China's Demographics

http://www.economist.com/news/china/21570750-first-two-articles-about-impact-chinas-one-child-policy-we-look-shrinking

This article discusses the nature of China's changing demographics for its working age population and effects that this may have on the Chinese economy. The country's working age population has been consistently growing until 2012 where it declined by 3.45 million. While, on the surface, this normally suggests a negative effect on the economy due to a shrinking labor force, it is entirely possible that China will be able to weather the problem while it works on relaxing its one child policy.

On the one hand, China has a high potential for urban employment and a large rural workforce with strong potential to grow migrant worker populations in the cities. This urbanization would also contribute to lower savings rates, higher consumption and an increasing wage rate. Also, the expansion of employment has contributed fairly little to China's startlingly high growth rate, weighing in at no more than about 0.7 percent. China can continue to augment its labor and continue its growth for now, but the demographics issues will have to be addressed eventually, lest they become a serious burden for China's growth.

http://www.nytimes.com/2013/01/28/business/debate-shifts-at-fed-to-easing-its-efforts-to-spur-economy.html?hp&_r=0

As stated in the article, the Federal Reserve has been very clear for their future plans regarding the Federal Open Market Committee (FOMC).  They will continue their purchases for bonds in hopes of holding down borrowing costs.  However, the Fed has once again started debates on whether or not they should have a larger role in trying to kick-start the weak economy.  Also, the Fed announced in December that they would keep short-term interest rates at close to zero until the unemployment rate fell below 6.5 percent.  At the time of the announcement the unemployment rate was at 7.8 percent.  At this point, this is the last option that the Fed has to go to and it may be time for more fiscal policies to be introduced.

Fed waits for job market to perk up

We all know The Fed has pledged to keep interest rates low and is now leaving it to the federal government to take over and do what it needs to do to get our economy out of its slump. After a two day meeting with the Federal Open Markets Committee the Fed as pretty much reassured its plan to keep interests rates low  until unemployment falls to 6.5%. If you ask me the Fed is just delaying future consequence, government intervention into free markets just causes more problems. 

Move Over Apple

When you think of smartphones or tablets the first word that comes to mind is Apple. The Iphone, Ipod, and the Ipad. Apple has led the world with these innovations and much more. They were the world's most valuable firm. Now Apple is dealing with bigger problems than trying to innovate a new product. Other firms, such as Samsung, has started to gain traction in the smartphones and tablet industries. This means that Apple is no longer the world's most valuable firm. They have taking huge hits in the stock market after their quarterly earnings report fell flat. Their stock has dropped a dramatic 30% since the new year. This has left Apple to explore other options. There are talks of them getting into the TV markets. Lately, Apple has been doing incremental innovations with only their existing products. This has been hurting them as competitors have been creating brand new devices that are leading the front line. Apple has plans to start making new devices to attract new customers. Also, the death of Steve Jobs also has hurt Apple. I believe that Apple will do fine and will still lead the world in innovative products.

General Motors: Now It's Time to Step on the Gas

http://www.economist.com/news/business/21569712-gm-has-emerged-stronger-crisis-it-not-yet-fast-lane-now-its-time-step

This article is discussing how General Motors is getting out of it's financial problems and heading towards steady profit and success. After years as a basket-case, pilloried as “Government Motors”, GM is back in profit, stepping up its output and creating jobs again. Investment banks are beginning to believe that half of GM's entire sales volume will be replaced. GM has been graded as "junk" by credit rating agencies but believe that this year that will change to "investment grade." The problem they have been facing is that their American home market shares have been slipping but, it's worldwide sales have increased dramatically. GM is also well ahead of Ford and Chrysler, its Detroit-based rivals, in the Chinese market, now the world’s biggest, where GM is profiting from its booming joint ventures with local makers. GM is heading into the right direction and I believe it's time to start buying stock in GM before the price is to high.

Car-Sharing, a cheap and economically friendly alternative to Driving

This article was about a new emerging concept in the car industry focusing on the renting of cars on very short term periods at hourly and even minute rates. This idea of car-sharing is based off of the tough economic period that we currently live in and is a cheap alternative to purchasing a car, especially in cities or for college students on campuses. The aspects of this new concept that make it so appealing are not only it's cheap rates but also it's ability to reserve and find one of these rented vehicles within 15 minutes of most residences where these car-sharing companies are located. Last year roughly 800,000 people registered to be apart of these car-sharing companies which was a 44% increase from 2011. The idea of simply renting a car when necessary seems to be growing rapidly in the untied states, at least in the metropolitan areas where most of these car companies are located. These companies not only provide a useful and efficient resource to the public but also have started to focus on variety so that customers have a spectrum of choices to choose from when deciding on the make and model of the car they wish to rent.
Another aspect of the car-sharing companies that makes it unique is the new policy adopted by most which lets its customers park anywhere in the city for free, cutting the outside costs to the customer besides the nominal charge fro renting the vehicle itself. This feature allows for a streamlined process where if a customer needed a vehicle quickly he or she could rent the vehicle and only have to worry about getting to their destination and not the minor setbacks of parking or access. One car-sharing company, Car2go, doesn't even require it's customers to indicate how long they will be driving or where there destination is as long as it is returned to the same spot it was acquired from. Overall, I found this article to illustrate an interesting parallel with the marginal cost = marginal benefit equation we have discussed in class and how some companies are taking advantage of the recession we are in to capitalize on people's intentions to save money and maximize their benefits.

