http://www.nytimes.com/2014/02/06/business/economy/the-olympics-a-costly-feel-good-moment.html?ref=economy
This year's winter olympics costed more than $50 billion, the largest expense for an olympic games thus far. This averages out to about $510 million per event. The cost of olympic games has increased drastically over the years. In the 1984 Los Angeles games, the entire thing costed about 1.2 Billion dollars in today's money.
While the olympics are for sure a tourist attraction that will stimulate the economy of the host, the olympics can only stimulate so much. $50 billion is an enormous amount of money for an event, and it is doubtful that that money will be pumped back into the economy.
Saturday, February 8, 2014
Comeback kids
http://www.economist.com/blogs/theworldin2014/2014/01/youth-unemployment
In the article "Comeback Kids" it talks about how the financial crisis has affected the ability of young students to find jobs out of college. The financial crisis has caused many graduates and youth to move back in with their parents because they are not able to find jobs.
In the article it states that about 36% of american's in the age group of 18 to 31 are still living at home. This number is extremely high and the article states this might be partly due to the fact this number factors in students. Many of the youth today who are getting jobs are receiving less pay then their peers did before the financial crisis and the ones who are paying rent are paying more. Although times have been hard, 2014 may be the year where it turns around as the amount of college graduates getting hired right out of school is estimated to rise. Internships have been a hot discussion topic lately but it is estimated that companies will be offering more placement opportunities where the students have the opportunity to impress the employers. With these estimations and other factors the International Monetary Fund increased its global growth forecast in 2014 by .1 percentage point. Hopefully 2014 brings better luck for college graduates.
In the article "Comeback Kids" it talks about how the financial crisis has affected the ability of young students to find jobs out of college. The financial crisis has caused many graduates and youth to move back in with their parents because they are not able to find jobs.
In the article it states that about 36% of american's in the age group of 18 to 31 are still living at home. This number is extremely high and the article states this might be partly due to the fact this number factors in students. Many of the youth today who are getting jobs are receiving less pay then their peers did before the financial crisis and the ones who are paying rent are paying more. Although times have been hard, 2014 may be the year where it turns around as the amount of college graduates getting hired right out of school is estimated to rise. Internships have been a hot discussion topic lately but it is estimated that companies will be offering more placement opportunities where the students have the opportunity to impress the employers. With these estimations and other factors the International Monetary Fund increased its global growth forecast in 2014 by .1 percentage point. Hopefully 2014 brings better luck for college graduates.
Obamacare and Employment
http://www.economist.com/blogs/democracyinamerica/2014/02/obamacare-and-employment
Many Republicans believe that the Affordable Care Act, better known as Obamacare, would be terrible for the economy by increasing unemployment. A recent report written by the Congressional Budget Office is forecasting the same idea for the near future.
The CBO has predicted a decrease in full-time employment by 2.3 million jobs by the time 2021 rolls around. This prediction is based upon the concept that citizens will choose to work less. In order to help lower income citizens purchase the healthcare, Obamacare offers tax cuts to those earning between 100% and 400% of the federal poverty line. This tax cut is predicted to dissuade people from working more because as their income rises, the tax rate rises, erasing the incentive to earn more money. Another affect of Obamacare is a higher standard of living for those around the poverty line. Now that lower class citizens have healthcare and a higher living standard they will be discouraged from working.
The biggest effect of Obamacare will harm employers, who now have to provide affordable health insurance for all full-time employees if they have over 50 on their payroll. This does not seem like a bad plan for the employees, however they will feel the pain because in order to offset the cost of providing health insurance, employers may resort to lower wage rates. The lower wage rate will cause a decrease in labor supply.
Although Obamacare's main objective was to help the needed and redistribute wealth from the rich to the poor, many critics believe that they are actually doing the opposite while increasing the unemployment rate. The reasoning being even though the average income for the needy does rise slightly when full value health care is added in, this healthcare is not liquid so it cannot be used for everyday costs like food and rent.
Many Republicans believe that the Affordable Care Act, better known as Obamacare, would be terrible for the economy by increasing unemployment. A recent report written by the Congressional Budget Office is forecasting the same idea for the near future.
The CBO has predicted a decrease in full-time employment by 2.3 million jobs by the time 2021 rolls around. This prediction is based upon the concept that citizens will choose to work less. In order to help lower income citizens purchase the healthcare, Obamacare offers tax cuts to those earning between 100% and 400% of the federal poverty line. This tax cut is predicted to dissuade people from working more because as their income rises, the tax rate rises, erasing the incentive to earn more money. Another affect of Obamacare is a higher standard of living for those around the poverty line. Now that lower class citizens have healthcare and a higher living standard they will be discouraged from working.
The biggest effect of Obamacare will harm employers, who now have to provide affordable health insurance for all full-time employees if they have over 50 on their payroll. This does not seem like a bad plan for the employees, however they will feel the pain because in order to offset the cost of providing health insurance, employers may resort to lower wage rates. The lower wage rate will cause a decrease in labor supply.
