Saturday, February 27, 2016
Cheaper Gas means more Driving
In an NPR article on gas prices, the article notes that because the price of gasoline has become cheaper more people driving their vehicles to work, school, etc. The price drop from a high of $4/gallon to a national average of $1.71/gallon.The article attributes this price drop in gasoline to the economic growth in the past few years in the U.S. Not only are people driving more because gas prices are lower but also because more people are employed and are using motor vehicles to commune to work. The article also makes notes some negative consequences in light of the recent gasoline price drops, one being increased pollution due to more vehicles on the road with most traveling longer distances to get to work. The other being a lose in productivity because with more people driving it takes longer to get to work due to traffic jams, construction, or similar road travel inconveniences. The article ends by commenting that with increased traffic on roads there's a need for greater investment the nation's infrastructure due to the federal highway fund shrinking because the tax on gasoline does not keep pace with inflation and also brings in even less on account of cars becoming more fuel efficient. Policy-makers are suggesting that we should move away from a gas tax and toward a tax the taxes the amount of miles we drive instead.
http://www.npr.org/2016/02/23/467768203/cheap-gas-contributes-to-record-u-s-traffic-volumes
Fed’s 3 Mandates: Price Stability, Jobs and ... Wall Street?
In The New York Times article "Fed's 3 Mandate: Price Stability, Jobs, and ... Wall Street?" author Neil Irwin explains what the role of the Federal Reserve is in the market when looking towards the future. As we learned in class, the Federal Reserve is made up of a board of governors and the Federal Open Market Committee. The chairwoman of the Fed, Janet Yellen, presides over the institution that has the main goals of maximizing employment, stabilizing prices, and moderating long-term interest rates. In order to create changes in the markets. The Fed mainly targets the interest rates through the supply of money to attain these goals.
Irwin's article is interesting because it focuses on the data and the information that these policy makers employ when making decisions about the economy. For example, as the article states, "should they rely on the information that appears on the financial data terminals many Fed officials keep on their desks, or on economic indicators conveniently collected in the Federal Reserve Economic Data database?" This is an interesting question because it impacts the policies that the Fed puts into place; if they are focusing on irrelevant data then they could mistakenly create a faulty policy that creates more harm than good.
Furthermore, the article also delves into the idea of what the true role of the Federal Reserve is; as chairwoman, will Janet Yellen "wean the economy off what is often called 'the Greenspan put?' And should she?" Alan Greenspan, chairman of the Fed in the late 80s to the mid 2000s sort of coined this idea that "the central bank will forever stand willing to intervene to keep markets from falling too much." During his time as chairman, Greenspan used the Fed to stabilize the market after the crash of '87, but in more recent times, there has been controversy over whether the Fed should continually step into economic crises in order to stabilize the market or let the market return to its equilibrium over time. The main idea of the article is that with continual aid from the Fed, it appears like they are "stepping in to bail out the stock market — so much so that financial markets tend to price in lower future interest rates whenever there is a drop in the stock market, as has happened in the early weeks of 2016." It will be interesting to see how the market changes over 2016 and if it is due to policies created by the Fed or just the natural instincts of the market.
Article link: http://www.nytimes.com/2016/02/28/upshot/feds-3-mandates-price-stability-jobs-and-wall-street.html?ref=economy&_r=0
Irwin's article is interesting because it focuses on the data and the information that these policy makers employ when making decisions about the economy. For example, as the article states, "should they rely on the information that appears on the financial data terminals many Fed officials keep on their desks, or on economic indicators conveniently collected in the Federal Reserve Economic Data database?" This is an interesting question because it impacts the policies that the Fed puts into place; if they are focusing on irrelevant data then they could mistakenly create a faulty policy that creates more harm than good.
Furthermore, the article also delves into the idea of what the true role of the Federal Reserve is; as chairwoman, will Janet Yellen "wean the economy off what is often called 'the Greenspan put?' And should she?" Alan Greenspan, chairman of the Fed in the late 80s to the mid 2000s sort of coined this idea that "the central bank will forever stand willing to intervene to keep markets from falling too much." During his time as chairman, Greenspan used the Fed to stabilize the market after the crash of '87, but in more recent times, there has been controversy over whether the Fed should continually step into economic crises in order to stabilize the market or let the market return to its equilibrium over time. The main idea of the article is that with continual aid from the Fed, it appears like they are "stepping in to bail out the stock market — so much so that financial markets tend to price in lower future interest rates whenever there is a drop in the stock market, as has happened in the early weeks of 2016." It will be interesting to see how the market changes over 2016 and if it is due to policies created by the Fed or just the natural instincts of the market.
