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Macro Unit II AP Econ in the News
Post your links to articles relating to what we're studying here. Be sure to include a short summary of your article along with your explanation to how it relates.
Howard Jing: Inside the Mind of a Debtor Nation
The United States has become a spending nation. Even though this is to be expected because rising wealth increases the average propensity to spend, many Americans have also spent beyond their means and become mired in debt. This article examines some of the reasons behind this trend. Some of them include an easy access to credit cards, a tendency to buy things in bulk, and an increase of commercials that encourages people to buy things.
Jessica Chiang: Philippine Inflation Hits Two-year Low
While the rest of the world is experiencing inflation, inflation in the Philippines actually dropped. The government expected a 3.9% increase, but inflation only increased by 3.8%. The central bank governor calls it a "pleasant surprise." This decrease in inflation is caused by stable currency and falling prices for food and other goods and services. The government still plans on cutting down interest rates, but not by much.
Michael Daily: The specter of stagflation looms over U.S. economy
Stagflation is an economic conundrum where aggregate supply decreases, or shifts to the left, resulting in both increased prices and reduced real domestic output. In the current economic recession the U.S. is experiencing stagflation poses a major threat. The article compares the current state of the economy to the unquestionable stagflation experienced in the U.S. in the 1970s. The U.S. has worked to cut down interest rates, which economists explain has bid down the value of the dollar. In addition some economists say the measures being put forth to stop this recession going further, will end up causing interest rates to grow higher to contain inflation damages. There are further risks involved in this recession because although the Fed is working to reverse the economy's state, their inability to deal with it may result in the people giving less trust to them as it happened in the 1970s. The article concludes by warning that a new era of inflation may ensue in the U.S.
Jonathan Lau: Dollar: It Will Only Get Worse
The value of the dollar continues to slip and this time it is because of rumors that interest rates would be cut and also because of a number of troubling signs about the strength of the U.S. economy. The most notable move of the week was the dollar hitting successive all-time lows against the euro and since exchange rates are a determinant of aggregate demand, expect more tourists shopping in America. To them, it seems like they have more money to spend because the price of goods in America appear to be so much cheaper. In short, their purchasing power has increased significantly.
Dana Yeon: Frugality can be Acquired, but It Can't Be Bought
With United States in recession, consumers are being accused of their frugal consumption schedules and negligible savings accounts. In this article, Kelly shows how good saving habits can be learned easily. According to her, learning from firsthand experience (ex: Great Depression) or from parents' spending habits are the easiest and most influential ways of learning the basic life skill of managing money, similar to driving and cooking. By highlighting many ordinary successful savers' saving habits, this article effectively addresses the many problems that exist in Americans' saving habits and seeks to fix them.
Jo Lo:Bush: We're in a Slowdown
President Bush acknowledged Thursday that the economy has slowed down but said the United States is not headed toward a recession. This comes at a time when most people feel America is near a recession or already is in the middle of one. President Bush hopes that the $170 billion dollar stimulus plan he had Congress pass a couple of weeks ago will kickstart the economy or make the recession brief if the country is already in one. Bush is also pushing Congress to pass laws that would help the intelligence sector since the previous one had already expired. According to Bush, "The law expired, the threat to America didn't."
Kevin Ma: Skill shortage leading to cost push inflation
This article talks about how because of skill shortage in India, it resulted in a cost push inflation. Because there is a shortage in the workforce, the pay for that particular job would be high. They face a shortage in the skills of workforce in technology, outsourcing sector, semi-skilled labor intensive sectors such as manufacturing, finnance, construction, and more. To get more workers, they have gotten recognized universities around the world to come help.
Drew Venkatraman:Consumer spending stalls in January
"Consumer spending is threatening to stall out while consumer confidence, battered by soaring energy costs and falling home prices, has taken a steep nosedive." This article focuses on the trends of spending a.k.a. C in the GDP equation. This is an essential part to determining the AS and AD curves. The article says that Americans are scared to invest and spend and are instead using their money and incomes to improve older models vs. upgrading to newer ones. This trend could is caused by the inflation, and the recession experienced in the U.S.
Serena Tu:Gold is a "Crisis Hedge" not an Inflation hedge
In times of uncertainty investors turn to Gold as a hedge against unforeseen disasters since gold is one of the few investments that is not simultaneously an asset and someone else's liability. With prices reaching levels we haven't seen since the 1980's, there is talk of Gold as an "Inflation Hedge". But how well does it really work? Rebecca Sung: Dollar Falls Again, Euro Zone divided
This article talks about how the dollar is comparing to major currencies like the euro, yen, francs, etc. In class, we discussed how exchange rates are a determinant of aggregate demand. The decrease in the value of the dollar causes an increase in the purchasing power of foreigners. In class, we said that Europeans are flocking to the US to shop because to them, everything is 25% cheaper almost like everything is going on a 25% sale. Now with one euro approximately equalling 1.50 USD and a prediction of continuing drops in the value of the dollar, I think even more Europeans will be travelling to the US for a shopping vacation.
