The article goes into detail regarding the issues regarding an indirect tax reform system. It shows that India has had problems implementing a free trade agreement with itself and even that so for years. A recent World Bank report shed light on how corruption in India's bureaucracy system has lead to its long distance truckers to be parked 60% of their time. A recent proposal to harmonize the system has been has been introduced in a form of a goods and services tax (GST). This proposal has been around since 2007, but the recent regime change has made it a center piece for moving forward.
A well designed GST would essentially give a boost to manufacturing and limit corruption and furthermore make India a true common market. A sin charge of extra tax on Alcohol petrol and tobacco would be implemented. In terms of politics the government must secure an agreement of 29 states to implement a common rate. The states must essentially give up their power on implementing taxes. Many worry about the loss of income as indirect taxes are a big chunk of state revenue. But in terms of exceptions many worry if too many are made the GST might just become the new solution with a mere different name.
Source:
http://www.economist.com/news/finance-and-economics/21631147-fix-indias-indirect-tax-system-overdue-it-may-fall-short
Sunday, November 9, 2014
Forget the 1% It is the 0.01% who are really getting ahead in America
http://www.economist.com/news/finance-and-economics/21631129-it-001-who-are-really-getting-ahead-america-forget-1
The article talks about the growing inequality in the share of wealth held. In 1976 about the share of wealth held by the top 1% was at about 19%. Compared to in 2000 the percentage shared by the 1% was 21%. This 2% increase is pretty unheard of, the percentage change in wealth held is usually very small percentage changes. Before the great depression the middle class (bottom 90%) controlled about 16% of the wealth, and the top .01% controlled about 25%. Once the great depression hit the trend reversed and the bottom 90% started increasing their share of wealth. Their share continued to grow all the way to 36% until the early 1980s. Where once again the trend had reversed and the bottom 90 started losing their share of wealth again. The author suggests that main reason that this income disparity is increasing and returning to pre Great Depression numbers has to deal with increasing debt of the middle class, largely homes values rising did not have much of and increase in wealth because mortgage debt was also rising as well.
In Ukraine Crisis, U.S. Businesses Face Tit-for-Tat Response to Sanctions
The United States and the European
Union have placed a number of sanctions on Russia as punishment for supporting
the pro-Russian separatists attempting to carve out independent states in
Ukraine. As a result of these sanctions
numerous European and American multinational firms operating in Russia have
experienced retaliation in Russia. The
retaliation has been defined as tit-for-tat and seen as immature by the western
world.
The article gave a
number of examples of companies feeling the effects. One of these companies was
McDonald’s. In the case of the fast-food chain, health inspectors made a
surprise check on a location and filled a frivolous lawsuit that can only be
seen as retaliatory. However this is not the worst action to be seen by the
Russian government. Currently, the
government is looking at seizing foreign media assets as well as the
consideration of laws, which would allow the government to seize foreign-owned
assets.
The situation
between Russia and the Western world is causing and will cause a hamper on
business done within the country for the near future. Many multinationals have
reported losses and have moved their employees out of Russia due to the volatility
of the situation.
Source: http://www.nytimes.com/2014/11/07/business/international/in-ukraine-crisis-us-businesses-face-tit-for-tat-response-to-sanctions.html?ref=international&_r=0
Greenspan: Inflation, interest rates, gold will rise within five years
Alan Greenspan, former Fed Reserve Chairman, was asked to assess what the price of gold would be a year from now. He said that he couldn't tell in a year, but could five years from now say that it would be higher. When asked about interest rates, he claims that he knows it will be considerably higher, and believes that inflation is only going to increase more and more. Low inflation and high interest rates are not ideal. Inflation is caused by a large growth in money supply and lower interest rates are supposed to compliment this, which would give people an incentive to spend. But if he views that in the future interest rates will be high, and inflation is currently low, than people have no reason to spend because there isn't enough growth in the MS. At the end of the article, he says that though the interest rates have been kept pretty low, they will indeed rise, and once they do, inflation will also.
http://www.wnd.com/2014/11/greenspan-inflation-interest-rates-gold-all-heading-up/
http://www.wnd.com/2014/11/greenspan-inflation-interest-rates-gold-all-heading-up/
The Rising US Dollar and its Implications
The U.S. Dollar is at it's highest level since June 2010 and has rallied approximately 10% from the spring this year. The appreciation of the dollar comes with some major implications globally and within the economy.
Due to a stronger dollar, import prices will be cheaper. Since the overall wage growth is still low, this rise in value will help purchasing power of consumers.
