An Interesting Take on Income Inequality

A hot topic in recent times has been the gap between America's rich and poor. While this fact may be true, people seem to be overreacting to this situation and assuming consequences that are far-fetched. I thought this article presented a very interesting explanation for why this has occurred.

In summary, the article describes how the changing American family model could be an influence. In mid-century America it was often the case that A well educated male would be married to a housewife or lesser educated woman. In modern times, however, many more women have higher education and work with their well educated male counterparts. Naturally, many of them marry each other and therefore have households with much higher income. With high income earners now living together rather than being evenly mixed,  the income gap has grown. This trend seems likely to continue as more and more women gain degrees and enter the workforce.

 http://www.economist.com/news/united-states/21595972-how-sexual-equality-increases-gap-between-rich-and-poor-households-sex-brains-and

Pakistan economy improving

      The  International Monetary Fund loan to Pakistan become less recent years. To get more loan from  IMF to rebuild reserves and support structural changes, Pakistan committed to increase growth and improve financial stability. Pakistan did several measures to decrease the deficit, reduce pervasive electricity shortages and increase the country’s poor rate of tax collection.

       IMF said Sunday that Pakistan has met almost all of its quantitative performance markers, which shows that it will have a huge improvement in economy. The IMF forecasts that inflation in Pakistan will boost 10 percent this year.

http://www.washingtonpost.com/world/middle_east/imf-pakistan-economy-improving-reform-on-track/2014/02/09/454b968c-919e-11e3-97d3-f7da321f6f33_story.html

Indian Politics

This article puts the focus on Rahul Gandhi's latest television interview. Gandhi, the scion and golden boy of India's political dynasty, is touted to run for the post of Prime Minister during India's next general elections. He represents the Congress party, who serve as one half of the UPA coalition alliance that currently holds power in India. Most people have been unhappy with the state of affairs in India under the UPA, with gripes ranging from extremely high food inflation to cultural issues such as the safety of women.

While a majority of the article is about Gandhi's latest interview, wherein he made a fool of himself, the author highlights one important factor to consider during the elections. Namely, both Gandhi and Narendra Modi (the opposition leader) have made promises about India's economy, but neither of them are willing to talk economic policies. It seems that this election is going to be more about a popularity contest than real issues.

From bureaucracy to corruption, India's business is tarnished and impossible to navigate. What citizens are looking for is an educated candidate with clear goals in mind and policies to help achieve these goals. Indian politics is a dirty business and this article serves well as an introduction to the current state of affairs.

Source:

http://www.bloomberg.com/news/2014-01-28/rahul-gandhi-speaks-too-much-and-not-enough.html

Argentina on the Brink

http://www.nytimes.com/2014/01/29/opinion/argentina-on-the-brink.html?_r=0

In Argentina in the last decade Argentina has come back to reoccurring finical problems.  For instance, President Cristina Fernández de Kirchner has devalued the Peso for Argentina and on top of that has relaxed some capital control.  The reason why the President did this is because it would release the pressure from country’s dwindling foreign reserves.  There was some positive results by printing more Peso money because the president did use some of that money to wasteful subsidies and financing the government.  This did lead to inflation, which took a told economy because the consumer price shot up 28 cents and the official inflation rate was 10.9 percent.  

The President made some other bad decision like picking unnecessary fights with private businesses and investors, which lead to hurting Argentina's economy.  On top of that she made a law of how much a citizen could convert Peso to dollar.  This lead to a thriving black market in currency.  Recently there has been some improvement, but only small ones.  A great example of one is economy minister, Axel Kicillof, has been doing a great job by negotiating with the oil company, because of that damage that the President has done.

Economy Added 113,000 Jobs in January; UR Dips to 6.6 percent

http://www.washingtonpost.com/business/economy/economy-added-11300-jobs-in-january-unemployment-rate-dips-to-66-percent/2014/02/07/9724cdb8-8f8f-11e3-84e1-27626c5ef5fb_story.html

This article outlines the current state of the economy and how the expected take off of 2014 didn't exactly happen. Instead, there was only a growth of 113,000 jobs in January, though the unemployment rate lowered to 6.6% and the hourly wage rose by five cents. There was a lot of hope for the new year, with the federal budget deal. The article discusses the current economic outlook as well as potential causes and solutions that can be taken.

