On September 18th, Scotland held a referendum on their independence. 55% of voters chose to remain a part of Britain. This was a relief to those tied to Scotland's economy, because a very close vote would have left some uncertainty about Scotland's future. Uncertainty in a country makes investors weary of putting their money there. If Scotland would have voted to become independent, or if there was the chance of another referendum, Scotland's economy would have taken a downturn due to this uncertainty. Some businesses such as the Royal Bank of Scotland even threatened to move their headquarters outside of Scotland if they became independent.
The fact that there was a 55% majority vote in favor of remaining part of Britain saved the potential downfall. Many people predicted the vote would be much closer, and since Scottish nationalist leader Alex Salmond stepped down, there is little fear of another referendum. This calms the fears of uncertainty in their economy and gives markets the confidence to stay.
Since the ECB doesn't have as much control of the EU economy as the Federal Reserve has in the United States, and there is current fear of deflation in the EU economy(1), I think creating a hiccup in investing is not something the EU would want. Economically speaking, I think it is a good thing that Scotland didn't separate from Britain at the moment, as that could indirectly lead to more serious problems.
The Federal Reserve board revealed that the median family headed by someone under 35 years of age earns $35,509 in 2013. That number is less than similar families reported in 1989. You would think with all the technological advances and popularity of education nowadays, we would do better than adults living in the 80's.
Young families have been doing worse and fallen behind older families. The survey of consumer finances pointed out that families headed by people over 55 years of age generally have higher incomes after inflation is adjusted.
The earlier generations came of age in a stronger economy and were not bothered with some problems adults face today like educational loans. Three years after the recession ended, the consumer survey showed that real income for all age groups except 35-44 years old declined from 2010-2013.
At first families with the most education earned more than those with less. People with more education earned almost twice as much but now the difference is only 52%. The age group where real income has improved the most over the last quarter- century are those aged 65-74. People who are past the traditional retirement age of 65 are still working now than they used to be. Higher pension income may be another contributing factor as to how this age group is bring more money home than vibrant young families.
http://finance.yahoo.com/news/unemployment-rates-rise-24-us-144033803.html;_ylt=AwrBEiFRyx1U3kAAp4aTmYlQ
According to the article, unemployment rises in nearly half of the states in the US. This is because demand for workers increases, more people searching for jobs while people don't immediately find the jobs. It makes the job gains nationwide in August the weakest this year.
Georgia and Mississipi has highest unemployment rate so far, 8.1% and 7.9% respectively.
The nationwide unemployment is now 6.1%, compared to. 6.2% last month.
North Dakota has lowest unemployment rate so far, with just 2.8%.
States has biggest job gains are Texas, California, Michigan.
Midwest has lowest unemployment rate among the four nation's region.
Scotland recently held a public vote, leaving it up to the citizens of whether they would become completely independent or remain as part of the United Kingdom. The ultimate decision of the people was to remain part of the UK and reject their shot at independence. This decision initially had a favorable effect on the market and pound, but the celebration soon faded as other issues were not able to take precedent in the UK.
During the campaign, one poll showed that the pro-independence party was ahead, which had a large decreasing effect on the exchange rate of the pound compared to the US dollar. This just goes to show that outside factors, such as the breakup of the UK, can have adverse affects on economic indicators, such as currency exchange rates and the stock markets. People feared that if Scotland voted for their independence, they may not use the pound anymore and a political breakup was anticipated.
This article talks about how Twitter recovered itself and raised $1.8 billion after boosting debt offering. Twitter raised this money by selling notes that owners can convert into stocks at prices that are 47% above the last closing level. Twitter sold these convertible bonds in two $900 million pieces, one maturing in 5 years and the other due in 7 years.
The investors of these bonds snapped up Twitter's offering at rates lower than a five-year industry average, rewarding the company with funds to back acquisitions and to pay for an expansion. Twitter is not really predicted to be very profitable in 2014. So they have been investing to build up their advertising business and add engineers who can help tweak their products to attract more customers.
The five-year notes will pay 0.25% and the seven-year notes will pay 1% point, according to the filing. These are lower than the average 1.5% paid by Internet media companies on convertible debt since 2009.