Alex Goldman: Dow Loses 315 on Economic Worries
Although this article primarily discusses how the US stock market is falling, it also includes the effects this decline has on consumers. In a confidence index recently taken, the US consumer's confidence has fallen. As we learned, this is a factor which can shift aggregate demand; to the left in this case. The article essentially addresses the wealth effect - consumer's assets have declined in value, and consequently so has their confidence.
Tim Chu:http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=478048&story_id=10757181 This article is about the recent falls in China’s stock markets. I found it pretty interesting because it also talks about how these falls in the stock market have been affecting the US’s stocks as well. Apparently, a drop in the shanghai stock market actually caused the Dow Jones market to fall a few percentages. This just goes to show how much China influences the US now. Not only does the US owe china tons of money, but most of the labor market is also supplied by china. Pretty amazing if you ask me.
Andy Xu: China Must not Hesitate to Curb Inflation
This articles says that China should not delay in stepping up efforts to tame inflation because price pressures are spreading and people are increasingly taking rising prices as a given fact. China's annual consumer inflation hit an 11-year high of 7.1 percent in January as fierce winter weather disrupted transport and damaged crops across southern China, driving up food prices. A senior economist at Peking University said:"What's more worrying is not inflation itself, but inflationary expectations." Therefore, before China's inflation comes catastrophe, the government must provide measures to halt this phenomenon.
Chan Min Park: New Home Sales Drop Again
This article talks about the drop in new home sales. More houses are being made, more houses are being supplied. However the demand for these houses are not as great and therefore results as surplus. The article says these houses that are not sold results in lower prices and might lead to recession. This is very much like the transition mechanism, where housing prices decrease and therefore wealth decrease. With the decrease in wealth, consumption decrease, aggregate demand decreases and therefore GDP decrease, price level increases, and unemployment rises. A GDP decrease and rising unemployment and price level means recession. Therefore as this article mentions, the surplus of houses could eventually lead to a recession.
Howard Lin: Rising Oil Price and its Effect on CHINA.
This article talks about the rising oil prices and its effects on China's economy, remember Mr.Welker once talked about the trucks all lining up infront of the gas station waiting for gasoline? In the past month, the price of oil has continued to rise, breaking the US$35 per barrel mark and setting a 10-year high. Oil prices in China have also gone up, reaching US$32 per barrel. Experts say that it would cause a inflation throughout China. As Oil is the cost of production and it would make the price of the product to go higher, than make consumer income go higher, and again as the spiral effect.
Kristie Chung: Stagflation in the U.S.?
This article explores the question as to whether the United States is actually at stagflation or not. The Federal Reserve Chairman, Ben Bernake, argues that the U.S. is "not anywhere near" the stagflation situation in the 1970s, combatting fears that have grown in the country with the economy slowing down and the inflation rising. The Fed cuts rates to stimulate t he economy, but to fight against inflation, it would have to boost its rates. Therefore, the Fed is having trouble energizing the economy. However, Bernanke is hopeful that the U.S. economy will turn stronger in the second half of 2008 with the help of the rate reductions and the recently introduced rescue package of rebates for people as well as the tax breaks given to businesses.
Cassy Chang:Falling Home Prices Effects People owe more money than their homes are worth. “When homes go into foreclosure, banks face a pileup of bad assets on their books.” Banks are tightening policy on lending money. The collapse of confidence is not helping the downward spiral. Economists propose loan modifications to ease terms for borrowers. The recession of the US economy is in large due to consumers’ expectations. Consumers’ aggregate demand decreases, causing a multiplier effect, which influences China since the US’s consumption of exports also decreases.
Julie Lin: Fed officials vow to keep watch on inflation: This article is about In a series of speeches in New York and Atlanta -- one day after Fed Chairman Ben Bernanke fielded sharp questions from members of Congress worried about rising inflation -- Fed presidents stressed that they had not forgotten their responsibility for ensuring stable prices. the fed officials vow to keep watch on inflation in various ways to keep up the economy.
Jinny Kwon: U.S. gasoline prices rise to $3.10 a gallon According to the article, the average price of a gallon of gasoline in the United States rose to $3.10 per gallon, which was an increase of 75.24 cents from last year's price level. As we have learned from our classes, gasoline is one of the most crucial factors of production for firms and business, and thus, a change in the cost of this input will result in a change in the aggregate supply. In this case, since the price of the input has increased, the aggregate supply curve will shift to the left leading to increases in price levels and decreases in the real output level. Overall, this will not only negatively affect the firms' profits, but will also hurt the economy by creating a recession and inflation. According to Lundberg, further rises in prices might not be prevented because "very soon gasoline will take on its own price strengths from rising seasonal demand". Thus, as prices soar and supply declines, demand will further increase, ultimately causing the prices to increase further up.
