AI investment forecast to approach $200 billion globally by 2025

     AI has the chance to increase global labor productivity by 1% point a year. For this to happen, major upfront investments are needed to happen through digital, physical, and human capital. These investments have the chance to reach 200 billion by 2025. In addition, it is predicted that AI investment could peak of up to 4% of GDP in the U.S. and up to 2.5% in other major AI leading countries. Even though AI investment is hard to predict, business surveys predict that through the second half of the current decade that AI will become even more impactful on investment. Even though AI investment is said to reach 100 billion in the U.S. and 200 billion globally the impact of AI investment right now is far from that. It currently accounts for little shares of GDP. The reasoning behind this is that AI investment currently is only focused on model development, but the reason such predictions of big increases in AI investment is because of the fact that AI is going to push for substantially larger hardware and software in the future. In a survey in 2021, it was reported that, only 4% of businesses use AI, and that a very few expect that AI will affect their labor needs in the next one to three years. However, a significant majority of companies do expect that they will adopt AI in the next 3-10 years. Overall, with all of this being true it can be concluded and predicted that AI adoption will have a major impact on economies, specifically the U.S., between 2025-2030. This makes the crazy statement that AI investment is forecasted to each 200 billion globally not as crazy.

August 1, 2023. Goldman Sachs .AI investment forecast to approach $200 billion globally by 2025. AI investment forecast to approach $200 billion globally by 2025 (goldmansachs.com).

U.A.W Strike Comes to an agreement but may cause other issues

 During the past 6 weeks, the U.A.W. has dealt with workers on strike, demanding a better pay agreement. The U.A.W.'s president, Shawn Fain, has proposed a contract to end the Ford Motor strike and invited other labor unions to align their contract expirations with UAW's. The recent strike was the first to target all three Detroit automakers and aimed to secure substantial wage and benefit increases while reversing concessions made during the companies' downturn. The U.A.W.'s agreement may have some far-reaching implications beyond the auto industry, potentially making other labor unions consider going on strike as a reasonable strategy. With the recent agreement, the U.A.W. gains more influence over decision-making processes and the reopening of closed plants, setting a standard for employee involvement in management decisions. It will be interesting to see how other labor unions will potentially change due to these new U.A.W agreements and how that will play a role in our economy within our given state. 

Zillow Plunges After Verdict on Real Estate Brokerage Commissions

 ZillowGroup and other real estate stocks took a hard hit today following a lawsuit filed against the National Association of Realtors. This lawsuit cost the NAR $1.8 billion USD after claims were made against how real estate agents are paid. Scrutiny is falling upon the commission-sharing system that dictates a 5-6% cut of a home's final sales price, to be split between the owner's agent and the buyer's representative. This lawsuit can potentially reshape the way real estate deals have been done for decades, with the federal government considering banning the commission-sharing system as a whole.

This is big news as the real estate industry has been struggling recently due to mortgage rates nearing 8% and home sales reaching lows comparable to the 2008 Foreclosure Crisis. In addition to this, notable real estate group such as ZillowGroup, Redfin, Opendoor, and others are all suffering major stock price losses. This may be a potential success for regular-joe stock traders looking to buy while the market is cold and prices are cheap. In terms of the macro trends, this lawsuit will solely affect the United States as countries like Australia and the UK have a far less expensive commission system in place.  

https://finance.yahoo.com/news/zillow-plunges-verdict-real-estate-183108068.html

Economic Repercussions of the War in Israel

 The war between Israel and Gaza has been an extremely tragic event going on. The fighting we have seen is terrible, but this is not the only bad thing taking place. At the start of the fighting the first thing to be affected was oil prices, also the most short-run issue. Oil barrels have already increased about $5 a barrel and this increase in pricing is expected to continue. If prices continue to rise it is estimated that the increased oil prices could weigh down global growth by 0.15 percentage point. Oil importers such as Pakistan are already facing economic struggles. There has also been a halt to gas production which has caused gas prices to go up. European gas prices are being affected the most at the moment, and if their gas supply continues to get cut thinner than prices will have to keep rising. Domestically, long-term interest rates have increased which suggests concerns that the higher energy prices will result in inflation, tightening monetary policy. 

Israel's economy has been impacted heavily due to the war. Government spending has increased due to the increased military efforts and paying for securities for their citizens, the labor force has dropped, tourism has dropped, and investment has dropped. Additionally, the shekel has dropped 5% since early October. This caused the bank of Israel to try to stabilize the market, where they chose to sell up to 30 billion USD in foreign exchange reserves. Clearly, this war has had a negative affect on Israel as a country but economically they are really feeling the affects as well. They are losing a substantial amount of money and their economy is getting hammered from the reduction in workers in the workforce which is causing less spending. Hopefully this war ends soon because war and death are just bad and we do not want to see anyone suffering. However, this war also needs to end so that all of this economic in balance can become a thing of the past and markets can get back to a more stable place. 