Twitter's five-year bonds were marketed by lead banks Goldman Sachs and Morgan Stanley between 0% and 0.5%, and the other bonds between 0.75% and 1.25%. After the IPO, Twitter executives saw an opportunity to increase cash cheaply in the debt market without instantaneously diluting shareholder's stakes. Twitter was inspired by Google and Netflix in successfully offering debts while borrowing remains inexpensive.
According to the
article “Siemens Prepares Bid for Energy Company Dresser-Rand”, Siemens, a
German oil company, is preparing a multi-billion dollar offer for the U.S. oil
industry equipment firm, Dresser-Rand. They are in competition with Sulzer, a
Switzerland based rival, who also wants to buy Dresser-Rand. Siemens offered
more than $6billion. Siemen’s Chief Executive, Joe Kaiser, wants to purchase
Dresser-Rand to beef up his presence in the U.S. energy market and capitalize
on the shale boom. Siemens produces equipment for companies to extract gas,
which is what Dresser-Rand does as well. The acquisition of Dresser-Rand would
increase profit of Siemens by infiltrating the U.S. market. They want to come
to the U.S. because of Germany’s strict controls over shale-gas exploration.
If Siemens can purchase Dresser-Rand
they will have more of a presence in the U.S. market. They have been trying to
come to the U.S. because of German’s restrictions and make profit from the U.S.
market. This would create a greater supply of natural gas in the U.S. because of
more equipment to access natural gas. Siemens also bought Rolls-Royce holdings,
a British turbine maker. Siemens is engaging in a good amount of international
business.
I was wondering what you guys believe the implications of Dresser-Rand being bought will be?
The key to our economy could truly be inside our gas tanks.
This article discusses how the forecast of the nation’s gas prices will be
roughly around $3 per gallon by the end of the year while experts predict $3.15
per gallon by Halloween. This time last year, gas prices averaged at $3.44 per
gallon. People may not think much of this towards our economy yet for each cent
lowered on gas prices actually adds $1 billion in cash flow to our economy to
be spent somewhere else. Compared to last year, we've already added $29 billion
to the economy. Experts say if gas prices decrease by 40 cents and ends up
staying at that rate, then that is worth three- to four-tenths of a point on
GDP. A problem the U.S. is having is involved with the collapse of corn
ultimately dropping the prices below $3.40. Corn-based ethanol was trading around
$1.80 proving to be at a multi-year low. This is calculated to be sixty to
eighty cents under gasoline. Moreover,
the outlook for oil is negatively trending bringing gasoline prices below $3
per gallon. As a fair warning, economists are already calculating the impact of
lower gasoline prices through consumption and overall inflation. Economists Michael
Gapen emphasizes these concerns produce harsher, further concerns pertaining to
global growth. Agencies have already dropped their 2014-2015 world oil demand
in its monthly report. The demand for barrels has decreased by 65,000 barrels a
day which paints a negative picture for the future of oil. This week, U.S.
refineries are at 93.5% capacity but once this summer’s driving season ends,
refineries are projected to lose one million barrels a day. This is a very
sensitive issue as the reduction of one million oil barrels will set capacity maintenance
offline. Overall, it is interesting to see how the economy reacts to these
stated problems. These problems raise questions pertaining to how the economy
will react due to the transformation of the current world we live in compared
to one with significantly less oil.
Another major retailer has been hit by hackers. This time, Home Depot has been targeted, exposing over 56 million credit and debit cards. Company spokespeople have stated that the bug is now out of their system and that they are diligently working on beefing up their cyber security in order to prevent future breeches.
In today's world, where many transactions are completed via electronic means, there are immense opportunities for hackers to attempt to steal peoples information. In order to continue on this trend of e-money we need to ensure that our money stays protected when these transactions occur.
Game competitions, e-sports, have been around for decades, and gamers are able to win thousands of dollars from these video game tournaments. In July, the 'International Dota 2 Championship' was held in Seattle, Washington. The prize pool for the tournament was a shocking 11 million dollars, breaking any kind of record held by any other e-sports tournament.
That is just an example of how fast this kind of sport is growing. Game tournaments set up giant arenas. Major teams have fan base of hundreds of thousands of people. Prize money reaches millions of dollars. More than 70 million people follow and watch e-sports on TV or through the internet.
