The Fed Has Not Stopped Trying to Stimulate the Economy

http://www.nytimes.com/2014/10/30/upshot/the-fed-has-not-stopped-trying-to-stimulate-the-economy.html?module=Search&mabReward=relbias%3Ar%2C%7B%222%22%3A%22RI%3A14%22%7D&abt=0002&abg=0&_r=0


This article is attacking the Fed because when it ran out of room to lower the short-term interest rates, it embarked in a different program.  This program bought long-term securities to push down longterm interest rates.  This lead to the Fed holding 4.5 trillion worth of assets.  By holding this amount of assets it keeps the interest rates to remain low and makes it easier for businesses and families to borrow.  THis Wednesday's Federal Reserve decision is supposed to end its bond-buying program.  The Fed therefore expect interest rates to remain low for a while.  The degree of monetary stimulus the economy is very high, but doesn't mean that is is sufficient.  The reason why for that is because unemployment remains high and inflation has continued to run below the Fed's target.

Bitcoins and exchange rate

http://www.coindesk.com/gallery-fire-destroys-thai-bitcoin-mining-facility/
supplementary:
http://qz.com/293418/an-enormous-bitcoin-mine-went-up-in-flames-affecting-the-entire-network/

This article outlines the effects of a large fire on "bitcoin(s?)," a source of online currency without a central bank. As a whole, Bitcoin has run from being ~ 1:1 (bitcoin to US dollar) to a nearly 345:1 exchange rate.

As a whole, bitcoins are an unprecedented innovation in economics; rarely (if ever) in history has there been a currency not backed by an international government. So far, though (and especially as the internet culture has taken off; graphs of the value of bitcoin since 2011 have shown nearly a 3000% increase in value over time), it has been fairly successful as a currency, because people have placed value in it ("arbitrarily," perhaps).

These articles show the effect that one fire can have on the bitcoin production as a whole. Since the currency is not backed by a national bank, it can dip and rise in value to somewhat significant extents, and because of the currency's bases (read article one) are based on CPU processing, the collapse of a serious "mining" operation can have a major effect on the value. As our course has evaluated recently, this severely effects exchange rates and purchasing power.

Japan Is On a U.S Stock Buying Spree

http://money.cnn.com/2014/11/07/investing/japan-pension-buying-us-stocks/index.html?iid=H_BN_News

In this article by CNN Money, it explains the recent growth in the U.S stock market as a direct result from the foreign investment by Japan. The Japanese have been looking to, and have, diversified their foreign investment portfolio by more than doubling their international stock portion of the portfolio to 25% from a mere 12%. This has resulted in about a $50 billion to the market for Americans.

Japan has one of the largest pension fund in the world, a whopping $1.1 trillion dollars, and as a result of this, they are now starting to deploy this money into different markets, mainly blue chip stocks with high dividends. All of this is due to Prime Minister Shinzo Abe's efforts to kick start the Japanese economy through stimulus spending known as "Abenomics".

Obama to seek more money for ISIS fight

http://thehill.com/policy/defense/223317-obama-to-seek-more-money-for-isis-fight

          

             Just yesterday, there are reports stating President Obama is expected to request additional money from congress in efforts to fight ISIS. There is no absolute number on the amount being requested but Bloomberg News has reported that the president will ask for somewhere close to $3.2 billion. The main purpose for the money is to be able to fully support the men and women carrying out the actions necessary in order to suppress ISIS. This money is acting as an amendment to the overseas contingency operation’s (OCO) $58.6 billion request for the 2015 federal budget. In other words, this is the war-funding account for the Pentagon that has paid off the wars in Iraq and Afghanistan. The approximate $3.2 billion addition to the 2015 budget would still be a relatively small amount compared to 2014’s budget of $85 billion. This year’s budget ended on September 30^th while the Pentagons 2015 defense budget will be passed sometime in December or early next year when newly elected members of congress take office. 

            As mentioned, a large sum of the money is to be used for the safety of American troops through a sufficient amount of resources. This includes munitions used in airstrikes and at least $500 million to train and equip Iraqi and Kurdish forces. Thus far, the Pentagon had estimated an average of $8.3 million a day heads towards fighting ISIS. Although this may seem like an accurate estimate, it is nonetheless an estimate. On October 28^th, the pentagon estimated $580 million since August 8^th but the National Priorities Project who tracks federal spending estimated at the same point, the U.S. has surpassed $1 billion.  This is all the statistics we have now regarding federal spending but at this rate we expect the war could cost somewhere between $2.4 billion and $22 billion per year. The large range proves the uncertainty we have as a nation regarding where this war with ISIS will lead. 

What's a $4,000 Suit Worth?

http://www.nytimes.com/2012/09/09/magazine/whats-a-4000-suit-worth.html?_r=5&

This article is about Peter Frew, a man who custom makes custom suits for $4,000 in New York City, and how his low economy of scale is an effect of cheaper made suits.