Article link: http://www.nytimes.com/2016/02/28/upshot/feds-3-mandates-price-stability-jobs-and-wall-street.html?ref=economy&_r=0
Thursday, February 25, 2016
Increasing concerns with the U.S. Corporate Tax rate
The article attached written by Renae Merle discusses the tax
savings that Pfizer is able to gain by its plan to merge with Allergan which is
based in Ireland. This deal was originally announced last year in which it was
estimated that it would provide savings of approximately $2 billion over three
years. However, a recent report was released by the “Americans for Tax Fairness”,
stating that they will actually save approximately $35 billion by moving away
from the United State’s corporate tax policy, because of the tax savings seen
from the profits earned internationally. This is the largest inversion seen in the
United States’ history.
Pfizer is just one of many U.S. companies that have decided
to make move from the U.S. for the tax savings. As discussed in the article,
with such a big company like Pfizer making this move it is starting to be an
increasing concern for U.S. lawmakers. On one side, while the U.S. government wants
to collect as much taxes revenues as they can, it is deterring companies to the
point that they are losing the tax revenues altogether. The current corporate
tax rate of 35% in the U.S. should be reviewed in the very near future to be
lowered to make it more comparable to the tax rates seen in the countries that
these firms are moving their headquarters to. However, what worries me is that
because there is so much disagreement presently in congress between democrats
and republicans that this issue will not be resolved quickly with so many
differing opinions regarding this matter. While I think that the tax rate will
eventually be changed, this disagreement between lawmakers will delay any
formal action from being taken, and while this happens there will just be a
continuing amount of U.S. based companies that will take the move like Pfizer
for tax savings.
What is your opinion, should the corporate tax rate of 35%
be reduced?
Wednesday, February 24, 2016
Survey suggests consumers struggle to save
An annual survey of consumers has found that 40% of U.S.
households report “good” or “excellent” progress in meeting savings goals.
Which means 60% of household are not satisfied with their
current saving rates. The overall respond to the survey is not so good, only about
50% of people have “sufficient” saving.
Although, about half consumers are short in saving in some
way, the majority of them are able to save some of their income. Around 70% of consumers
are able to saving at least something each month, and cover those potential
emergency expenses.
I looked up the “Household
and non-profit institutions serving households net saving ratio” for several
countries, the result turns out inconsistent with this article. Japanese save about 2.422%
of their income, whereas American save about 4.873%. This inconsistency might
due to make assumption without any research.
|
Switzerland
|
17.824
|
|
Germany
|
9.548
|
|
Euro area (15 countries)
|
6.543
|
|
United States
|
4.873
|
|
Canada
|
4.104
|
|
Japan
|
2.422
|
Data source: (http://stats.oecd.org)
https://www.consumeraffairs.com/news/survey-suggests-consumers-struggle-to-save-022416.html
Saudi Oil Minister Rules Out the Possibility of Production Cuts
Ali bin Ibrahim al-Naimi announced on Tuesday that there is no possibility that oil production cuts (recently announced by several countries) will lead to a reversal of the oil prices. His comments, made at the annual IHS Ceraweek conference, actually put further pressure on oil prices. His comments are founded on some recent patterns and events. Saudi Arabia, Russia, Qatar, and Iraq have raised production to compete for Asian markets. This increase in production has lead to record levels of inventories. The problem in production freezes resides in the fact that a country will not reduce production unless other countries follow suit; this is the stance Saudi Arabia has taken. The solution is thought to rest in the ability to get all the major oil producing countries to agree to decrease production. Hopefully, the inventory would begin to decline. Other experts see the solution as waiting for the inventory to flatten. For example, Russian production is already beginning to decline due to a lack in investment.
Clifford Krauss, NY Times 2/24/16
Clifford Krauss, NY Times 2/24/16
Implications of Negative Interest Rate
To prevent a slide into deflation, the euro area central bank, the central bank of Japan and the Fed of U.S. are now looking favorably at keeping interest rates below zero.
The article mentions that theoretically this should reduce borrowing costs, thereby increasing the pool of loan-able funds. In practice however, customers might lose faith in the financial market and instead begin to hoard money outside of banks.
