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Category Archives: economics

Four Nations Are Winning the Global War for Talent

19 Wednesday Oct 2016

Posted by samuelmwatkins in development, economics, politics

≈ 2 Comments

statue-of-libertyWhile undoubtedly a victory for the US, UK, Canada, and Australia, the  brain drain from almost every other nation to rich, English speaking countries poses a problem for the world. While economic development models have shown the incentives for this trend for decades, they also show how it retards advancement in the developing world. How can countries like Malawi or Bangladesh be expected to pull themselves out of stagnant development traps when their best and brightest are leaving for more comfortable and (monetarily) more productive lives in the US? The recipients  of these skilled migrants have little incentive to restrict their access to immigration, which would amount to denying themselves a valuable economic resource, and the source countries cannot deny emigration without violating personal freedom and rights. The solution to this problem is as yet unclear, but for more global equality to emerge, the distribution of the most skilled and smart must be more even.

See the WSJ article here.

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A Trans-Atlantic Revolt Against Central Bankers

12 Wednesday Oct 2016

Posted by samuelmwatkins in economics, politics

≈ Leave a comment

trump-theresa-may

In recent months, prominent conservative politicians, including presidential candidate Donald Trump and Theresa May of the UK, have criticized central banks for their expansionary monetary policies. Their arguments center around how the current monetary environment of near-zero interest rates has favored asset-holding wealthy individuals, while leaving everyday savers with their savings in banks at the mercies of inflation and stagnant wealth. Without more than mentioning the ease of availability of return-laden and relatively safe assets to savers of only modest means (minimum entry into a Vanguard Target Retirement Fund is only $1000), it is clear these politicians are leveraging the aftereffects of the Great Recession to their political advantage. The most sophisticated macroeconomic models of today generally agree that without the Fed’s efforts to lower rates to zero, the contractions of the Great Recession would have been much worse. While the Federal Reserve’s actions to counteract the financial crisis are certainly not above criticism (allowing Bear Stearns to fail, and then bailing out Lehman Brothers, for example), they certainly played a vital role in preventing a much more severe economic collapse. Instead of condemning the Fed for (arguably) creating winners and losers within the economy, these aftereffects of the worst economic contraction since the Great Depression should instead remind us to be more grateful for the reasons we didn’t repeat the Great Depression, including the Federal Reserve.

View Judy Shelton’s article on this topic here.

Few Expect China to Punish North Korea For Latest Nuclear Test

14 Wednesday Sep 2016

Posted by carrollalysha in diplomacy, economics, international law, politics, war & peace

≈ Leave a comment

Last week, North Korea conducted its biggest nuclear test to date; however, the Chinese reaction has been practically non-existent. Their silence can be better understood in context of the incredibly complex situation between North Korea, South Korea, China, and the United States. South Korea has become incredibly fearful of the North Korean nuclear tests and has reached out to its ally, the United States, for protection. The United States recently agreed to deploy a missile defense system (THAAD) in S. Korea to protect it from N. Korean nuclear advances; however, China sees this missile defense program as a security threat to itself. On the other hand, China has a formal treaty with only one country: N. Korea. While they are eager to keep close western ties for economic reasons, they want to maintain a healthy relationship with N. Korea to balance the U.S.’s influence in S. Korea. China has agreed to join in the United Nations in pressuring N. Korea through economic sanctions. However, as evidenced by the recent nuclear tests, China has not been entirely honest about its trade dealings with N. Korea. Unfortunately, until China initiates a harder lockdown on sanctions against N.Korea, there is nothing the rest of the world can do to halt the progress of N. Korea’s nuclear system.

Complicated enough?

China’s real fear is that harsh economic sanctions will put so much pressure on N. Korea that current leadership will collapse. Although this is an appealing idea, the resulting chaos and vacuum of power could lead to a failed state. China, with its geographic proximity, will face the brunt of the N. Korean defeat.