Still, the gaming industry will probably have to overcome stereotypes about games and gamers, specifically, the seriousness of the game, or that the skills of a professional gamer are a type of athletic excellence.
Tomorrow, Friday September 19th, Alibaba is expected to start being publicly traded in the New York Stock Exchange. Alibaba Group Holding is a Chinese online company that is being priced at $68 a share, this will make the company the most expensive initial public offering (IPO) in history. At this price Alibaba is expected to raise a whopping $21.8 billion purely off of the IPO, and that's a minimum! These prices will give the e-commerce company an initial market value of $168 billion, which will make it in the 40 biggest public companies in the world, surpassing massive companies like Amazon.
Jack Ma, Alibaba's founder and executive chairman, has pitched his company over the past two weeks in hopes to help the betterment of China's middle class. The online company works by connecting the buyers and sellers without physically ever holding any inventory.
There has been some controversy about the ethics surrounding the online company. The majority of the company is owned by senior investors rather than foreign shareholders. If the company makes nearly as much as their expected profit, Ma's stake in Alibaba will be worth more than $13 billion. Including the $867 million in a sale of shares of the offering tomorrow. It will be interesting to watch this stock and see if the bold predictions become a reality. In addition to any unethical transactions being committed by the senior investors to make their quick and massive profits.
Tomorrow, Friday the 19th, is expected to be a high volume and high volatility day on the stock market. It is what investors call, "quadruple witching", where four option contracts expire on the same day. Investors will be trading more than usual to come out favorable from their position.
Also affecting the stock market will be the IPO of Alibaba and the vote on the independence of Scotland. The result on the vote is expected Friday morning. I believe that there will be many ups and downs throughout the day, but the bull market will continue and the S&P and Dow will close at a higher level. How do you think the Alibaba IPO and the vote for Scotland's independence affect the market?
The Euro zone is in a way banking
on the strength of the German economy to pull it out of an economic downturn.
As stated by The Economist in the September
5th edition, “Germans are inclined, not without some pride, to see
their economy as the strongest horse to pull the euro zone out of its misery.”
However, there has been recent fear due to a 0.2% decrease in real output and a
1% decrease in manufacturing from the first to second quarter. This does however
come with some explanation, for during the first quarter there was a mild
winter which allowed for increased construction. Also, more important was the
effect of the geopolitical crisis between Ukraine and Russia during this time (German
exports to Russia have decreased drastically).
Despite a poor second quarter, the
overall economy in Germany is still strong. The current federal budget is almost
balanced and unemployment is still low. Since the state of Germany’s economy is
stable, now is a good time to start being the horse to pull the euro zone out
of the hole it has dug itself into per se. Germany faces two options to do so,
it can either increase investment across the board which would include both
investment by companies and by the government, or increase wages. Since Russia
is hindering Germany’s ability to increase investment the best option is to
increase wages.
A desire to raise wages is
definitely evident, for in July the president of the Bundesbank, Jens Weidman,
announced that she was calling for wage increases of 3%. This increase in the minimum
wages will also inadvertently cause an increase in most wage rates, mainly
because it will be 40% more than the median wage. This rise in the minimum wage
would mimic the “natural Hume mechanism, but with Euros instead of gold,” says
Michael Burda an Economist at Berlin’s Humboldt University. Basically, what he
is saying is that Germany would be copying the tactics of countries in the 18th
C that were on the gold standard who adjusted wages and prices to respond to economic
imbalances. Basically Burda is saying that the euro zone has imposed a gold
standard on some of its 18 members. In effect, if Germany were to let its wages
rise since it is the back bone of the euro zone it could cause for an economic
upturn, but if it doesn’t than the euro zone should expect to face deflation in
the near future.
What is good in the case of Germany is that it does have the
ability to raise wages without the economy inflating too badly, if at all. This
is in part because Germany practiced wage restraint for so many years and
started implementing rigorous labor-market reforms in 2003. In conclusion,
unions implemented wage raises less than that of inflation and productivity growth,
causing an internal devaluation. The effect of these restraints was a more
competitive export market which caused workers to consume less and in turn
increase surpluses. This wage raise would have a reverse effect; it would
increase the overall economy, reduce surpluses, increase spending, and thus
bring the euro zone relief.