Although Obamacare's main objective was to help the needed and redistribute wealth from the rich to the poor, many critics believe that they are actually doing the opposite while increasing the unemployment rate. The reasoning being even though the average income for the needy does rise slightly when full value health care is added in, this healthcare is not liquid so it cannot be used for everyday costs like food and rent.
Ignore the Unemployment Rate?
http://online.wsj.com/news/articles/SB10001424052702303496804579364852603962422?mod=WSJ_hp_EditorsPicks
Perhaps everything you thought you knew about the country's most sacrosanct economic indicator, the Unemployment Rate, is wrong. At least that is what Zachary Karabell thinks. Instead of being an insightful predictor of the true unemployment rate, Karabell argues that the U measurement is deeply misleading and over-generalized. As he explains,
"We have multiple unemployment rates—by race, gender, geography and above all educational attainment. When people talk of an unemployment crisis, it would be more accurate to speak of an education crisis or a crisis of men whose skills are mismatched to today's jobs. It would be more accurate to speak of a jobs crisis in specific regions of the country or for specific industries. Yet we maintain the collective fiction that one simple average accurately captures multiple realities."
Read the article and see what else the author has to say, and whether or not you agree with, leave a comment!
The effect of today’s technology on tomorrow’s jobs will be immense—and no country is ready for it
http://www.economist.com/news/leaders/21594298-effect-todays-technology-tomorrows-jobs-will-be-immenseand-no-country-ready
Innovation has always improved our society and raised our productivity.Also, innovation has created new jobs and deprived some jobs.In this ariticle, one recent by academic at Oxford university suggests that 47% of today's jobs could be automated in the next two decades. It is not the distant future. The aggregate of job is certainly decreasing right now. I think that it is possible that all of jobs are done by a machine. We may not have to work in th fututre,but is that fortune for human beings?
Most interesting opinion in the article is that the benefit of innovation is undistributed. This means as increse in the gap between rich and poor. The world drew near to the end of praising indiscriminately innovation. A goverment has to think about how to deal with innovation, because most companies want to raise productivity and so use technology,meaning they cannot regulate the innovation by themselves.
Innovation has always improved our society and raised our productivity.Also, innovation has created new jobs and deprived some jobs.In this ariticle, one recent by academic at Oxford university suggests that 47% of today's jobs could be automated in the next two decades. It is not the distant future. The aggregate of job is certainly decreasing right now. I think that it is possible that all of jobs are done by a machine. We may not have to work in th fututre,but is that fortune for human beings?
Most interesting opinion in the article is that the benefit of innovation is undistributed. This means as increse in the gap between rich and poor. The world drew near to the end of praising indiscriminately innovation. A goverment has to think about how to deal with innovation, because most companies want to raise productivity and so use technology,meaning they cannot regulate the innovation by themselves.
The Worldwide Wobble
http://www.economist.com/news/leaders/21595900-world-economy-will-have-bumpy-2014-recovery-not-yet-risk-worldwide
Last month, the global economy as a whole seemed to stumble. Since the beginning of January, global share prices have fallen by over $3 trillion. However, many economists believe that this is a temporary case. It is thought that while the global economy may not have the acceleration it hoped to have, the growth will still see an overall improvement from last year.
A large part of this scare came from America's and China's economies. Through January, the US saw low manufacturing orders and car sales, which scared many. This, however, could very well be due to the frigid temperatures that have been experienced all over the nation through most of January. The cold weather seems to have slowed economic activity, but it is expected to pick up again and the recovery to continue. While it certainly is slowing, China's economy doesn't seem like it will come to a complete halt. Some believe that the economy will "end in a financial bust," but it is unlikely this is occurring now. Emerging market powers are dependent on China's growth rate, meaning that if China were to collapse, so would many others just coming to power. Since this doesn't seem to be happening now, there is still hope for a brightening future of the global economy.
A recovery overall may still seem likely, but there are many factors on which it all depends. The US, for one, would play a big part in this if GDP were to increase, unemployment would decrease, et cetera. If the Euro-zone agreed on monetary policies to increase the money supply and fix problems with low inflation rates, then the global economy would improve simply from that. Although, with so many factors that are uncertain, the future for the global economy still cannot be set in stone.
Last month, the global economy as a whole seemed to stumble. Since the beginning of January, global share prices have fallen by over $3 trillion. However, many economists believe that this is a temporary case. It is thought that while the global economy may not have the acceleration it hoped to have, the growth will still see an overall improvement from last year.
A large part of this scare came from America's and China's economies. Through January, the US saw low manufacturing orders and car sales, which scared many. This, however, could very well be due to the frigid temperatures that have been experienced all over the nation through most of January. The cold weather seems to have slowed economic activity, but it is expected to pick up again and the recovery to continue. While it certainly is slowing, China's economy doesn't seem like it will come to a complete halt. Some believe that the economy will "end in a financial bust," but it is unlikely this is occurring now. Emerging market powers are dependent on China's growth rate, meaning that if China were to collapse, so would many others just coming to power. Since this doesn't seem to be happening now, there is still hope for a brightening future of the global economy.