Here's the article link: http://www.bloombergview.com/quicktake/negative-interest-rates
This is also related:
http://www.cnbc.com/2016/02/24/why-the-feds-inflation-strategy-will-fail-commentary.html
The article mentions that theoretically this should reduce borrowing costs, thereby increasing the pool of loan-able funds. In practice however, customers might lose faith in the financial market and instead begin to hoard money outside of banks.
Here's the article link: http://www.bloombergview.com/quicktake/negative-interest-rates
This is also related:
http://www.cnbc.com/2016/02/24/why-the-feds-inflation-strategy-will-fail-commentary.html
Tuesday, February 23, 2016
Oil price: are the numbers stacked against oil producers?
In this article on the BBC online news source, it discusses the current state of oil prices globally and the projection in the near future. It helps to highlight the notion that although oil price per barrel has fallen dramatically in recent times, this summer we make see a spike in the price that could alleviate some of the suppliers anxieties. Despite such over supply of oil by producers and losing profits, they continue to pump out lots of oil. This is because many consider the process of shutting down production and restarting when prices increase to be more expensive than to keep producing even if a surplus and losing profits is taking place. For the full article click below.Click Here
Goldman Sachs banker embroiled in massive overseas money scandal
This article discussed how a high ranking Goldman Sachs' regional chairmen, Tim Leissner, is being investigated for fraud after it was discovered that a $681 million sum of money appeared in the bank account of Malaysian Prime Minister Najib Razak. The FBI has been investigating transactions, with possible evidence of money-laundering, across five different countries. Many on Wall Street say this is just the tip of the iceberg and that these type of corrupt practices are still prevalent all over the world, but more more so in developing countries like Malaysia.
Corruption is defined as taking public resources or money for private gain and it is something that is a huge problem in international business for a variety of reasons. Sometimes it is culturally acceptable to bribe officials in other country, but in the United States it is completely legal due to the Foreign Corrupt Practices Act. This states that any U.S. company doing business overseas is not permitted to participate in any corrupt business practices, which is exactly was Tim Leissner did. I think it is good we have laws in place to reduce corruption because corruption is something that impedes economic growth and hurts the general population.
http://nypost.com/2016/02/13/goldman-sachs-banker-involved-in-a-massive-overseas-money-scandal/
Corruption is defined as taking public resources or money for private gain and it is something that is a huge problem in international business for a variety of reasons. Sometimes it is culturally acceptable to bribe officials in other country, but in the United States it is completely legal due to the Foreign Corrupt Practices Act. This states that any U.S. company doing business overseas is not permitted to participate in any corrupt business practices, which is exactly was Tim Leissner did. I think it is good we have laws in place to reduce corruption because corruption is something that impedes economic growth and hurts the general population.
http://nypost.com/2016/02/13/goldman-sachs-banker-involved-in-a-massive-overseas-money-scandal/
Fed Up With Uber And Lyft, Drivers Plan To Launch Competing App
The Uber Drivers Network, a vocal group of Uber and Lyft drivers who have organized strikes and protests in New York City, will soon have a new tool to wield in their battle for better working terms. As early as this month, instead of petitioning Uber and Lyft, the group plans to launch its own ride-hailing app to compete with them.
A video posted on the Uber Drivers Network Facebook page over the weekend shows an app interface that looks much like that of Uber or Lyft. "A platform for drivers by drivers," reads an attached status update. "We, drivers, provide the cars and EVERY expense related to the business, the only thing ‘they’ provide is the app. Now we have our OWN!"
Many have argued that a co-op isn’t practical as a competitor to a goliath like Uber. But Janelle Orsi, an Oakland-based lawyer who specializes in sharing economy issues, still believes it could work.
"The companies themselves have very few assets," she told me in an interview last year. "They don’t own cars, and they don’t own infrastructure, they don’t own hotels. They just own a software platform and a lot of clout. And if that clout goes away, then they just have software. And lots of people can create software."
Uber, which refers to its drivers as "partners," argues that when fares go down, their drivers make more money because more customers use the app, decreasing the amount of time drivers spend idling between rides. An Uber spokesman says that drivers in New York are earning 17% more per hour than they were before the price cut, and that the amount of time they spend waiting for their next fare has been cut in half.
So the question is, can separate applications from disgruntled groups within Uber and Lyft lead to a better experience than the ones that already exist for Uber and Lyft?