The U.S. Labor Market Cools, And its Not Just the Weather

After one of the worst months of job creation in December, job growth numbers in January fell below expectations as well. 75,000 jobs were created in December after the numbers had been revised to take into account the bad weather. January's unrevised numbers show that 113,000 jobs were added to the economy, quite a bit below the expected 180,000.http://www.businessweek.com/articles/2014-02-07/the-labor-market-is-cooling-off-and-its-not-just-the-weather#r=mar-lst

Private sector job growth has been relatively steady. It accounts for 142,000 jobs added in January. Government sector jobs however, have declined by 29,000. The unemployment rate has declined from 6.7 to 6.6% and average wages have increased have gone up 5 cents. The labor force also increased by 499,000 increasing the participation rate by 0.2%. 

This past months labor statistics aren't all bad but not exactly what the fed wants to see. They promised in 2012 that interest rates would remain extremely low until unemployment came below 6.5%. That time is getting closer and the labor market isn't in the best shape. Over the past year the unemployment rate has decreased by about a percent, but much of that is due to the decline in labor force participation. 

http://www.businessweek.com/articles/2014-02-07/the-labor-market-is-cooling-off-and-its-not-just-the-weather#r=mar-lst

Bankruptcy Fees in Detroit

http://money.cnn.com/2014/02/05/news/economy/detroit-bankruptcy-fees/index.html?iid=SF_E_River

The devastation of bankruptcy is continuing to spiral the city of Detroit further down. On July 18th of last year, Detroit filed for bankruptcy, and the fees that entail said bankruptcy continue to pile on. About $13.3 million of fees have been reported. Another $400,000 more in expenses are expected to be paid as well. From an economic standpoint, Detroit is in shambles, however the city is doing its best to recover from the bankruptcy. Deals on such things as how to pay for retiree health care as well as keeping the city owned pieces of art on display in the museum have been made, showing signs of progress. Though progress is being shown, the city is behind $18 billion in liabilities as well as $11.5 billion in other unsecured debt. The main bill of nearly $14 billion came from Jones Day, a primary law firm. Detroit will continue with their progression, and will remain optimistic.

CVS dropping tobacco products.

The largest pharmacy chain in the nation CVS just announced that they are going to stop selling all tobacco products.  This will cut nearly two billion dollars from there annual sales.  Annually CVS pulls in roughly 120 billion in sales but losing two billion is a huge cut.  They are saying they are taking a step into the future and being more creditable as a pharmacy chain.  CVS is trying to say they are taking healthcare more seriously and if your not all in your not in at all.  To make up on there lose they are offering small perks in there stores.  One of the new products is being able to sign up for expensive cancer drugs and helping the customer find a way to make payments through the store.  There new products are helping the company work closer with doctors and hospitals which CVS hopes this lifts them in the future as a competitive edge with and advantages in things such as Obamacare.  Overall CVS thinks by making this decision that customers will trust the chain more and bring more people through the doors.  Will more pharmacy chains follow suit in dropping tobacco products and how will this effect their stocks if they lose so much in sales?
http://www.forbes.com/sites/matthewherper/2014/02/05/cvs-to-stop-selling-tobacco-sacrificing-2-billion-in-sales-for-public-health-and-future-growth/

http://www.cnn.com/2014/02/07/opinion/kohn-two-economies/index.html?iref=allsearch

With the monthly job report just being released this January we see some troubling facts that may have a significant impact on the middle class.

High-end luxury items as well as top of the line restaurant have seen slow growth in sales while company’s like Red Lobster and Loehmann’s are closing down. The American Economy has not seen inequality like this since the 1920’s. Tax cuts intended to have companies invest more into producing goods and services, we now see being pocketed and spent on luxury items.

