Contraction in the 1st Quarter of 2015 - US Economy

According to the WSJ (LINK), the US economy contracted (GDP fell at a 0.7% annual rate) during the first quarter of 2015. This is far worse than the initial estimate that showed about 0.2% growth.

Economists are blaming the shortcoming on: harsh weather, a strong dollar and a labor dispute at West Coast ports. These have weakened the demand for American goods at home and abroad.

The Fed views the first-quarter stumble largely due to “transitory factors—such as the stronger dollar—that will dissipate in coming months. The central bank is looking for signs of a rebound soon as it plots when and how quickly to raise short-term interest rates, which have been near zero since December 2008 to stir economic growth.”

Even though we saw a contraction in GDP for the first three months of 2015, “other signs point to the economy humming along at a steady, though modest, growth pace. Company layoffs are exceptionally low and hiring across the U.S. remains solid. Mortgage applications are up amid other signs of growing housing demand.”

“We’re still growing at a relatively steady pace, although one that just doesn’t feel satisfying,” said Richard Moody, chief economist at Regions Financial Corp. “Six years into the recovery, we still really haven’t absorbed all of the idle capacity in the economy. When your underlying trend of growth is so slow, it doesn’t take much to just kind of stop the train.”

Do you have any general thoughts or comments about this article?

Do you think our economy will show growth now that our brutal winter has come to an end?

It seems our economy is doing fairly well (low unemployment level and bump in the housing market) as of late. This prompted the question, is GDP the best measurement of how our economy is working or could there be another evaluating tool more accurate? (Sparked by our in class discussion about Stiglitz last week)

PR or journalism

Bill Moyers gave a speech in New York recently (see here) where he discusses the waning of journalism and the impact of its loss on a democratic society. 

One snippet from the piece:

How can strong independent journalism thrive when independent outlets can’t afford to pay reporters, writers or producers a living wage; or when websites ask them to post four or five items a day; or when they leave journalism school and take jobs logging algorithms at Facebook (what does that even mean?). What happens to a society fed a diet of rushed, re-purposed, thinly reported “content?” Or “branded content” that is really merchandising — propaganda — posing as journalism?
And what happens when PR turns a profit and truth goes penniless? One of my mentors told me that “News is what people want to keep hidden, everything else is publicity.” So who will be left to report on what is happening in the statehouse or at the town hall? In the backrooms of Congress, the board rooms of banks and corporations, or even the open and shameless bazaar of K Street where the mercenaries of crony capitalism uncork bottles of champagne paid for by “dark money” from oligarchs and PACs? What happens when our elections are insider-driven charades conducted for profit by professional operatives whose spending on advertising mainly enriches themselves and the cable and television stations in cahoots with them? We know the answer, we know that a shortage of substantial reporting means corruption remains hidden, candidates we know little about and even less about who is funding them and what policy outcomes they are buying. It also means even more terrifying possibilities. As Tom Stoppard writes in his play Night and Day, “People do terrible things to each other, but it’s worse in the places where everybody is kept in the dark.”

And the challenge of journalism today is to survive in the pressure cooker of plutocracy. Where, in this mighty conglomeration of wealth and power, when for all practical purposes government and rich interests are two sides of the corporate state — where is the moral center of the commonwealth? How does journalism serve the endangered ideals of democracy? Can we find the audience that will dive deep — the audience that rebels against being treated as a branded market identified by the price tag on it? How do we report on the creeping dystopia of a cynically frivolous society with a political class that has made an ideology of ignorance, demoralizes workers and disdains the future? Can journalists be both patriotic and subversive — will we cover those who seek to disrupt the workings of a dominant and ruthless over-class with the attention and enthusiasm we accord the powers that be — by whom so many journalists appear mesmerized?

When I was first elected to the city commission in Kalamazoo (1997), the city hall beat reporter told me that he would never speak to me or anyone else in government without a tape recorder.  He researched his stories and asked hard questions that I often didn't want to answer.  I would cringe sometimes to read what I said to him.  By the time I left government, we routinely sent the paper (now mostly online) an outline of a story in a press release and the quotes we wanted to be in the story.  I actually wrote some of the stories that appeared in the press about some pretty controversial things.  I think the loss of a middle class investigative free press is one of the worse things happening in our country today.

ALICE Report- Michigan Jobs (Recommended)

-May 28th

ALICE Report- Michigan Jobs (Recommended)

“The cost of basic household expenses in Michigan is more than most jobs can support. Even though the cost of living in Michigan is among the most affordable in the U.S., a basic household budget is beyond what most jobs in the state can provide to working households.”

While it is well recognized that Michigan has faced daunting economic times with the decline of the auto industry and the Great Recession, the official poverty rate of 16 percent obscures the true magnitude of the financial instability in the state.

Michigan has 605,210 households below the Federal Poverty Level (FPL) but also has 930,503 Asset Limited, Income Constrained, Employed (ALICE) households (equaling a grand total of 1.54 million households (income) below the ALICE Threshold). The ALICE threshold represents those in our communities who are working yet still struggling to reach ends meet.

More than 60% of all jobs in Michigan pay less than $40,000 a year. This is terrifying, especially because many of us are joining the workforce soon! The ALICE report projects a domination of low-income jobs in Michigan’s economy for the foreseeable future. Nearly three quarters of Michigan’s 1,529 municipalities have 30 percent or more of households unable to make ends meet. The average level of income needed in order to survive in Michigan ranges from $47,000 to $62,000 annually for a family of four.

Here is a LINK to the full report.