Mond Gu: US inflation reaches 17-year high
Offical data shows that increased energy and food costs, has caused a sharp increase in price. This resulted in the highest rate of inflation in 17 years. Data shows that consumer prices rose 4.1%, energy prices rose 17.4%, and food prices rose 4.9% in the year of 2007. The US Federal Reserve is expected to lower the interest rate to help spur some growth in the economy.
Howard Jing: Inside the Mind of a Debtor Nation
The United States has become a spending nation. Even though this is to be expected because rising wealth increases the average propensity to spend, many Americans have also spent beyond their means and become mired in debt. This article examines some of the reasons behind this trend. Some of them include an easy access to credit cards, a tendency to buy things in bulk, and an increase of commercials that encourages people to buy things.
Jessica Chiang: Philippine Inflation Hits Two-year Low
While the rest of the world is experiencing inflation, inflation in the Philippines actually dropped. The government expected a 3.9% increase, but inflation only increased by 3.8%. The central bank governor calls it a "pleasant surprise." This decrease in inflation is caused by stable currency and falling prices for food and other goods and services. The government still plans on cutting down interest rates, but not by much.
Michael Daily: The specter of stagflation looms over U.S. economy
Stagflation is an economic conundrum where aggregate supply decreases, or shifts to the left, resulting in both increased prices and reduced real domestic output. In the current economic recession the U.S. is experiencing stagflation poses a major threat. The article compares the current state of the economy to the unquestionable stagflation experienced in the U.S. in the 1970s. The U.S. has worked to cut down interest rates, which economists explain has bid down the value of the dollar. In addition some economists say the measures being put forth to stop this recession going further, will end up causing interest rates to grow higher to contain inflation damages. There are further risks involved in this recession because although the Fed is working to reverse the economy's state, their inability to deal with it may result in the people giving less trust to them as it happened in the 1970s. The article concludes by warning that a new era of inflation may ensue in the U.S.
Jonathan Lau: Dollar: It Will Only Get Worse
The value of the dollar continues to slip and this time it is because of rumors that interest rates would be cut and also because of a number of troubling signs about the strength of the U.S. economy. The most notable move of the week was the dollar hitting successive all-time lows against the euro and since exchange rates are a determinant of aggregate demand, expect more tourists shopping in America. To them, it seems like they have more money to spend because the price of goods in America appear to be so much cheaper. In short, their purchasing power has increased significantly.
Dana Yeon: Frugality can be Acquired, but It Can't Be Bought
With United States in recession, consumers are being accused of their frugal consumption schedules and negligible savings accounts. In this article, Kelly shows how good saving habits can be learned easily. According to her, learning from firsthand experience (ex: Great Depression) or from parents' spending habits are the easiest and most influential ways of learning the basic life skill of managing money, similar to driving and cooking. By highlighting many ordinary successful savers' saving habits, this article effectively addresses the many problems that exist in Americans' saving habits and seeks to fix them.
Jo Lo:Bush: We're in a Slowdown
President Bush acknowledged Thursday that the economy has slowed down but said the United States is not headed toward a recession. This comes at a time when most people feel America is near a recession or already is in the middle of one. President Bush hopes that the $170 billion dollar stimulus plan he had Congress pass a couple of weeks ago will kickstart the economy or make the recession brief if the country is already in one. Bush is also pushing Congress to pass laws that would help the intelligence sector since the previous one had already expired. According to Bush, "The law expired, the threat to America didn't."
Kevin Ma: Skill shortage leading to cost push inflation
This article talks about how because of skill shortage in India, it resulted in a cost push inflation. Because there is a shortage in the workforce, the pay for that particular job would be high. They face a shortage in the skills of workforce in technology, outsourcing sector, semi-skilled labor intensive sectors such as manufacturing, finnance, construction, and more. To get more workers, they have gotten recognized universities around the world to come help.
Drew Venkatraman:Consumer spending stalls in January
"Consumer spending is threatening to stall out while consumer confidence, battered by soaring energy costs and falling home prices, has taken a steep nosedive." This article focuses on the trends of spending a.k.a. C in the GDP equation. This is an essential part to determining the AS and AD curves. The article says that Americans are scared to invest and spend and are instead using their money and incomes to improve older models vs. upgrading to newer ones. This trend could is caused by the inflation, and the recession experienced in the U.S.
