It's no secret that the Eurozone is an economically struggling region of the world, and although it has been recovering from the blow caused by its economic crisis, it has been doing so very feebly. Now, the recovery has suddenly stopped; in the second quarter of the year, the Eurozone was recorded as growing 0%. While economists say that the overall Eurozone economy should not sink into a recession yet again, it does not seem like the recovery will pick up its pace anytime soon. The future of its countries economies all depends on what actions the European Central Bank takes.
globalEDGE Blog - By Tag: economics
As harvest time approaches across Europe, many farmers are worried about how much revenue they will make this fall because of trade restrictions with Russia. These trade restrictions, a result of the ongoing conflict in the Ukraine, have had a large impact on European growers, who ship an estimated 5.2 billion euros worth of produce to Russian markets. With Russia’s embargo on European goods, farmers across the European Union are scrambling to find new markets to sell their goods, or risk large price reductions as a result of smaller demand.
Earlier this year, Japan implemented a sales tax increase from 5 to 8 percent. Bloomberg experts had predicted a median 7 percent decline, however, the economy declined by only 6.8%. And although an economic decline is never ideal, the contraction that has occurred in this quarter is much less impactful than in 1997, the last time the sales tax was hiked.
On July 18, the seventh annual Global Innovation Index (GII) was released at the B20 Australia Summit in Sydney. This year, the report's theme dealt with the Human Factor in Innovation, referring to the role that people play in the overall innovative success of different countries. While Switzerland, the United Kingdom, and Sweden topped the list, a significant change was seen: nations in the region of Sub-Saharan Africa showed the most overall improvement on the list. Seventeen African nations, including Mauritius, Seychelles, and South Africa, jumped up in the rankings by several placings. Sub-Saharan Africa has already seen great strides in economic growth and freedom, and this new development spells good news for Africa and its future.
The second richest man in the world, Carlos Slim, made a proposal this week that might excite employees around the globe. Slim, the Mexican telecom magnate, told those at a business conference that he thinks employers should move to shorter work weeks that promote increased leisure time for employees without losing productivity. His proposal had employees reporting to work only three days a week, giving workers four day weekends year-round. He believes that the shorter weeks would help to boost employee morale and increase leisure activities, which in turn would have a positive effect on the economy.
Angela Merkel, the current chancellor of Germany, has been reigning over the country for 8 years. Her approval rating of 71% seems expected when you consider the 2014 estimated GDP growth in Germany. Compared to the Eurozone average of 0.25% Germany’s domestic demand and increase in construction have been great assets to the country’s economy. Despite her success as chancellor, some believe that she is not taking actions that will positively impact the long-term economy.
An important economic issue that is affecting several countries is the rising number of shadow businesses: businesses unregistered with their country's government. These businesses exchange goods and services, both legal and illegal, without paying taxes to their government. Typical examples of these include small taxicab services, roadside food stalls, and drug dealing. These businesses are causing concern because of their increasing prevalence in developing countries, which many worry is crippling economic growth and development. Other countries with smaller numbers shadow businesses are looking for ways to try and incorporate the operations of these businesses into their national economies. Here is a closer look.
Sports are big business across the world. The recent agreement to sell the Los Angeles Clippers, of the NBA, for $2 billion is the largest amount paid for a sports franchise in the history of the United States. Across the world things are no different. In 2012, for the first time, a sports franchise issued an IPO and went public. Manchester United, an English soccer club, currently holds a $2.75 billion market cap, making it one of the most valuable sports franchises.
On Monday, June 2nd, the Obama administration announced through the EPA that new rules have been put into effect to reduce carbon pollution by coal and power plants by 30% by 2030. This is a historic occasion, as it marks the first time that the United States government has acted to try and regulate power plant emissions. The new rules have been met with high praise by many environmental groups and activists. However, debate has sparked over the potential economic impact of these rules. While concerns have been voiced over the effects on the coal and energy industries, many economists are also claiming these rules will lead to an overall positive outcome for the U.S. and the world. Here is a closer look.