However, Chinese officials fail to understand that the United States is also not looking to force the collapse of the N. Korean government. China forgets that S. Korea, on N. Korea’s southern border, will also have severe challenges in dealing with refugees and security issues. The United States, as a long-time S. Korean ally, will also become involved in the political, economic, and humanitarian crisis. The United States has no interest in involving itself in the fallout from another power vacuum.

Because the UN sanctions were crafted with the intent to weaken, not destroy, the N. Korean government, China needs to do a better job enforcing their part of the sanctions. Until they do, the possibility of a successful N. Korean nuclear attack grows by the day.
Full text of the article here: http://www.nytimes.com/2016/09/12/world/asia/north-korea-china-nuclear-sanctions-thaad-america.html

Iceland’s Prime Minister Among Leaders Leaked with Panama Papers

06 Wednesday Apr 2016

Posted by emmagleave in economics, international law, leadership, politics

≈ 3 Comments

Tags

Government Corruption

A recent article by the New York Times discussed in depth the rise of government corruption in terms of private wealth and side-operations of officials. With the massive leaking of the Panama Papers, it mentioned a mixture of top European, Asian, and other top government officials involved in these potential investigations and scandals. Among those under fire was interestingly enough, Iceland’s own Prime Minister Sigmundur David Gunnlaugsson, who stepped down this week after connections to an “off-shore tax shelter” caused outrage in the country.

Similar outcry has been seen with the UK’s own David Cameron and Brazil’s President Dilma, but given Iceland’s usual reputation of transparency and progressivism, it was admittedly surprising to see them wrapped up in a headline like this. Typically recognized for their openness toward refugees with the Syrian Refugee Crisis or active advocacy for environmental protection, news involving them is not usually negative, except for their economic crash from 2008 linked to the American market crash.

With figures like “the Chilean head of Transparency International, a prominent anticorruption advocacy group”, who  “was forced to step down after his name appeared in the leaked papers as an agent for offshore companies in the Bahamas” even becoming entangled in corruption cases, it raises the question: who has the real voice or power to address these issues and change the acceptability of such activities? In the case of Iceland it seems that public pressure played a large role in inciting change- does some of that public power translate to American culture and government? Should laws be passed to close some of these legal loopholes to encourage more transparent leadership?

For more perspective on this issue see the post Corruption Causes Economic Crashes or read http://www.nytimes.com/2016/04/05/world/panama-papers-explainer.html.

 

White is the New Black: Let’s Talk Lithium

30 Wednesday Mar 2016

Posted by Christopher Hales in economics, environment, politics

≈ 2 Comments

Tags

Green, natural resources, south america

5BC03D22-1F74-45F6-B4C0-C0D30CDF8552_w640_s.jpg

Today’s car industry is rapidly heading towards “green cars” but many don’t understand how electric cars–the most popular alternatively powered cars–are made. To produce these “green” cars, massive amounts of mining have to take place. Why? Electric cars require large lithium batteries. Currently the world’s largest lithium reserve resides in Bolivia, but Chile and Argentina have substantial reserves as well. With global demand for lithium sharply increasing, these counties are set to be big influencers in the market, supplying any company that needs to make rechargeable batteries.

It’s currently forecast that by 2023, the global demand for lithium will outstrip the supply. What will this mean? These counties that have held relatively minor roles on the world’s stage are about to become huge, controlling a very in demand substance. Is lithium about to become the new crude oil? I definitely think so. It will be interesting to see how it all works out economically and politically.

However, I’m troubled that electric car batteries last roughly 7-10 years before they lose their capacity to hold a charge. All batteries will eventually need to be disposed of and replaced. An article from the scientific journal Sustainable Materials and Technologies points out that currently, we don’t have a very organized method for recycling these massive batteries. I’m not a scientist, but I wonder what will happen to all these spent raw materials, and how effectively they can actually be recycled.

It leads me to wonder how “green” electric cars are overall.

Read the full story from the VOA.

