Previous studies had argued that countries with public debt-to-GDP of 90% or higher would lead to a slowdown in GDP growth. A new study suggests that the level of GDP may not be the determining factor, but rather its "trajectory." The more interesting metric in my opinion is the level of total credit, or the amount of total private and public debt outstanding. As we have seen in class, private debt can easily bring down the economy.
http://www.economist.com/news/finance-and-economics/21597933-new-research-suggests-debts-trajectory-affects-growth-more-its-level-breaking
Sunday, April 27, 2014
Even Without Sanctions, Russia's Economy Is Looking Sicklier Than Ever
Signs of Russia’s growing economic distress became even
clearer today, as the central bank unexpectedly raised interest rates for the
second time since March, while Standard & Poor’s cut the country’s debt
rating to one notch above junk. In
lifting the benchmark borrowing rate from 7 percent to 7.5 percent, the bank
said it was acting to cool inflation that’s now running above 7 percent. But,
says economist Tim Ash of Standard Bank in London, “it has nothing to do with
inflation. It’s all about signaling that the central bank is shoring up its
defenses” to strengthen the ruble and stem the flight of capital from the country.
With Russian companies and consumers facing higher borrowing costs, the rate
hike will depress an economy that’s already in danger of tipping into
recession. And continuing political uncertainty over Ukraine means that foreign
companies “will not invest in Russia’s real economy, they’ll just stall their
investment,” Ash says. Moreover, “inflation is likely to remain relatively
high,” above 7 percent this year, emerging-markets economist Liza Ermolenko of
Capital Economics in London wrote in a note to clients.
http://www.businessweek.com/articles/2014-04-25/even-without-sanctions-russias-economy-is-looking-sicklier-than-ever#r=nav-fs
Cities where home prices are hitting new highs
While home values nationwide are still down 13.5% from their
pre-housing bust peaks, prices in these major housing markets have recovered.
This article lists seven cities where home prices are hitting new highs. The
first city on the list is Dallas, TX, who boosted home values from just below
$127,000 in late 2011 up to current home value at $143,200.
The seven cities listed seem to have a commonality that is
helping housing values rise—booming oil and other energy-related industries, as
well as healthcare and technology-related industries. Population growth and
economic growth are also commonalities between these cities who have boosted
housing values from their housing boom peaks. It is interesting that many cities, such as
Austin and San Antonio, Texas, are on this list as well as the recent list CNN
Money came out with for the top ten growing cities in America.
Wall Street Week Ahead: A burst of energy with Exxon, Chevron on tap
Since late Februrary, it seems as though investors have fallen out of love with biotechnologies and other high flying stocks. The oil industry is what really seems to be fueling the market. Since the 25th of February Energy names have been the best-performing sectors of the S&P 500. They hope to continue to build on these recent gains. These sectors alone have attract large inflows 9 out of the past 10 weeks. They also have begun to average 488.9 million dollars weekly over the last 4 weeks. This is the largest inflow these sectors have seen since 2011. On a total return basis the energy market is up more than 7%. This can be compared to the1.8% loss the healthcare sector has seen, making it the worst performing sector in the period. The oil companies are not only making money for themselves but they are also paying it out to the shareholders. Both Exxon and Chevron are ranked among the top 10 dividend payers in terms of absolute dollars. This should continue to attract new investors.
http://finance.yahoo.com/news/wall-street-week-ahead-burst-222954993.html
Millions of Middle Class American Families Living Paycheck to Paycheck
According to a study done by Brookings Institution, more than 25 million middle class families in America are living paycheck to paycheck.
While these people receive decent salaries, they lack savings and readily accessible funds. The study finds that 66% of these families are middle class, with a median income of $41,000. These families also have a median net worth of $41,000 even though they do not own liquid assets. Researchers say that these findings are surprising and that they do not expect these people to be living paycheck to paycheck.
The reason as to why these middle class families don't put away their cash in the bank or the stock market isn't clear. Greg Kaplan, assistant professor of economics at Princeton University, suggests that many people believe that housing and retirement funds will bring them better returns in the future. He also found out that people who prefer to put all their money into illiquid assets are able to consumer more in the future. People would rather own a home even though they won't have a lot of spending money.
http://money.cnn.com/2014/04/25/news/economy/middle-class-paycheck/index.html?iid=SF_E_LN
What stumps Warren Buffet? Minimum wage
Warren Buffet told CNN in an interview wednesday when asked whether or not to raise the minimum wage, "I thought about it for 50 years and I just don't know the answer on it." Buffett also said that the current federal minimum of $7.25 is not a living wage. If raising it didn't hurt employment he'd want it up significantly higher. "You do lose some employment as you increase the minimum wage, if you didn't I would be for having it $15 an hour," he said. Many states and cities have already raised their minimum wages above the federal minimum. Ohio for example is at $7.85. Also, President Obama is pushing for a raise nationwide to $10.10 an hour. However as we have learned in class, increasing the minimum wage also increases the unemployment. So what do you think? Should we raise the wage?