Serena Tu:Gold is a "Crisis Hedge" not an Inflation hedge
In times of uncertainty investors turn to Gold as a hedge against unforeseen disasters since gold is one of the few investments that is not simultaneously an asset and someone else's liability. With prices reaching levels we haven't seen since the 1980's, there is talk of Gold as an "Inflation Hedge". But how well does it really work? Rebecca Sung: Dollar Falls Again, Euro Zone divided
This article talks about how the dollar is comparing to major currencies like the euro, yen, francs, etc. In class, we discussed how exchange rates are a determinant of aggregate demand. The decrease in the value of the dollar causes an increase in the purchasing power of foreigners. In class, we said that Europeans are flocking to the US to shop because to them, everything is 25% cheaper almost like everything is going on a 25% sale. Now with one euro approximately equalling 1.50 USD and a prediction of continuing drops in the value of the dollar, I think even more Europeans will be travelling to the US for a shopping vacation.
Alex Goldman: Dow Loses 315 on Economic Worries
Although this article primarily discusses how the US stock market is falling, it also includes the effects this decline has on consumers. In a confidence index recently taken, the US consumer's confidence has fallen. As we learned, this is a factor which can shift aggregate demand; to the left in this case. The article essentially addresses the wealth effect - consumer's assets have declined in value, and consequently so has their confidence.
Tim Chu:http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=478048&story_id=10757181 This article is about the recent falls in China’s stock markets. I found it pretty interesting because it also talks about how these falls in the stock market have been affecting the US’s stocks as well. Apparently, a drop in the shanghai stock market actually caused the Dow Jones market to fall a few percentages. This just goes to show how much China influences the US now. Not only does the US owe china tons of money, but most of the labor market is also supplied by china. Pretty amazing if you ask me.
Calvin Lu:House Votes to Rescind Tax Breaks for Oil Industry The House of Representatives had voted to repeal the tax break on oil and gas companies in order to finance for cleaner energy source. The article mentioned that this would cause domestic oil to be less competitive on the international market. The country would be more dependent on foreign oil and would drive the oil price up. In my opinion, this repeal of tax break will cause the price level to rise and thus result in inflation, as oil is an input for nearly all products.
Caleb Liao: http://www.economist.com/science/tq/displaystory.cfm?story_id=10202736
"No Fridge Required" Is an article about new technology that is emerging which will take away the need to refrigerate certain medications. I think that this improvement will affect the U.S. economy in a possitive direction. This will increase orders from outside the U.S. thus affecting the Xn factor in contributing to the overall gdp of the U.S.
Alice Su: Why it Takes More Bread to Buy Dough These Days
In this article, MarketWatch economists take a look at how inflation in the U.S. has led to rising food prices, and analyzes the ways that aggregate supply and demand have contributed to this phenomenon. While factors such as the weak U.S. dollar and expectations for the future have strongly affected aggregate demand, rising costs of production have also led to a decrease in aggregate supply, thus leading to heavy inflation and a recession at the same time. Read this article for a succinct analysis of how a specific part of American consumption has contributed to the wider occurrence of stagflation in the United States.
Caleb Liao: http://www.economist.com/science/tq/displaystory.cfm?story_id=10202736
"No Fridge Required" Is an article about new technology that is emerging which will take away the need to refrigerate certain medications. I think that this improvement will affect the U.S. economy in a possitive direction. This will increase orders from outside the U.S. thus affecting the Xn factor in contributing to the overall gdp of the U.S.
Alice Su: Why it Takes More Bread to Buy Dough These Days
In this article, MarketWatch economists take a look at how inflation in the U.S. has led to rising food prices, and analyzes the ways that aggregate supply and demand have contributed to this phenomenon. While factors such as the weak U.S. dollar and expectations for the future have strongly affected aggregate demand, rising costs of production have also led to a decrease in aggregate supply, thus leading to heavy inflation and a recession at the same time. Read this article for a succinct analysis of how a specific part of American consumption has contributed to the wider occurrence of stagflation in the United States.
Andy Xu: China Must not Hesitate to Curb Inflation
This articles says that China should not delay in stepping up efforts to tame inflation because price pressures are spreading and people are increasingly taking rising prices as a given fact. China's annual consumer inflation hit an 11-year high of 7.1 percent in January as fierce winter weather disrupted transport and damaged crops across southern China, driving up food prices. A senior economist at Peking University said:"What's more worrying is not inflation itself, but inflationary expectations." Therefore, before China's inflation comes catastrophe, the government must provide measures to halt this phenomenon.
Jacques Zhang: Putting Caps on Prices is Only a Short-Term Solution
Yes, this is yet another article about China, but also Asia in general. The article's first point is that both food and oil prices (which are considered vital for energy) costs are going up, thus the supply costs are also going up. This shifts the AS curve left, which in turn causes inflation. The thing is, the most common solution, especially in China, seems to be placing price caps on many goods, so that inflation is somewhat "controlled," at least for the short term. The article discusses how price caps are only a short-term solution and will fail in the long run.
