Saturday, September 16, 2017

CPI shows rise in inflation.

On September 14th the Bureau of Labor Statistics released data that showed the overall inflation rate jumped up by .4% to 1.9%. The BLS also released a CPI without the more volatile food and energy prices that only rose by .2% to a level of 1.7% higher than the same month last year. This data will be quite informative on the state of the U.S. economy and could have a major impact on the Fed's future decisions. The Fed has thus far been succeeding relatively well at its mandate of full employment but has generally not been doing as well at its job of price stability. The Fed aims for an inflation rate of 2.0% and has not hit such a benchmark since the April report. This data will be quite important as the Fed considers another rate hike this year and when it will begin selling off its balance sheet. Jim O’Sullivan of High Frequency Economics thinks that “The data help the case for following up the start of Fed balance sheet normalization next week with another rate hike in December, although there will be three more CPI reports before the December decision is made.” While this may be the case the Fed policymakers generally focus on an index based more off of personal consumption expenditures. Chairwoman Yellen has often stressed that one off factors like changing pharmaceutical prices and a drop in wireless data charges have kept this index down.

https://www.ft.com/content/b8b1d036-994d-11e7-a652-cde3f882dd7b

Tuesday, September 12, 2017

Most Americans would hike taxes, tolls to pay for roads: Survey

Almost three quarters of Americans are willing to pay increased taxes and tolls to fund road construction and other transportation initiatives according to a survey taken by Missouri-based engineering firm, HNTB Corp. This percentage of citizens increased to 84% in agreement of increased taxes if such funds would be legally mandated towards infrastructure. The reason this has not already been enacted is that taxpayers fear their money is being diverted into other, lower-priority functions of the federal and state government’s choosing. For example, when New Jersey had a gas tax hike in order to compromise the sales tax cut, Governor Chris Christie had to stop construction projects due to a funds drought. The United States as a nation is currently facing a large infrastructure backlog. The American Society of Civil Engineers has projected the fall to be around $1.44 billion short for the next decade of infrastructure spending. This begs the question of whether to seek a private outsider partnership to help complete the necessary transportation assets in the future. When President Donald Trump took office, he promised a $1 trillion infrastructure program. However, surveys following this revealed nearly half of Americans lacked interest in paying higher taxes to fund it. The willingness of paying these higher taxes is directly in result of a desire to avoid road congestion and save travel time. This conflict in the public is very obvious and it will be interesting to see what actions are taken.

https://www.cnbc.com/2017/09/11/most-americans-would-hike-taxes-tolls-to-pay-for-roads-survey.html

Monday, September 11, 2017

US consumer borrowing increased in July

The Federal Reserve reported that overall consumer credit rose $18.5 billion in July, which is up from the $11.9 billion increase in July.This increase brought consumer credit to total of $3.75 trillion. However, increased loan demand is often a sign of continued economic growth and the gain suggests that the overall growth is back on track after a slow start. It will be interesting to see the affects on consumer credit after the impacts of the hurricanes are felt and people are beginning to rebuild.

The article also highlights that employers added 156,000 jobs in August and the unemployment rate ticked up to 4.4 percent. More jobs and more unemployment? This could mean that more people entered the labor force and are looking for jobs. Also in July, consumer pending rose by 0.3 percent which is the best spending since April.

https://apnews.com/36c36cf77d9840cfbec9210ad074eb64/US-consumer-borrowing-increased-in-July

Tesla's "Strange" Way of Helping Hurricane Victims

Throughout the evacuation process, specifically during Hurricane Irma in Florida, Tesla owners received a strange upgrade.

Tesla owners were surprised with an additional 40 miles to the total range of one charge. This was to help with evacuation efforts and take away the uncertainty of family plans. The additional miles were upgraded to the Tesla operating system through a remotely enabled free software upgrade. This free upgrade ends Saturday. As you may think, there were many different reactions to this strange update, here they are:

1. There is the Tesla customer who is weary of Teslas abilities to 'add' mileage to the battery, but did not care in the moment because they were given the 40 extra miles. This is a more than fair opinion considering most owners just wanted to evacuate to a safe area. One owner said, "“I was totally blown away. It was super awesome of them to do that,” Mr. Forman said of the software upgrade. “Tesla is always thinking outside the box.”

2. There were the Tesla owners, AND non Tesla owners who were distraught over this.. Some tweets that were referenced in the article read, "Hold up. Tesla is hiding the max battery range until we need it? That's messed up" Which is another valid argument, why is Tesla able to add 40 miles? Shouldn't they get those 40 miles regardless?

