Since the legalization of marijuana in some of the United States, Mexican drugs cartels have seen drops in their illegal business. Either recreational or medicinal marijuana is now legal in over half of the U.S. and American weed has now become a serious threat to illegally imported Mexican weed. NPR did an investigation in Mexico and talked to a marijuana farmer who said 1 kilogram of weed cost $60-90 two to three years ago but now that it is legal in more states, the price for a kilo has dropped to $30-40 and it is expected that the cartels will collapse beyond recovery if the price falls to $20/kilogram. The article also states that not only is legally grown U.S. marijuana gaining popularity because it is up front and legal, it is also of higher quality. Pot has been legal for recreational use in the U.S. for 11 months now and its effect on the illegal drugs market is already apparent.
It sure seems like the "experiments" in Colorado, Oregon, and Washington have been mostly successful and this news of its negative effect on Mexican cartels is certainly yet another good sign. It will also force illegal dealers to find income from somewhere else so they will have to get jobs and pay taxes on what they make rather than off-the-books deals where they keep profit. I wonder if these numbers of the declining illegal market will encourage more states to legalize as it looks like this will be more effective than the war on drugs ever was.
11 Months After Marijuana Legalization, Here's What's Happening to Cartels
Saturday, December 13, 2014
Lew: 'Great success story' that U.S. is producing so much oil
http://www.cnbc.com/id/102259863
Speaking at the "Opportunities for Tomorrow" conference treasury secretary Jack Lew said lower oil prices are "an unquestioned positive for the US economy." He stated that the lower oil prices have helped boost our economy which hasn't been doing so well recently. He compared the drop in oil prices to a cut in taxes. He also spoke about the spending battle that is going on in Washington. The congressional Republicans are wanting to come up with a solution that allows the government to stay open and keep spending money as an opportunity to repeal part of the Dodd-Frank banking reforms. He thinks that the president and congress is going to have to come up with a trade-off. He spoke on several other issues as well such as tax reform. He said "there's no question that fixing our broken tax code is in the public interest. Another topic he talked about was employment and wages. He basically talked about the issues that we need to fix in our economy in the short run.
http://www.nytimes.com/2014/12/14/world/after-barren-years-in-somalia-signs-of-growth-in-bananas.html?hp&action=click&pgtype=Homepage&module=photo-spot-region®ion=top-news&WT.nav=top-news&_r=0
Somalia's banana industry is growing again. The industry ran into trouble when the country broke out into civil war in in 1991. The civil war caused the Somali government to collapse. Bananas then became used as a source of currency in what became known as "the banana wars". The banana trade took a huge hit, but it has just started to recover. One of the reasons for the recent recovery is that Somalia is becoming a more stable country as it has recently elected a new president and adopted a new constitution. Also, farmers are increasing security so that they are able to conduct their business. The return of the banana industry is great news for the Somali economy. In 1990, the Somali banana trade was worth $96 million. The trades return is good for all of Somalia. There is also the fact that Somali bananas are said to be the best in the world.
The rise of the banana trade will hopefully be able to boost the Somali economy so that it can recover and maybe become even larger than it was before the country went into turmoil. Currently Dole and other large banana companies are hesitant in investing in Somalia because their are still concerns about stability, but Dole has invested their in the past. Perhaps Somalia will become more stable allowing for outside investment. But for now, the Somali banana trade is growing, which is a good sign for the future of Somalia.
Somalia's banana industry is growing again. The industry ran into trouble when the country broke out into civil war in in 1991. The civil war caused the Somali government to collapse. Bananas then became used as a source of currency in what became known as "the banana wars". The banana trade took a huge hit, but it has just started to recover. One of the reasons for the recent recovery is that Somalia is becoming a more stable country as it has recently elected a new president and adopted a new constitution. Also, farmers are increasing security so that they are able to conduct their business. The return of the banana industry is great news for the Somali economy. In 1990, the Somali banana trade was worth $96 million. The trades return is good for all of Somalia. There is also the fact that Somali bananas are said to be the best in the world.
The rise of the banana trade will hopefully be able to boost the Somali economy so that it can recover and maybe become even larger than it was before the country went into turmoil. Currently Dole and other large banana companies are hesitant in investing in Somalia because their are still concerns about stability, but Dole has invested their in the past. Perhaps Somalia will become more stable allowing for outside investment. But for now, the Somali banana trade is growing, which is a good sign for the future of Somalia.