Helen Chu: Nation Faces Increasing Inflation Risk
This article talks about not China’s current state of inflation, but the inflation to come, which apparently is not a pretty picture. The main cause of increasing inflation for the rest of the first half of 2008 is the latent inflationary impacts of the snowstorm and the increases in raw agriculture prices. The inflation that China is experiencing right now is only the tip of the iceberg, as within next one to two months, China will be hit by the full impact of the natural disaster and the rise in costs.
Margaret Liu: http://www.slate.com/id/2123009/
Apparently, the rich are suffering the most from inflation in the USA, US economists are optimistic that the rate of inflation will not rise significantly, and according to the article, depending on your geographic location, you will be affected by inflation differently. Large cities such as new york seem to be the leading cause of the nation's rising inflation. Not only is the income of the rich reduced, but goods the rich buy seem to be rising more than goods that the middle class and poor buy.
Kevin Yeh: Rising Inflation creates Unease in Middle East
Increases in the price levels of oil have caused runaway inflation in the Middle East, and now the people are forced to choose between food and shelter, being unable to get both. Some wealthier governments are trying to give money to their citizens to help them out, but the aid is generally not enough.
Kevin Chiu: As Inflation Rises, Home Values Slump, Data Show As real-estate prices are falling rapidly for houses, other costs are increasing at an expedite rate; this causes a problem for policy makers as they cannot “move too aggressively and cut interest rates and stimulate the economy” because it might startle inflation at a time where consumers are already “squeezed by higher prices of food, energy and other goods”. U.S. citizens are undergoing a phase where prices are beginning to become too high, while their main assets, their houses, are dropping rapidly. “February may go down in history as the month that the previously indefatigable U.S. consumer finally threw in the towel, beaten by a combination of deteriorating labor market conditions, surging prices for food and energy and collapsing house prices,”.
Jack Lo: European Banks Confront Economic Slowdown
For a while the European Bank threatened to raise the interest rates. However, the bank's president, Jean-Claude Trichet, has recently announced that they might follow the Federal Reserves and instead cut interest rates. Trichet was afraid that labor unions will demand higher prices if interest rates were increased. This would lead to an inflation, which is something that the European bank does not want.
The United States' Economy: Going Down, Down, Down...
Katherine Yang: China's Next Big Export: Inflation
This article describes China's inflation. It describes the rising prices posing problems for the Chinese and the possible problems it could pose for the rest of the world. The rising prices is caused by rising demand, which in turn, is caused by Chinese consumers consuming more. The increase in price level is causing problems for many Chinese, especially cooking oil price increases.
Jeewon Oh: Wholesale inflation rate soars
Inflation rates are rising at a faster pace than expected. The wholesale prices had risen by 7.5 percent over the past 12 months, which is the fastest pace in more than 26 years. A recession accompanied with inflation has led to "stagflation" in the United States. Although inflation was disregarded due to recession, inflation has been caused by higher oil and food prices. This increased the overall input costs, yielding a 0.4 percent increase in consumer prices.
Yun Qi Mok: China's Inflation Rose to 7.1% in January
China's inflation seems to be a very hot topic, and probably because it is such a scary and real happening. This article discusses not only China's soaring inflation, but also the spiralling exaserbation of the problem. Becuase of high inflation and increases in price level, aggregate supply decreases as input costs are too high; in turn, lack of supply pushes price levels even higher, and unemployment appears. Aggregate demand, however, keeps increasing as wages in China increase, even past the level of full employment, where inflation shoots up again. Thus, the article writes that China's director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences suggests that China allow the RMB to appreciate, thus making foreign imports seem cheaper; foreigners finding Chinese goods will buy less (net exports decrease, AD decreases), and Chinese people will buy more foreign goods (consumption decreases, AD decreases).
Conrad Liu: The United States' Economy: Going Down, Down, Down...
A article fresh from the New York Times, it talks about the recent growth rate of the United States by using the results obtained from the 4th quarter, although the rate still remains at 0.6%. Either way, it describes the effects that recession causes in an economy, such as increased cyclical unemployment. Inflation also seems to be on the rise despite the seemingly unavoidable recession.
Charlie Gao: Food-price Fears in China
This article talks about the rising prices of food in China. Because prices of food rises in China, companies have to pay more to feed their workers. This will cause the companies to hire less workers and invest in less capital in order to save money. This is illustrated with a leftward shift in the aggregate supply curve. A decrease in aggregate supply leads to unemployment, higher price level, and decrease in real GDP. This is not very good for China's economy.