A recovery overall may still seem likely, but there are many factors on which it all depends. The US, for one, would play a big part in this if GDP were to increase, unemployment would decrease, et cetera. If the Euro-zone agreed on monetary policies to increase the money supply and fix problems with low inflation rates, then the global economy would improve simply from that. Although, with so many factors that are uncertain, the future for the global economy still cannot be set in stone.
The effect of today’s technology on tomorrow’s jobs
Coming to an office near you: The effect of today’s
technology on tomorrow’s jobs will be immense—and no country is ready for it
This article is about the effect of the emerging new
technologies on employment, which is directly related to what we are discussing
in class. The article states that “One recent study by academics at Oxford
University suggests that 47% of today’s jobs could be automated in the next two
decades.” This is related to Professor Skosples' example that in the future we
will be ordering McDonalds meals from robots. The impact of new technology on
the labor force will hit fast in the short run, however technological
innovation will also create new jobs in the long run that go along with the
changes in demand and supply of goods and services due to new technologies.
The problem with emerging technologies is timing. It takes
years for new industries to grow, as we saw in industrial revolution. Unskilled
workers are increasingly more at risk while skilled and specialized workers
jobs are least vulnerable to the impact of new technologies. Digital startup
companies, such as Amazon and Facebook, will positively affect employment in
the long run by innovating and create new goods and services to employ millions,
although the effects of these companies aren’t as positive now in the short run.
Although unpopular in the short run, economies need to keep current to keep up
with competition. Shunning new technologies would leave an economy left behind
and lower economic growth in the long run.
I agree with the article’s stance that economies need to
enhance their educational systems to create more skilled workers to fill new
jobs that will arise due to new technologies, however I do not agree that it is
entirely up to the government to implement this. Benefits of technological
progress are unevenly distributed, which leads to inequality, but I question
the government’s role in fixing this problem. I agree that an emphasis on
critical thinking needs to be introduced in educational systems, however I
think that it is important that rote-learning needs to remain a part of curriculums
because these are fundamental skills that will enhance critical thinking.
Incorporating technology into education will also be important to create
skilled workers who know how to use their fundamental skills in the real world
of technology. I also agree that developing adult continuous education is
important. For example, CPA’s and Architects must take continuing education
courses each year to renew their licenses in order to make sure their credentials
are current to today’s world.
US job growth remains weak in January
A few weeks ago we did a homework concerning economics growth. Although the prediction reports are as optimistic as ever, the results are disappointing as January's employment reports kick in. According to the article:
On a lighter note, according to the statistics, much of January jobs gain came from traditional blue collar sector. Could this be an indication that manufacturing jobs are starting to shift back to the US? We will look forward to future reports.
Article: "Job growth remains weak" by Annalyn Kurtz from http://money.cnn.com/
"The U.S. economy added 113,000 jobs last month, according to the government. That's an improvement from December, but was far weaker than hoped. Economists had been expecting an addition of 178,000 jobs."The report shows the lowest unemployment in 5 years. However, it does not necessarily show that the economy is now better off than it previously was, since a lot of long time unemployed people have dropped out of the labor force. Participation rate, as reported, is "still hovering around its lowest level since 1978".
On a lighter note, according to the statistics, much of January jobs gain came from traditional blue collar sector. Could this be an indication that manufacturing jobs are starting to shift back to the US? We will look forward to future reports.
Article: "Job growth remains weak" by Annalyn Kurtz from http://money.cnn.com/
Puerto Rico Has Credit Rating Cut One Step to Junk by S&P
http://qz.com/174058/how-puerto-rico-got-into-this-economic-mess-you-keep-hearing-about/
Puerto Rico recently had it's debt downgraded by the S&P Tuesday from BB+ to BBB-. This decision was made because the country is having a difficult time raising funds in the capital markets. Moody's and Fitch are expected to follow shortly. Puerto Rico has a municipal market that sits around $3.7 trillion and investors have been anticipating this downgrade for months. The Islands Government plans to sell bonds to help fix financial deficits they are having. Municipal bonds from Puerto Rico are popular in the mainland US because they are tax free, which gives investors an incentive to purchase them.
The Islands Governor says that "Decades of financial irresponsibility can't be fixed in twelve months," which seems pretty accurate. He will release a new budget that has no deficit spending that relies on borrowing, something that has not been done in Puerto Rico for over 10 years. He hopes this will revive the nations economy. The economy of Puerto Rico has contracted in 6 out of the last 7 years, so their economic situation is certainly not helping their financial situation.
China's Economy in 3 Parts
http://www.economist.com/news/finance-and-economics/21594999-some-chinese-economic-indicators-are-moving-right-direction-others-are
This article explores China's economy in three different areas. Economist believe that some Chinese economic indicators are moving in right direction where others are not. China’s economy grew by 7.7% in 2013 but a widely observed index of manufacturing published by the bank HSBC fell for the fourth straight month. To completely understand China’s economy today, it would be helpful to think of it in 3 parts. Three forms of growth to consider are supply, demand and credit. For the long run, China’s economy might depend on its workforce size and productivity.
