Democrats are in conflict with the Fed. Senator Elizabeth Warren stated that she will oppose a second term for Powell. She claims that Powell has made the U.S. banking system less safe which makes him a dangerous man to lead the Federal Reserve. It will be interesting to see how the relationship between congressional leaders and the Fed tie into the solutions in how to fix the U.S. economy. 

Source: Yellen warns delay in raising debt limit will slow economy - ABC News (go.com)

Panic Buying in U.K. Creates Shortages at Gas Stations

     U.K.’s departure from the European Union have impacted the U.K. in multiple ways. Recently, shortage of tanker drivers to transport the fuel tankers across the country has created panic among the consumers, and now the British government is looking for more tanker drivers to deliver the fuel to gas stations. As a result of panic, many gas stations closed after their supplies depleted and the government kept soldiers on standby to deliver the fuel. However, the government official stated that there’s plenty of fuel in the U.K., but it needs to be delivered to gas stations. U.K. is helping this situation by easing their visa restriction (temporarily) for truck drivers which will allow up to 5000 truck drivers from across the EU to drive the fuel tankers and help to solve the gas shortage issue. For the moment, the oil companies are asked to suspend competition and help the government identify the areas for fuel shortages so that they can focus on them and help resolve the issue. According to the Petrol Retailers Association, existing supplies are being given priority to highway gas stations to avoid tailbacks. The main reason because the U.K. left the EU which revoked the right of EU citizens to live and work in the country and it also implemented a strict immigration system which meant that lower-paid and lower-skilled workers had to meet a strict set of criteria to enter and work in the country. The government defended this by that this would force the local businesses to train local employees and pay them higher wages. Furthermore, the pandemic worsened this problem. Significant number of truck drivers changed their job because wage raises were nowhere to be seen. The government is also trying to reach out to drivers who have truck driving licenses and are currently not working, requesting them to return. It is possible for the government to train new truck drivers but not feasible because it takes 18 months to train a driver and the government requires drivers now to resolve the shortage. If the government is not successful to solve this shortage, gas stations that have supplies of fuel will charge a higher amount and they can make huge profits.

The Taliban are asking airlines to resume flights to Afghanistan

 As of Sunday, the Taliban requested that airlines resume travel to Afghanistan. The Kabul airport has been closed since the suicide bombing killing 13 American soldiers and resulting in damages to the airport. The Taliban have come to recognize that citizens of the country have became stranded in other countries since the shut down of international flights. This has also impacted other citizens in not being able to travel for business or studies.  Teams from Qatar and Turkey have aided in their efforts of reopening the airport for use again. The call for international flights to resume from the Taliban is aimed at the Taliban trying to gain legitimacy and recognition on the national stage. Some flights have already resumed but given the minimal amount of flights prices have double or tripled for flights. It will be interesting to see as this situation evolves, how it will continue to effect prices for flights. In addition what impact will this have on the Afghanistan economy as it looks the rebound since being taken over by the Taliban. It will also be interesting to see how the Taliban plan to regulate this and keep citizens from fleeing the country. 

A failed state

Household net worth rises above $141 trillion, but debt up sharply as well

 The Federal Reserve reported on September 23 that American households had a big jump in net worth, but it was accompanied by a big increase in debt and credit. “Thanks in good part to a big surge in stock market earnings, total household net worth rose to $141.7 trillion through the second quarter of 2021”, this is a little above 4% better than the previous quarter and about 19% better year to date. A big reason this can be attributed to is the massive increase in the stock market.  As I said previously debt also rose significantly “Household debt mirrored that of the federal government, which ended the quarter owing $28.5 trillion after a 9.6% increase”. It is good that households are seeing an increase in net worth, but at what cost? It is not good for our debt to rise simultaneously alongside net worth. Despite the positive of net worth increasing this past quarter, there is little evidence to suggest that this big increase in net worth will continue to occur. About 60% of the net worth increase is attributed to the rise in the stock market, the stock market performing as good as it has been cannot be the sole evidence to support a constant increase in net worth because of how inconsistent stocks can be.

source:

https://www.cnbc.com/2021/09/23/household-net-worth-rises-above-141-trillion-but-debt-up-sharply-as-well.html

Should the U.S. economy stop their emergency funds now?

