Why the Fed won't hike interest rates

There are reasons to believe that the Fed's interest rate hike will not happen until 2017. First, the employment report for August was weaker than many anticipated. Wage growth was at its slowest increase since March and the average work weak was the lowest it has been since February of 2014. Overall, job growth did not improve as expected. 

Another factor influencing the Fed's decision is this upcoming election which can cause destabilization across markets. While the market is operating at prices assuming a Clinton victory, there is the potential for an election related disruption. In recent days, Trump has been leading Clinton among likely voters. The Fed might wait before making a decision until after the election. 

At the end of the article, the author criticizes the Fed for their actions. He believes that raising the interest is not only a difficult decision, but also an unpopular one. However, their unwillingness to make a decision is hurting our long term economic growth prospects. 

http://www.cnbc.com/2016/09/08/3-reasons-a-fed-rate-hike-is-off-the-table-till-2017-commentary.html 

How this country has gone 25 years without a recession

The last time Australia experienced a recession, the Soviet Union was still intact.
The country's economy has barely struggled, riding out the global financial crisis and other nasty shocks. "Australia's exceptional track record of 25 years of GDP growth without a recession has paralleled China's spectacular economic ascent," said Rajiv Biswas, chief Asia-Pacific economist at IHS Markit. But Australia can't rely on digging things out of the ground and shipping them off anymore. China's economy is now growing at its slowest pace in a quarter century, and commodity prices have collapsed from their peaks of a few years ago. Investment in Australia's huge mining sector has slumped, but other areas like housing construction and consumer spending have helped pick up some of the slack. The country's central bank has played its part, slashing interest rates to a record low. The plunge in the Australian dollar has helped make exports more competitive and attract tourists from overseas. The government has also lent a hand: In the latest quarter, growth was lifted by a sharp increase in public investment. Despite some warnings about rising debt levels, Australia's economy isn't generally expected to slip up anytime soon. "A recession in the next few years seems unlikely" unless there's a crash in China's economy or Australia's housing market, said Paul Dales, chief Australia and New Zealand economist at Capital Economics.


-- Matt Egan contributed reporting.
September 07 HONG KONG


http://money.cnn.com/2016/09/07/news/economy/australia-25-years-no-recession/index.html?category=economy

Apple tax case: Why is Ireland refusing billions?

There has been a big commotion as to why the Irish government is refusing take money owed to them through taxes from Apple. The European Commission states that the company owes the Irish Republic around 11 billion pounds (£11bn) or 13 billion Euros (€13bn). According to the article, this €13 billion could be beneficial for the country and is equivalent to all of Ireland's healthcare budget, 66% of its social welfare bill, 15 million iPhones, 27% of Apple's 2015 profit.

The article discusses possible reasons such as the country’s reluctance to compromise their reputation as an investment destination. Foreign direct investment from large multinational companies have played a major role in Ireland’s economy for years. The article states that these big shot companies, such as Apple, employ thousands of people in the country and the people seem to be happy with them.

The majority of the population disagrees with the notion that Apple owes the country the €13bn euros. The RTE poll found that 68% percent of respondents are in favor of appealing the European commission finding.  Also, another major reason discussed was the minority government that Ireland has. The main party has 50 of the 158 seats and their major opposition supports their policies on the national budget, so they also back an appeal. This appeal process could take years and years, and the £13bn euros has been put in a escrow account while the appeal process goes on.

http://www.bbc.com/news/world-europe-37299430 

Grocery Prices Falling

If you have gone grocery shopping lately then you may have noticed that food prices have fallen drastically.  If you are a consumer this is music to your ears, but to big super market chains like Kroger, Ralphs and Harris Teeter, it is not news that you want to hear.  The main reason for all of this is food deflation, mainly because of weak global demand and excess food supply because of technological advances that are producing food so fast the supply is outweighing the demand.  The price of some of the main commodities like cocoa and corn have fallen by more than 10%, wheat by around 20% and cattle has decreased the most at around 30%.  Overall for our consumers this decrease in food prices is a good thing but in the end will leave to manufactures stocks to fall and a lot of food will be wasted due to the excess supply.