This article is interesting because it shows how quantity is valued over quantity in our economy.
Frew makes $4,000 suits, but makes only around $50, 000 a year because it takes him 75 hours to produce a suit of unmatched quality. While many high ranking businessmen in New York City have the money to spend on one of his suits they usually do not want to spend that much money on something that will take them about a month to get it. People rather get cheaply, fastly made suits, that are not anywhere near the quality of the custom made suits, but are more time efficient and less expensive.

Russia's currency won't stop falling

http://money.cnn.com/2014/11/07/investing/russia-currency-ruble-putin/index.html?iid=SF_E_River

The Russian Ruble has depreciated 30% to the U.S. dollar in the past year, and 10% of that was in the past week. The large drop in the last week was caused by the Russian central bank stating they would reduce support for the Ruble. The drop in oil prices, the standoff with the West, and tensions with Ukraine are also all contributing to this drop. Inflation is over 8% and the central bank doesn't think this will change for the better anytime soon.

This really hurts Russian consumers since their dollar has depreciated they can no longer consume as many imports, or repay debts in foreign currencies. There is also high inflation which means prices are rising domestically as well. This will lead to lower consumption and a lower GDP overall. I don't think now was the proper time for the Russian central bank to say they would support the Ruble less so it could be traded more freely. With the other political issues happening in Russia already causing uncertainty, announcing that they would support their own currency less was bound to make it worse. In a time when there is much uncertainty in the economy the central bank needs to be the voice of reason and try to keep expectations positive.

Unemployment falls to 5.8% but "things actually aren't going well": Dan Alpert

http://finance.yahoo.com/news/alpert-on-low-wage-job-growth---these-are-not-jobs-185041381.html
It is a good sign when payrolls are up, unemployment goes down. 214000 more jobs are added, unemployment is 5.8%, lowest since July 2008. Economists estimste to have 235000 jobs added this month. Hourly wages only increases 2%. however, the low wage jobs, which is restaurant, leisure and hospitability sector, retailers.
Dan Alpert said that the end of long-term unemployment benefits may be one of factor why low wage job creation in 2013 happens in 2014. Higher wage jobs do grow, but grows slowly in recent months. 31% of American says we need to find quality one.
So he concludes that things are not going well.
I would say yes, it does not go well, but you can't expect both higher minimum wage and lower unemployment at the same time. when minimum wage is low, unemployment decreases and another way around.

Saving in Germany: Worse than nothing

http://www.economist.com/news/finance-and-economics/21631140-interest-rates-turn-negative-some-worse-nothing

This article talks about how Deutsche Skatbank plans to apply a negative interest rates to some deposits in Germany. However, this only applies to balances of over €500,000 ($625,000) in instant-access accounts, of which there cannot be very many. Surprisingly, it is not the first time that German banks have applied negative interest rates. This means some banks require businesses to pay to make deposits in banks. For the first time, personal accounts have received such treatment. Presumably the bank hopes to nudge savers into other longer-term, less liquid or higher-return investments, which it can make some money by selling.

The European Central Bank has been hoping to encourage banks to lend by charging them a negative interest rate on the excess deposits they stash with it. However, being slightly skeptical, the Germans have accused the ECB of postponing an inevitable reckoning for past mistakes with its interest-rate policy. Relations between the ECB and the Bundesbank, Germany’s traditionally hawkish central bank, are not so well now.

The ECB's intention is to encourage savers to switch to riskier assets, spurring productive investment, which does not really seem to be working. Germans have responded to low rates by saving less. Private investment has plunged in recent years, mirroring the German state's own under-investment. This has increasingly been recognized by the Germans as a national problem. 

“U.S. Stocks Rise on ECB Stimulus Hopes”

Since the European Central Bank’s President, Mario Draghi, reiterated the ECB’s unanimous commitment to stimulus growth in the region, stocks have been rising in the United States. Ian Winer states, “There’s a massive liquidity being pumped into the market”. That is what generates an underlying bid for stocks. According to our ISLM model, this shifts the money demand curve to the right and increases income. Although stocks are not investment in our model, we can see an affect with the increase in money demand. U.S. stocks also rallied last Friday when the Bank of Japan made a surprise decision to increase its stimulus measures. An increase in the value of stocks is a good sign for our economy. 

U.S. has added 2.3 million jobs this year

214,00 jobs were added this past October increasing the years total to 2.3 million. This increase in jobs was also coupled with a decrease in the unemployment rate to 5.8%. This is the lowest number seen since 1999. This trend of increased jobs and lower unemployment are telltale signs that the U.S. economy is definitely rebounding from the recession of 2008.