hyperlink:  http://www.nytimes.com/2013/01/26/business/car-sharing-services-grow-and-expand-options.html?_r=0  

Factory Jobs in China

http://www.nytimes.com/2013/01/25/business/as-graduates-rise-in-china-office-jobs-fail-to-keep-up.html?pagewanted=1&_r=0

This article is a case study of a man named Mr. Wang who is a unemployed college graduate in China.  The article goes into great depth about the emergence of an increasingly "educated" work force in China.  China has 10x more college graduates now then they did in 1989 during  Tian'an men square.  The rising education level of young working age people has created an interesting dynamic in the Chinese workforce.

Factory jobs are plentiful in China and offer good wages and stable employment.  The working conditions have improved significantly over the past few years, and the starting salary is twice that of a starting white-collar job.  However, people like Mr. Wang are not content with a factory job now that he has a college degree.  It is viewed as "dirty work" and beneath him.  However, Mr. Wang is unemployed himself and actively looking for a white-collar job.  The underdevelopment of the service sector in China means that white-collar jobs are few and very competitive.  Some experts point to the state capitalism as being responsible for the underdevelopment of the service sector. Mr. Wang is in a unique position where he can afford to be unemployed.  Due to the one child policy, Mr. Wang has four grandparents and two parents that are willing to support him. 

Experts are wondering how this changing dynamic in the Chinese labor force will affect factories and white-collar jobs.  It is likely that China will see a shift towards more vocational graduates to fill the available skilled factory jobs.  It is also likely that conditions in factories will continue to improve to make the jobs more appealing.

Euro Crisis Could Erupt Again This Year

In this article, economist Barry Eichengreen warns that the euro crisis could resurface again in 2013. He  says that even though the European Central Bank talked about a positive change in the markets and an economic recovery, the recession could appear again if European leaders don't solve their problems quickly.

Eichengreen says that the euro zone leaders should steady their banking systems, and not allow banks to add to government debt by expensive bailouts. To prove the point, during the recent Economic forum held in Davos, Mario Draghi, chief of European Central Bank reassured everyone of a recovering economy but added that this has not transmitted to the economy yet. Furthermore, the European Central Bank made proposals for heavily indebted countries, but Eichengreen says that the underlying problems have not been solved and the crisis can come back. 

Foreigners not welcome

http://finance.yahoo.com/blogs/the-exchange/u-immigration-policies-sabotaging-u-economy-010256021.html

This article mentions how the existing system for international students who study in US harms the economy. According to the article, foreign students who graduate from US universities are forced to return home. Similarly, tech workers whose temporary work permits expire are also in many cases forced to return home. This system harms the economy of US as foreign students added around $21 Billion to the US economy last year. Similarly, foreigners who study in US on average generate 2.5 jobs for American citizens thanks to their innovation, research and development work.
President Obama has taken note of this and wishes to change the existing scenario. He mentioned the same in a recent speech.

The Upside to Japan's 'Currency War'

Link: http://www.businessweek.com/articles/2013-01-24/the-surprising-upside-to-japans-currency-war#r=nav-r-story

This article explains Japan's current actions to affect their currency as well as their reasoning behind doing so.  In Japan's current currency situation, the yen is stronger than what they (the government and their domestic markets) want it to be, so the government is taking action by purchasing bonds from countries with weaker currencies in order to weaken the yen. The Japanese government is taking action in such a way so that they are able to spur domestic growth as a weaker yen will cause their exports to be cheaper while making their imports more expensive. Japan also hopes that its actions will put them at a 2% inflation rate (a healthy inflation rate) as opposed to the trend of deflation that they have been seeing. When looking at the big picture, with a world market looking for growth, Japan's weaker yen may be what is needed to help push growth.

However, smaller emerging markets criticize Japan's strategy. If one country racks up surpluses, another must take deficits and if Japan uses other currencies to weaken its own, they are causing the opposite to happen to those they are getting their bonds from. As Coy says, "Competitive devaluation is even blamed by some economists for the Great Depression." As a conclusion though, Coy says it best, even though it can be easy to point fingers at Japan, the big picture is of greater importance.