Link:http://www.fastcompany.com/3057014/fed-up-with-uber-and-lyft-drivers-plan-to-launch-competing-app
A video posted on the Uber Drivers Network Facebook page over the weekend shows an app interface that looks much like that of Uber or Lyft. "A platform for drivers by drivers," reads an attached status update. "We, drivers, provide the cars and EVERY expense related to the business, the only thing ‘they’ provide is the app. Now we have our OWN!"
Many have argued that a co-op isn’t practical as a competitor to a goliath like Uber. But Janelle Orsi, an Oakland-based lawyer who specializes in sharing economy issues, still believes it could work.
"The companies themselves have very few assets," she told me in an interview last year. "They don’t own cars, and they don’t own infrastructure, they don’t own hotels. They just own a software platform and a lot of clout. And if that clout goes away, then they just have software. And lots of people can create software."
Uber, which refers to its drivers as "partners," argues that when fares go down, their drivers make more money because more customers use the app, decreasing the amount of time drivers spend idling between rides. An Uber spokesman says that drivers in New York are earning 17% more per hour than they were before the price cut, and that the amount of time they spend waiting for their next fare has been cut in half.
So the question is, can separate applications from disgruntled groups within Uber and Lyft lead to a better experience than the ones that already exist for Uber and Lyft?
Link:http://www.fastcompany.com/3057014/fed-up-with-uber-and-lyft-drivers-plan-to-launch-competing-app
Monday, February 22, 2016
Bridging a Digital Divide That Keeps Schoolchildren Behind
This article looks into the lives of teens as well as grade school children who do not have access to the internet at home, but however have school work that relies on the internet for completion and submission. Some of the solutions children themselves have come up with is to sit on the sidewalk next to a school and connect to the wifi outside of the school, go over to friends' houses who have wifi, take longer bus rides home upwards of three hours just to complete homework using the bus's wifi, and also to stay at the school until late in the evening to complete their work. While schools and students are working to make this situation better for those who do not have internet at home, it has not been enough to help them in the long run.
As a teacher said, "we must use the internet in the classroom and school work to prepare the students for what they will face in the future." With this being said however, something must be done in order to make it easier for students to complete their work without having to do so much extra work. The increasing divide we are seeing is being deemed the "homework gap." In order to try and combat this the Lifeline Plan has been drafted which would subsidize broadband services for low income families. However, a similar program was established in 1985 and some believe this plan was drastically wasted and abused. Therefore, this plan has received a lot of criticism and has not yet been decided on.
However the fact still remains, these children need access to the internet in order to complete their education and as it currently stands they are not able to receive the help they need. Do you think the Lifeline Plan is a good idea if it is established with more monitoring of internet activity? Or do you think this problem should be dealt with another way through potentially transporting children to libraries and other public places that have free internet services for a certain amount of time and then returned home upon completion?
http://www.nytimes.com/2016/02/23/technology/fcc-internet-access-school.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=second-column-region®ion=top-news&WT.nav=top-news&_r=0
As a teacher said, "we must use the internet in the classroom and school work to prepare the students for what they will face in the future." With this being said however, something must be done in order to make it easier for students to complete their work without having to do so much extra work. The increasing divide we are seeing is being deemed the "homework gap." In order to try and combat this the Lifeline Plan has been drafted which would subsidize broadband services for low income families. However, a similar program was established in 1985 and some believe this plan was drastically wasted and abused. Therefore, this plan has received a lot of criticism and has not yet been decided on.
However the fact still remains, these children need access to the internet in order to complete their education and as it currently stands they are not able to receive the help they need. Do you think the Lifeline Plan is a good idea if it is established with more monitoring of internet activity? Or do you think this problem should be dealt with another way through potentially transporting children to libraries and other public places that have free internet services for a certain amount of time and then returned home upon completion?
http://www.nytimes.com/2016/02/23/technology/fcc-internet-access-school.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=second-column-region®ion=top-news&WT.nav=top-news&_r=0
Why the Fed will decide to raise interest rates
By now, just about everyone agrees that the economy is in trouble.
The financial markets have already reacted to the thought that we might
be headed into another recession. The pundits are seriously debating
negative interest rates — charging people to keep their savings in a
bank — as the next desperate effort to help the economy.
Federal Reserve Chair Janet Yellen got lambasted in Congress by both political parties. And another interest rate hike by the Fed — just about everyone now agrees — is simply out of the question.