This article explores China's economy in three different areas. Economist believe that some Chinese economic indicators are moving in right direction where others are not. China’s economy grew by 7.7% in 2013 but a widely observed index of manufacturing published by the bank HSBC fell for the fourth straight month. To completely understand China’s economy today, it would be helpful to think of it in 3 parts. Three forms of growth to consider are supply, demand and credit. For the long run, China’s economy might depend on its workforce size and productivity.
China’s urban workforce, the main driver that produces much
of the country’s output, is experiencing slow growth. A shrinking age group for
this sector is posing future problems. The population of working age is
declining by millions. This current demographic shift has contributed to a de-acceleration
in China’s potential growth rate.
The Chinese economy depends on a second form of growth: that
of demand. Too little spending on goods and services will cause problems in the
underemployment of even a shrinking population. Other problems arise in
inflation. Demand in China is still modest, enough to increase GDP. However,
the economy failed to expand fast enough to generate any inflationary pressure.
Consumer prices rose fairly slowly while prices paid to producers fell for the
22nd month in a row.
The growth in credit for China is the main concern for
economists. The stock of outstanding financing for the private sector grew by
about 20% last year but now some of these loans are turning ugly. One credit
product, sold exclusively through ICBC, China’s biggest bank, is poised to
default at the end of this month. It raised 3 billion yuan (over $490 million)
for Zhenfu Energy group, an ill-fated coal-mining venture, the vice-chairman of
which was arrested for taking deposits without a license. Zhenfu cannot repay
its debts. The big question that remains is whether the product’s buyers,
sellers or issuers will bear the loss.
Some argue that China’s credit is not all this bad and even the
bad lending is not all bad. The same believe that credit can be divided into 3
categories, according to how it is spent. Some is spent on new capital and
infrastructure, increasing the economy’s productive capacity. Other chunks of
credit are spent wastefully, either on consumption or useless projects with
struggling markets. These loans add nothing to the economy’s productive
capacity, but does however add to demand. The third kind of credit is spent speculatively,
on existing assets, in an attempt to increase their value. This third kind of
credit adds little to growth.
Many argue that this problem should be offset by stronger
exports and consumer spending, both of which have plenty of room for
improvement. China’s dependence on investment remains a worry.
Friday, February 7, 2014
Brazil January Inflation Slower Than All Economist Estimates
http://www.bloomberg.com/news/2014-02-07/brazil-s-january-inflation-slower-than-every-economist-estimate.html
David Biller and Raymond Collit discuss how Brazil's inflation in the month of January was slightly lower than economists predicted. Economist estimated that Brazil's inflation would be at .61%, but in the month of Janaury was actually .55%. This was good news for Brazil as they try to cap price increase that has seen steady growth since April.
As consumer price increases declined from .64% to .60%, transportation prices also dropped by .03% in January. Transportation costs were a huge factor in slowing down prices. Though growth has become gradual, Brazil's currency vs the US, is the weakest it has been in the past five months.
Brazil has shown has shown commitment to focalize on inflation. The central bank plans to, "look to more currency intervention, administered prices, and macro-prudential measures to cap price increases." In five months, Brazil will be hosting the world cup, which could possibly have an enormous impact on inflation.
David Biller and Raymond Collit discuss how Brazil's inflation in the month of January was slightly lower than economists predicted. Economist estimated that Brazil's inflation would be at .61%, but in the month of Janaury was actually .55%. This was good news for Brazil as they try to cap price increase that has seen steady growth since April.
As consumer price increases declined from .64% to .60%, transportation prices also dropped by .03% in January. Transportation costs were a huge factor in slowing down prices. Though growth has become gradual, Brazil's currency vs the US, is the weakest it has been in the past five months.
Brazil has shown has shown commitment to focalize on inflation. The central bank plans to, "look to more currency intervention, administered prices, and macro-prudential measures to cap price increases." In five months, Brazil will be hosting the world cup, which could possibly have an enormous impact on inflation.
Euro-Zone low inflation
http://www.economist.com/blogs/freeexchange/2014/02/european-central-bank?zid=295&ah=0bca374e65f2354d553956ea65f756e0
Inflation in the Euro-zone was surprisingly low in January, falling from 0.8% to 0.7%, rather than rising to 0.9% as was expected. This caused a flurry of speculation of continual fall in interest rates, causing many to expect the European Central Bank to respond promptly during meeting of the ECB's governing council on Feb 6th. Many expected the ECB to possibly loosen its monetary policy (lowering interest rates) since it was supposed to reach a target inflation rate of just below 2%.
Although the ECB did not taken any further action in response to the fallen inflation rate, the ECB had already lowered its' lending rate in November from 0.5% to 0.25%.