Most other manufacturers brag that they "sell vehicles that are incapable of learning and improving and are highly vulnerable to obsolescence,” Adam Jonas, an analyst at Morgan Stanley. This seems to be a point of emphasis for other car companies now that Tesla took part in this action.

I am very curious as to what this will do to consumers perspective of Tesla. Personally, I think people should admire the initiative, but also be able to hold back on upgrades if they so choose.

https://www.nytimes.com/2017/09/11/business/tesla-battery-irma-upgrade.html?rref=collection%2Fsectioncollection%2Fbusiness&action=click&contentCollection=business&region=stream&module=stream_unit&version=latest&contentPlacement=3&pgtype=sectionfront

DACA ending will be a downside for republicans

https://www.reuters.com/article/us-usa-immigration-trump/republicans-could-lose-u-s-house-in-2018-over-immigration-fight-bannon-idUSKCN1BL14O

If congress does not act appropriately on the DACA and Dreamer issue republicans will be in for a loss. There is no real reason to attack these 800,000 immigrants right now. They are all working and contributing to our communities and our great country. Republicans will see many battles within themselves if they do not focus on greater issues and communicate effectively.

Bannon, a right-wing media executive who used to work for the Trump administration, warns republicans about this issue. If actions are not executed well, they could be in for a great disadvantage. Losing the house will make passing federal laws for Trump more difficult. For right now, I recommend for Trump if he wants to be productive to not focus on immigrants who are working and advancing our country but to instead use his power to fulfill his campaign promises. There is no insight if he will ever repeal Obamacare or implement the three trillion dollar infrastructure plan.

China announces to shut down local exchanges of Bitcoins

Another day, another crash and another Chinese ban. This time, as Reuters spotted, a single report from financial news site Caixin is saying that the Chinese government is considering banning cryptocurrency exchanges in China.

In particular, the report is saying that Chinese citizens won’t be able to use exchanges to buy bitcoins, ethers and more using Chinese yuan, and vice versa.

Cryptocurrencies aren’t banned per se, just exchanges. But do bitcoins have value in China if you can’t exchange them? That’s the main question and the reason why cryptocurrencies are crashing.

Sunday, September 10, 2017

Chinese Exports Grow Again

China’s exports increased 5.5% from a year earlier in August, according to customs data released Friday. Some economists said the pace, while lower than July’s 7.2% rise and the 6.0% forecast in a poll of economists, is steady enough to help prop up growth in the world’s second-largest economy. The rebound in exports this year was a contributing factor in lifting the Chinese economy to a stronger-than-expected performance for the first half of the year. While less important to China’s growth than a decade ago, trade still has an impact. For much of the past two years, lackluster global demand has dragged down China’s growth. The growth of exports is due to a recovery of global growth.The U.S., EU or Japan—external demand is still robust.So China can sell a lot of products which is cheap and fine.

https://www.wsj.com/articles/chinese-exports-grow-for-sixth-straight-month-1504843458

Texas ranchers may have lost tens of millions of dollars worth of cattle in Harvey

Hurricane Harvey devasted Texas. Texas is the nation's largest producer of cattle. One in four beef cows are in Texas. The Texas agriculture officials believe that they have lost millions of dollars in the cattle industry due to the aftermath of Harvey. Thousands of cows died during and after the storm. Before the storm Texas was home to 1.2 million cattle. The storm has not only wiped out a massive amount of cattle but as well as all of the ranches. Thus ranchers have lost their "product" and their place of operation. For a rancher, one can get insurance on their herd, but many don't because of the high price. If a rancher's whole herd drowned then they are out thousands of dollars. This puts a lot of cattle businesses or slaughterhouses in danger of taking a huge loss or even going bankrupt. Even though there's a extreme loss of supply now in the meat industry, economists don't expect a rise in meat prices, because the cattle on the east coast especially Texas are sent there to grow into adults then they are sent to the slaughterhouse. Thus inferring that there's enough cattle elsewhere in the U.S. not to effect the price.