Even the minutes of the January Fed meeting show that Yellen might be having second thoughts about the rate-hike policy.
But get ready for another switcheroo: The economy is suddenly looking better. I emphasize the word “looking” because it really isn’t actually better — at least not by any appreciable amount.
Link: http://nypost.com/2016/02/17/why-the-fed-will-decide-to-raise-interest-rates/
Federal Reserve Chair Janet Yellen got lambasted in Congress by both political parties. And another interest rate hike by the Fed — just about everyone now agrees — is simply out of the question.
Even the minutes of the January Fed meeting show that Yellen might be having second thoughts about the rate-hike policy.
But get ready for another switcheroo: The economy is suddenly looking better. I emphasize the word “looking” because it really isn’t actually better — at least not by any appreciable amount.
Link: http://nypost.com/2016/02/17/why-the-fed-will-decide-to-raise-interest-rates/
Former NBA star Ray Allen is opening a fast-food restaurant that's unlike anything on the East Coast
Ray Allen, the all time 3 point leader in NBA history, and three time NBA champion is trying his hand at fast food. Allen and his wife/business partner, Shannon, are opening an all organic fast-food restaurant named Grown.
Grown will be opening in Miami in March, and is the only organic fast food restaurant with a drive-thru on the entire East Coast. Although, the West Coast has several organic fast-food chains with a drive-thru.
Interestingly, the inspiration behind this idea was their son, who has Type 1 diabetes and has special dietary needs. Like most Americans, they loved the convenience of grabbing a meal at a fast food restaurant, but hated the lack of healthy options that actually tasted good. So the Allen's began doing some research and found that this was a common frustration among American families. Of course, when you're a retired NBA star, money is not a huge concern. Needless to say, funding the restaurant was quite easy.
Grown will offer healthy snacks such as the Sante Fe salad which is comprised of organic greens, avocado, corn, tomato salsa, grilled shrimp, and plantain strips. The prices will range from as low as $4 to as high as $18.
This article was particularly interesting to me because I had the exact same idea last summer. I was working at an internship in Columbus and went out to eat every single day for lunch. Usually I just grabbed fast food because it was cheap and convenient. However, I hated that I was eating horribly for at least one meal a day, 5-6 times a week. Unfortunately, since I was 19 years old and not a retired NBA star, I had no way of turning this idea into a legitimate business. Also, I have no experience in the restaurant industry, and probably could not handle running my own business at this age... but the idea was there. Therefore, I think that I should be expecting to receive some sort of compensation by the Allen family.
http://www.businessinsider.com/the-first-organic-fast-food-chain-on-the-east-coast-2016-2
Grown will be opening in Miami in March, and is the only organic fast food restaurant with a drive-thru on the entire East Coast. Although, the West Coast has several organic fast-food chains with a drive-thru.
Interestingly, the inspiration behind this idea was their son, who has Type 1 diabetes and has special dietary needs. Like most Americans, they loved the convenience of grabbing a meal at a fast food restaurant, but hated the lack of healthy options that actually tasted good. So the Allen's began doing some research and found that this was a common frustration among American families. Of course, when you're a retired NBA star, money is not a huge concern. Needless to say, funding the restaurant was quite easy.
Grown will offer healthy snacks such as the Sante Fe salad which is comprised of organic greens, avocado, corn, tomato salsa, grilled shrimp, and plantain strips. The prices will range from as low as $4 to as high as $18.
This article was particularly interesting to me because I had the exact same idea last summer. I was working at an internship in Columbus and went out to eat every single day for lunch. Usually I just grabbed fast food because it was cheap and convenient. However, I hated that I was eating horribly for at least one meal a day, 5-6 times a week. Unfortunately, since I was 19 years old and not a retired NBA star, I had no way of turning this idea into a legitimate business. Also, I have no experience in the restaurant industry, and probably could not handle running my own business at this age... but the idea was there. Therefore, I think that I should be expecting to receive some sort of compensation by the Allen family.
http://www.businessinsider.com/the-first-organic-fast-food-chain-on-the-east-coast-2016-2
Starbucks Will Reward How Much You Spend, Not How Often You Visit
Starbucks is changing its loyalty program that currently focuses on how often you visit rather than how much you spent. The current program gives a customer one "star" per visit regardless of what you purchase. Beginning in April, a person will earn two stars for every 1$ they spend. These stars can be redeemed for any product sold at Starbucks stores.