This past weekend, European Union nations experienced eventful elections for the Europe Parliament that will cause a stir on future economic reforms. This election term saw a very aggressive battle between two opposing forces – pro-European Union parties supporting strong central powers, and anti-European Union parties (also known as Eurosceptics), who are nationalists that want to decrease central powers of the union. The elections were forecasted to see anti-European forces make major gains and double their seats in parliament as a result of increasing unrest caused by unfavorable union wide measures.
International economists are all asking the same question: Is the Eurozone's financial crisis over? For a region of the world that has borne some of the worst repercussions of the Great Recession, it could potentially be said now that the biggest brunt of the crisis is over, and the countries of the Eurozone are now on their (uneasy) way to recovery. However, this is not a confident prediction. Several factors, such as worryingly low inflation and high unemployment, are still present in these economies, showing that more problems may still be nigh. At this point it may be dangerous to assume the Eurozone has seen the last of its economic woes. Here is a closer look.
Over the past decade South Asia has experienced rapid economic growth, but its infrastructure growth has not kept pace. The World Bank recently came out with a report, “Reducing Poverty by Closing South Asia’s Infrastructure Gap,” which found that countries in South Asia need to invest up to $2.5 trillion in order to bridge the infrastructure gap in the next ten years. An infrastructure gap is the difference between a country’s development goals and its actual capability to obtain those goals.
In the face of major economic sanctions from many countries around the world, especially the United States and other Western nations, Russia has been actively looking to avoid economic isolation. As a result of this, it has turned to many large nations in the East to set up economic agreements. One country that is willing to open its doors is China. After over ten years of talks on the subject, Russia and China are finally coming close to signing what has been called a "Holy Grail" for Russia and especially Moscow; a deal where Russia will send natural gas to China.
The International Monetary Fund (IMF) predicted that Nigeria’s gross domestic product (GDP) was $354 billion last year, making it the second largest African economy behind South Africa. This past Sunday, for the first time in a decade, Nigeria’s statistician-general announced a revision in its GDP from 42.4 trillion naira to 80.2 trillion naira. How could an economy grow so much in just one night?
Brazil’s economy posted surprisingly good numbers for the fourth quarter of 2013, renewing hope that the country’s economic fortunes can turnaround. Brazil had seen its GDP contract by .5% in the third quarter, leading some analysts to speculate that the country was headed for a recession. The new numbers for the fourth quarter show that the economy grew .7% from the previous quarter and 2.3% over the entire year, numbers that no one expected to see. This news brings some relief and encouragement to Brazilian officials, who currently have their hands full with issues surrounding the economy, protests, and major upcoming sporting events.
India has a caste system which is a social structure that separates people according to different socio-economic conditions. In recent years the system has been relaxed and it is easier to move from caste-to-caste, but it is still significant to the Indian culture. Having a caste system can increase the amount of poverty and economic activity, leading to a decrease of international trade. In May, India’s general election will take place and the front-runner to be the next prime minister is Narendra Modi. Modi was a former tea seller, which is not considered an elite occupation and is quite different from the former occupations of leaders from the ruling Congress party.
Many emerging markets have noted the rapid devaluation of their currencies taking place over the past year. In Colombia, the peso is now worth 2,017.01 per U.S. dollar, the weakest currency level since 2009. While other emerging markets such as South Africa and Turkey are fighting incessantly to combat currency declines by raising interest rates, Colombia is taking a different approach by fully embracing the decline of its currency.
China's economy has politicians, investors, and businessmen all over the world biting their nails in nervous anticipation. Business and investment in the country have become increasingly risky and low expectations have been predicted for several sectors of the economy. The country as of late has been able to hold their own and beat their dismal forecasts; however if it does not stabilize its economy soon, it could prove bad news for the country and for the global economy.