Inflation in the Euro-zone was surprisingly low in January, falling from 0.8% to 0.7%, rather than rising to 0.9% as was expected. This caused a flurry of speculation of continual fall in interest rates, causing many to expect the European Central Bank to respond promptly during meeting of the ECB's governing council on Feb 6th. Many expected the ECB to possibly loosen its monetary policy (lowering interest rates) since it was supposed to reach a target inflation rate of just below 2%.
Although the ECB did not taken any further action in response to the fallen inflation rate, the ECB had already lowered its' lending rate in November from 0.5% to 0.25%.
Romanians Reject Euro Loans After Hungary Disaster: Mortgages
http://www.bloomberg.com/news/2014-02-02/romanians-reject-euro-loans-after-hungary-disaster-mortgages.html
Romania, European Union's second poorest country and also one of the most affected by the economic crisis has been using record- low interest rates to rebuild its housing market. It has been forcing home buyers to abandon cheap euro- denominated mortgages.
The government has been giving $4.2 billion in loan guarantee to first time home buyers. The government expects that the borrowers will accept higher payments in exchange for local currency loans that wont increase the costs if leu (Romanian currency) plunges against the euro.
The government changed this four year old program for euro loans last October. This new program for euro loans covers credit only in leu. This change was brought about after seeing how Hungary(neighboring country) was affected by buying Swiss franc loans and had to end up paying a lot more in their own currency. The forint(Hungarian currency) has been depreciated by about 75% since 2008, when most of the loans were issued.
The Romanian plan guarantees 50% of the value mortgages with a 5% down payment. This will reduce the risks of the banks and will thus be able to give out cheaper loans. The Romanian Central Bank also reduced its interest rate to a 3.75%, one of the various government cuts. This program will protect Romanian citizens from the exchange rates.
Romania, European Union's second poorest country and also one of the most affected by the economic crisis has been using record- low interest rates to rebuild its housing market. It has been forcing home buyers to abandon cheap euro- denominated mortgages.
The government has been giving $4.2 billion in loan guarantee to first time home buyers. The government expects that the borrowers will accept higher payments in exchange for local currency loans that wont increase the costs if leu (Romanian currency) plunges against the euro.
The government changed this four year old program for euro loans last October. This new program for euro loans covers credit only in leu. This change was brought about after seeing how Hungary(neighboring country) was affected by buying Swiss franc loans and had to end up paying a lot more in their own currency. The forint(Hungarian currency) has been depreciated by about 75% since 2008, when most of the loans were issued.
The Romanian plan guarantees 50% of the value mortgages with a 5% down payment. This will reduce the risks of the banks and will thus be able to give out cheaper loans. The Romanian Central Bank also reduced its interest rate to a 3.75%, one of the various government cuts. This program will protect Romanian citizens from the exchange rates.
inflation in other country's and its effects
http://www.economist.com/news/finance-and-economics/21595485-developing-economies-struggle-cope-new-world-locus-extremity
This article is talking about the inflation rates of country's like Turkey and Argentina and how the devaluing of there currency is causing problems with the people trusting in its value so people are obtaining bonds and using U.S Dollars to store value. it also relates some of the problems with there inflation comes from the Federal Reserves quantitative easing. this is because the Fed is buying bond causing some crowding out in the international market.
Additionally in my comparative politics class we talked about how in Argentina if you ask how much a car cost the salesman will say 5000 Dollars but the price will be listed in Pesos this is is a cultural effect of the inflation that these country are experiencing this also has reduces the use of there national currency making it much less valuable because it is seen as unstable.
From Cloud to Clout
This article discusses the leaders of Microsoft stepping up and stepping down and the effect of that on the company's current economic standing. The company appointed Satya Nadella, who was head of Microsoft's cloud and enterprise group, as the Chief Executive and now Microsoft's Bill Gates will become a 'technology advisor' and no longer chairman.
From Cloud to Clout, Nadella boasts 9% increased revenues and 12.8% increased operating income in his division, making it the company's best performing divisions, reason to choose Nadella. And while it took almost more than half a year, this could be a good shift in power for Microsoft, potentially foreshadowing due to Nadella's previous stats and the contemporary shift of "desktops and corporate data centres to cloud software and remote servers".
http://www.economist.com/blogs/schumpeter/2014/02/microsofts-new-boss
Thursday, February 6, 2014
The Winter Olympics and Crowding Out
The Winter Olympics which are about to begin present an interesting example of public sector crowding out. The article mentions that the Russian economy has been on a downturn lately in the time since the Olympics was awarded to Sochi. In that time the Russian government has spent approximately $50 billion on preparations for the games. In part the article claims that this is "caused by an erosion of most other commodity prices and a dearth of new foreign investment." It seems that the massive investment of the government had the effect of increasing interest rates by decreasing investment.
Given that the Olympic games are such a spectacle and brings a lot of attention, is it worth the potential crowding out of private investment that can occur when the government embarks on a massive project?