Polish national bank lowers interest rates as inflation slows

Poland's central bank, the National Bank of Poland, has lowered its key interest rate to 5.75%, citing a decrease in inflation despite it remaining high at 8.2% last month. This move, the second rate cut since September, has raised concerns about political motivations. Analysts had anticipated the cut after a drop in annual inflation from 10.1% in August. The decision contrasts with other central banks worldwide, which are either increasing borrowing costs or maintaining high rates to address inflation resulting from the global economic rebound and increased costs due to events like Russia's invasion of Ukraine.

Press, Associated. “Polish National Bank Slashes Interest Rates as Inflation Slows.” Fox News, FOX News Network, 4 Oct. 2023, www.foxnews.com/world/polish-national-bank-slashes-interest-rates-inflation-slows.

Occupied West Bank paralysed as economy stalls

 The economic crisis in the occupied West Bank has been exacerbated by Israeli-ordered shutdowns, intensified military actions, and settler attacks. These developments have collectively created a grim economic landscape for Palestinians residing in the region. These challenges have reached every corner of daily life, resulting in many hardships. 

  

The closure of major checkpoints has severely hampered mobility and the flow of goods, disrupting the transportation of produce, a key element of the local economy. Sales have dwindled significantly, with many businesses experiencing a 50% reduction in revenue. The disruptions in transportation have not only made it more expensive to conduct business, due to rising fuel costs and longer delivery times, but have also left many shelves empty, causing supplies of essential items like vegetable oil, rice, flour, and sugar to run low. 

  

The West Bank's economic challenges are not new, as it has endured a 56-year-long occupation and persistent restrictions on movement. The United Nations has estimated that the Israeli occupation cost the Palestinian economy a staggering $47.7 billion in fiscal revenues between 2000 and 2017. These longstanding issues were already impacting the economy before the recent events, and they have been further intensified by the current crisis. 

  

In addition, the recent turmoil has led to joblessness for the majority of the 200,000 Palestinian laborers who work in Israel and illegal Israeli settlements in the West Bank. This has led to a significant drop in revenues, as the laborers are unable to contribute to the local economy as they did before. 

  

The Palestinian Authority is particularly concerned about the scarcity of basic items, further exacerbating the economic crisis. The situation is expected to have long-term negative effects on the Palestinian economy, with the repercussions expected to linger, including rising prices for essential goods. 

  

However, amidst these economic hardships, many Palestinians in the West Bank acknowledge that their situation, while dire, is relatively better than that of their counterparts in the besieged Gaza Strip. Despite the challenges they face, they still have access to food and water, and their children are safe and playing around them. This perspective underscores the resilience of the Palestinian people in the face of adversity, as they strive to cope with and overcome the economic challenges they confront in the occupied West Bank. 

Source: https://www.aljazeera.com/features/2023/10/29/there-is-zero-work-occupied-west-bank-paralysed-as-economy-stalls

Will the US economy find balance?

 ​​Ryan Duckworth

Professor Skosples 

Human Biology  

October 19th 2023

Will the US economy find balance?

The US economy currently stands on a thin rope, where the slightest push could tip it towards a recession or guide it towards a soft landing. Bloomberg Economics model shows a message- the risks of recession in 2024 are more pronounced than those of a stable economic path.

While the model, known for its accuracy, suggests a better chance of a 2024 recession, it's important to remember that The Fed typically confirms a recession months after it has begun. However, the model hints at the possibility of a downturn in late 2023. While this prediction might not appear severe at slightly better than a 50% chance, the interpretation depends on one's economic perspective. 

The signs of the past 18 months, including record-high inflation and a steady rise in interest rates, are bright spots. Consumers continue to spend demonstrating that a strong labor market and a delayed impact of higher interest rates due to the pre-pandemic cash reserves and fixed-rate mortgages provide some cushion.

In Conclusion, the US economy is totally up in the air of uncertainty. As we approach the pivotal months of 2023 and 2024, the US economy's journey unfolds, reminding us that the outcome remains uncertain. It's a thin rope, and we can only wait until the future.