Just how much does it cost to host an Olympics? The 2014 Winter Olympics in Sochi, Russia are more expensive than every other Winter Olympics combined. The cost is projected to be around $51 billion, which is ten million dollars more than the 2012 Summer Olympics in Beijing, China. This money goes towards construction, transportation, hospitality, security, lodging and more. For events like the Olympics, it is starting to look like a waste of money for all of the over-extravagant, luxurious decorations and celebrations that take place. It has become less about the athletics, and more about which country can make their Olympics look the best to the world. A country like Russia has a lot larger problems that it should allocate $51 billion to, especially if they are trying to clear up their image.
Is it possible to predict the number of medals each country will win in the Winter Olympics by using a combination of economic indicators? Without economics, predicting the winners would involve an extensive amount of knowledge on numerous sports and athletes. By using an economic model, one does not need extensive knowledge about each sport. In a recent study, Madeleine Andreff and Wladimir Andreff tried to predict the number of medals a country could win in the Winter Olympics by using economics.
In December of 2013 the Federal Reserve (FED) announced that it would begin to taper its bond-buying program by $10 million per month. As a result of quantitative easing (QE), the FED had been purchasing $85 million in assets in order to stimulate the economy. As the Federal Reserve continues to reduce its monthly purchases, there will be certain effects on globalization. Since tapering was announced, emerging market economies have been struggling. As the FED continues to taper, emerging markets could continue to see and outflow of funds and fluctuations in their currencies.
The figures are showing a stark truth: the levels of income inequality all around the world remain on the rise. In several countries, especially the largest and richest ones, the rich get richer while poverty becomes worse day after day. While it is a common argument that a degree of inequality is necessary for motivating people to work harder, it is also true that such extreme levels of it can be detrimental to the economy. As a result, this trend is proving to be a concern to economists and political figures everywhere.
Eugenio Proto, an Associate Professor at Warwick University, and Aldo Rustichini, an Economics Professor at the University of Minnesota, found that the relationship between national income and national life satisfaction is “hump shaped.” They discovered that there is a clear positive relation in poorer nations, then flattens out at around $30,000-$35,000, and then turns negative. The relationship between national income and life satisfaction are critical to policymakers.
As students all over the country depart from the cozy homes of their parents to go back to school a question with a seemingly obvious answer is asked - why? The start of a new semester signals a new beginning that entails learning and growth for another four months. The obvious answer to why so many young people do this every fall and winter is that school provides them with necessary skills in order to make a living in the world—a world that is becoming ever more competitive. However, little research has been done on exactly what return someone may receive for the skills they possess. The OECD published a recent paper taking a stab at this question.
Inflation has been credited with being the main reason for Moody’s Investor service choosing to downgrade Venezuela. In terms of currency, inflation has been more than fifty percent year to date, even after President Nicholas Maduro created the law to make businesses cut the cost of consumer goods. The high risk of a collapse and the economic imbalances of the Venezuelan economy have also been cited as a reason for the downgrade because the caused currency and bond ceiling ratings to move to a “speculative” grade. The government is planning on devaluing the Venezuelan currency in 2014. The current account surplus has also decreased by thirty five percent for the past three quarters in comparison to the three quarters last year. All of these statistics point to an economic collapse, but there might just be a way out.
After a 4 day meeting in Beijing, party leaders agreed to make changes to the infamous one-child policy in China. This previous policy allowed one child to be born into each family unless both parents were only children, in which case they may have another child. Additionally, couples in rural areas were allowed to have a second child provided that their first was a girl. Although theoretically this law was implemented to combat poverty by decreasing the total amount of births, the result instead was a long-term imbalance of genders and a capped labor force. Consequently, the Chinese government has altered the policy to ensure continual manufacturing growth in the coming years.
As the world becomes increasingly globalized, workers from around the world are experiencing increased opportunities to work abroad. This is exactly what is occurring in Canada. As the province of Alberta continues to boom economically, Canadian companies are in need of a labor supply. With too few Canadians to fill the extra jobs needed, Canadian firms have begun recruiting internationally. The international recruiting strategy has been very successful as Canadian companies were able to find an abundant supply of workers from the United Kingdom and Ireland. This development in Canada is a testament to the many benefits of international business.