http://money.cnn.com/2016/09/09/investing/kroger-food-prices-deflation-commodity-supermarkets/index.html?iid=SF_LN

Income and Spending Rises

Consumer spending has had some gains throughout the month of June due to Americans slow income gains. With the second quarters numbers in real personal consumption has climbed all three months of the second quarter and this is huge because this is said to be the single largest determinant of gross domestic product expansion in our consumer driven economy. Consumption expenditures increased 4.2 percent during this quarter seeing the largest gain in a year. This is nice news to hear since the economy has had stubborn improvement since the Great Recession. Chad Moutray, chief economist at the National Association of Manufacturers, wrote in a research note last week."This release reflects a rebound in consumer spending, but there were significant drags on activity from fixed investment and inventories." Many analysts the only promising part of the second quarters report was an increase in consumer spending.  Inventory and investment weakness in the second quarter are largely expected to abate as the year wears on, so the increasing number of Americans are going to start buying even more in the second half of the year."Reassuringly, consumers are still spending, and outlays are well supported by income growth," Gregory Daco, head of U.S. macroeconomics at Oxford Economics. 

In conclusion, real personal consumption expenditure rising is a good thing for the economy as a whole. If this continues to rise it can really cause a positive impact on our nations GDP. This provides some hope in fixing our weak economy. 

http://www.usnews.com/news/articles/2016-08-02/spending-income-gains-offer-hope-amid-weak-economy

Fed Sees Modest Economic Growth Amid 'slight' inflation

This article talks about how the United States economy grew at a modest pace during the months of July and August. Nevertheless, a strong labor market failed to put upward pressure on wages and prices (inflation). The job market 'remained tight' in most districts and little consumer spending had changed. The interest rates has remained steady this year following the sharp increase that took place in December.
Many reports stated that upward pressure on wages remained fairly modest and expect the average price to rise (inflation). Government report stated that the unemployment rate remains unchanged at 4.9%, with employers adding a net 151,000 jobs. Reports from the supply management show a declaration in business activity following the previous month.
'Employment expanded at a moderate pace', along with Boston having a large number of job openings. The main issue stated in the article regarding employment is the fact that companies in Boston had difficulty filling job vacancies for high skilled positions. This, in the long term could lead to structural unemployment where there is a mismatch between the skills the employers want and the skills workers have.
Therefore, in my opinion, there are positive signs of the long term economy growing, a strong labor market that prohibits increased wages and higher prices of goods and services. There is definitely economic uncertainty surrounding the November presidential election, but currently, unemployment is still at 4.9% and prices will increase modestly. But overall, employers must find the best match (employee) to fill in the job position, with the necessary skills. This would increase the rate of employment and overall output in the long run, which in turn increases per capita GDP.

http://www.bloomberg.com/news/articles/2016-09-07/fed-sees-modest-economic-growth-amid-slight-inflation

Fed Officials Divided as September Policy Meeting Nears

With the meeting that the Fed is going to have on September 21 getting closer, everyone is starting to talk about what might happen and which could be the results of this. One of the most important topics from this meeting is if the Fed is going to raise the interest rates. About 35 percent of the people think that the Fed is going to increase the rate in the meeting, but most of the people this change is not going to happen until December of this year. Some of the reasons for this is that for example some people say that for the rate to be increased the inflation has to be greater than it is now, according to the article the Fed's target is about 2 percent, which right now is very far from it since the last release form the US government in August showed a 0.8 percent. Also some comments from people involved with the Fed and specialist show that the possibility for the rates to increase in this meeting is higher than before and most of them say that it is going to change this year, but most of them say this change is going to happen on December. One quote from the article that shows this is "The Fed can afford to be patient and deliberate in its actions," said by Dallas Fed President Robert Kaplan. Which explains why the change is most likely to happen in December that in the meeting that they are having this month.

There have been a lot of opinion on whether the Fed should increase or not the interest rate, but the truth is that after September 21 when the meeting is taking place, there would be people supporting the decision and people criticizing it. The most possible outcome from this meeting is that they re not going to increase the rate taking into accounts the comment from the Fed, because they have been saying that they can wait and that they don't want to take decisions that will be very hard to fix later on, so they ask people for patience.