http://money.cnn.com/2014/04/23/investing/buffett-minimum-wage/index.html?iid=SF_E_LN
http://money.cnn.com/2014/04/23/investing/buffett-minimum-wage/index.html?iid=SF_E_LN
Reusable rockets in development
http://www.economist.com/news/science-and-technology/21600968-spacexs-latest-launch-could-change-economics-going-orbit-up-and-down
Since the beginning of space traveling, the rockets were just disposables: They could only be used for a single blast. Then they are dropped down to the ocean from mid air after they are burnt up. This was one of the reasons why space project budget was so high. The only reusable rocket was built in the United States, yet the shuttle was sabotaged and resulted in the deaths of two crew members, which just augmented the cost even more.
SpaceX has been developing the rockets to make it reusable. Their theory is that, after shooting, instead of just dropping to the ocean, it will land rather softly by deploying its legs. They are even thinking of hovering technology for the rocket. The success in this project might play a major role in reduction of the mammoth quantity of expenditure in space traveling in the long run.
Since the beginning of space traveling, the rockets were just disposables: They could only be used for a single blast. Then they are dropped down to the ocean from mid air after they are burnt up. This was one of the reasons why space project budget was so high. The only reusable rocket was built in the United States, yet the shuttle was sabotaged and resulted in the deaths of two crew members, which just augmented the cost even more.
SpaceX has been developing the rockets to make it reusable. Their theory is that, after shooting, instead of just dropping to the ocean, it will land rather softly by deploying its legs. They are even thinking of hovering technology for the rocket. The success in this project might play a major role in reduction of the mammoth quantity of expenditure in space traveling in the long run.
How will the Fed handle new big issues
Despite their unanimous vote to continue lowering their bond-buying strategy, there is much uncertainty within the Federal Reserve on how to tackle the big issues that lie ahead. Federal Reserve Chairman Janet Yellen has pointed out three major issues that the Federal Reserve must track: "the level of slack in the labor market, whether inflation is rising back toward the Fed's 2 percent goal, and the factors that could derail the economic recovery." On Tuesday and Wednesday, Fed officials will meet to discuss these issues. However, the U.S. central bankers are not likely to move quickly on policy.
http://www.reuters.com/article/2014/04/27/us-usa-fed-idUSBREA3Q08920140427
http://www.reuters.com/article/2014/04/27/us-usa-fed-idUSBREA3Q08920140427
Rebirth of America's dead factories
http://money.cnn.com/gallery/smallbusiness/2014/04/21/factories-plant-manufacturing/index.html?iid=Lead
American manufacturing has been going overseas for over past two decades to reduce the costs. High-tech systems are doing more and more work for people. Therefore it has been cruel for workers in manufacturing industry. But now it is going to change.
Stuart Lichter, president of Industrial Realty Group, said "demand for closed factories has picked up since the recession," which means American companies are going to bring production back home. This movement will inject new blood to thousands of closed factories and greatly boost U.S. job market then make the domestic economy be better.
American manufacturing has been going overseas for over past two decades to reduce the costs. High-tech systems are doing more and more work for people. Therefore it has been cruel for workers in manufacturing industry. But now it is going to change.
Stuart Lichter, president of Industrial Realty Group, said "demand for closed factories has picked up since the recession," which means American companies are going to bring production back home. This movement will inject new blood to thousands of closed factories and greatly boost U.S. job market then make the domestic economy be better.
Few Consumers Are Buying Premise of Mobile Wallets
Few Consumers Are Buying Premise of Mobile Wallets
The New York Times posted an article addressing the efforts to move toward a more technological way of life. The newest efforts include the use of mobile wallets has the market looking for a boost in consumer spending. Though extremely rocky, there have been substantial jumps in online purchases from 2011 to 2012. Creating an easier way for consumers to pay for items, like the use of wallet apps, would increase spending globally. This could also have some averse effects if fraud sparks with these apps; in this case spending would decrease.
The New York Times posted an article addressing the efforts to move toward a more technological way of life. The newest efforts include the use of mobile wallets has the market looking for a boost in consumer spending. Though extremely rocky, there have been substantial jumps in online purchases from 2011 to 2012. Creating an easier way for consumers to pay for items, like the use of wallet apps, would increase spending globally. This could also have some averse effects if fraud sparks with these apps; in this case spending would decrease.
Subscribe to:
Posts (Atom)