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Inequality in Indonesia at record levels: World Bank

Inequality in Indonesia at record levels: World Bank | Macroeconomics | Scoop.it
Inequality in Indonesia has reached historical levels, according to a report revealed by the World Bank in Jakarta on Tuesday.
Perse Economics's insight:

FP: Inequality in Indonesia has reached all time highs, its Gini coefficient has risen by 400% since 2000, however the level of absolute poverty has fell resulting from sustained high growth. 

One of the main reasons stated for the increase in inequaulity was low resiliency of the poor, this could be amplified by worse job oppourtunities in an unfair labour market.

The world bank has recommended that the Indonesian government increase welfare spending for the poor, primarily on public services and skills training. 

Approximately 40% of the indonesian population are clustered just outside the absolute poverty bracket, possibly blurring absolute poverty stats.

 

However is it important that inequality is increasing if the number of people in absolute poverty is decreasing as well? 

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From Colombia to New York City: The economics of cocaine

From Colombia to New York City: The economics of cocaine | Macroeconomics | Scoop.it

"As we analyze the Mexican cartels, we recognize that to understand their actions and the interactions between them, we need to acknowledge that at their core they are businesses and not politically motivated militant organizations."

Perse Economics's insight:

GR: This article reviews and analyses the economics behind cocaine trade in southern and central America, looking at the Mexican cartel as A business instead of a gang, or politically motivated crime-organisation. 

Looking at the pricing behind cocaine trade we can see that in 1990 1 kg of cocaine leaf could be bought for $1.30, and with 1 kg of cocaine requiring 450-600kg the price to produce cocaine could be between $585-780 dependent on labour cost. This kg can then be sold in the Mexican jungle for $2,200 or for $5,500 at columbian ports, or $10,000 in central america.

However to maximise profits the cartel has cut out the middle man transporting the cocaine to central america themselves utilising economies of scale. And now they can buy 1kg for $2,200 from cocaine producers in Mexico, selling the 1kg for $24,000 to their partners in the US for $24,000 making a 990% profit.

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China’s Unwilling Consumers

For several years, Chinese leaders have been pursuing economic “rebalancing”: The country’s longstanding growth model, based on investment and exports, is to be replaced by one based on services and domestic consumption. Unfortunately, household spending will not be driving the economy anytime soon.
Perse Economics's insight:

SF- This article draws on the contrast between how China makes up it's AD (primarily from Investment and exports) and how developed countries such as the UK make up their AD through domestic consumption. I think it's interesting to think of the implications of the fact that China's low level of consumption may be generational and that we should expect China to become a net consumer rather than a producer. My speculation predicts this would lead to greater future inflation rates and greater strain on the environment as more resources are extracted which could be devastating in the fight against climate change and environmental degradation. The article also mentions (indirectly) how high GDP does not lead always lead a high standard of living as despite China's high GDP people are still insecure about their future as there is a weak wealthfare state in China and no pension scheme. This results in a high propensity to save and therefore low levels of consumption which could be seen as equivalent to a low standard of living. 

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China and South Africa in $6.5bn worth of deals - BBC News

China and South Africa in $6.5bn worth of deals - BBC News | Macroeconomics | Scoop.it
China and South Africa sign deals and loans valued at $6.5bn (£4.3bn), with the focus on building infrastructure in the African giant.
Perse Economics's insight:

CT - Over the past half of the year, Chinese investment in Africa has decreased by 40%. As well as this due to China’s economic slow-down and decreasing demand, many African companies in exporting were hit hard.  However, recent deals and loans have been announced between China and Africa that are valued at $6.5bn. The main focus of the deals are on infrastructure ($2.5bn to South Africa’s state-owned rail operator). A rise in infrastructure will increase employment levels. This will also result in higher consumption due to the multiplier effect. Hopefully this will help strengthen the African economy. 

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China’s Latest Five-Year Plan

China’s Latest Five-Year Plan | Macroeconomics | Scoop.it
Last month, the Chinese government released a preliminary summary of its 13th Five-Year Plan. While this is an important document for understanding where China is headed in the 2016-2020 period, China’s five-year plans just aren’t what they used to be.
Perse Economics's insight:

FW - China has announced its 13th five year plan, which highlights how the market structure there has changed since the 1980s. Previously, the plan would be a strict outline of industrial expansion when all firms were by law public and state owned enterprises, however the shift to decentralised and private firms means the plan acts more as a target and details the state in which politicians hope the economy will be in, by 2020. Aims include improving the overall standard of living, achieving GDP growth of 6.5%, and improving air and water quality. However, the article outlines how the development of China’s economic structure more towards services and household consumption, will create difficulties in maintaining stable growth. For example, the working age population is no longer increasing as a consequence of the one child policy, and stricter environmental policies use resources and impede growth.

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USA And Europe – The Ups And Downs Of Economics - iExpats

USA And Europe – The Ups And Downs Of Economics - iExpats | Macroeconomics | Scoop.it
The clear divergence in economic growth between the USA and Europe has become more apparent with announcements from leaders of the central banks on both sides of the Atlantic
Perse Economics's insight:

KS: The article explains that the economies of the US and Europe are diverging further, shown by recent announcements by the head of the European Central Bank, Mario Draghi, and Federal reserve chair Janet Yellen. This is relevant to the course as it shows how economic growth affects employment, inflation, and the central bank's decision to alter interest rates as a consequence. Essentially the US's economy is growing successfully while Europe's single-currency zone is struggling, and inflation forecasts have already been lowered. Eurozone countries therefore need to recalibrate their policies.