The Most Expensive Picture Ever Sold
What is the most you would spend in order to buy a photograph? $100? Maybe $200? A Photographer named Peter Lik took a photo titled “Phantom” in the Antelope canyons of Arizona and made art history by selling this piece for $6.5 Million. The black and white photo shows a beam of light coming through a hole on the ceiling of the cannon resembling a ghost like figure. The private collector who purchased this piece has decided to remain anonymous. Art experts have different views on whether a photograph should ever be worth this much money but someone out there bought it so according to that private collector it was worth every penny.
http://money.cnn.com/2014/12/11/news/economy/peter-lik-phantom/index.html?iid=SF_E_River
http://money.cnn.com/2014/12/11/news/economy/peter-lik-phantom/index.html?iid=SF_E_River
"Russia's Decision to Drop Pipeline Puts EU in Tough Spot"
In the
article titled “Russia's Decision to Drop Pipeline Puts EU in Tough Spot”
discusses Russia’s plan to abandon the natural gas pipeline through Europe.
Putin said he was going to drop the pipeline under the Black Sea to Bulgaria in
favor of an alternative route. The problem is that a lot of Russia is heavily
dependent on Russia’s energy, and they are very vulnerable to a cutoff of
Russia’s energy. The EU’s antitrust authorities said Russia’s half owner of the
pipeline could not control its entire capacity. Russia challenged EU
competition and energy market rules at the World Trade organization in April,
the EU stopped talks with Russia about the project.
What do you guys believe will happen in the future? What will be the implication of this?
Obama's economy
During president Obamas presidency
many opponents of his policies have claimed Obama has hurt the economy even
more than when he took office. Supporters claimed it was not his fault because
he took office at the beginning of the worst economic down turn since the great
depression. This article just looked at the facts since Obama took office. The opponents have claimed unemployment has
shrunk due to many people leaving labor force, not people getting more jobs. While
some people have left the labor force, there have not been enough people
leaving the labor force to bring it down to its current level. This past year
was actually the best year for hiring since 1999. Opponent’s also claimed Obama’s
economic plans are too slow. While it has taken the economy a while to recover,
it is important to note Regan experienced two recessions during his presidency.
It’s important to just look at the facts when evaluating Obama’s presidency
because many politicians are misreporting economic facts and giving the public
a bad idea of how the economy is doing.
Station Owners Like Low Gas Prices as Much as You Do
http://www.dailyfinance.com/2014/12/12/gas-stations-owners-like-low-gas-prices/
Gas station owners buy gas on the wholesale market. When the wholesale price of gasoline falls quickly, the difference between the cost of wholesale gasoline (with taxes) and the price at the pump gets wider, boosting profits for stations. The steeper the drop, the better. Station profitability is at its highest since 2005.
While this does mean you could be paying even less for gasoline than you already are, gas stations do not make much money from selling gasoline, averaging only 3 cents a gallon.
When the wholesale price of gasoline soars, like it did in 2012, station owners can't increase the price at the pump as fast as their costs are going up or they risk losing customers to competitors. But when the wholesale price is going down, like it is now, there isn't the same pressure to lower the price.
Because prices are lower, consumers no longer search all over town for the lowest price and they completely fill up their tank when they stop to get gas. Then, they spend the left-over money on what's really profitable for station owners: the drinks and snacks inside.
The real question is how much longer the low gas prices will last.
Gas station owners buy gas on the wholesale market. When the wholesale price of gasoline falls quickly, the difference between the cost of wholesale gasoline (with taxes) and the price at the pump gets wider, boosting profits for stations. The steeper the drop, the better. Station profitability is at its highest since 2005.
While this does mean you could be paying even less for gasoline than you already are, gas stations do not make much money from selling gasoline, averaging only 3 cents a gallon.
When the wholesale price of gasoline soars, like it did in 2012, station owners can't increase the price at the pump as fast as their costs are going up or they risk losing customers to competitors. But when the wholesale price is going down, like it is now, there isn't the same pressure to lower the price.
Because prices are lower, consumers no longer search all over town for the lowest price and they completely fill up their tank when they stop to get gas. Then, they spend the left-over money on what's really profitable for station owners: the drinks and snacks inside.
The real question is how much longer the low gas prices will last.