Inflation Fuels Crises in Two Latin Nations
In their article, “Inflation
Fuels Crisis in Two Latin Nations” authors Turner, Forero, and Lyons explain
the significance of inflation in Argentina and Venezuela. The authors use Carlos Bianchi's
funeral home to show the harm inflation causes small businesses. Mr. Bianchi is
forced to make all of his sales on account, to be paid at a later date at an
unknown price. The lack of certainty is significantly hurting his business.
China’s slowdown, investor’s
recent cynicism about emerging markets, and Argentina and Venezuela’s lofty
inflation will almost certainly lead to recession in the two Latin American
countries. In 2013 Venezuela and Argentina experienced inflation of 56
percent and 28 percent respectively. These figures are expected to be higher in
2014. Combined, economists are forecasting a 3 percent decline in GDP led by
reduced investment and consumption.
Many argue that removing subsidies,
price caps and currency controls would restrain inflation in Argentina and
Venezuela, but sources close to the Presidents of both countries say they have
political reasons for avoiding these types of economic policies. I guess
only time will tell how damaging this round of inflation will be. Hopefully
it will not be as bad as 1989 when inflation in Argentina reached 5,000
percent.
They Are on the Run
http://www.nbcnews.com/business/rich-chinese-fleeing-australia-u-s-2D12051630
More than half of all multimillionaire Chinese have left or plan to leave China to immigrate to countries such as Australia and the United States in search for a better life. Australia's new visa program that launched a little over a year ago has already granted 65 visas to Chinese millionaires. This visa program has brought in already $325 million to the Australian economy and plans to exceed $3.5 billion a year. U.S., U.K., Spain, Portugal, the Caymans, and Gambia all plan to attract wealthy Chinese. Even though many countries plan to obtain wealthy Chinese, this does not necessarily mean that more jobs will be created for these economies. In the United States a foreigner that wants to obtain a green card must invest at least $500,000 in a U.S. business that creates at least ten jobs for that business . In European countries all that is required is that immigrants that want to obtain citizenship must invest 500,000 euros into domestic property. In Australia, immigrants that plan to require citizenship do not even have to create domestic jobs. All that is required is that applicants invest in financial markets or bonds.
This flooding of wealthy China-men may lead to an increase in money supply to the economies they are investing into, but does not necessarily mean that these economies will be better off. Since Australia began its visa program, the government has been cracking down on poorer immigrants and not allowing them to come into the country. This crackdown may cause a deficit of unskilled labor in the country. Without enough unskilled labor these wealthy Chinese coming into the country may not receive adequate goods and services to remain comfortable.
Lastly what will become of China's economy if all the wealthy begin to move out of the country? Their population is already the highest in the world (1.4 billion people) along with a giant amount of poor and underclass. Less jobs will be sustained because the wealthy business owners will be gone. If all the rich begin to move out and the money supply continually decreases, I predict given these indicators, that China's economy and GDP will have a very volatile downfall in the near future.
http://www.nbcnews.com/business/rich-chinese-fleeing-australia-u-s-2D12051630
More than half of all multimillionaire Chinese have left or plan to leave China to immigrate to countries such as Australia and the United States in search for a better life. Australia's new visa program that launched a little over a year ago has already granted 65 visas to Chinese millionaires. This visa program has brought in already $325 million to the Australian economy and plans to exceed $3.5 billion a year. U.S., U.K., Spain, Portugal, the Caymans, and Gambia all plan to attract wealthy Chinese. Even though many countries plan to obtain wealthy Chinese, this does not necessarily mean that more jobs will be created for these economies. In the United States a foreigner that wants to obtain a green card must invest at least $500,000 in a U.S. business that creates at least ten jobs for that business . In European countries all that is required is that immigrants that want to obtain citizenship must invest 500,000 euros into domestic property. In Australia, immigrants that plan to require citizenship do not even have to create domestic jobs. All that is required is that applicants invest in financial markets or bonds.
This flooding of wealthy China-men may lead to an increase in money supply to the economies they are investing into, but does not necessarily mean that these economies will be better off. Since Australia began its visa program, the government has been cracking down on poorer immigrants and not allowing them to come into the country. This crackdown may cause a deficit of unskilled labor in the country. Without enough unskilled labor these wealthy Chinese coming into the country may not receive adequate goods and services to remain comfortable.
Lastly what will become of China's economy if all the wealthy begin to move out of the country? Their population is already the highest in the world (1.4 billion people) along with a giant amount of poor and underclass. Less jobs will be sustained because the wealthy business owners will be gone. If all the rich begin to move out and the money supply continually decreases, I predict given these indicators, that China's economy and GDP will have a very volatile downfall in the near future.
Wednesday, February 5, 2014
The Return Of The Supply Side
http://www.economist.com/blogs/freeexchange/2014/02/obamacare-and-employment#comments
This article discusses whether jobs are based upon the economy's supply or demand. The article weights pros and cons between Obamacare and the influence it will have on jobs and supply. I thought a very interesting comment that the article discusses is what it means to have a job. For example, should people be working for longer or enjoying more leisure time? What is best for the economy? Should we advocate for working for longer or less? The article retorts that people are usually better off when they work, stating, "Work provides dignity, enhances productivity, creates goods and services, and raises GDP, generating the taxes that pay for transfers to those who really shouldn’t work."