Competing firms in Europe and other countries who have not seen an appreciation in their currency, will have an export advantage.
Since commodities are priced in dollars, a stronger dollar translates into lower commodity prices. Due to the appreciation the real rates of interest and inflation will modestly rise also. Historically, higher real rates have further hampered commodity returns as they raise the opportunity cost of holding an asset that produces no income.
Although the value of the U.S. dollar is appreciating it is still only as strong as it was in 2006. It is still down 30% compared to its value in 2001.
Read More: http://ow.ly/E2fD3
Due to a stronger dollar, import prices will be cheaper. Since the overall wage growth is still low, this rise in value will help purchasing power of consumers.
Competing firms in Europe and other countries who have not seen an appreciation in their currency, will have an export advantage.
Since commodities are priced in dollars, a stronger dollar translates into lower commodity prices. Due to the appreciation the real rates of interest and inflation will modestly rise also. Historically, higher real rates have further hampered commodity returns as they raise the opportunity cost of holding an asset that produces no income.
Although the value of the U.S. dollar is appreciating it is still only as strong as it was in 2006. It is still down 30% compared to its value in 2001.
Read More: http://ow.ly/E2fD3
Standby. European Central Bank is preparing new stimulus
http://money.cnn.com/2014/11/06/investing/ecb-stimulus-draghi/index.html?iid=SF_E_River
This article explains current happenings in the European Economy and plans for further Quantitative Easing.
The European Central Bank plans to keep the interest rate low at 0.05%, as well as increase government spending by about 1.25 trillion dollars. These effects combined should increase not only investment but national income as a whole.
Some believe that these stimuli are not enough, so the ECB has announced plans of quantitative easing to increase the scope of their government spending to include corporate bonds and other assets.
It will be interesting to see the actual effects of these plans and to judge whether or not they worked well.
This article explains current happenings in the European Economy and plans for further Quantitative Easing.
The European Central Bank plans to keep the interest rate low at 0.05%, as well as increase government spending by about 1.25 trillion dollars. These effects combined should increase not only investment but national income as a whole.
Some believe that these stimuli are not enough, so the ECB has announced plans of quantitative easing to increase the scope of their government spending to include corporate bonds and other assets.
It will be interesting to see the actual effects of these plans and to judge whether or not they worked well.
Jobs Data Show Steady Gains, but Stagnant Wages Temper Optimism
The new employment report from the government that was released Friday showed evidence that despite the continued criticism of the worsening economy, the economy is actually improving. The reported showed a large increase in number of people who found jobs last month, dropping the unemployment rate to 5.8 percent which is a big improvement compared to a year ago when it was at 7.2 percent. An estimated 214,000 jobs were created in October. This all are good signs of a improving economy but there is a catch. Wages are only up 2 percent in the past 12 months. This means that yes, people are finding jobs but the workers aren’t really feeling the comfort from the paychecks. This slow recovery has been the spark for many states including Nebraska, Alaska and Illinois trying to vote for a minimum wage increase to help speed up the process.
I feel like to fully recover, its going to be a long and slow process. The increase in job creation is a positive sign and the wages will follow, but it will recover more slowly.
U.S. Ranked 65th in the World in Gender Pay Gap
According to the World Economic Forum, there is no country
in the world where women earn as much as men for doing the same job. Currently, the US stands at 66%,
meaning women earn 66% of what men earn for similar jobs. This percentage ranks
65th among 142 polled countries. Burundi, a small African country, has the highest percentage
with 83%. In Italy, women make
less than half of that men make, making only 48%. Some of the countries that have the most equality are those
where many people live below the poverty line, and there are many more low
paying jobs than high paying jobs.
The problem of gender inequality in terms of payment is a global
problem, not just in the US. But the
sad part is that the WEF expects it to take 81 years for the gender gap to
close.
http://money.cnn.com/2014/10/27/news/economy/global-gender-pay-gap/index.html?iid=HP_River
Michigan latest state to ban direct Tesla sales
Michigan, along with many other states, have banned Tesla from selling their vehicles to customers through their "direct-selling" business model. They have no brick-and-mortar store front as many other dealerships do, which allows them to keep their prices cheaper than their competitors. Seeing this as a threat for business, many dealerships have put pressure on the local and state governments to ban or prohibit Tesla from selling in their state.
I think that reactions like this just show how other companies are afraid of something different than how they operate, and they also realize that not being "direct sellers" increase the cost of their products, which would naturally make them less competitive with Tesla and other "direct selling" companies. I don't think it is fair to outlaw Tesla. If other dealerships don't want to go out of business because of Tesla's innovative business model, then they should rethink their model and change what could hinder their competitiveness.