On Tuesday, NASA announced its new official partnerships with aeronautics companies Boeing and SpaceX. After NASA retired the space shuttle in 2011, the organization would send their astronauts to the International Space Station (ISS) via the Russian Soyuz program, costing $70 million for each seat (six seats each year are the norm). The $6.8 billion contracts, 4.2 for Boeing and 2.4 for SpaceX, further solidifies NASA's plans "to establish safe, reliable, and cost effective access to space" and to allow private companies to do so.
In the past, privatizing space was unheard of and up until recently, NASA only partially funded certain companies in their space-going endeavors (Boeing receiving over $100 million from NASA previously). This full-fledged shift to private space contracts means the companies involved will get the funding they need to establish the access to space they want and that the money for these contracts will stay in the U.S. Since 2011, NASA has had to send their astronauts over to Kazakhstan or Russia and pay the Russians for access to their spacecraft. Now, not only does this contracted money stay in the country, it also supports these companies that are blazing the trail for space travel. While a downside to only awarding two contracts (Boeing and SpaceX) is that there may not be a lot of competition between firms, not only are these companies not alone but this is just the beginning. Other firms like Sierra Nevada and Virgin Galactic, among others, are also right in the thick of things in this new space age and the recent announcement of the NASA contracts is just the first of many. This shift to privatizing space in not only saving NASA money and getting humans one step closer to Mars and other destinations, it is also announcing the beginning of a new space race, one with the competition of capitalism at its heart, and can only bode well for the U.S. and the world as we move forward into this bright future.
Depending on how the Scottish Referendum is decided on the September 18th, the Scottish economy can be greatly effected. The simple 'Yes' or 'No' vote given to the people of Scotland to become an independent nation will dictate the future of Scotland's economy and currency
Presently, the United Kingdom and Scotland share the same currency with the pound sterling. The Bank of England sets the interest rates and backs the pound. The Treasury gives Scotland's government a three-year funding settlement and allows for the annual budget to divided out. For taxation, Holyrood has the power to vary the income tax but has never exercised these powers.
A 'Yes' vote, would change many parameters of the economic situation. Supports for an independent Scotland have claimed that they wish to establish a currency union with the UK. Political parties however would wish for a Scottish currency or "flexible currency" such as those of Sweden and Norway. The annual budget would have to be raised in Scotland through other means. The taxes would be cut to lure corporations to reestablish in Scotland and by simplified.
In essence a 'No' vote would mean the economy and currency of both countries would continue to progress as always. The tax system would however be controlled and set by the Scottish government.
Overall, the Scottish Referendum will be a huge stepping stone for the progress of the country. The referendum allows for Scotland to part ways with the rest of the UK peacefully if passed. Many other country like states such as Catalonia and Flanders will be looking to the voting outcome tomorrow as well, to see a possible indication of direction in their perspective countries. Whichever the outcome of the decision is to be tomorrow. An united UK or an independent Scotland will have effect how both countries operate and behave with each other.
In a recent press conference, Fed Chair Janet Yellen declared that the Federal Reserve intends to stand by their previous commitments of keeping interest rates very low for a "considerable time." The Fed claims the economy is expanding at a moderately considerable rate. However, Yellen has also stated that inflation rate is still below its 2 percent goal, and that employment rates are slowing down. Some economists, such as chief economist John Silvia of Wells Fargo, have used these statements to explain the Fed's actions, saying that "they want to let the market know they are not ready to raise rates anytime soon." Yellen also noted that the Fed does not intend to set any specific dates or time periods, stating that the Fed's decisions are "highly conditional" and able to change at a moments notice. This reinforces the implication that the economy can be sporadic and unpredictable.
"U.S. Consumer Prices Post First Decline in 16 Months" By REUTERS September 17, 2014
The Labor Department reported that CPI fell 0.2 percent in August. This is the first decline in CPI since April 2013. While food and housing (rent) prices rose, this was offset by decreases in energy, apparel, used car, airline tickets, and recreation prices. For the first time since 2010, the "core CPI" did not change, when you do not look at food and energy prices. However, "in the 12 months through August, the core CPI rose 1.7 percent."