Although the average income in America remains stagnant at the moment, consumption has slowly risen. Forcing one to wonder, are people just piling up debt? The author argues that Americans are beginning to live unsustainably, however it is always important to keep in mind the increasing price of a college education.

-Kyle Foster

As Minimum Wages Rise, Businesses Grapple With the Consequences

There has been a lot of talk recently about raising the minimum wage of workers across the country in order for it to be a more sustainable income. While at first glance it may sound like a good idea to many people there are many things that will happen in response to this. This article discusses many situations of how this will affect the economy. A large focus of which tends to be on the small business side where for example, raising the wages of the workers very well may put some out of business because there isn't an increase in revenue to handle the increase in wages. It is noted in the article that currently the federal minimum wage of $7.25 when adjusted for inflation is about 23% lower than the wage in 1968. In my opinion there should not be a raise in the federal minimum wage as I do not believe it would be beneficial to the economy in the long run. http://www.nytimes.com/2014/02/06/business/smallbusiness/as-minimum-wages-rise-businesses-grapple-with-the-consequences.html?ref=economy

Hyperinflation Is Venezuela's Biggest Enemy Now

Venezuela's inflation rate last year was at a stunning 56%, qualifying for hyperinflation. The bad thing is that it's predicted to increase substantially over the next year to over 60-65%. The article states that Venezuela should decrease public spending to get control of the deficit they face. The bolivar (Venezuelan currency) will soon be nearly valueless at this rate, meaning purchasing power substantially decreases, causing prices of goods to have to decrease, causing lower net income for businesses, ultimately hurting the Venezuelan economy overall. Now, Venezuela is nowhere near Argentina 's annual inflation of 12,000% in 1990, but hyperinflation is no laughing matter. 

President Nicolás Maduro says he is fighting against a "parasitic bourgeoisie" who is hoarding goods to destabilize the government. However, Maduro has put in place very strict price controls and foreign trade policies that literally cause businesses to sell their goods at a loss. Maduro has also proposed to put into plan even stricter policies for this, causing business owners to become very anxious. Because of this, many Venezuelans have bought US dollars in order to get rid of their hyper inflated, worthless currency.

Maduro thinks that the entire Caribbean economy will grow this year by 3%, which is slightly more than it did last year. This is due to their close ties with the US economy, which is also expected to have substantial growth this year. However, with Venezuela's case, Maduro said their economy will suffer an "important deceleration".

This article shows how hyperinflation can destroy an economy. Maduro makes fiery speeches at political opponent, when the US dollar is their actual rival. It seems that it is near impossible for Venezuela to prevent an economic collapse unless they can get control of this hyperinflation. http://www.miamiherald.com/2014/02/08/3920434/andres-oppenheimer-venezuelas.html

"Debt ceiling must be raised by Feb 27th"

Treasury Secretary Jack Lew told Congress that the debt ceiling needs to be raised by the 27th or our economy will face major issues. Lew estimates that by then the treasury will run out of special accounting maneuvers to ensure that all the country's bills are paid in full and on time.  The obligations that Treasury must pay include everything from issuing Social Security checks to paying government contractors to making payroll for federal workers and military personnel. After the 27th, if Congress still hasn't raised or suspended the nation's debt ceiling, Treasury would only be able to pay incoming bills with the cash it has on hand plus whatever revenue comes in on a daily basis. Lew suggests "I respectfully urge Congress to move as quickly as possible, raise the debt limit, and provide certainty to the economy and to the financial markets." Although a debt suspension doesn't actually raise the debt ceiling, it would allow for us to keep borrowing and able to pay our country's bills on time. 

http://money.cnn.com/2014/02/07/news/economy/debt-ceiling-reached/index.html

"Nation to hit debt ceiling Friday"

http://thehill.com/blogs/on-the-money/economy/197156-this-week-nation-to-hit-debt-ceiling-friday

This article talks about the United State's borrowing limit, that will be hit Friday ($16.7 trillion).  Republicans argue that there should be some policy concessions to raising the ceiling, where Democrats will not negotiate on it.  This limit was suspended until February 7th due to the government shutdown.  In the coming week, the Congressional Budget Office will give an update on the economic and budget outlet.  Along with the CBO's update, hard data will be provided concerning jobs in January.  The article concludes with how there is skepticism with the IRS wrongdoing of conservative groups, along with how there are issues with the republicans and democrats concerning the issue of the debt ceiling and other such things.