U.N. Security Council Tightens North Korea Sanctions

02 Wednesday Mar 2016

Posted by runforlife77 in diplomacy, economics

≈ 1 Comment

Tags

North Korea, Sanctions, United Nations

Today, the United Nations Security Council voted unanimously to enforce tough new sanctions on North Korea. The resolution was drafted by U.S. and Chinese officials, and calls for the inspection of all cargo going in and out of the country, the banning of weapons trade, and also expands the number of individuals under sanctions. Although these measures are designed to further restrict North Korea’s ability to continue its nuclear weapons program, its success depends largely on individual country’s (especially China’s) willingness to enforce it.

Additionally, these sanctions do not ban North Korea’s exporting of coal and iron ore, its primary revenue sources, or from buying oil, unless these activities can be proved to support its nuclear program. This resolution also has no power to punish those who illegally aid North Korea’s nuclear program, or those countries who do not comply with sanctions (such as the inspection of cargo from North Korea).

While these new sanctions are undoubtedly a step forward, their effects will largely depend on the level to which China enforces them. China is North Korea’s closest economic partner, and the two countries share a 870 mile-long border. China has stated that it sees these sanctions as a way to bring North Korea to the negotiating table, not as an ultimatum. China, of course, does not want a failed state on its boarders, and so, while it undoubtedly disproves of North Korea’s nuclear weapons program, it has not been as tough on the country as some (like the U.S.) would hope. Time will tell if future events will provoke a change in China’s stance.

Read more here.

The Ugly Reality: An Underground Economy

24 Wednesday Feb 2016

Posted by Christopher Hales in economics, politics

≈ 1 Comment

Tags

immigration, Refugee, Sweden

sweden_refugees_111215.jpg

Of the 163,000 refugees and migrants that entered Sweden 2015, the Swedish state estimates that approximately 80,000 need to go home. Roughly half the migrant population is no longer welcome in Sweden, now living illegally. But what do politicians realistically think will happen? According to The Christian Science Monitor, an ugly underground economy is booming.

After traveling across a continent, and enduring months of hardships, why would these refugees and migrants be so eager to go home in masses? Most stay, even after their applications for residency have been denied. As a direct result, they take under-the-table jobs where they are not accounted for when their employers file taxes. With no other choice, flocking to the low wage market is the only answer. It’s here that some businesses begin to exploit people, and hurt the legal citizens and residents by working under the minimum wage. A haircut may be cheap, but what’s the cost in the big picture?

Sweden, unlike the USA, does not grant citizenship to those born in the country. In 2015 the number of children born to illegal parents doubled over the previous year. One Swedish pastor explained “We’re getting a class of people who are born completely outside society.” While these children are unaccounted for and not officially recognized by the government, all children in Sweden will receive free education and healthcare through age 18. The implications of the crisis include a significant drag on the welfare system.

What do you think? The United States has struggled with the topic of immigration, but hasn’t really produced any meaningful answers. In 2010, Utah became the first state to allow illegal immigrants to possess a state issued drivers license. The idea behind it is that it gives illegal immigrants a sense of validity, making them less fearful of the police and less likely to flee the scene of an accident. According to The Salt Lake Tribune, about 35,000 licenses have been issued since 2010. Is this an effective solution? What should or shouldn’t be done?

Read the full story at The Christian Science Monitor.

Photo from here.

It’s Going Down For Real….Or Is It?

20 Wednesday Jan 2016

Posted by nicolesmith32 in economics, Uncategorized

≈ 5 Comments

China has been mentioned in the news virtually everyday of the new year due to unfavorable market trends. In his article, Neil Gough sheds light on the condition of China’s G.D.P growth since the economic hardship of 2009. At first glance,China’s 2015 economic growth rate of 6.8% seems admirable, especially when compared to the growth rates of other developed countries. The problem: 6.8% is the lowest growth rate since 2009. Worry has engulfed investors as they look at the declining trend.
Although the stats seem grim, it is important to take a more broad perspective. Since 1990, China’s growth rate has been in the double digits. Analysts and investors alike should be able to recognize that the growth rate of a country cannot grow rapidly indefinitely. Being able to grow quickly for 25 years classifies China as an anomaly.
We have very little need to worry about China’s economic condition. They have provided the world with lower-end manufactured goods for decades and the world will continue to rely on them for that. Although there are rising competitors in Southeast Asia, China’s large population and inexpensive labor make them the most fierce competitor now and into the future. The growth rate has decreased, but let’s remember that the rate is still in the positive direction.