Fannie Mae, Freddie Mac detail plans for 3% down-payment mortgages
http://www.latimes.com/business/la-fi-fannie-mae-freddie-mac-mortgage-downpayment-20141208-story.html
This Monday, Fannie Mae and Freddie Mac once again announced plans to back mortgages with down payments as low as 3%, in a move containing "safeguards to protect against abuses that led to the subprime housing market crash." The finance giants were seized by the government in 2008 due to their near-bankruptcy because of the bad mortgages they backed. 187.5 billion dollars were pumped into the companies to keep them from going under. They claim that as the housing market has rebounded, the companies have returned to profitability. FHFA Director Melvin Watt announced the new low-down payment option in October, causing a stir of criticism from critics who believe the companies are too risky. Watt, however, says the 3% down payment programs come with "strong underwriting standards that provide a responsible approach to improving access to credit while ensuring safe and sound lending."
This Monday, Fannie Mae and Freddie Mac once again announced plans to back mortgages with down payments as low as 3%, in a move containing "safeguards to protect against abuses that led to the subprime housing market crash." The finance giants were seized by the government in 2008 due to their near-bankruptcy because of the bad mortgages they backed. 187.5 billion dollars were pumped into the companies to keep them from going under. They claim that as the housing market has rebounded, the companies have returned to profitability. FHFA Director Melvin Watt announced the new low-down payment option in October, causing a stir of criticism from critics who believe the companies are too risky. Watt, however, says the 3% down payment programs come with "strong underwriting standards that provide a responsible approach to improving access to credit while ensuring safe and sound lending."
The real silver lining of falling oil prices
It is no surprise that new
technology of hydraulic fracturing and horizontal drilling has increased oil and
natural gas production. This technology has shocked the market resulting in a
40% price decrease. At the end of this week, oil has dropped to an average of
$57 a barrel while the national average of gasoline has dropped to $2.60 per
gallon. Despite major controversy, the decrease in prices is bettering the U.S.
economy through many facets. Over the
last five years, the economy has consistently been at a 2% growth rate per year
while this year we are at 3%.
The
international Energy Agency’s 2015 forecast shows a reduction in demand growth
of 900,000 barrels a day to the previously projection of 1.1 million barrels a
day globally. Moreover, the U.S. production predicts to grow to 685,000 barrels
a day next year. What does all this mean for the future? Well, since 2011, the
U.S. dollar has appreciated by over 20% meanwhile gold and oil has fallen 40%
in the past 6 months. The dollar is the world’s reserve currency therefore commodities
are priced in dollars; the dollar causes lower commodity prices. This occurred
in the 1980’s and 1990’s but when the dollar collapsed in the 2000’s, gold and
oil skyrocketed. Today, commodity prices are falling while the purchasing power
of the dollar is increasing. With inflation being low, this means the money in
your pocket can purchase a lot more in the open market.
A problem
being talked about today is due to the Fed adopting a 2% inflation target. Many
believe this is a problem because it will double prices as generations pass. Paul
Volcker, the greatest American central banker argued the adoption by the Fed because
our job today is to maintain the dollar’s stability. The ultimate goal is to keep oil prices down
and keep the dollar where it’s at today, which will help grow the economy in a
positive direction.
Do you think the Fed is conducting the correct policy or is
Volcker right in terms of creating inflation?
Friday, December 12, 2014
China's factory output growth declines
Industrial production rose by 7.2 percent over a year earlier. The Chinese officials decide to commit "new normal" of slower growth based on Chinese consumption. Their economic growth is 7.3%. The import decreased due to lack of domestic demand.
The officials say that they can solve this problem. but they cut interest rate unexpectedly in November 22. As a result, economic growth may fall to 7.1 or even 7 because of that. Investment slows in 11 months as rate of 15.9.
"Officials seem willing to allow investment to cool further, as long as employment and consumer spending remain strong,"- an analyst said.
Analysts told the president that it will face downward pressure and increase difficulty for the business. They want the government to reduce excess productivity and wrestle with heavy debt made by state companies and local government.
As an economist's perspective, I don't think decrease interest rate is a great idea, because of inflation rate that goes with it. Of course it boosts investment demand, but also increase debt too, that results in crowding out. With the situation of decreasing in domestic consumption, this will result in more excess production. The problem hasn't been solved. Instead, they should make Chinese product more appeal to other countries, so that export will increase more.
Source:
http://finance.yahoo.com/news/chinas-factory-output-growth-declines-092450160.html
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