Jeff Ye: Rushing on by road, rail and air
China is using more money to develop and build new airports and runways, new railroads, new ports, new roads etc. than ever before. The new $3.8 billion dollar expansion to the Beijing airport has now made it the largest airport in the world. The new 36km 6 lane highway across Hangzhou bay is now the longest sea-crossing bridge in the world, the record formerly held by Shanghai. China is now rapidly developing its transportation system, in anticipation of the coming olympics, and world recognition.
Judy Chen: Inflation in Singapore Soars to a 25-Year High
In this article, it has mentioned that Singapore's inflation reached to a 25- year high in January due to the rising prices of food costs and commodities. In January, the consumer price index rose 6.6% since 4.4% rising in December. The inflation was not caused by only rising prices, but also the low interest rate in Singapore, which leads to higher consumer spending and the increase in aggregate demand. Both causes are resulted in highest inflation in Singapore in 25 years.
Kevin Huang: China Amends Law to Reduce Energy Consumption By 2010, China hopes to reduce energy consumption per capita by 20% with a slight change to the law. In 2007 China had already shown a 1.23% drop in energy consumption per capita. The question is, can China actually acheive this goal by 2010 because spreading out to the many people all over China will take energy and money.
Nicole Wong: Manufactured goods orders plunge
Demand for durable products has declined in the past month, indicating that consumption of these goods has decreased by a significant amount. Consumption of cars, computers and other means of transportation has declined so much that economists are beginning to see the possibility of a recession as even more feasible than before. As society fears an upcoming recession, they are more liable to save more of their disposable income rather than consume other goods. With a decline in GDP, is society itself amplifying the effects of a recession?
Michael Chow: Stocks sink on recession fear
This article mentions how stocks slumped Thursday after comments from the Fed chair Ben Bernanke on the banking sector and weak reports on economic growth and the jobs market revived worries about a recession. Treasury prices rallied Thursday, sending yields lower, as investors sought the relative safety of government debt. Oil touched a record trading high above $102 a barrel, while gold was not far from all-time highs. The dollar hit another record low against the euro and also fell against the yen.
Yes, this is yet another article about China, but also Asia in general. The article's first point is that both food and oil prices (which are considered vital for energy) costs are going up, thus the supply costs are also going up. This shifts the AS curve left, which in turn causes inflation. The thing is, the most common solution, especially in China, seems to be placing price caps on many goods, so that inflation is somewhat "controlled," at least for the short term. The article discusses how price caps are only a short-term solution and will fail in the long run.
Helen Chu: Nation Faces Increasing Inflation Risk
This article talks about not China’s current state of inflation, but the inflation to come, which apparently is not a pretty picture. The main cause of increasing inflation for the rest of the first half of 2008 is the latent inflationary impacts of the snowstorm and the increases in raw agriculture prices. The inflation that China is experiencing right now is only the tip of the iceberg, as within next one to two months, China will be hit by the full impact of the natural disaster and the rise in costs.
Margaret Liu: http://www.slate.com/id/2123009/
Apparently, the rich are suffering the most from inflation in the USA, US economists are optimistic that the rate of inflation will not rise significantly, and according to the article, depending on your geographic location, you will be affected by inflation differently. Large cities such as new york seem to be the leading cause of the nation's rising inflation. Not only is the income of the rich reduced, but goods the rich buy seem to be rising more than goods that the middle class and poor buy.
Kevin Yeh: Rising Inflation creates Unease in Middle East
Increases in the price levels of oil have caused runaway inflation in the Middle East, and now the people are forced to choose between food and shelter, being unable to get both. Some wealthier governments are trying to give money to their citizens to help them out, but the aid is generally not enough.
Kevin Chiu: As Inflation Rises, Home Values Slump, Data Show As real-estate prices are falling rapidly for houses, other costs are increasing at an expedite rate; this causes a problem for policy makers as they cannot “move too aggressively and cut interest rates and stimulate the economy” because it might startle inflation at a time where consumers are already “squeezed by higher prices of food, energy and other goods”. U.S. citizens are undergoing a phase where prices are beginning to become too high, while their main assets, their houses, are dropping rapidly. “February may go down in history as the month that the previously indefatigable U.S. consumer finally threw in the towel, beaten by a combination of deteriorating labor market conditions, surging prices for food and energy and collapsing house prices,”.
Jack Lo: European Banks Confront Economic Slowdown
For a while the European Bank threatened to raise the interest rates. However, the bank's president, Jean-Claude Trichet, has recently announced that they might follow the Federal Reserves and instead cut interest rates. Trichet was afraid that labor unions will demand higher prices if interest rates were increased. This would lead to an inflation, which is something that the European bank does not want.
The United States' Economy: Going Down, Down, Down...
Katherine Yang: China's Next Big Export: Inflation
This article describes China's inflation. It describes the rising prices posing problems for the Chinese and the possible problems it could pose for the rest of the world. The rising prices is caused by rising demand, which in turn, is caused by Chinese consumers consuming more. The increase in price level is causing problems for many Chinese, especially cooking oil price increases.