"Slow Jobs Growth Stirs Worry"

http://online.wsj.com/news/articles/SB10001424052702304680904579368562158283286?mod=WSJ_WSJ_US_News_5

Although the economy is recovering, there is a worry that it is not recovering as quickly as hoped and the jobs growth indicators prove that. The last two months have had low gains of jobs, "marking the weakest two-month stretch of job creation in three years." Although more jobs are being added, not enough are being added to really help the economy in its recovery. On the bright side, the unemployment rate has moved down to 6.6%, which is the lowest it has been since 2006. This decline in the unemployment rate, however, is not coming because of the addition of jobs but rather because more people went out and found jobs. This means that the labor-force participation rate has gone up. More people are willing to accept low-paying or part-time jobs because of the trouble that they are having in looking for full time jobs that suit their credentials. If we want our recovery to have quicker, more stable growth, employers must be willing to hire. In order to get employers to higher, people must be willing to accept lower wages, minimum wage must be lower, taxes must go up, or the government must spend more. All of these fiscal strategies sound unreasonable, but I think America has lost their nationalistic pride. How did we get out of the Great Depression in three years? Nationalism. It just does not seem to be there anymore.

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

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

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

As Fed, China pull back, so do global markets

Link to the Article

The article talks about how S&P and Dow Jones had dropped 2% in the global market due to the fact that China's massive build up of its infrastructure has slowed down. Because China has slowed down its infrastructure build up, countries are not able to export construction goods like heavy equipment and raw materials. And due to the fact that they are no longer buying these goods, the economies of the world that sell these material goods have taken a hit, so the fed has to keep up the stimulation of the american economy and there will no repeat of the 2008 economic crisis. The state of world economies is still very fragile after the housing bubble collapse in America. The fed fears that there will be another economic collapse due to the fact that China may have bad loans and unstable debt. If China defaults on these loans we will be forced into another world recession. China has taken precautions in putting trillions in foreign reserves as a buffer in case the loans are bad and debt is unstable.

This article gives a great insight on how China has learned from the mistakes of America and has taken the precautions of preventing another recession. This forward thinking hopefully can have other countries follow suite when building up there infrastructure and making sure that there is money in reserve to back up loans in case locally municipalities can not pay back their loans.

Europe's Central Bank, Defying Doomsayers, Holds Rate Steady

With the inflation rate being below 1% and prices continually falling, the euro zone is threatened with deflation that could take over at any moment. Despite pressure from consumers, economists, and other businesses to raise the interest rate, Mario Draghi, president of Europe's Central Bank, continues for the third straight month to keep the interest rate at a very low 0.25%. Although inflation is very low and deflation could be upon the euro zone soon if monetary action is not taken, Draghi responds to his critics by saying, "We have to dispense with the question, Is there deflation? The answer is no." This stands to reason that unless there is some drastic change in the economy such as deflation setting in, Draghi will keep the interest rate where it is for at least another month.

http://www.nytimes.com/2014/02/07/business/international/european-central-bank-holds-interest-rate-at-0-25.html

Economy added 113,000 jobs in January; unemployment rate dips to 6.6 percent

2014 was supposed to be the year that the economy took off. After new data from January was released, it looks as though this may not be the case. Only 113,000 jobs were added in January, which was lower than expected. The increase in jobs helped to bring down the unemployment rate to 6.6%. Some more good news was the expansion of the labor force, as well as a rise of 5 cents in hourly wages.
There were signs that January job growth may not meet expectations. A closely watched index of manufacturing activity tumbled last month and auto sales were lower than expected.
Robert Shapiro, chairman of economic advisory firm Sonecon and a former top official at the Commerce Department, viewed the lower than expected job growth as a "pause" in the economy's growth. “We need two, three, four more months of weak numbers before we say there’s any real problem,” he said.
Stuart Hoffman, chief economist for PNC Financial Services, was even more optimistic. He believes January's results will be revised upward when next month's data is released and that hiring will soon pick up. He claimed, "“We won’t strike out three months in a row. Keep the faith, baby, keep the faith.”
Economists are keeping an eye on the Fed's short-term interest rate, which has been promised to be kept near zero until "well past" the time the unemployment rate has reached 6.5%. With the rate already at 6.6%, economists will be seeking clarity from the Fed and how it will react once the line is crossed.