Additionally, the "underlying inflation pressures were muted." Though this CPI report was released before the conclusion of the Fed meeting today, it could impact their policy decisions as they move away from buying bonds. According to the article the decline in CPI and reduction of inflation pressures "could lessen the urgency for the Federal Reserve to raise interest rates," which is likely the Fed's next policy move.
Do you think this is a good or bad thing, and for whom? How much impact do you think this will or did have on the Fed's most recent policy decisions?
Last fiscal year the United States
spent $8.51 million on deportations. Each deportation cost $23,000. It costs
that much because of legal fees, apprehension of the individual, and the
removal of the individual. The customs enforcement office is allocated $3
billion for deportations and enforcement of customs at the border. Those
services include patrolling and safeguarding the entrances into the United
States. This is an economic issue as well as a border issue. Last year it was
estimated 12 million undocumented workers lived in the United States. This
causes problems because while their work adds to GDP, their income is not taxed
since they are undocumented and don't contribute to the Government spending through tax collection. Furthermore, these undocumented workers could be
taking United States citizens jobs and decreasing the real wage of people in
the same industry as them because there are so many of them. Also, a lot of
government spending is allocated just to protecting the border. The United
States either needs to change its customs policies or find a less costly way of
protecting the border if it wants to lower these considerable costs. Plus, the money spent on deportations could be
spent in better places. Where do you think it could be better spent?
The article talks about The Fed raising the interest rate in the United States. It says The Fed may give us a clearer picture on when it will do so in the next week. When the U.S, economy took a hit The Fed lowered the cost of borrowing money to help increase growth and inflation. Now that we have created growth and inflation The Fed wants to return interest rates back to their normal previous levels, but they are having trouble deciding when to. They want to return the interest rates to previous levels but at the same time they don't want to halt growth all together. This has to do with the fact that our economy also impacts so many other countries/regions economies. The European Central Bank is not in the same boat as the U.S. they have been lowering their interest rates, just as we did, in an attempt to rekindle growth and inflation in Europe. Another large economy that has been affected by our crisis was China. The article states that "China annual growth has roughly halved since the financial crisis hit demand for its goods." China's central bank has also been pumping money into the economy to keep it afloat, but they have not lowered interest rates. This has really raised the cost of living in bigger cities such as Beijing, where a cup of coffee from Starbucks could cost as much as $6. The reason given for not wanting to lower interest rates is that the government does not want to "dilute the power of big state-owned enterprises such as China Telecom to make space for smaller start-ups." The big thing here is that The Fed will have a hard time raising interest rates here without affecting many other countries as well. I think they need to ask themselves do they want to just look after the well being of our economy or do they want to look after the well being of the economy of the entire globe. Since our economy is largely dependent on trading with many other countries I think they should wait a little bit to see if economies of some our biggest importers and exporters picks up.
Janessa Robinson will soon join the "mega loan club" of college graduates with over $50,000 in student debt.
The 24-year-old didn't intend to join those ranks, but her bachelors' degree from Tulane University left her nearly that much in debt, and she plans to start graduate school soon.
The price of education is egregious," she told CNNMoney.
Almost 19% of student loan borrowers owe more than $50,000, according to a report published last week by the Federal Reserve. Only 6% of borrowers had that much in 2001. Student loan debt now outstrips credit card and auto loan debt in America.
Robinson is one of many young college graduates financially stretched to cover both living costs and student loan payments. She pays $275 a month toward her current loans while working an entry-level job at a non-profit in Washington D.C.
Her next step is a graduate degree in public policy. It will mean taking out additional $43,000 -- the same amount as her current annual income. She's considering going on forbearance -- a time period where borrowers don't have to make payments but interest on the loan accumulates -- while she attends graduate school.
Despite the high costs, she still thinks her education is worth it. The statistics support her belief. People with college degrees have higher lifetime earnings, better employment opportunities and significantly lower poverty levels.
"My degree has put me in a position where I can get an entry level job," Robinson said.
Only workers with Bachelor's degrees saw their median incomes rise between 2010 and 2013. Everyone else saw a decline, according to the Federal Reserve. It was especially harsh for those with only some college such as an Associate's degree.