Jeewon Oh: Wholesale inflation rate soars
Inflation rates are rising at a faster pace than expected. The wholesale prices had risen by 7.5 percent over the past 12 months, which is the fastest pace in more than 26 years. A recession accompanied with inflation has led to "stagflation" in the United States. Although inflation was disregarded due to recession, inflation has been caused by higher oil and food prices. This increased the overall input costs, yielding a 0.4 percent increase in consumer prices.
Yun Qi Mok: China's Inflation Rose to 7.1% in January
China's inflation seems to be a very hot topic, and probably because it is such a scary and real happening. This article discusses not only China's soaring inflation, but also the spiralling exaserbation of the problem. Becuase of high inflation and increases in price level, aggregate supply decreases as input costs are too high; in turn, lack of supply pushes price levels even higher, and unemployment appears. Aggregate demand, however, keeps increasing as wages in China increase, even past the level of full employment, where inflation shoots up again. Thus, the article writes that China's director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences suggests that China allow the RMB to appreciate, thus making foreign imports seem cheaper; foreigners finding Chinese goods will buy less (net exports decrease, AD decreases), and Chinese people will buy more foreign goods (consumption decreases, AD decreases).
Conrad Liu: The United States' Economy: Going Down, Down, Down...
A article fresh from the New York Times, it talks about the recent growth rate of the United States by using the results obtained from the 4th quarter, although the rate still remains at 0.6%. Either way, it describes the effects that recession causes in an economy, such as increased cyclical unemployment. Inflation also seems to be on the rise despite the seemingly unavoidable recession.
Charlie Gao: Food-price Fears in China
This article talks about the rising prices of food in China. Because prices of food rises in China, companies have to pay more to feed their workers. This will cause the companies to hire less workers and invest in less capital in order to save money. This is illustrated with a leftward shift in the aggregate supply curve. A decrease in aggregate supply leads to unemployment, higher price level, and decrease in real GDP. This is not very good for China's economy.
Jeff Ye: Rushing on by road, rail and air
China is using more money to develop and build new airports and runways, new railroads, new ports, new roads etc. than ever before. The new $3.8 billion dollar expansion to the Beijing airport has now made it the largest airport in the world. The new 36km 6 lane highway across Hangzhou bay is now the longest sea-crossing bridge in the world, the record formerly held by Shanghai. China is now rapidly developing its transportation system, in anticipation of the coming olympics, and world recognition.
Judy Chen: Inflation in Singapore Soars to a 25-Year High
In this article, it has mentioned that Singapore's inflation reached to a 25- year high in January due to the rising prices of food costs and commodities. In January, the consumer price index rose 6.6% since 4.4% rising in December. The inflation was not caused by only rising prices, but also the low interest rate in Singapore, which leads to higher consumer spending and the increase in aggregate demand. Both causes are resulted in highest inflation in Singapore in 25 years.
Kevin Huang: China Amends Law to Reduce Energy Consumption By 2010, China hopes to reduce energy consumption per capita by 20% with a slight change to the law. In 2007 China had already shown a 1.23% drop in energy consumption per capita. The question is, can China actually acheive this goal by 2010 because spreading out to the many people all over China will take energy and money.
Nicole Wong: Manufactured goods orders plunge
Demand for durable products has declined in the past month, indicating that consumption of these goods has decreased by a significant amount. Consumption of cars, computers and other means of transportation has declined so much that economists are beginning to see the possibility of a recession as even more feasible than before. As society fears an upcoming recession, they are more liable to save more of their disposable income rather than consume other goods. With a decline in GDP, is society itself amplifying the effects of a recession?
Michael Chow: Stocks sink on recession fear
This article mentions how stocks slumped Thursday after comments from the Fed chair Ben Bernanke on the banking sector and weak reports on economic growth and the jobs market revived worries about a recession. Treasury prices rallied Thursday, sending yields lower, as investors sought the relative safety of government debt. Oil touched a record trading high above $102 a barrel, while gold was not far from all-time highs. The dollar hit another record low against the euro and also fell against the yen.
Chan Min Park: New Home Sales Drop Again
This article talks about the drop in new home sales. More houses are being made, more houses are being supplied. However the demand for these houses are not as great and therefore results as surplus. The article says these houses that are not sold results in lower prices and might lead to recession. This is very much like the transition mechanism, where housing prices decrease and therefore wealth decrease. With the decrease in wealth, consumption decrease, aggregate demand decreases and therefore GDP decrease, price level increases, and unemployment rises. A GDP decrease and rising unemployment and price level means recession. Therefore as this article mentions, the surplus of houses could eventually lead to a recession.
Howard Lin: Rising Oil Price and its Effect on CHINA.