Recently, Standard & Poor downgraded Netherlands' sovereign debt from a coveted AAA rating to a AA+ rating. The downgrade came as S&P sees a weak growth outlook, even though the Netherlands is seen as part of Europe’s healthy economic core. Also, S&P raised its outlook on Spain from negative to stable, showing that some of the struggling southern European countries may be recovering. As many southern countries continue to improve economically, some of the northern countries are suffering from poor growth prospects.
Recent financial figures have shown that several countries around the globe have experienced some of their lowest inflation rates in years. Normally this would be the goal of the nations' central banks, but in the economic states of these regions, this low inflation could be the source of several problems. Now the issue facing many of the world's richest nations is to avoid extremely low inflation and to try and raise prices. The proposed processes to achieve these goals have the potential to lead to some intense competition.
Major changes could be coming to China, after officials released plans to reform economic and social policies. China’s president, Xi Jinping, unveiled reform plans after a four-day conclave of Communist Party leaders in hopes that the economic changes will increase economic growth, which has slowed since the world-wide recession. Along with the economic reforms, plans were made to relax the one child policy and close labor camps, both infamous in the international community. The reforms, if implemented, could have wide-ranging impacts on society and business in China, improving human rights and opening new sectors of the economy to private companies.
Pensions have become an increasingly talked about topic of late. With bankruptcies of cities, and most notably of Detroit, it is unsure whether people who worked their entire lives with the promise of a retirement will actually receive such. The trick with pensions is how does a company or city adequately plan for retirement costs decades into the future?
In his recent article, Michael Burda, a Professor of Economics at Humboldt University Berlin, suggests the European Central Bank (ECB) should be redesigned with regional rather than national central banks. The column proposes that instead of each country having a national bank, boarders should be drawn to create regional banks. The United States, which has 12 regional banks, is a country that uses this central bank system.
Last week, the City of Detroit became the largest city to file for bankruptcy in the history of the United States. The once vibrant city, whose roots came from automobiles and music, fell-victim to its financial situation, which includes between $18 to $20 billion in debt. Along with a large amount of debt, Detroit has encountered problems with underfunded pensions, diminishing population, and poor public services. As a result of the bankruptcy, Detroit could experience large legal fees and cuts in its public services and bondholders will be left with pennies on the dollar. Is Detroit just the tip of the iceberg for cities that may file for bankruptcy?
Foreign direct investment has a large effect on the economy of countries. It can increase production, employment, exports, imports, and economic growth. Over the past five years, emerging markets have seen an increase in foreign capital from investors in search of higher yields. Three popular emerging market countries among foreign investors that have experienced political instabilities in the past month are Brazil, Turkey, and Egypt. The political instability could prove to be detrimental to emerging market financial growth in the short run, but investors should be more worried about the slowing economies of these countries.
One of the most significant trends of the past several years has been austerity measures taken by governments all over the world in order to try to keep their budgets in control. Much of the support for these actions came from a 2010 paper by Ken Rogoff and Carmen Reinhart of Harvard entitled Growth in a Time of Debt.
In 2002, Daniel Kahneman won the Nobel Prize in Economics, which isn’t all that unusual until one realizes that Kahneman isn’t an economist at all, but rather a psychologist. The reason that Kahneman won the Nobel is because he has dedicated his life (along with his partner Amos Tversky) to attempting to disprove the rational agent model that is a major underlying assumption of modern economics. The rational agent assumption assumes that all people are entirely rational and make the decisions that maximize utility for them (the people in this case are popularly called Homo Economis). Kahnemen thinks this isn’t true due to innate biases inside people and lays out why in Thinking Fast and Slow, which is an overview of his life’s work.