This image below compares the current reward program and the new one that will begin in April. One notable change is that certain days throughout the month will provide double-stars.
Some My Starbucks Rewards members have criticized the current program because those customers that spend more and purchase 3 products are being just as rewarded as others that just buy one product. There are also flaws in the current system where some people buy three items and break it up into three transactions to get three stars. Starbucks noted that this was creating delays at the checkout.
Not only is this new program going to be more beneficial for the loyal customers but it will also allow the business to operate more efficiently.
When the Starbuck's reward program was launched it 2009, it was one of the most successful loyalty programs that has more than 11 million active members. The company says it increased the number of member by more than 50% over the last two years, and those 11 million members spend three times as much as nonmembers.
Starbucks believes that this new program will defiantly drive up sales because customers will spend more if they earn more.
This image below compares the current reward program and the new one that will begin in April. One notable change is that certain days throughout the month will provide double-stars.
Some My Starbucks Rewards members have criticized the current program because those customers that spend more and purchase 3 products are being just as rewarded as others that just buy one product. There are also flaws in the current system where some people buy three items and break it up into three transactions to get three stars. Starbucks noted that this was creating delays at the checkout.
Not only is this new program going to be more beneficial for the loyal customers but it will also allow the business to operate more efficiently.
When the Starbuck's reward program was launched it 2009, it was one of the most successful loyalty programs that has more than 11 million active members. The company says it increased the number of member by more than 50% over the last two years, and those 11 million members spend three times as much as nonmembers.
Starbucks believes that this new program will defiantly drive up sales because customers will spend more if they earn more.
http://www.nbcnews.com/business/business-news/starbucks-revamps-its-rewards-program-gives-stars-cash-not-visits-n523656
Middle-aged white death trends update: It’s all about women in the south
This article discusses casual inference in regards to death the death toll rates in various sections of the United States. The data, although aesthetically pleasing to read with the assistance of clearly defined chart titles and axis, is secondary to what I had thought was the most effective assertion he first raph delineates raw dearth rates for women between the ages of 45-50. This graph was published in the New York Times and along with arbitrary analysis form "highly touted and confident economists". I think the more important lesson that people could potentially learn would be to more critically analyze the data, author and the specific machinations of developing and publishing potentially misleading data for media outlets such as the NYT. The several graphs towards the bottom of the website illustrate what happens when certain variables are controlled for, with final lamentations from the author about people who may unintentionally disseminate inaccurate research.
http://andrewgelman.com/2016/01/19/death-trends-update-its-all-about-women-in-the-south/
The World's Biggest Miner May Be About to Toast Its Oil Drillers
David stringer from Bloomberg assesses within the article, the future success of the biggest miner, BHP Billiton Ltd. The article states that even though in the past year we have head toward the worst energy market downturn in a generation due to the slow in growth in China, the company BHP Billiton Ltd. may be able to expect something other than a decline in profits.
After a dam burst in Brazil and a 86% drop in Sydney shares the company needs a rebound. Although profits can expect to see a drop when it comes to iron ore, the company, unlike its competitors, has a significant foothold in crude oil and expects a rise in crude oil prices. Every $1 dollar per barrel change in crude oil impacts BHP’s net profit after tax by $52 million. BHP could rally by about 50 percent in the six to nine months after oil prices rebound, based on its average performance in the past.
https://www.yahoo.com/finance/news/worlds-biggest-miner-may-toast-230856768.html
Rising Yen Adds to Abe’s Challenges as Japan’s Economy Contracts
Unlike most places around the world Japan struggled with deflation which contrary to how it sounds has its own set of problems. During deflations prices go down, as do profits which causes people to lose jobs and invest less, it has a horrible impact on the economy as it growth slows down exponentially.
Shinzo Abe the prime minister of Japan is famous for having counteracted this by maintaining a low price for the yen by pushing the central bank to print more yens and buy more government bonds. So a lot of Japan's growth heavily relied on its weak currency.
This coincides with what we learnt in class. With a lower exchange rate, an export oriented country like Japan gets to gain a lot of revenue from its net exports, especially when inflated into the figures in its own currency.