With COVID -19 wave's erupting, the U.S. economy has become a victim of inflation, high unemployment rates, and low economic growth. However, as we come close to the end of the second year of COVID-19 there is a sense of optimism in the government. According to the Forbes article, the Central Bank has reported that job marketing is slowly improving. Due to this, they will now stop their emergency funds to the economy. A date has not been set for when the funds will stop. In August, fewer jobs were put up as the Delta variant was spreading. Current inflation rates are also at 5.3% which is the highest it has been in 13 years! Currently, the fed's have two goals  for the economy: 

1) Keep the U.S. inflation at 2% 

2) Reach maximum employment - which means everyone who needs a job has one. 

During the pandemic, the government supported the economy by slashing interest rates to historic lows and pumping billions of dollars into the financial system by buying government and corporate bonds. After the emergency funds will stop the interest rates will go back up. 

With COVID-19 still being a sensitive issue will this help the economy start functioning on its own again or will this hurt the economy even more? If the government doesn't pull out now then is there a better time? 

https://www.bbc.com/news/business-58659476

Japan approaching end of COVID-19 emergency in most areas - health minister

     Japan has been seen as one of the best countries in terms of both economy and one of the best places to visit in the world, but due to Japan being located in East Asia, right next to China, it has had its fair share of Covid-19 cases. 

    Despite Japan being one of the most developed countries in the world, they struggled severely with cases due to several socio-political problems. The first being that Japan has the biggest metropolitan area in the world and it doesn't help that it is also very densely populated so the Covid-19 cases can spread very easily and quickly. Japan also has a very young population, combine this with having lots of night life in the worlds biggest metro area and this is a recipe for disaster. The final and most significant reason for the Covid-19 Cases being so rampant is the lack of Covid-19 Vaccines, and the Japanese people not wanting to get vaccinated as they do not trust the Western medicine and they don't have access to it.

Due to the severity of the Covid-19 cases, the Japanese government implemented a strict travel ban and several state of emergencies. No foreigners were allowed entrance or allowed to leave the country, only Japanese citizens could come back and you needed government documentation. The Covid-19 state of emergencies were pretty simple as well,  you had to wear masks, and businesses had to close and were compensated by the government. When cases declined there was more of a soft lock and you could do more things and go places, the state of emergencies were national at first but then only applied to certain prefectures with the most cases. 

Since the state of emergencies, Covid-19 cases have declined, more than half the population of Japan is vaccinated, 80% of all Covid-19 cases are from people who did not take the vaccine. Due the drop in Covid-19 cases, the government is thinking of lifting the state of emergencies placed in certain prefectures, but this isn't without concern. The government does agree that if they do see a more sudden rise in cases, it could overwhelm the healthcare system and put it into a crisis; but as of now it seems things are once again  getting back to normal and Japan is getting ready to open its borders.

SOURCES:

https://www.reuters.com/world/asia-pacific/japan-approaching-end-covid-19-emergency-most-areas-health-minister-2021-09-24/

https://apnews.com/article/pandemics-tokyo-coronavirus-pandemic-asia-japan-8049258656473799e491604fefe44e79

https://apnews.com/article/business-health-japan-coronavirus-pandemic-4b409cf1a663759d6a434fe1faf0cc2d

Should Digital Currencies be regulated?

 Bitcoin emerged a decade ago as a viable alternative to money, and has since then (especially recently) gained major traction. However, the the world's 2 biggest economies are not too happy with it. And while both the US and China have begun to implement regulations of cryptocurrencies, they are also in the process of developing their own digital currencies centrally as well.

Cryptocurrencies are traded online, away from the control of governments, central banks and institutions of the global financial system. For this reason, China has banned all use of it, claiming that it used by criminals. The US also claims that it is important that the Fed is able to deliver a stable and trustworthy currency to its people, and bitcoin acts as a barrier in that. They also claim that while innovation is very important, where the public is concerned the government has to step in and enforce some sort of regulation.

However, some countries are embracing the cryptocurrency. El Salvador declared Bitcoin as a legal currency, and Ukraine followed suit. Cuba, Malta, Singapore and Switzerland are all also becoming more open to the idea of a virtual currency, and trying to create a business environment where crypto is able to grow.