Additionally, there is further discussion on the report released today by the Congressional Budget Office to compare compelling arguments based on how Obamacare affects demand and supply in the labor markets. The article concludes that Obama should get started with supply-side reforms in order for them to be in full force once the economy reaches full employment.
This article discusses whether jobs are based upon the economy's supply or demand. The article weights pros and cons between Obamacare and the influence it will have on jobs and supply. I thought a very interesting comment that the article discusses is what it means to have a job. For example, should people be working for longer or enjoying more leisure time? What is best for the economy? Should we advocate for working for longer or less? The article retorts that people are usually better off when they work, stating, "Work provides dignity, enhances productivity, creates goods and services, and raises GDP, generating the taxes that pay for transfers to those who really shouldn’t work."
Additionally, there is further discussion on the report released today by the Congressional Budget Office to compare compelling arguments based on how Obamacare affects demand and supply in the labor markets. The article concludes that Obama should get started with supply-side reforms in order for them to be in full force once the economy reaches full employment.
Consumer Spending Propelled Fourth-Quarter Growth: Economy
The subject of this article deals primarily with the growth in the US economy in Q4 but also talks about the international facts that relate to economic growth. To start off with consumer spending grew by 3.2 percent in Q4. With this business investments and the amount of US exports increased as well. Although GDP grew overall the housing market played a downward role on the economy due to the extreme cold weather that decreased selling as well as production of houses. The government shutdown is believed to have cut GDP by 0.3 percent. In addition to cutting GDP this shutdown could have been the cause of the reason that government spending had declined, from year to year, the most since 1971. Finally the Fed recently voted to reduce bond purchases by $10 billion to $65 billion because of the improvement in the economies growth.
Tuesday, February 4, 2014
Feds Study on Job Crisis
The New York Federal Reserve released a paper recently that
has caused a lot of talk and confusion. The paper reports that the US job
market is actually at a great place now and is where it actually should
be.
Labor force
participation has fallen and is stilling falling and the biggest drop was after
the recession, and the paper said that the main reason for the labor force
participation rate not being where we want it to be is because of the baby
boomers retiring. However many argue that it can’t be the only cause.
The paper also says some charts can misleading
and not show the whole picture in particular the Civilian Employment-Population
Ratio. They believe it is misleading
because it does not include the baby boomers retiring. So a new chart was produced
and this chart shows that many people were working before the recession and now
they are all retiring.
Many don’t
agree with what this paper said. A main argument against this was that they
don’t look at the younger generation in the work force. The younger generation
participation in the labor force has actually shrunk while the baby boomers
have much more participation.
http://www.huffingtonpost.com/2014/02/04/new-york-fed-labor-market_n_4723769.html?utm_hp_ref=business
US Small Businesses
US Small Businesses: Borrow more, signaling growth ahead
The borrowing of US small businesses has boosted in the last couple of moths, which has reached it highest level in nearly seven years. Economists view this increase in borrowing a signal for economic growth and could continue throughout the year. Small companies take out loans to buy new technology and equipments. Many view the peak in borrowing as a signal for a rise in hiring ahead.
This is good sign for the Federal Reserve, who has recently hired a new chair Janet Yellen. The Federal Reserve has plans to end bond-buying before the year it out if the economy does not improve and if the unemployment rate does not improve.
http://www.cnbc.com/id/101387287
Monday, February 3, 2014
Bad manufacturing data = Decline in U.S. stocks
The Institute of Supply Management just released manufacturing data for the month of January and it is worse than predicted by analysts. This has sent the stock market tumbling down 2.0%. Extreme weather conditions are being labelled as the cause of the outcome. Compared to the month of December last year, manufacturing was at a 4-year high so the optimism that came with it just got shattered by this month's report. In my opinion, as weather conditions get worse year by year and global warming becomes more of a reality, it is important for analysts to give weather conditions more weight in making future predictions about such type of data.
Sunday, February 2, 2014
For Obama, Investing in Brighter Futures Remains a Tough Sell
John Harwood’s New York Times article, For Obama, Investing in Brighter Futures Remains a Tough Sell,
discusses President Obama’s plans to boost the economy. Obama is hopeful that
increasing government spending will create a better standard of living. He wants
to spending money on infrastructure, research and development initiatives,
education, job training and more. He wants to invest in business using stimulus
packages. Obama hopes employers can use the funds to raise employee wages. An
increase in government spending seems to be the fiscal policy that Obama wants
to employ. However, Congress is not on board with these plans; they are more
concerned with reducing the country’s deficit. Obama believes his ideas are
“critical to lifting stagnation’. Republicans think it is the individuals
responsibility, and Obama should reduce government spending and cut programs.
Now that the baby boomers are retiring, choosing the right policy is more
important than ever.