This article talks about the rising oil prices and its effects on China's economy, remember Mr.Welker once talked about the trucks all lining up infront of the gas station waiting for gasoline? In the past month, the price of oil has continued to rise, breaking the US$35 per barrel mark and setting a 10-year high. Oil prices in China have also gone up, reaching US$32 per barrel. Experts say that it would cause a inflation throughout China. As Oil is the cost of production and it would make the price of the product to go higher, than make consumer income go higher, and again as the spiral effect.
Kristie Chung: Stagflation in the U.S.?
This article explores the question as to whether the United States is actually at stagflation or not. The Federal Reserve Chairman, Ben Bernake, argues that the U.S. is "not anywhere near" the stagflation situation in the 1970s, combatting fears that have grown in the country with the economy slowing down and the inflation rising. The Fed cuts rates to stimulate t he economy, but to fight against inflation, it would have to boost its rates. Therefore, the Fed is having trouble energizing the economy. However, Bernanke is hopeful that the U.S. economy will turn stronger in the second half of 2008 with the help of the rate reductions and the recently introduced rescue package of rebates for people as well as the tax breaks given to businesses.
Chris Seah:Consumer Spending Stalls
This article highlights the massive consumer purchasing slowdowns in recent months. Apparently, consumer spending has not been so weak since 2001 when the US was still recovering from the dot com bubble. This has affected the aggregate demand curve since the source cites "depreciating home values", which correlates directly to a fall in consumer wealth, shifting it to the left. Rising oil prices are shifting the AS curve to the left as well, making for a dangerous scenario. Price levels will rise while real domestic output falls; the American economy (and consumer) is going to have a very rough ride in the coming months.
Cassy Chang:Falling Home Prices Effects People owe more money than their homes are worth. “When homes go into foreclosure, banks face a pileup of bad assets on their books.” Banks are tightening policy on lending money. The collapse of confidence is not helping the downward spiral. Economists propose loan modifications to ease terms for borrowers. The recession of the US economy is in large due to consumers’ expectations. Consumers’ aggregate demand decreases, causing a multiplier effect, which influences China since the US’s consumption of exports also decreases.
Julie Lin: Fed officials vow to keep watch on inflation: This article is about In a series of speeches in New York and Atlanta -- one day after Fed Chairman Ben Bernanke fielded sharp questions from members of Congress worried about rising inflation -- Fed presidents stressed that they had not forgotten their responsibility for ensuring stable prices. the fed officials vow to keep watch on inflation in various ways to keep up the economy.
Jinny Kwon: U.S. gasoline prices rise to $3.10 a gallon According to the article, the average price of a gallon of gasoline in the United States rose to $3.10 per gallon, which was an increase of 75.24 cents from last year's price level. As we have learned from our classes, gasoline is one of the most crucial factors of production for firms and business, and thus, a change in the cost of this input will result in a change in the aggregate supply. In this case, since the price of the input has increased, the aggregate supply curve will shift to the left leading to increases in price levels and decreases in the real output level. Overall, this will not only negatively affect the firms' profits, but will also hurt the economy by creating a recession and inflation. According to Lundberg, further rises in prices might not be prevented because "very soon gasoline will take on its own price strengths from rising seasonal demand". Thus, as prices soar and supply declines, demand will further increase, ultimately causing the prices to increase further up.
Mond Gu: US inflation reaches 17-year high
Offical data shows that increased energy and food costs, has caused a sharp increase in price. This resulted in the highest rate of inflation in 17 years. Data shows that consumer prices rose 4.1%, energy prices rose 17.4%, and food prices rose 4.9% in the year of 2007. The US Federal Reserve is expected to lower the interest rate to help spur some growth in the economy.
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| SharonLi | My computer won't load the easyedit toolbar for some reason. | 0 | Feb 28 2008, 11:14 AM EST by SharonLi | |
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As Inflation Soars, Zimbabwe economy plunges
http://www.nytimes.com/2007/02/07/world/africa/07zimbabwe.html?_r=1&scp=1&sq=As+Inflation+Soars%2C+Zimbabwe+Economy+Plunges&st=nyt&oref=slogin This article describes Zimbabwe's hyperinflation crisis which has severely affected living conditions, jobs, and the government. Though all incomes were raised, this raise was not enough to match up to the severity of the hyperinflation, leading some workers to even go on strike. Hence, productivity decreased leading to lower GDP and more inflation. Costs are "soaring" and this includes raw materials, which would increase production costs and create cost-push inflation. The government also tried to alleviate the situation by selling gasoline to farmers at a cheaper price, but instead of using it, the farmers sold it on the black market to earn money. With the government planning to set certain prices for businesses, the black market is expected to grow even more. The government also tried to make inflation illegal, but the situation has spiraled out of their control. |
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