Why airline fares aren't lowering due to falling oil prices

Source
Almost everybody has noticed that oil prices have been dropping recently, which consumers are probably very happy about. However, there are consumers who are wondering and expecting airline fares to go down as well. This is not likely to happen. Instead, airline fees have increased by around $4 since mid-October, and this past year is one of their most profitable in a while. Companies are avoiding lowering prices because they are most vulnerable to changes in the economy. There are plans to use their profit towards building more aircraft carriers, improving technology and airport facilities, and new ground equipment. Ultimately, lower airline prices would not be in the best interest of anybody in the economy.

U.S. jobless claims, wages data point to tightening market

http://finance.yahoo.com/news/u-jobless-claims-wages-data-002120846.html

The number of Americans filing for unemployment fell more than expected as compensation increased during the third quarter of the year. This comes at a time when the Federal Reserve officially stopped bond buying program. Many are beginning to speculate that the Fed may start to raise rates sooner rather than later. Compensation increased at a rate of 2.3% over the quarter and hourly compensation increased 3.3%, The Fed is closely watching wage growth and will use it as a key factor when they decide the raise rates. One economist cited in the article expects a hike in rates in early 2015.

Obviously interest rates are an important part of the economy. It will be interesting to see how this plays out over the next few years.

Oil rich Countries hurting

Many oil rich nations are currently hurting because oil prices have dropped from around $100 a barrel to $83 a barrel. Iran, Nigeria, Venezuela, Russia, and Saudi Arabia are all hurting because they based their government budgets on high oil prices.  Since the oil prices have dropped so much they are going to have to make some tough cuts in order to stay afloat. To make matters worse, all these countries continue to keep producing oil at the same rate, driving down the price of oil even more. They keep producing the same rate because they don’t want to lose market share for when the prices go back up. Also contributing to the drop in oil prices is a new supply found in the U.S, causing oil prices to go down even more. These oil rich countries need to make budget cuts quickly otherwise they may default in the new future.

http://money.cnn.com/2014/10/30/investing/cheap-oil-prices-hurt-iran-venezuela-saudi-arabia/index.html

Saving in Germany: Worse than nothing

http://www.economist.com/news/finance-and-economics/21631140-interest-rates-turn-negative-some-worse-nothing

Deutsche Skatbank, a EU bank in Germany, plans to apply a negative rate of interest to instant access personal accounts that have a balance larger than $625,000.  This is the first time that negative interest rates have been applied to personal accounts. The bank hopes to nudge savers into other longer-term, less liquid, or higher-return investments; the bank can make a profit by selling these investments.

The European Central Bank has been hoping to encourage banks to lend by charging a negative interest rate on specific depository accounts at the ECB.  However, Germans accuse the monetary policy of spurring lending and economic activity without deeper fiscal and structural reform.  Relations between the ECB and Bundesbank, Germany's central bank, are not good.

Regardless, the ECB has similar intentions as that of Deutsche Skatbank's: to encourage savers to switch to riskier assets and productive investment.  Unfortunately, these intentions do not appear to be working as Germans have responded by saving less.  Lack of investment is increasingly recognized as a national problem in Germany.

I think it will be interesting to see if Germans continue to save less and shy away from investment.  If they place over $625,000 in a personal instant access account, they are essentially paying to have their money looked after.  However, if they chose not to save and not to invest, their money fails to make any interest at all.

Would you move abroad for a job?

http://money.cnn.com/2014/10/05/pf/working-abroad/index.html?iid=SF_BN_River

A new survey found 64% of people worldwide say they would be game to cross borders for their careers. Respondents from less developed economies - such as Pakistan, Jamaica, Honduras and Ghana - were much more willing to uproot themselves than workers in more stable economies. But France and the Netherlands broke that mold: More than 90% of the French and Dutch respondents said they'd be willing to go abroad. By contrast, less than half of the American, British and German respondents felt the same way. Location, of course, makes a difference when choosing a new place to live. Among those who said they were willing to work abroad, non-U.S. citizens said they would most like to work in the United States, while Americans looking to ex-patriate said the United Kingdom would be their top destination.Survey takers also chose their favorite cities for jobs. Among all respondents, the top 10 cities were London, New York, Paris, Sydney, Madrid, Berlin, Barcelona, Toronto, Singapore and Rome.Even though the global workforce has become more mobile than ever, not every type of worker is eager to pack her bags. The BCG survey found that 70% of engineers, particularly those in information technology and telecommunications, were willing to go abroad. Far less willing were those who worked in the fields of health and social work, with only about half saying they'd take a job in another country.
It makes sense that people from less developed economic countries would be more willing to go abroad and work in different countries.  However, the significant part of this article is that not only are less developed economic countries are willing to go abroad but the more stable economies are willing also.  I believe this can become a second option for workers and we may start to see more of this. I think most people would want to work where they are born but if other countries have more to offer, i don't think being open to relocation is a bad idea.  Only certain countries and cities have what it takes to attract people and make them move abroad.  