AT&T cuts wireless prices
Reflecting the growing importance of cellular devices, AT&T is cutting their prices as well as offering discounts and credit to new customers that switch from another service provider.
Cellular Service could be considered an oligopoly, with few major players all offering the same basic service. AT&T has responded to market pressures to increase their service base by cutting costs. This continual effort by all service providers to cut consumers costs could turn into 0 profits, by decreasing price until ultimately Price = Marginal Cost for each provider. This could prove to decrease the players even more if cutting costs down so much is a continuing trend even further and resulting in firms leaving the market due to negative profits.
Read the article here
Cellular Service could be considered an oligopoly, with few major players all offering the same basic service. AT&T has responded to market pressures to increase their service base by cutting costs. This continual effort by all service providers to cut consumers costs could turn into 0 profits, by decreasing price until ultimately Price = Marginal Cost for each provider. This could prove to decrease the players even more if cutting costs down so much is a continuing trend even further and resulting in firms leaving the market due to negative profits.
Read the article here
Incomes Are Flat, Reflecting a Slowdown in Job Growth, but Consumer Spending Rises
American consumer spending has increased by 0.4% in December, following an increase of 0.6% in consumer spending in November of 2013. However, incomes have only increased by 0.2% in November and did not increase in December. The income growth for 2013 was 2.8%, and due to the fact that there was no increase in income in December, it may be expected that employment growth will decline momentarily. However, there is good news that current predictions estimate that 2014 will see an increase in employment growth, which will give people more disposable income to spend. At the same time, the Federal Reserve is planning to decrease its actions with the federal economic stimulus. This could mean an increase in the domestic interest rates. Some economic forecasters have voiced concern that an increase in interest rates would not be productive for the US economy. Although other economic predictions have been positive since Congress has recently stopped the slashing of government spending, there is a new belief that the federal government will not be as counterproductive with economic growth as it was in 2013 (where policies of the federal government decreased economic growth by 1.5%). Some recent information that has been released by groups such as the University of Michigan show that the "index of consumer sentiment" has decreased to 81.2 from 82.5 between December to January. Also, the saving rate has decreased to 3.9% after taxes. Overall, there should be some economic growth in the US, but different factors such as an increase in interest rates or perhaps federal policies such as cutting government spending could decrease some of the potential for economic growth in 2014 for the US economy.
What happens to the Saudis when the Oil runs out?
Saudi Arabia is the biggest producer and exporter of oil in the world. approximately 80 percent of the Saudis GDP depends on its Oil exports. However the country is currently at a moment in it history where it has realized that very soon, the oil is going to run out. Not only are its oil reserves slowly dwindling but the amount of domestic energy demand has also increased which means alot of the oil revenues and indeed the oil itself is going to meet the growing energy demand. An article in the telegraph (famous UK economics magazine) predicts that Saudi Oil may run out as soon as 2030. the big question is, What does this mean for the US economy? The US economy is highly dependent on Oil from Saudi Arabia and that is a fact. approximately 13 percent of its yearly oil imports come from the Arab state and because the US imports two thirds of its oil, this is by no means a small number. And it is not just the US economy, Saudi oil is exported all over the world. What will happen when it runs out? It could be argued that other countries will step up and harvest the oil that is present within their own countries but what will happen initially?Will we see another oil crisis like we saw in 1973? What will the transition be like? what will the political implications be like? Lets not forget that the US has openly been courting Saudi Arabia for many years due to the oil trade and its strategic alliance with the country because of its location in the middle East, If that incentive does not exist anymore, does this mean that the US will overlook Saudi importance. What will happen to the welfare Saudi economy and worse off, what will happen when the greatest oil producing nation in the world goes barren, the implications seem to be very negative, both economically and politically.
Comeback Kids
http://www.economist.com/blogs/theworldin2014/2014/01/youth-unemployment
This article is about the high rate of 20 something's living with there parents due to high rates of unemployment. This article directly relates to me and other students who are soon to be on the job hunt. In Britain 26% of people aged between 20 and 34 live with their parents and in US is worse where that number is at 36%, numbers that are directly related to high unemployment especially in large urban areas. These high numbers could be trouble for this college student generation; however the number of job offers is at a 5 year high and has jumped 8.7% which is a good sign after the recent recession. Another hopeful sign for young workers is that the International Monetary Fund has just increased its global growth forecast by .1%, a number that might seem insignificant but could be enough to get jobs for many young people.
This article is about the high rate of 20 something's living with there parents due to high rates of unemployment. This article directly relates to me and other students who are soon to be on the job hunt. In Britain 26% of people aged between 20 and 34 live with their parents and in US is worse where that number is at 36%, numbers that are directly related to high unemployment especially in large urban areas. These high numbers could be trouble for this college student generation; however the number of job offers is at a 5 year high and has jumped 8.7% which is a good sign after the recent recession. Another hopeful sign for young workers is that the International Monetary Fund has just increased its global growth forecast by .1%, a number that might seem insignificant but could be enough to get jobs for many young people.
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