Resource

https://www.businessinsider.com/us-economy-recession-prediction-model-2023-10

Israel’s Economy Convulsed by the War With Hamas

    Israel's economy is being "tested to the limits" as the war with the Hamas continues to wage on. Israel mobilized a record 350,000 reservists trying to push the offense on Gaza, which drained roughly 8% of their workforce. Additionally , more than 120,000 Israelis have had to leave their homes due to the war.

The limited workforce, combined with shutdowns of offices, has triggered a crash in activity in Israel spanning from agriculture to banking. This crash is being compared to the impact of Covid-19 pandemic and the lockdowns that brewed from that.

Further estimates from the impact of the war include:

- A staggering $2.5 billion is being lost by the government per Mizrahi-Tefahot, a top Israeli lender.

- Private consumption fell by nearly a third in the days after the war broke out.

- Nearly half of the 500 high tech companies surveyed last week reported a cancellation or delay of an investment agreement.

The war has proven to be a large test on Israel, as well as their foreign relations such as Qatar. The oil rich nation has spent decades as the Middle East's go between, and are constantly criticized by neighboring countries for housing Hamas leaders while maintaining connections to Israel.

The longer the war goes on, the more damage this will cause not only to the fighters but also economies as a whole. For Israel, these devastating losses will become much worse if the war starts to enter a stage 3, or become global.

Article link: https://www.bloomberg.com/news/newsletters/2023-10-30/israel-hamas-war-s-economic-shock-turkey-rates-egypt-pound-egp-black-market#xj4y7vzkg 

Chinese inflation and trade data point to weakness

     China's economy is facing challenges that has economists confused, an absence of inflation. While some economists think that low or no inflation is a positive thing, it can be quite the opposite. A little bit of inflation is typically viewed as healthy for the economy. Inflation encourages more flexibility in pricing and help maintain reasonable real interest rates.

    This lack of inflation can be attributed to a significant drop in food prices, including a 22% decrease in pork prices. While energy prices rose, it wasn't enough to offset the downward pull of food prices. When you exclude food and energy prices, core prices increased by a mere 0.8% year-on-year, which is significantly lower than what's considered ideal.

    The weak inflation is indicative of various economic variables, including slow consumer demand and overcapacity in industries. Consumers who have experienced a dip in home prices, have reacted by saving more and spending less, further slowing economic growth.

    The challenges are not confined to domestic markets. Exports have been dwindling, with only a couple of months in the past year showing growth. China's export decline is largely influenced by the global economic slowdown, trade tensions with the United States and Europe, and changes in supply chain investment patterns. Exports to key partners like Southeast Asia, the United States, and the European Union have witnessed notable drops.

    On the import front, the situation is also not in a good spot, as China's imports have decreased for the eighth consecutive year. Imports from the United States and other major partners haven taken a hit, further underscoring the complex economic landscape China finds itself in.

    In Summary, China's economic challenges, including the absence of inflation, shrinking exports, and declining imports, underscore the multifaceted issues the country is grappling with. It will require strategic policies and global economic shifts to navigate these troubled waters effectively

Russia’s Central Bank Raises Rates to 15 Percent to Curb Inflation

     Russia's invasion of Ukraine has had plenty of effects on surrounding nations including itself. In the year and a half that Russia had spent at war, its economy has been dealing with plenty of issues, issues involving inflation, recessionary risks, declining economy, production issues, etc. In another pole to help stabilize the economy the Central Bank of Russia raised the interest rate by two percent landing it at 15% as of now. This was a policy enacted to reduce the rising inflation which as of now is at 7.5% with them vying to lower it to a modest 4% to 4.5%.

    Russia is also struggling with its production because of a surge in spending which the bank clarified that "it is increasingly exceeding the capabilities to expand the production of goods and the provision of services." This is mostly the case because Russia is now getting close to spending about 1/3 of its budget on defense spending which is translating to a lack in its production center leading to limited supply. Which translates to higher inflation and higher levels of borrowing.

    There are certain fears that the raising of interest rates could slow the country's growth, Mr. Nadorshin, the chief economist at the PF Capital consulting company in Moscow, adds "We are in the moment when growth is transforming into a recession." Though opposite of that there is relief in the people's eyes which they had believed this was all going to be a lot worse so spending and borrowing is continuing steadily. And because of this there has been predicted a low risk of the country falling into a recession and that if this keeps up Russia will return to a growth economy. Another positive for Russia is thanks to Western companies leaving and opening up opportunities for new Russian businesses to fill in the gaps.

    Russia seems to be on the path of stability as of now which could change in the coming months, but for now, Russia is moving toward a good spot as of reports.

Cited Source:

https://www.nytimes.com/2023/10/27/world/europe/russias-central-bank-interest-rates-inflation.html