I believe that the devastation of the ranches will cause many individuals financial stress and because there are so many people involved in one. It will effect the overall unemployment rate because it will take a while to have pastures grow back to be ready for the cattle to feed. There's going to be numerous people out of work until a ranch is fully functioning again. Also for ranchers that lost there whole herds they have to be able to front money in order to gain a new herd.

http://www.foxbusiness.com/markets/2017/09/08/texas-ranchers-may-have-lost-tens-millions-dollars-worth-cattle-in-harvey.html

Saudi Arabia's vague economic shift leaves huge oil IPO on track

On Saturday the Saudi government said that Saudi Aramco is still on track for its initial public offering planned for 2018. "The IPO process is well underway and Saudi Aramco remains focused on ensuring that all IPO-related requirements are completed on time and to the very highest standards," the Saudi information ministry said. The partial sale of Aramco is part of a massive shift in the Saudi economy, the reason for doing this is to reduce the dependency on oil and diversify the economy. The sale of Aramco is not the only thing that Saudi Arabia is doing to shift the economy. They have already cut some subsidies and announced new taxes which shows they are making progress towards their new economy.

I think Saudi Arabia is making the right decision by trying to diversify their economy. Right now their economy fluctuates based on oil prices. Oil prices have not recovered well enough for the kingdom and the economy is stagnant because of it. "The International Monetary Fund expects GDP growth at just 0.1% this year". If they sell part of Aramco and move towards the economy that they are planning on having, I think it will be very beneficial and the economy would be much more stable.

http://money.cnn.com/2017/09/10/investing/saudi-economy-revision-aramco-ipo/index.html?iid=SF_LN

"Tesla triggers upgrade for cars in Irma's path"

This article is about a software update being offered by Tesla to car owners living in southern Florida trying to escape the hurricane. This update would allow their Tesla vehicle to drive an extra 40 miles before needing a recharge. This is great because Tesla is trying to help out their customers and people in general get to safety and away from Hurricane Irma. However, it is highlights an interesting point of, why wasn't Tesla always giving people the maximum driving range capability?

The answer lies in their ability and want for making more money. They are able to use software to restrict the batteries' range. They can sell this less-efficient battery at cheaper price point. With a cheaper price, they can increase their quantity demanded. Whenever they get a high paying customer, they can offer that customer the full range battery package at a premium. And make a little extra money.

Tesla is fully inclined to do what they want in terms of pricing and functionality. I think some customers may be ticked off if they now know that their battery isn't lasting to its fullest capability. Tesla can be charged at home or at one of many supercharging stations positioned in certain states across the country. Their battery is the car's fuel source. The ability to increase the batteries' range will be the driving goal of Tesla and other car manufacturers going into the future. It will be interesting to follow this story and see what it leads to.

http://money.cnn.com/2017/09/10/technology/tesla-battery-irma-florida-evacuation/index.html?iid=hp-stack-dom

US officials propose sanctions

Secretary Mnuchin, of the US treasury, stated that he wants the UN to further their sanctions on North Korea. And that there will be consequences if the countries currently engaging in trade with North Korea don't comply.
He states that "he will seek an executive order from Trump to sanction any nation trading with Pyongyang".
His reasoning is inspired by the current nuclear testing being performed by Nortth Korea.

Putting sanctions on not only North Korea, but all countries that trade with them, could negatively affect the US economy.
Trade has a positive affect on consumer welfare, due to a larger variety of choices of products, as well as having the lowest price available.
And the opposite is true when trade is not available.

Source:

https://www.cnbc.com/2017/09/06/mnuchin-warns-us-may-seek-sanctions-on-north-korea-trade-partners.html

Worry About Florida Farmland Advances Along With Irma

The U.S. economy is expected to experience approximately $290 billion dollars of damages with the devastation from Hurricane Harvey and Hurricane Irma. While Harvey's has concluded, Florida is still bracing itself for damages that Irma has in store for it. This weekend, Florida saw Irma stray west which was good, however the category 3 hurricane still caused serious economic problems to the state of Florida.

There are more than 47,000 commercial farms in Florida, and in 2016, Florida was the nation's top producer for a large portion of the fruit and vegetable market, such as oranges, grapefruits, watermelons, tomatoes, and cucumbers, as well as sugar cane. The sales of oranges and grapefruit sales totaled to $825 million in 2016. Irma is predicted to hit over 9.4 million acres of farmland in Florida.

The predictions made by farmers could see that 50% of the citrus crop in Florida could be devastated, which is even more serious given that most crops have not been harvested yet. The market for these crops have ramped prices nearly 20% and has had the U.S. agricultural futures market anxious all week in preparation for the storms damages. Not only has the price increased, but farmland insurance firms may raise their premiums significantly following Irma.

https://www.nbcnews.com/storyline/hurricane-irma/worry-about-florida-farmland-advances-along-irma-n799876

The financial toll caused by hurricanes Irma and Harvey.