http://www.nytimes.com/2016/01/19/business/international/china-gdp-economy.html?ref=world

Chinese Renminbi Promoted to “Main World Currency” Status

30 Monday Nov 2015

Posted by atoigue6 in economics

≈ 8 Comments

Tags

china, IMF

In a historic decision, the International Monetary Fund officially gave the Chinese Renminbi the status of a “Main World Currency”. With this promotion, the renminbi joins the dollar, pound, euro, and yen as a currency recognized for its economic security and reliability in international trade.

An advertisement promoting China's renminbi (RMB) or yuan, U.S. dollar and Euro exchange services is seen outside at foreign exchange store in Hong Kong, China
– An advertisement poster promoting China’s renminbi (RMB) or yuan , U.S. dollar and Euro exchange services is seen outside at foreign exchange store in Hong Kong, China August 13, 2015. REUTERS/Tyrone Siu/Files

The promotion has long been sought by Beijing as one of its top economic goals, and was endorsed by Pres. Xi Jinping who stated that the renminbi’s new status “will improve the international monetary system and safeguard global financial stability,”. A few of the benefits that will come because of this new status are that China will have increased influence in international bailouts of other nations (such as the Greek debt crisis) as well as having the renminbi become a more common form of currency in international trade and finance.

In order to receive this coveted status, however, China had to relax the grip it has over the renminbi. Considering that the Communist Party has for decades maintained a tight leash on the economy, Beijing will have to prove to foreign investors and businesses that its currency can be trusted and that the government will not implement radical economic reforms that could threaten the renminbi’s credibility abroad.

Now, Americans shouldn’t fear that the renminbi will come to overtake and surpass the dollar in terms of importance on the world stage. Eswar Prasad, a former head of the I.M.F.’s China division (and who is now the Tolani Senior Professor of Trade Policy at Cornell University) stated “the most likely scenario is that the renminbi will erode but not seriously rival the dollar’s status as the dominant global reserve currency.” On the contrary, Christine Lagarde, the managing director of the I.M.F., stated upon announcing the renminbi’s promotion that “the continuation and deepening of these efforts will bring about a more robust international monetary and financial system, which in turn will support the growth and stability of China and the global economy.”

Source: http://www.nytimes.com/2015/12/01/business/international/china-renminbi-reserve-currency.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news

Barter, Don’t Buy

22 Tuesday Sep 2015

Posted by emmagleave in economics

≈ 1 Comment

Among the turbulence currently being experienced in Europe over the Syrian refugee crisis and EU instability, the ongoing struggle of Greece’s economic crisis looms in the shadows. While a few months ago Greece’s citizens were skeptical over the actual improvements within their economy, one can only imagine the difficulties being experienced currently in the face of the refugee crisis (and despite their struggles, Greece has still been willing to accept and aid thousands of refugees).

In the face of such dire economic circumstances, many are turning to what we often think of as a dormant or even ancient practice to deal with the inflation and debt: bartering. The Greek version, however, holds many modern adaptions, connecting individuals and their various services through online clubs and applications like Tradenow. There are many benefits to having technology capable of intervening in light of such a crisis, helping individuals get what they need and working around currency issues, yet it raises the question of if such a system will just skirt around the core issue or actually lend temporary stability while the government works to address the currency crisis. Hopefully the latter will be the case, and in the mean time people will continue to cultivate alternative options for trading.

http://www.nytimes.com/2015/09/22/business/international/trading-meat-for-tires-as-bartering-economy-grows-in-greece.html?ref=world

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