http://www.washingtonpost.com/business/economy/economy-added-11300-jobs-in-january-unemployment-rate-dips-to-66-percent/2014/02/07/9724cdb8-8f8f-11e3-84e1-27626c5ef5fb_story.html

China's Economy: In three parts

http://www.economist.com/news/finance-and-economics/21594999-some-chinese-economic-indicators-are-moving-right-direction-others-are

China's economy grew by 7.7% in 2013. This article is about how some factors that show economic growth in China's economy predict continued growth and some factors predict a decline in growth in the upcoming year. China is experiencing lessened growth in its urban workforce this creates a diminishing potential for growth in the economy. Whether the economy fulfills the expected decrease in economic growth is up to the demand for goods and services.

Employment's Decline, for Men of All Ages

Within the past decades unemployment has raised many problems and is hard to find solutions for. But for men who graduated high school between 1982 and 86, their unemployment has a lot to do with bad timing. Men who graduated during this time period entered their prime working years in a period of slow growth in 1994. Only 83.3 percent of men between the ages of 25 and 29 were working. Now a decade later we are coming across the same problem. The government came out with a report that again only 83.3 percent of 25-29 year olds were working. This is do partially to the recession in 2009. Within the last 5 years employment has increased modestly but still remain low. According to the congressional budget office it is because the erosion of skills associated with long-term unemployment are preventing a growing number of people from returning to work.

http://economix.blogs.nytimes.com/2014/02/07/employments-decline-for-men-of-all-ages/?ref=economy

http://www.economist.com/news/finance-and-economics/21595937-fed-may-be-tapering-central-banks-japan-and-europe-are-still

The article discusses how although many Americans blame the recent upheaval in the financial markets on the feds decision to cut back in quantitative easing that the opposite is happening in Japan.  In fact, Japan started buying 70 billion (dollars equivalent) a month which is a much greater sum than the United States 85 billion buy back easing when considering the size of the economy.  The article addresses that there is much more to consider than simply the feds reduction quantitative easing - and how quantitative easing can be used in two different ways - for Japan it is addressing its problem of deflation.

Where rich Chinese want to live

http://money.cnn.com/gallery/news/2014/02/06/china-wealthy-move/index.html?iid=SF_E_River

Recent trends have shown that the United States of America is the favorite destination of wealthy Chinese citizens. A new program that exchanges a green card for a $500,000 investment as well as a desire for cleaner air and water, and better schools has encouraged this movement. They are also moving to Europe, Australia, Singapore, and other places around the world. However, citizens making over 10 million yuan are interested in staying in China. In the United States of America this idea is not too popular among some of the wealthier citizens. Only  time will tell whether this trend will benefit or disrupt our economy. 

The U.S. Labor Market Cools, and It's Not Just the Weather

http://www.businessweek.com/articles/2014-02-07/the-labor-market-is-cooling-off-and-its-not-just-the-weather#r=nav-f-story

The economy added just 113,000 jobs in January. The average prediction by economists surveyed by Bloomberg was for a gain of 180,000. The weak report is better than the 74,000 jobs created last month, which was the worst month of job creation in three years, but it shows December’s weakness was more than just an aberration. The hope was that historically bad weather in December led to a bizarrely low number that would soon get revised up. After two straight months of big misses on the jobs front, though, it’s not just the cold weather that’s slowing down hiring. Part of the drag is that the government keeps shedding workers. While the private sector added 142,000 jobs last month, government payrolls shrank by 29,000. Those cuts were pretty evenly distributed between the federal government, which lost 12,000 jobs, and local government, which cut 11,000 jobs, 8,700 of which were to local education staff. Despite that, the labor force did grow by 499,000 people, raising the participation rate ever so slightly to 63 percent, from 62.8 percent in December. According to the household survey, total employment grew by 616,000, pushing down the unemployment rate for the right reason for a change, as a smaller share of people in the labor force were not unemployed. Still, it’s not exactly what the Federal Reserve wanted to see when it said in 2012 that it would keep short-term interest rates near zero as long as unemployment remained above 6.5 percent.