Two large hurricanes hitting the U.S. within two weeks of each other means massive amounts of damage that needs to be covered by insurance companies. RMS, a company that estimates catastrophic damage, estimated between $25 billion and $35 billion in losses that will be covered by insurance from Harvey alone. The RMS is waiting to release their estimates on Irma since the storm’s path is still in flux, however another catastrophic modeling firm known as AIR Worldwide estimates between 15 and billion worth of insured losses due to Hurricane Irma. Property damage is not the only concern because Irma and Harvey hurt the job market which leads to a slowing short term economic growth. We have learned from the past that natural disasters don’t usually hurt the economy in the long run. The U.S. economy may slow in the third quarter briefly but any dip in the economy won’t last long.

http://money.cnn.com/2017/09/10/news/economy/hurricane-irma-harvey-economic-damage/index.html?iid=hp-toplead-dom

China looks at plans to ban petrol and diesel cars

China currently is the world's biggest car market and made 28 million cars last year which is almost a third of the global total. Global car firms like Nissan, Ford and General Motors are all working to develop electric cars in China. China hopes to have electric battery cars account for one fifth of its vehicle sales by 2025. This shift will also cause the demand for oil in China to decrease drastically. China currently is the worlds second largest oil consumer behind the U.S.

China not wanting to use diesel and petroleum cars is a positive move for them in getting rid of their CO2 emissions. The past 50 years China has been actively involved in expanding all of their industries is still sort of in their industrial revolution. Their air is some of the dirtiest air in the world due to all of the fossil fuels being burned. The damage to the environment is mostly due to the factories emitting CO2's into the air. Most Chinese people don't even own a car. So its a nice thought to change their focus to electric cars but the factories will still be fully operational and still will be emitting CO2's into the air. The problem isn't mainly due to how many cars are there. I'm sure if all the cars there were electric it would benefit their environment. But the constant use of their factories to produce as much as they can is going to continue to pollute the air, so going electric wont really make a difference.

D.A.C.A. Program Ending

As we have all heard by now, the D.A.C.A. program will be coming to end as an executive order came from the White House. The question remains, what impact will this have on the U.S. economy? In short it will leave the country with 800,000 less workers in the workforce. Most of these workers work in an agriculture job. With a shortage of workers for the agriculture industry, you can almost be sure that wages for these jobs will increase by looking at a supply and demand curve. With the supply of labor getting smaller, the demand curve for labor would stay at the same quantity of workers demanded. This causes the equilibrium of wages to increase. The problem being here that some farms that are not as large in geographic size and do not have this extra money on hand to pay workers even more. The next logical thing that would happen is that farms would turn to more capital means of production and use technology to harvest the crops that farmers depend on to sell and survive. The problem again being a lack of money. Farm equipment like, combines, tractors, and plows can cost upwards of $70,000. To get the work done like before the farmers would have a choice to make, employ more people, invest in more capital means of production, or a third option would is to downsize to avoid the costs of the previous options. This means less money flowing into the farmers pockets which would mean consumption of farmers wold decrease. Crop output could also suffer if some farmers decide to take the downsizing route of operating. Overall there will be less money flowing in the economy because of this executive order.

Link: http://money.cnn.com/2017/09/05/news/economy/daca-us-economy/index.html

The DACA Repeal's Effect on the Economy

Economists across the political spectrum are concerned that Trump’s decision to repeal Deferred Action for Childhood Arrivals (DACA) will increase unemployment. DACA is an immigration policy established by the Obama administration to protect the children of undocumented immigrants. Commonly referred to as “dreamers”, these immigrants arrived as children with their parents and grew up in American society.

Many economists have argued that the problem with today’s job market is rooted in the nation’s lack of highly-skilled workers. In an attempt to create job openings for documented American workers, the Trump administration has decided to end the DACA program. With an American education, the “dreamers” are generally more skilled than the majority of undocumented immigrants. Currently, 91 percent of the “dreamers” are employed. Therefore, removing them from the workforce could likely exacerbate the current issues with the American job market.

The decision to repeal DACA poses a significant threat to output as well, for firms in need of skilled individuals are at risk of losing many qualified workers. Economist Ike Brannon even warns of “severe shortages” of labor and a reduction of economic growth by $280 billion in the next decade. The numerous other potential costs of removing DACA range from a decrease in overall consumption to a shortage of medical professionals. DACA’s repeal appears to pose a significant amount of threats that, according to Brannon and other economists, far outweigh its potential benefits.

https://www.usatoday.com/story/money/2017/09/08/dacas-end-would-hurt-economy-hiring/638835001/