In this article we see how with the price of the yen rising, Japan is facing slowed economic growth. The central bank is planning to push negative interest rates to try to counteract this now. While this might increase investment demand for a while, the Abe government will need to take further measures if it wants to ensure its weak-yen dependent economic plan. In class we learnt about how increasing net capital outflows, or cutting government expenditure might help.
Shinzo Abe the prime minister of Japan is famous for having counteracted this by maintaining a low price for the yen by pushing the central bank to print more yens and buy more government bonds. So a lot of Japan's growth heavily relied on its weak currency.
This coincides with what we learnt in class. With a lower exchange rate, an export oriented country like Japan gets to gain a lot of revenue from its net exports, especially when inflated into the figures in its own currency.
In this article we see how with the price of the yen rising, Japan is facing slowed economic growth. The central bank is planning to push negative interest rates to try to counteract this now. While this might increase investment demand for a while, the Abe government will need to take further measures if it wants to ensure its weak-yen dependent economic plan. In class we learnt about how increasing net capital outflows, or cutting government expenditure might help.
Here's how much it costs to get a haircut around the world
In class, we discussed about the difference between the price of a haircut
in India and the U.S.
I found this interesting article about “How much it costs to get a haircut
around the world.” these data were recently released by the UBS. UBS analysts
looked at haircut services for men and women separately in big cities around
the world.
The price of a haircut ranges from $95.05 to $4.63 for women, and from
$77.72 to $4.50 for men.
The level of technology and service included in a haircut is probably the
same everywhere, then why is there such a difference?
It is not hard to discover that there is a relationship between the cost
for haircut and the average wage/salaries in that city. For example, Oslo,
Geneva, and New York City are the most expensive place to get a haircut, but on
another hand, the average salaries of these cities are also on the top of list.
This kind of makes sense to expect people who earn the more to pay more for
service, but I'm not sure if there's such a big difference in comparison to
average wages.
The prices also differ by gender, in cities like Jakarta, Taipei, and Hong
Kong men and women pay almost the same price for haircuts. But these are the
only exceptions that I can find among all these data. For the most part, women
pay on average 40% more than men for the haircut. In some places like Dublin
and Cairo, women pay almost three times higher than for men for haircut. I understand women may have longer hair and have more specific desire for
their hairstyle, but it doesn’t make sense to charge women 3 times higher
prices.
The only reason why some barbers can still have their job it takes some
time and probably a visa to fly to Jakarta and have a nice and cheap haircut. ☹
http://www.businessinsider.com/how-expensive-haircuts-are-around-the-world-2015-9
Sunday, February 21, 2016
Oil Markets Show Deep Doubt over Supply Freeze
Three OPEC members - Venezuela, Qatar and Saudi Arabia along with Russia have decided to stagnate their total output of oil at January levels in an effort to raise the prices of oil, which have been at an all-time low.
The trouble is that the oil market is oligopolistic and for something like this to work, it needs to have the consent of all major suppliers (in this case, countries) in the market.
Another problem is that the US markets are in less need of oil, because a significant portion of interior USA consumes domestic oil and the US demand for oil in the world market has decreased.
It seems highly unlikely that the world oil price will significantly increase in the near future and what this means for the world economy is that a lot of countries like Russia, Venezuela and potentially all of OPEC will take large economic hits leading to possible recession, high fiscal deficits and higher rates of unemployment. The affects of these will likely be felt in other parts of the world including the United States.
http://uk.reuters.com/article/uk-oil-markets-opec-idUKKCN0VQ1VH
The trouble is that the oil market is oligopolistic and for something like this to work, it needs to have the consent of all major suppliers (in this case, countries) in the market.
Another problem is that the US markets are in less need of oil, because a significant portion of interior USA consumes domestic oil and the US demand for oil in the world market has decreased.
It seems highly unlikely that the world oil price will significantly increase in the near future and what this means for the world economy is that a lot of countries like Russia, Venezuela and potentially all of OPEC will take large economic hits leading to possible recession, high fiscal deficits and higher rates of unemployment. The affects of these will likely be felt in other parts of the world including the United States.