Questions: Answer the one(s) that interests you the most!

What are you thoughts on the ALICE report? 

How have we as a state become such a large supplier of low-income jobs and is this a new trend we're seeing across the US?  

Why is Michigan projected to create even more low-income jobs in the foreseeable future? 

How does this affect income inequality? 

What policies could Michigan implement to fix this problem?

       

Too big to jail

Inequality leads to unequal treatment under the law....like this.

Last week, JP Morgan, Citigroup, Barclays, and Royal Bank of Scotland pled guilty to felony charges of conspiring to manipulate currency prices, and UBS pled guilty to manipulating benchmark interest rates. Regulators and prosecutors found the misconduct because the traders left extensive, written tracks — in chatrooms called “The Cartel” and “The Mafia.”...When an individual is convicted of a felony, they face years of disenfranchisement — from being denied the right to vote in many states, to facing barriers to finding work, felony convictions have real-world consequences for people. But when it comes to banks, regulators and law enforcement work together to ensure collateral consequences don’t occur.....

When a bank is charged with a crime, there are certain penalties that automatically kick in. Here is what the banks were facing as a result of their felonies:

• Disqualification from managing mutual funds and exchange-traded funds for RBS, JP Morgan, Citigroup and UBS.
• New barriers for issuing securities. All the convicted banks are “well-known seasoned issuers,” which is a special status that lets them quickly raise capital without having to get SEC approval first. A criminal conviction automatically disqualifies a bank from this status.
• No more immunity for earnings projections. Since you can’t verify the accuracy of the future, the law gives companies a “safe harbor” that allows them to make forward-looking statements anyway — without fear of lawsuits. The felony pleas would disqualify UBS, Barclays and JP Morgan from this immunity, thus subjecting all of their statements to the normal liability standards for fraud.

UBS and Barclays could no longer raise unlimited amounts of money though the sale of private securities.

But before the banks agreed to plead guilty, they were told that the penalties would be waived. And they were.

  See here for the complete story.

Trans-Pacific Trade Pact Highlights the Political Power of the Affluent

May 27th-

Link

"The Trans-Pacific Partnership trade deal making its way through Congress is the latest step in a decades-long trend toward liberalizing trade — a somewhat mysterious development given that many Americans are skeptical of freer trade."

"Similarly, a Pew Research Center survey released on Wednesday found that a plurality of Americans making under $30,000 per year say that their family’s finances have been hurt by free trade agreements. By contrast, those making more than $100,000 per year overwhelmingly believe free trade has been beneficial — 52 percent said trade agreements have helped their family’s finances versus only 29 percent who said they have hurt."


Briefly describe why you think Americans that are in higher social classes feel that free trade is beneficial to their family's finances. Also I am curious if you support the Trans-Pacific Partnership? If so briefly tell me why you support it if not explain your argument against it.  

Wolf on modern finance: we have too much

Wolf has strong opinions about modern finance.

It is easy to question the role of financial activity. After all, between January 2012 and December 2014, financial institutions paid $139bn in fines to US enforcement agencies. More fundamental is the contrast between the 7 per cent average share of the financial sector in US gross domestic product between 1998 and 2014 and its 29 per cent average share in profits.

An organised society offers two ways of becoming rich. The normal way has been to exercise monopoly power. Historically, monopoly control over land, usually seized by force, has been the main route to wealth. A competitive market economy offers a socially more desirable alternative: invention and production of goods and services.


Alas, it is also possible to extract rents in markets. The financial sector with its complexity and implicit subsidies is in an excellent position to do so. But such practices do not only shift money from a large number of poorer people to a smaller number of richer ones. It may also gravely damage the economy.....

The harms take two forms. The first is direct damage: an unsustainable credit-fuelled boom, say. Another is indirect damage that results from a breakdown in trust in a financial arrangements, due to crises, pervasive “duping”, or both.

The harms take two forms. The first is direct damage: an unsustainable credit-fuelled boom, say. Another is indirect damage that results from a breakdown in trust in a financial arrangements, due to crises, pervasive “duping”, or both. 

So what to do about it?  Increase sense of morality in finance and reduce incentives for misconduct.  Get rid of too big to fail and to big to jail.

see the complete story here.

Malaysia denies entry to Hong Kong student leader for 'anti-China' views

I found this article to be interesting as it talks about how Malaysia denies entry Hong Kong student (Joshua Wong) for having anti-China views (here).

Wong was the face of the "Umbrella Movement," which brought parts of Hong Kong to a standstill for more than two months late last year with mass rallies calling for fully free leadership elections.

Wong had been planning to give talks on democracy in China, from the massacre of pro-democracy protesters in Beijing's Tiananmen Square in 1989 to Hong Kong's Umbrella Movement, according to the Scholarism student protest group he founded.

But Malaysia's Inspector-General of Police Abu Bakar Khalid said the purpose of Wong's visit was to explain how he had organized demonstrations in Hong Kong.

"We were afraid that what he was going to speak about would harm our security," he told Agence France-Presse.

"He was also going to speak about China. We know his anti-Chinese speeches. We do not want him to jeopardize our ties with China," Khalid said.

Khalid said Malaysian police had asked the immigration department to stop Wong entering the country.

"We do not need him in Malaysia as Wong is an undesirable element," he said.

I found it interesting and frighting that Malaysia  police find any individual that anti-China views to be threat to their business relationship with China. It makes it seem like China has a large influence on the country (i.e., Malaysia). Also, I wonder if the recent of Malaysia is pro-china as their police department and immigration department appears.

What are your thoughts?