Central banks' steroids aren't working

This article talked about how recently investors feel that the central banks do not have what it takes to turn around the world economies. The article sites how the European Central Bank introduced a “steroid-filled” stimulus on Thursday and although markets rallied, almost all markets ended up in the red by the end of the day. Related is how the Japanese Central Bank introduced negative interest rates initially causing a rise in the Nikkei 225, Japan’s benchmark stock market index. However just six weeks later the Nikkei 225 is down again. This article sites a patterns that castes a bleak outlook on the world markets for the rest of 2016.

http://money.cnn.com/2016/03/10/investing/central-banks-action-not-working/index.html?iid=SF_LN

China's primary schooling enrollment policies reflect that of my own hometown...

Link: http://www.cnbc.com/2016/03/13/chinas-property-market-overheats-in-tier-1-cities-stagnates-in-lower-tiers.html

CNBC reports that China has changed their primary school enrollment policies to be solely determined on a pupil's home address. Prior to 2014, a prospective student would test into primary school and be placed in one of many options in a city like Beijing. This is no longer the case. Many Chinese families are relocating their homes in order to guarantee that their children are secured a desk in the finest schools in their area. For many Chinese people, this doesn't come at a cheap price. The wealthier Chinese families have been known to spend big when it comes to education, but many people such as Peter Zeng are spending as much as 600,000 USD in order to buy properties in well known school districts so that their children can enroll in prominent schools.

I can see many similarities between this situation in Beijing and my own community as well as surrounding ones. In suburban Chicago, a good school district is very important to many families. Families that choose to settle in the suburbs of any city often seek a good school district, but in my own town, 55th street serves as the dividing line for high schools. Homes on the south side of the street are often priced $100,000's less than like homes on the north side of the street because the high school on the north side is more amicable. Since I was born, my town has transformed from a sleepy commuter suburb to a swanky and affluent village boasting one of the highest teardown rates in the country - developers have built homes so large that the town floods after every rainstorm because many people lack yards behind their 6,000 sqft, homes. It appears that a well awarded school district can mean a lot in the US, and it is particularly relevant in China too. 

On a further note, due to the rocketing prices in some school districts, many Chinese people are using apartments as investment opportunities and they rely on appreciation of their property almost too greatly. Many Chinese people are investing in apartments, borrowing against them, then "flipping" them in the short run. With property rates going up 3x in 5 years, little money required in downpayment, and interest rates at 4.9% apr, Chinese people state "it's almost like free money."

Thailand Aims to Boost Foreign Investment

Thailand Aims to Boost Foreign Investment

The article was published by the Epoch times, and written by Emel Akan. The main theme of this article is how Thailand is becoming a large player in the industry business. More specifically Thailand is largest automotive manufacturer in Southeast Asia, and is increasing growth in industries such as aviation and aerospace. Overall these increases in industry are bringing awareness to Thailand causing countries to seek foreign investment with them.

Economist viewing Thailand see a very profitable investment due to low tax rates, cheap labor, and geographical advantage. However due to political instability in the past economist viewing Thailand see the potential risks involved. The article then discusses the views from Thailand economist and political figures. Their opinions differentiate due to their belief that the “edgy” political system has calmed down in the past year. They feel the their government is focused heavily on restoring investor confidence in the two sector of automotive and aviation.

The takeaways from the article are clear that Thailand is boosting production to try and be leaders in automotive and aviation production in Asia. The reason it is achievable is because investment incentives are large due highly skilled work force, and Thailand’s entry into ASEAN. From an international business standpoint the creation of ASEAN allows 10 countries to form a single market and production base, allowing the free flow of capital, goods, services, investment, and skilled labor across the region. Why Thailand sticks out is there highly skilled labor compared to other countries involved. From a foreign investors view a highly skilled workforce is necessary when contemplating opening a factory in technological sector such as aviation.

 http://www.theepochtimes.com/n3/1898341-thailand-aims-to-boost-foreign-investment/ 

“China is experiencing its slowest growth in 25 years, but the government is still holding fire on its giant stimulus bazooka”

“China is experiencing its slowest growth in 25 years, but the government is still holding fire on its giant stimulus bazooka”

In a press conference over the weekend, Zhou Xiaochuan, governor of the People’s Bank of China, says that China will adopt a relatively prudent monetary policy, as long are there are no major international or domestic financial crises. Zhou expects that China will reach its economic growth target without a distribution of any stimulus. These words align with what has become the “new normal” for China, as economic growth slows in the country. This should spark the interest of China’s worldwide competitors, as an opportunity to advance to new markets may be possible with the slowdown of China. Experts say, however, that the slowdown is needed so the China can move the economy from manufacturing reliant to consumer spending reliant. Only time will tell but it will be interesting to see what China’s next moves are, and how other economies around the world will respond.

http://money.cnn.com/2016/03/12/news/economy/china-central-bank-governor-monetary-policy/index.html?iid=SF_LN

Monetary policy and the markets: What if the helicopters took off?