Debt ceiling must be raised by Feb. 27

The treasury is at the legal limit for borrowing, in order to run the country and if congress doesn't make a deal there could be another government shut down. Lew is using "accounting tricks" in order to extend the deadline but if this is not taken care of soon the then, of course according to the media, the whole market will meltdown and everyone is going to freak out and the world will come close to the end. The government is hoping they do not come close to a default and everything can stay happy and safe. Both sides both do not want another government shut down, but a deal will most likely have to be made. There does not necessarily need to be an increase, but most likely there will be a suspension of the debt ceiling like what has happen in the past.

http://money.cnn.com/2014/02/07/news/economy/debt-ceiling-reached/index.html?iid=SF_E_Lead

Dear Congress: Help the Long Term Jobless

Senate Republicans almost blocked the three month renewal of unemployment benefits for those who are long term unemployed. This program provides 47 weeks of benefits after state-paid benefits ran out. If this legislation did not pass more than 1.7 million Americans would have lost these benefits.  Economist stress the importance the extension of these benefits have on the economy. Even though the unemployment rate has fallen to 6.6% (the lowest in 5 years) this number is still really high and should not be seen as this great accomplishment. Also there is the concern that the number of jobs added to the market are lower than what were to be expected. Only 113,000 instead of the expected 189,000. People who are long term unemployed make up 35.8% of all people unemployed. The concern is whether or not these individuals will be able to work again. Without the extension of these benefits the probability of them finding work would deplete immensely.


http://finance.yahoo.com/blogs/daily-ticker/plight-of-the-long-term-unemployed-160841066.html

Emerging Economies Hike Rates to Defend Currencies

The article that I found was published to the ABC news website and was written on January 29^th. Countries are becoming increasingly open to the idea of raising interest rates as a way to protect their domestic currencies. Recently, the central bank in India increased rates by a quarter of a percent up to eight percent. This doesn’t seem like much but it can have a substantial effect on the local economy as well as international investors. According to the author, this move was justified because it will keep a cap on inflation pressures. A lower value for currency is susceptible to stroke inflation because it increases the relative price of imports. Raising interest rates can have a positive effect by strengthening the value of local currency because investors are looking for higher returns. Turkey and South Africa quickly followed India’s example and jacked up their rates to ensure the well-being of the lira and rand. Unfortunately, according to Neil Mackinnon, "The history of using interest rates to defend a currency usually ends in tears." We will have to see whether or not more countries follow India’s method.

http://abcnews.go.com/International/wireStory/emerging-economies-hike-rates-defend-currencies-22280693

The Worldwide wobble

According to an article published to The Economist, 2014 is going to be a tough year for the global economy. The performance in 2013 was very impressive, however people are skeptical that it can be repeated. One of the reasons why the first two months of 2014 have been so average is because investors are trying to cash out on the high stock prices that the market ended with in 2013. They are taking the money and running because most experts don’t believe that it will last. Written on February 8, the article explains that “American share prices, in particular, were beginning to look too high: the S&P finished 2013 at a multiple of 25 times ten-year earnings, well above the historical average of 16”. However we aren’t doomed just yet. One point that the author wants to make clear is that economists and experts alike have a pretty poor track record when it comes to predicting sudden shifts in the global economy. Another reason why investors are scared of 2014 is because of China’s slowing growth. Factory activity is at a six month low. It doesn’t take a specialist to understand that when the world’s most productive manufacturer is slowing then there will probably be a negative consequence that can be seen in the global economy. There is a large amount of uncertainty for the future but at this point, all we can do is be optimistic.

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