"We're in this odd status quo where we're questioning the value of a college degree, particularly in light of student debt," said Andrew Kelly, director of the Center on Higher Education Reform at the American Enterprise Institute, a right-leaning think tank in Washington.
"Some form of post-secondary education is more important than ever before because other groups are worse off," he added.
Jefferey Jackson is still waiting for his degree to pay off. He earns $24,000 working at the library of his alma mater, Georgia Southern University, after earning his bachelors and his masters.
Jackson, 29, had no financial support from his family, which he says is poor, to pay for college. He took out $88,000 in loans to pay for his two degrees. He cannot afford loan payments on his salary, and his job does not require his degrees.
Despite his troubles, Jackson has no regrets about his education or loans. He's the first person in his family to earn a college degree,
"It's something I'm really proud of myself for doing," said Jackson, who hopes to find a state or federal government job. "I would definitely say the investment is worth it. If the opportunity presents itself, go after your dreams."
While the mega loan club is growing, the majority of student debtors, 64%, hold $25,000 or less in student loans.
Student loan debt is also not a burden only for young graduates. Less than 40% of all student debt owners are under the age of 30, according to a report by the Federal Reserve Bank of Kansas City.
This article is interesting to me because it shows the dilemma that American students are faced with these days. Data shows that getting higher education increases your earning but the cost of education these days is ridiculous. Students take out these loans just to have to work forever to pay them back. But i guess it's all worth it in the end, at least I hope lol.
The new secretary Robert McDonald announced that the VA department needs many new medical workers. He hopes to fill the vacant positions including doctors, nurses, and consultants.
One of the bigger issues that the VA needs to address, is creating a value proposition for its employees. Along with that goal, is the charge to adapt their organization's "culture," in the hopes to attract more applicants. McDonald has already expanded an outreach program to recruit from medical schools.
A new demand for medical students will likely impact the market and it will be interesting to see the extent of this new recruitment campaign.
In certain cases, globalization has proven to reduce inequality in developing countries through cheaper communication and quicker, more accessible transportation. However, other countries are not so lucky and an increase in globalization has shown a rise in inequality. There are economic theories that support each case.
One theory predicts the first case, which states that inequality falls when globalization is apparent in a country. Since less-developed or poor countries tend to produce goods that need a large amount of unskilled labor, while developed or richer countries are seen to hire more skilled labors, and provide more complex services. As there is an increase in globalization, there is a high demand for unskilled workers, which then raises the wage rate for those labors, while the skilled workers wage remains more or less the same, thus reducing inequality.
There is another theory that explains how inequality has risen in developing countries. This one emphasizes outsourcing as a major factor, and how in poor countries, multinational companies hire skilled labors and pay them with high wages. A study showed that multinational companies pay their employees 40% more than those of local companies. Furthermore, these employees are given more opportunities and responsibilities, which increases productivity, which then leads to a boost in wages. On the other hand, unskilled workers don't have such opportunities, so there is no increase in productivity and ultimately no raise in wages, deepening the inequality gap.
In the end, globalization struggles to bring equality in developing countries.
This
article discusses the continuing investigation surrounding the attack on JP
Morgan’s computer network. Hackers accessed the bank’s computer system in June
and continued undetected until the end of July. During this time, hackers were
able to view information about one million customer accounts as well as obtain
a list of the software applications that the bank uses on its computers.
However, it’s thought that hackers were only able to view names, addresses, and
phone numbers and no financial information or Social Security numbers.
Investigators believe that the attack had been planned for months and it’s
possible that it involved Russian cybercriminals and support from a foreign
government. While they are still working to determine the extent of the attack,
they say it may be difficult to be sure that all vulnerabilities from the
attack have been found. The author discusses how hackers could possibly search
JP Morgan’s applications to find the ones with security weaknesses that have
not yet been fixed, potentially regaining access.
It’s
alarming that hackers were able to breach the security of such a large banking
company. As the author of the second article discusses, successful cyber
attacks against banks are uncommon since they arguably have the strongest
security of any industry. With hackers becoming more skilled, it’s clear that
more precautions should be taken. Hopefully JP Morgan is able to fix its
security issues before any other successful attacks are made and before serious
financial information is compromised.