" INTEREST rates are negative in much of Europe and Japan, and it may be a while before the Federal Reserve follows up December's quarter-point increase in rates. So that doesn't leave the authorities with a lot of room, in terms of altering the level of rates, to ease policy if another downturn hits." This article is interesting to read as it talks about the negative interest rates in countries like Japan and part of Europe. It talks about the effects of it on the Us economy and what the countries next move should be. The article proposes a policy "Helicopter Money" which is defined as money that the fed can create through Monetary policies such as increasing government spending on infrastructure or by direct transfers to consumers in order to increase inflation which is less than the expected rate. Thus an increase in GDP through the hellicopter money can help increase inflation stimulated by an increase in Demand and Gdp.

Article Link: http://www.economist.com/blogs/buttonwood/2016/03/monetary-policy-and-markets

How Much More Can The Labor Force Grow?

This last month of February showed solid job growth and the unemployment rate unchanged.  According to the labor department’s survey of households, the American workforce grew by 555,000 people. The most it has rose in 16 years.  With the baby boomer recession coming to an end, it is looking like the labor force is pointed back in the right direction and people are looking, and securing a job are rising. But with more people getting jobs has also caused problems with wages.  Wages are still considered low and are not rising fast.  The fed have to make a decision on whether or not raise interest rates. If they believe it will stay solid then it makes sense to raise them quickly.  

Fed’s Plans to Raise Interest Rates Are Delayed, Not Derailed

     In this New York Times article, author Binyamin Applebaum discusses the possibility of the gradual growth of the Federal Reserve's interest rate. The Fed's interest rate is important because it is the deciding factor of the rate at which banks can borrow money from the Fed. When the rates are higher, this means that there is concern over inflation and the board and the chairwoman, Janet Yellen, would prefer banks to borrow from each other and lend from their reserves. While, on the other hand, when the rates are lower, this means that there is less concern over inflation in the market and the fed isn't as concerned about printing more money for smaller banks when they need to fulfill their reserve requirements. This past year, the Fed has raised the interest rate due to the high economic growth and tight labor markets, they wanted to make sure that the economy did not grow excessively.
     It is interesting now, however, that since the market did not do as well as originally forecasted, there has been some concern about whether the fed will stick with their original plan to continue to raise the rates. The article notes that the plans have "been delayed, not derailed." Furthermore,  Applebaum takes into consideration some of the reasons for the Fed maintaining their decision to raise the rates. Some officials are concerned about a rise in the inflation rate, a rate that is supposed to hover around 2% ideally. It is noted that "Fed officials predicted in December that they would raise the benchmark rate by about one percentage point over the course of 2016, most likely in four quarter-point increments." Additionally, the article mentions that there is very slow wage growth occurring, and as a result, "some Fed officials see as evidence that employers are still finding an abundance of candidates for available jobs," which would suggest that the Fed should continue on with their official goals.

Article: http://www.nytimes.com/2016/03/14/business/economy/feds-plans-to-raise-interest-rates-are-delayed-not-derailed.html?ref=business&_r=0

Why flying is still so expensive

Although price of oil saw a steep decline recently, it had little impact on the plane ticket price in United States. It might come down to the fact that there is not much competition left in the US airline industry. Over the last few decades, the industry witnessed a few mergers between different airlines (eg. Delta and Northwest, United and Continental, etc.) reducing the likelihood of airlines to undercut one another on price. There is also an overlap in ownership of airlines which, according to Jose Azer, a senior associate at the consultancy Charles River Associates, causes tickets to be about 10 percent higher than they otherwise would be. The Department of Justice is on investigation of whether there is a collusion behind pricing. The article states that federal prosecutors are more likely to find noncompetitive industry as the contributing factor rather than coordination between airlines. 

http://www.businessinsider.com/heres-why-flying-is-still-so-expensive-2016-3

How robots will kill the 'gig economy'

In the article "How robots will kill the 'gig economy'", it talked about the innovation that will take place in the future. The article talked about how many jobs in the near future will become automated, such as Uber drivers, machine operators, and certain delivery services. 

   One analyst made a prediction stating, "We forecast that 16 percent of jobs will disappear due to automation technologies between now and 2025, but that jobs equivalent to 9 percent of today's jobs will be created,". Many jobs will become automated, however the increase in jobs will come from the need to repair and install such systems. Uber believes that they will not replace their current drivers for a few decades but they are striving towards automated drivers. 

This article was very interesting because it almost takes the stance that this increase in technology will hurt the economy and cause higher unemployment rates. However according the Solow model, an increase in technology will cause growth in the economy and a higher standard of living. This is due to an increase in the total factor of productivity or A. This would intern cause a higher steady state. I believe the article is looking at the short run because the Solow model shows that standards of livings rise in the long run due to the increases in the total factor productivity. 

http://www.cnbc.com/2016/03/09/how-robots-will-kill-the-gig-economy.htm

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Winter of discontent for oil and gas producers

This article talks about oil and gas producers.  On one hand consumers are happy because they saved money this holiday season due to the warmer winter, but on the other hand the producers are suffering.  While the U.S. is still pumping gas at record levels, the price of gas is the cheapest it has been in 18 years.  This constant change in supply and demand is causing a glut of stored gas and the price of gas will continue to stay low until the gas is sold.  It is predicted that this year more gas will be used to generate electricity over coal because of the large quantity still being pumped out. 

  http://www.usatoday.com/story/money/columnist/2016/03/13/winter-discontent-oil-and-gas-producers/81641052/