Money Is Not Wealth -- But It Helps Create Wealth

http://www.forbes.com/sites/steveforbes/2014/09/30/money-is-not-wealth-but-it-helps-create-wealth/

This article is about how our ideas of money are erroneous, especially the ones that policy makers have. Money, in this article, is presented as a symbol of the economy, but not the economy itself, production of goods and services is. Kind of like what we learned in class already about money.

Midway through the article some different economic theories are presented, which I think is the most interesting part of the article, because we usually just learn one way of thinking of the economy, but there are many ways to approach the economy. The article closes with the idea that the government cannot create wealth in economy, even though it controls monetary policy. The real creators of wealth in an economy are companies.

Scotland should avoid Quebec’s fate

Link: http://money.cnn.com/2014/09/19/news/economy/scotland-vote-quebec/index.html?iid=SF_E_River

After Scotland’s vote against independence on September 18^th, many have been watching to see what will happen to the country’s economy. This article says that Scotland should be able to avoid the same fate that Quebec met after both of their referendums.

When Quebec voted against independence in both 1980 and 1995, their economic growth was much slower than the rest of the country, especially after the 1995 vote. This was partially due to the fact that the margin between votes was extremely small in the second referendum with only a 1.2% difference between votes. This caused money to flow out of the province, leading to uneasiness in investors.

In Scotland’s case, over 55% of voters voted against independence, a larger margin than expected. Analysts also say that the chances of another Scottish referendum are small, a belief that was reinforced on Friday when Scotland’s nationalist leader, Alex Salmond, resigned. This should help to ease any uncertainties that investors have, helping to keep money from flowing out of the country and ultimately decreasing the impact that the referendum could have on the economy.

Although it’s unlikely that Scotland will face the same problems as Quebec, the author says that the country will still need quickly rebuild business confidence since many were worried about the impact the vote would have on trade and prices. Boosting business confidence will help to reduce any risks.

It’s good to know that Scotland will likely not face any issues similar to the ones faced by Quebec after the independence referendum. It will be interesting to see how the country handles rebuilding business confidence in coming months.

De La Rue Polymer Palava

http://www.economist.com/news/business-and-finance/21621226           

           In the article, the author explains why banknote printing has become less profitable in recent years. Although interest rates have been low coupled with quantitative easing, one would think that the demand for hard cash would be up, but that is not the case. De La Rue is a currency printer that produces over 150 national currencies. It ranges from printing currency for the island of Fiji to printing currency for the Bank of England. The new English banknotes will be made partially of plastic for the first time.

            Despite De La Rues success in acquiring new contracts, the company projects its profits to fall by $21 million this year to roughly $110 million. The reason for the decrease in profitability can be attributed to the banknote division. De La Rue has new competition in printing plastic money from companies such as Giesecke & Devrient from Germany and Oberthur from France. On top of that, Australian firms have been using polymer-plastic printing technology for the past decade. Reportedly, De La Rue secured its contract with the Bank of England to print new plastic currency because it offered a large discount, which in turn it will now have to offer to other contracts.

            However, De La Rue also provides other services such as printing passports that it can fall back on. Nowadays, most transactions take place without any hard currency so there have been talks from central banks to dispose of printing currency completely. Also, since the demand for money has decrease over time due to technology, the supply of real money needs to decrease as well in order for there to be less inflation.

'Quite some time' before rates should rise: Fed's Evans

http://www.cnbc.com/id/102040309#.

Chicago Federal Reserve President Charles Evans told CNBC that he believes it will be "quite some time" before it is appropriate to begin to raise interest rates.

Evans hinted that June could be the first rate increase, but continued to say that if it were his decision, he would wait longer due to how difficult it is for an economy to come out of near-zero rates.

Evans is confident that the economy is getting stronger but before raising rates, he wants to see inflation reach the targeted 2% that we discussed in class.  The targeted 2% would help boost jobs.

Evans also claims that the US, even through a higher funds rate policy, cannot engineer a way to increase the low interest rates around the world.

As we discussed in class, once people begin to expect a higher rate of inflation, interest rates will increase, money demand will decrease, and prices will increase in order to re-establish an equilibrium in the market.  I think it will be interesting to see when that expectation of a higher rate of inflation actually does occur.

Wage gap between the Rich and Poor

Source

The gap between the wages of executives and their average employees is constantly growing, and employees are starting to believe that the executives care more about getting richer rather than income equality. Based on the results from a survey conducted for 25,000 people, and across 25 countries, this is found to be true. On average, executives earn up to almost 296 times the amount their average employee make, based on the assumption that they are better awarded for their services can have more implications than thought. The most important one is if the average worker feels they are not being awarded enough, they are not going to be motivated to do a good job when they work. Employees begin to feel isolated, and there is distrust between them and their management, which could potentially lead to a protest. One of the solutions and possible preventions is to introduce a living wage, which is an hourly rate that is frequently updated, and it represents the average cost of living in an area. This would be the minimum companies pay their average employees. Results of companies that have implemented this has shown that there will be a better employee retention rate, engagement, satisfaction and productivity if the living wage is present.  