Oil prices surge as US burns through crude supply at record rate

Oil Prices have risen this past week because of an over supply of oil in the United States, this over supply is at the highest rate this year. Many people are saying this over supply has come from tropical storms and hurricane Herman. The industry used 14.5 million barrels in storage, mostly from the East coast, and the Gulf shores.

This also effected US imports of oil, as there was a sharp decline of 1.8 million barrels a day. With imports down, and oil drilling in the United States shutting down in the Gulf area we saw gasoline stocks drop by 4.2 billion barrels.

Andrew Lipow is the president of Lipow Oil Associates, and he is certain that in the next few weeks the oil inventory will recover to an extent, but the imports need to catch up. He also stated these storms are effecting the shipping of oil, but he does not believe that will affect OPEC from increasing their oil production.

Vladmir Putin and Saudi Deputy Crown Prince Mohammed bin Salman met durin the G-20 meeting, and issued a statement of cooperation, which contributed to the increasing oil prices.

The oil industry has a large effect on our economy as we import a lot of oil, but we also produce a lot of oil. No one thinks about storms affecting the distribution of oil, or affecting the production of oil in the United States, but these storms have had an affect on our oil industry, with the rising prices, and the decline in oil imports. From reading this article I do not believe this will have a large impact on our oil industry, but it does affect the production and distribution of oil for a short period of time.

http://www.msn.com/en-us/money/markets/oil-prices-surge-as-us-burns-through-crude-supply-at-record-rate/ar-AAiF08v

Sir Philip Green denies he tried to 'blackmail' Pensions Regulator

Philip Green is the former owner of BHS (originally British Home Stores), he is described as the “Britain’s Donald Trump” on the cover of the renowned US magazine regarding the latest issue of a lengthy feature about the billionaire tycoon.

The article in the magazine's headlined “How Sir Philip Green made an outrageous fortune and outraged an entire nation”. It describes the collapse of BHS has caused in the UK and examines Green’s background, quoting supporters of the tycoon in the US but also critics such as Labor MP Frank Field.

The coverage of the scandal in the US is significant because Green has expanded Topshop into large American cities and the US private equity firm Leonard Green owns 25% of the chain.

BHS collapsed into administration in April, with the last of its 164 shops closing last month. The demise of the retailer led to 11,000 job losses and left a £571 million pension deficit.

Green sold the department store chain for £1 to serial bankrupt Dominic Chappell 13 months before it collapsed. The tycoon, his family, and other BHS investors collected more than £580 million from the company during the 15 years he ran it.

The magazine likens Green to Trump because of his “flowing white curly locks, perma-tan, and unshakable brashness”. William D Cohan, the award-winning journalist who wrote the article, claims that Green called him while he was writing it to say: “You’re on trial. Let’s see how well behaved you are.”

However, Philip Green claimed that was "wholly untrue" that he had tried to pressurize the regulator.
he also attacked statements made by MP Frank Field, calling them "untrue, totally inaccurate and unhelpful". Sir Philip said: "I would like to apologize sincerely to all the BHS people involved in this sorry affair."


Sir Philip Green denies he tried to 'blackmail' Pensions Regulator

Transportation Industry Predicting Economic Decline

The transportation industry has historically been a strong indicator of an economic downturn. It has been proven that in an economic decline, one of the first industries to show this decline is transportation. More specifically speaking, the the plane, boat, and train industries are usually a prelude to economic growth/ decline as whole. The graph below shows the freight transportation index (FTI). It is interesting to note that the decline in the FTI at the beginning of 2008, is similar to the decline in 2016. A very large portion of freight usage comes from the transportation of raw materials to manufacturers. If manufacturers are not expecting growth, or even a decline, they are not going purchase and transport more raw and intermediate goods. This is really a self fulfilling prophecy. If the manufacturing companies are predicting an economic decline then they will not purchase, transport, and produce more goods which will in itself negatively effect the economy.

http://www.cnbc.com/2016/09/08/transportation-planes-trains-and-trucks-point-to-economic-downturn.html