San Francisco votes in $15 minimum wage

http://money.cnn.com/2014/11/05/news/san-francisco-increased-minimum-wage/index.html?iid=SF_E_River       

In the article, Ben Rooney reports that San Francisco in California has become the second United States city to raise its minimum wage to $15 per hour. The other city to already do so was Seattle in Washington. The reason behind the increase is to increase the workers living wage, or the minimum income for a worker to meet their basic needs. The Mayor of San Francisco, Edwin Lee, believes that this push will narrow the gap between the rich and poor in the city.

The previous minimum wage in San Francisco had been set at $10.74 per hour, a 140% increase in wage. The ballot was approved by the majority of voters yesterday at 77% compliance with raising the minimum wage. However, the law will not be effective immediately. The wage will rise slowly starting in 2015 and finally reach $15 per hour by 2018.

Other states that also made changes to their minimum wage laws include Alaska, Arkansas, Nebraska, and South Dakota. However, their increases were not as drastic. The motion to raise the national minimum from $7.25 to $10.10 an hour has not made it out of the Senate. President Obama has mandated that companies with federal contracts increase their minimum wage to $10.10.

If the government increases the minimum wage, this will cause some wage rigidity problems. Specifically, it will increase the structural unemployment. If employees are paid more, companies may not be able to employ as many workers.

Hollywood Catering to Massive Chinese Audience

Popular Hollywood blockbusters are beginning to move more and more into the international realm in order to make them more profitable for their distribution companies. Studios and distributors have found the massive potential in revenues in places like China/Hong Kong and have begun to market themselves and their movies to those markets. For example, among the top 5 highest grossing films of 2014, three are Chinese (or from Hong Kong) and the top grossing film (Chinese) has raked in over $53 million more domestically than the next highest. Because of these huge numbers, American studios are beginning to alter their movies to appeal to foreign audiences, often to the dismay of other viewers (myself included). For example, the Chinese enjoy "big-budget, 3-D installment(s) of blockbuster franchise(s)", studios often water down dialogue so it is easily translated for subtitles or dubbing in other countries and visual effects are usually the focus over actual story/plot, often to the point of being overwhelming. These claims can be backed up by the international success of Transformers: Age of Extinction. Transformers grossed over $1 billion this summer which is a tremendous financial success for its distributor, Paramount. However, where financial success can often be a result of a highly acclaimed film, Extinction received a Rotten Tomatoes score of 18% and many American viewers came away disappointed in the overwhelming CG loaded action, simple dialogue, and gratuitous product placement. This is backed up by the fact that the movie earned less than 25% ($2.4 million out of $1.1 billion) of its total revenue in the U.S. Domestic earnings have been a larger portion of the whole in the past and studios usually target their marketing towards U.S. audiences in order to get the highest return. In short, it seems that movie studios have discovered an untapped gold mine of cash in Chinese audiences and the industry is shifting to a more international state.

The film industry is a part of the services portion of GDP and accounts for thousands of jobs and tremendous marketing and even political influence so this international shift could have very divisive results. On the bright side, this expansion will create many job opportunities all over the world as well as making more films available to more viewers around the world. Business will boom with this increased revenue and the film industry will likely thrive in a new era of special effects and mass appeal. Personally, I don't like this one bit and I thought Transformers 4 was a laughably horrendous show from Michael Bay, Mark Whalberg, and Stanley Tucci (plus the dinosaur robots were barely even in the movie, unlike the marketing would lead you to believe). I don't like the idea of compromising a film's integrity, essentially selling out, just to bring in the cash and I hope this doesn't become too much of a trend. I attempted to write this neutrally and without bias but I'm positive there is some partiality in the writing above and I apologize for that. I hated Transformers.

Lights! Camera! China!

http://www.nytimes.com/2014/11/04/business/in-traveling-to-the-stars-risk-and-cost.html?ref=todayspaper


Space travel is now moving into the private sector, with billionaires looking to find ways to use space travel for commercial use. One of these billionares is Richard Branson who is looking to create a space tourism company.

But with two recent accidents of private companies, some people have doubts about the private companies being involved because they are looking to cut cost for commercial benefits. One of the accidents occurred on a test run by Virgin Galactic, Branson's company, in which one pilot died and the other was injured. The other accident occurred when and Orbital Sciences rocket blew up shortly after being launched. The rocket was carrying a supply vessel to the international space station.

There are dangers in the private sector being involved in space travel, but there is also tremendous gain. And if the government was the only ones working on space travel, there would still be risk involved. Involving the private sector will increase the innovation that comes out of space technology. Coming from a different perspective, there will most likely be greater and better innovations with both the private and public sector working.