Most Asian Stocks Rise as Japan Rallies on U.S. Data, Yen

Stocks slid to lower levels last week due to concern over slowing Chinese economics growth and that the Federal Reserve may tighten monetary policy sooner than some were previously expecting. Asian investors are closely watching the market and are worried about the overall business conditions going forward. There is some uncertainty involved in the market. Japans market rose as the Yen weakened against the U.S. dollar.

The U.S. GDP grew at a rate of 4.6% in the second quarter which is causing uncertainty over when the Fed will begin to hike interest rates back up. Today, the markets are just correcting themselves from a little over reaction last week from the U.S. news, slower growth in China, and protest around Hong Kong's central business district.

The Federal Reserve's decisions not only impact the U.S. but markets all over the world listen to their meetings. This shows why the Fed must be so careful in what they disclose. Everyone is watching and it affects the whole globe.

Not there yet

Blackberry use to control the smartphone market in the early years, but then Apple and Samsung took over, and now Blackberry accounts for less than 1% of smartphone sales annually worldwide. To try and reestablish their foothold in the market and turn around their financial situation, they recently came out with their latest smartphone, the Blackberry Passport. Unlike other smartphones, the passport still has the standard QWERTY keyboard, while also incorporating the typical smartphone touchscreen. To make themselves a standout, Blackberry also created a new technology, Blend, which will now allow users to use any operating system to view email, messages and anything else. They have also started to take a step in the direction of creating and selling software to larger buyers, instead of individual customers, in case their sales in smartphones falls even more. 

I was honestly surprised to even see this article. I hadn't heard of a new Blackberry phone in years, and I remember seeing them all the time on TV years ago, but they really have been kicked out of the market place. I think it was a good idea to keep the traditional QWERTY keyboard, many people in older generations aren't the biggest fans of a full touchscreen, but the even better move was inclusion of the Blend technology. This will definitely set Blackberry apart from Apple, who is only compatible with Apple products. Trying to get back into the smartphone market doesn't seem that it would be very easy, similar to trying to get into the market of passenger air flight, one can't simply jump into it once it is pretty dominated by a few companies. But the better decision I think for Blackberry would be to move more towards producing software for larger companies. Unless they plan on providing some incentive for consumers to want their product more than those already available, such as really low prices or better plans, I don't really see Blackberry reestablishing themselves as a prominent seller of smartphones. 

Link: http://www.economist.com/news/business-and-finance/21620699-blackberrys-promised-comeback-has-not-yet-materialised-not-there-yet

1 in 5 laid-off workers can't find a job

          This article is about a survey conducted by Rutgers University which talks about how more than twenty percent of those people who were laid off in the last five years are unable to find a job. Moreover, amongst those who did, forty-four percent said the new job came with a pay cut and the remainder reported that the new job had a  drop in status.
          The survey furthermore showed that the workers were highly pessimistic towards employment opportunities both currently as well as in the future. Thirty-six percent said that the economy will never recover from the recession.
         The survey was carried out with 1,153 workers, about a quarter of whom were unemployed for more than six months.The survey came up with a demographic for the typical  long term unemployed individual, which is : "a white male with a high school degree from the South who makes less than $30,000 a year."



 Title Link - http://money.cnn.com/2014/09/22/news/economy/long-term-umemployment-survey/index.html?iid=SF_E_River

Fed hints that interest rates will rise in the near future.

http://www.cnbc.com/id/102032001

Richard Fisher of the Federal Reserve, says that rates will likely rise in spring of 2015, he also added that it may hit even sooner.

This is a case identical to what we discussed in class, about how without even changing the interest rate yet, simply warning that it will rise in the future will cause immediate responses and actions. We should see people's expected inflation to rise, which according to the Fisher effect will cause interest rate to rise. Demand for real money will decrease, as its value will decrease in the future. Lastly, we will see prices increase to account for the decreased demand of money.

Eight Major Fashion Brands back Minimum Wage Hikes in Cambodia

Source: Bloomberg Businessweek

http://www.businessweek.com/articles/2014-09-22/h-and-m-other-fashion-brands-back-minimum-wage-hike-in-cambodia

A number of fashion brands including Swedish H&M have backed a minimum wage hike for workers in Cambodia.  Garment workers in the Asian country have been protesting for a hike in minimum wage for a significant amount of time. In January of last year, a police crackdown left several dead in said protests.  Recently, the protests have not been in the form of strikes but as protests during factory lunch breaks. The strategy seemed to work as eight major fashion brands submitted a letter to the Cambodian deputy prime minister backing a minimum wage hike. The letter addressed fair living wage, changing purchase practices and prices to account for this hike. The letter did not address specific figures but is a big step in creating fair wages for outsourced jobs.