http://uk.reuters.com/article/uk-oil-markets-opec-idUKKCN0VQ1VH
The Economics of Trader Joe's and Whole Foods
This article focused on the economics of two organic health foods grocery stores, Trader Joe's and Whole foods. Trader Joe's is a private ownership grocery store while Whole foods is a public ownership grocery store. Trader Joe's keeps their costs low by offering a limited selection of organic options while maintaining their own private label for many of their grocery products. Their stores are small and usually their locations are in strip malls or shopping areas to keep costs low. Whole foods focuses on building large stores, with a large selection of produce, in affluent areas where there is a high demand for organic groceries. In order to expand and to be successful in more urban areas, Whole foods is trying to adopt the business model of Trader Joe's by developing their own brand and store 365. These smaller 365 stores with the private 365 label has the same benefits of Trader Joe's while taking advantage of the already existing infrastructure and and establishments of Whole Foods. The main dilemma for Whole Foods will be to try to separate the image of Whole Foods with 365 to move away from the image of being expensive and "for the wealthy" as many people consider Whole Foods to be out of their budget while still maintaining the reputation of Whole Foods high quality products.
http://www.investopedia.com/articles/markets/021916/economics-trader-joes-and-whole-foods-365-wfm.asp
http://www.investopedia.com/articles/markets/021916/economics-trader-joes-and-whole-foods-365-wfm.asp
Oil prices stabilize but market remains weak on ongoing glut
Since mid-2014, oil production has been ahead of the demand for oil by 1-2 million barrels a day, resulting in prices falling by about 70%. Last week both Russia and OPEC announced that a production freeze will be put on crude oil in hopes to level out with demand. One oil trader, however, insists that freezing production at current levels wont actually reduce the glut, but will only add to it more. Also, many OPEC members are hesitant to freeze the production and are not fully committed so it is not a certain option. I think that a production freeze would ultimately not be beneficial because of the reason the oil trader gives which is that crude stocks in the U.S. are at a record high.
https://finance.yahoo.com/news/oil-prices-stay-weak-ongoing-004741624.html
https://finance.yahoo.com/news/oil-prices-stay-weak-ongoing-004741624.html
Global economy faces a 'five-finger discount'
Many people think that global markets started off on the wrong foot in the new year, leaving investors to wonder if there are deeper problems ahead with the recent slowdown in global growth. In the 1970's the U.S. struggled through a deep recession, and shopkeepers were watching out for consumers to act upon the "five-finger discount," a euphemism for shoplifting. This article talks about these "five-finger discounts," and how central bankers should be reminded of these growth-robbing challenges threatening the global economy over the next several business cycles.
1. Stalling globalization-When fueling corporate profits and personal income increases through international trade, capital and labor flows for about 30 years, and globalization appears to stall.
2. Unfavorable demographics- If current trends of large emerging market economies hold up over the next 10 to 15 years, many will be in the same position as most developed countries. This will cause slow growth in the supply of labor, higher dependency ratios and possibly a reduction in productivity growth.
3. Excessive leverage- Many people nowadays have high levels of debt, public, corporate, and household. Recent events in Chinese markets increase concerns that excessive leverage could set off another wave of global financial instability.
4. A harsher regulatory environment- More regulations is time-consuming and expensive for business, and most likely restricts productive investment.
5. Rising taxes- Twice as many countries have increased income taxes than cut them during this global financial crisis. Higher taxes tend to reduce incentives for employing capital and labor, distort domestic economic fundamentals through dead weight losses, and can prompt larger businesses to maximize returns for their investors by wasting resources to seek out lower tax bases for their operations.
Link: http://www.cnbc.com/2016/02/19/global-economy-faces-a-five-finger-discount-commentary.html
1. Stalling globalization-When fueling corporate profits and personal income increases through international trade, capital and labor flows for about 30 years, and globalization appears to stall.
2. Unfavorable demographics- If current trends of large emerging market economies hold up over the next 10 to 15 years, many will be in the same position as most developed countries. This will cause slow growth in the supply of labor, higher dependency ratios and possibly a reduction in productivity growth.
3. Excessive leverage- Many people nowadays have high levels of debt, public, corporate, and household. Recent events in Chinese markets increase concerns that excessive leverage could set off another wave of global financial instability.
4. A harsher regulatory environment- More regulations is time-consuming and expensive for business, and most likely restricts productive investment.
5. Rising taxes- Twice as many countries have increased income taxes than cut them during this global financial crisis. Higher taxes tend to reduce incentives for employing capital and labor, distort domestic economic fundamentals through dead weight losses, and can prompt larger businesses to maximize returns for their investors by wasting resources to seek out lower tax bases for their operations.
Link: http://www.cnbc.com/2016/02/19/global-economy-faces-a-five-finger-discount-commentary.html
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