Link: http://www.theverge.com/2014/10/22/7038407/michigan-tesla-ban-signed-into-law
I think that reactions like this just show how other companies are afraid of something different than how they operate, and they also realize that not being "direct sellers" increase the cost of their products, which would naturally make them less competitive with Tesla and other "direct selling" companies. I don't think it is fair to outlaw Tesla. If other dealerships don't want to go out of business because of Tesla's innovative business model, then they should rethink their model and change what could hinder their competitiveness.
Link: http://www.theverge.com/2014/10/22/7038407/michigan-tesla-ban-signed-into-law
Will Lebron James stimulus be good for Cleveland ?
http://www.nytimes.com/2014/11/09/magazine/will-the-lebron-james-stimulus-be-good-for-cleveland.html?ref=business&_r=0
After Lebron James announced his return to the Cleveland Cavaliers, people mostly in the Cleveland area were thrilled and celebrated in the streets. Old jerseys broke out and hope was suddenly restored for the Cavs. This year season tickets sold out after Lebron announced his returned and jersey sales rocketed. Fitzgerald one of Cleveland's boosters "envisioned" that the city will be enriched by this excitement. Restaurants located near the arena who lost a lot of business after Lebron left to Miami are now very hopeful that business will pick up. Also many stores that sell T-shirts and jewelry are also optimistic. LeRoy Brooks, a professor of finance at John Caroll University mentioned that the same people making more money will spend it in Cleveland, therefore multiplying the "James Effect". Brooks also added that James will bring between $163 million and $426 million to the regional economy. Apparently, the Lebron stimulus could reach $285 million and could create about 550 new jobs.
Last year, the Cleveland area's economic output was about $123 billion. By estimates, the return of James wold expand output by less than one half of 1%. On the other hand, other experts believe these estimates are inflated. Cleveland us paying for the right to host James, and the most projected spending is merely dollars circulating around northeast Ohio. In other words what's good for downtown Cleveland is bad for the suburbs. They believe the return of James in effect is a return in that investment. Regardless, some people still see hope. Nike paid James roughly $13 million year to endorse its products. Now James is endorsing Cleveland. The return of Lebron which was announced just a week after the news that the 2016 Republican National Convention will take palce in Cleveland, could also change the way residents think about their city. Mood matters in this case.John Maynard Keynes regarded "animal spirits" as a primary motor of growth. When people are happy or feeling good, they are more likely to take risks and make investments.
In my opinion, people might have good reason for expecting economic growth of that magnitude but i'd be more conservative about estimates than Fitzgerald and co are. what are your thoughts?
After Lebron James announced his return to the Cleveland Cavaliers, people mostly in the Cleveland area were thrilled and celebrated in the streets. Old jerseys broke out and hope was suddenly restored for the Cavs. This year season tickets sold out after Lebron announced his returned and jersey sales rocketed. Fitzgerald one of Cleveland's boosters "envisioned" that the city will be enriched by this excitement. Restaurants located near the arena who lost a lot of business after Lebron left to Miami are now very hopeful that business will pick up. Also many stores that sell T-shirts and jewelry are also optimistic. LeRoy Brooks, a professor of finance at John Caroll University mentioned that the same people making more money will spend it in Cleveland, therefore multiplying the "James Effect". Brooks also added that James will bring between $163 million and $426 million to the regional economy. Apparently, the Lebron stimulus could reach $285 million and could create about 550 new jobs.
Last year, the Cleveland area's economic output was about $123 billion. By estimates, the return of James wold expand output by less than one half of 1%. On the other hand, other experts believe these estimates are inflated. Cleveland us paying for the right to host James, and the most projected spending is merely dollars circulating around northeast Ohio. In other words what's good for downtown Cleveland is bad for the suburbs. They believe the return of James in effect is a return in that investment. Regardless, some people still see hope. Nike paid James roughly $13 million year to endorse its products. Now James is endorsing Cleveland. The return of Lebron which was announced just a week after the news that the 2016 Republican National Convention will take palce in Cleveland, could also change the way residents think about their city. Mood matters in this case.John Maynard Keynes regarded "animal spirits" as a primary motor of growth. When people are happy or feeling good, they are more likely to take risks and make investments.
In my opinion, people might have good reason for expecting economic growth of that magnitude but i'd be more conservative about estimates than Fitzgerald and co are. what are your thoughts?
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