As the U.S. has just released that its GDP has grown only 0.1% in the 4th quarter of 2012 and that trend of low growth is persistent in every economic headline for seemingly every country, the question of whether this is a temporary phenomenon or the new reality is very relevant. Personally, I am of the opinion that this zero growth environment may be unavoidable.
In the last decade, Argentina has undergone a rapid ascension from widespread poverty and a huge budget deficit towards economic prosperity and stability. The government of Argentina, only ten years ago, defaulted on a $100 billion budget, sending over half its population into poverty. Following this economic catastrophe was a period of contraction. This, however, would last only three months and would then give way to economic growth.
The Euro has popped up many times in the news recently. Because of the debt crisis in Europe, many countries were left unable to fulfill the convergence criteria to have the Euro as a currency, leading to many problems throughout Europe. It wasn’t just the current crisis that brought about these issues; they have been rooted in the Euro ever since it was created. So what exactly are a few of these issues and how can they be solved?
Pecans have long been a steady source of income for farmers in the United States. Southern farmers produce two-thirds of the world’s supply and U.S. consumers have been the main source of their business. According to the U.S. Department of Agriculture, the current price of $2.14 per pound for pecans is nearly twice as high as three years ago. What has caused this sharp spike and what does the future hold for the pecan industry?
Two weeks ago, the European Central Bank (ECB) raised its benchmark interest rate from 1 percent to 1.25 percent, putting it at odds with its counterparts in the United States and Britain. This move has sparked a debate as to whether the ECB jumped the gun with the interest rate hike.
With articles starting to surface saying that the recent Japanese earthquake could cost the Japanese people over $300 billion in economic damage, I thought it would be pretty interesting to try to put that number into focus. In other words, while $300 billion is a lot of money no matter how you put it, is it really that much damage if a typical hurricane does about $350 billion in damage? Thankfully, the people at The Economist have created this graph that shows the world’s costliest natural disasters so we can put the Japanese earthquake into perspective. What the graph shows is very intriguing.
Everyone has been hearing about it lately. Look at any news site and it will be the top story if not many of the top five stories. Ever since Mohamed Al Bouazizi set himself on fire in December to protest Tunisia’s economic situation, revolution has been spreading across the Middle East. These conflicts are demonstrating how some of the world’s smallest countries can have great effects on the rest of the planet.
Last week we talked about microfinance, and specifically ways to help alleviate poverty in the poorest of areas. A topic that’s closely related to microfinance, but in some ways a better option is micro-franchising. It’s basically business ownership training. It is not only for developing counties however, it can be used for the poor in cities of developed countries as well.
There has been much hype recently about rising inflation rates around the globe. The euro zone had an inflation rate of 2.2% in 2010, while China's rose 5.1% from November 2009 to November 2010. Many people fear that a surge in inflation could have an adverse effect on the recovery efforts of many economies. But what exactly is inflation and how does it affect an economy?
While just about everyone in the world knows that in aggregate the world has been going through a so-called “Great Recession,” not nearly as many people understand how it has impacted the different regions in the world. Now, thanks to a new study called the Global MetroMonitor produced by The Brookings Institute and the London School of Economics, they can.
Just recently, on November 8, 2010, gold reached its non-inflation adjusted high of $1,400 per ounce. As shown in this chart by Kitco, gold has been increasing at a very rapid pace in the past year. This has prompted many investors to say that gold could potentially be the next “bubble,” or a security that has a huge increase in price only to suddenly “pop” and decrease rapidly in price. However, there is evidence to contradict these fears, especially in the U.S. bond markets.
Is it possible that corporate social responsibility, one of the most popular trends in modern business, is an irresponsible goal for any profit-driven organization to pursue? Is the pursuit of the triple-bottom-line (people, planet, profit) contrary to the value that corporations provide for society? Ann Bernstein, the leader of the Centre for Development and Enterprise in South Africa argued in her new book that it is more valuable for companies to focus solely on profit while leaving people and planet to fend for themselves, especially in developing nations.