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Perse Economics's comment, December 4, 2015 6:50 AM
What do you think the main causes of the Eurozone slowdown are? Do you have any ideas of policies that could be used to stimulate the Eurozone economies? Do you think that the federal reserve should raise rates?
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Why Negative Interest Rates Are Becoming the New Normal

Why Negative Interest Rates Are Becoming the New Normal | Macroeconomics | Scoop.it
Tools that were academic thought experiments a decade ago are now becoming standard-issue parts of the policy tool kit for central banks.
Perse Economics's insight:

PS: The ECB set a negative interest rate in summer 2014, and has recently lowered it to -0.3%.  A negative interest rate means that the bank pays you to borrow money; this means it should act as an effective stimulus to borrowing and investment.  However, it also means that you have to pay the bank to hold your savings.  It would make more economic sense to simply hold your savings in cash at home.  However, this is typically very impractical, and the security of keeping your money at the bank may outweigh these costs.  This challenges the long-held orthodoxy of the zero lower bound (that long-term interest rates can't go below zero), and suggests that in a world where cash is less and less usable a negative interest rate can credibly be set.

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Venezuela: Economy on the brink? - BBC News

Venezuela: Economy on the brink? - BBC News | Macroeconomics | Scoop.it
The BBC's South America Business Correspondent Daniel Gallas takes a closer look at Venezuela's economy ahead of key legislative elections
Perse Economics's insight:

SM 

Oil accounts for more than 90% of Venezuela's revuenue made from exports, so the continuing low oil prices mean the country has the highest inflation rates in South America. There is also a huge shortage of supplies, such as 70% of medication is short, meaning that long queues occur, with it sometimes taking hours to get inside supermarkets because of these queues. This means Venezuela's economy is declining. 

Also there are 3 official exchange rates as well as the illegal black market, with most Venezuelans using the black market as it is hard to recieve authorization to buy dollars at the preferential rates.

With an estimated 73% of Venezuelans living in poverty, the country is in desperate need of a stable economy.

 

Do you think Venezuela's economy is on the brink? Drop a comment below as I would love to listen to your insights and opinions!

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Perse Economics's comment, December 4, 2015 6:51 AM
Very interesting article. I would have to agree that things aren't looking so jolly for the Venezuelans! Especially as there is such a low oil price and an extremely high inflation rate.
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Why the U.S. and Europe are taking such a different approach to their economies

Why the U.S. and Europe are taking such a different approach to their economies | Macroeconomics | Scoop.it
Federal Reserve and European Central Bank expected to adopt opposing measures
Perse Economics's insight:

PS: For the first time since 2008, there is expected to be a divergence of monetary policy from the worlds major central banks, with the Fed in the US set to raise interest rates this month while the European Central Bank is stepping up its quantitative easing and lowering its already-negative interest rate.  Expansionary policy in the eurozone and contractionary policy in the US would cause the value of the dollar to rise against the euro even further than it has in recent months; it is argued that the resulting negative effect on US exports could reduce the need for a Fed rate rise in the first place.  However, domestic conditions make this divergence very likely, with the US's steady growth and tightening labor market looking very different to the eurozone which is still barely out of recession.  As the global economy becomes more interconnected, and the volume of trade grows, it will become increasingly difficult for central banks to pursue differing monetary policies in this way.

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IMF to include China's yuan in SDR currency basket

IMF to include China's yuan in SDR currency basket | Macroeconomics | Scoop.it
The yuan's inclusion in the SDR — which will take effect next October — marks another step in China's global economic emergence.
Perse Economics's insight:

HB-

The Yuan will be the third largest currency in the SDR system with a weighted value of 10.9%. After a sudden depreciation in August, the People's Bank of China promises there will be no more "sudden changes" in the Yuan's value.

 

But is this good for China? Let me know...drop a comment below.

 

*lemonlife

 

LT-

After being added to the IMF basket, China's economy will see little difference in the short-run but will gain more political and therefore economic benefits over time. Being part of the IMF currency basket provided China with the honour and sense of respect from the International Monetary Fund, with the YUAN now weighting 10.9%, along side the USD at 41.7%, EUR at 30.9%, YEN at 8.3% and GBP falling to 8.0%.

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Perse Economics's comment, December 4, 2015 5:58 AM
SM- No
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Brazil's recession deepens in third quarter - BBC News

Brazil's recession deepens in third quarter - BBC News | Macroeconomics | Scoop.it
Brazil's economy shrank by 1.7% in the third quarter of the year deepening the country's worst recession in 25 years.
Perse Economics's insight:

TMD: Brazil’s economy is at an all time low, resulting from a decrease in investment, rising inflation (meaning that there is less consumption), drought, and corruption scandals. However, the main factor is that as China goes, so does Brazil as they received major funding and orders from the Chinese economy and most of their trade relied on China. Their other major trading partners are also facing problems with consumer demand, which may further prolong Brazil’s road to economic recovery. 

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Is China a brake on Africa's progress? - BBC News

Is China a brake on Africa's progress? - BBC News | Macroeconomics | Scoop.it
What does China's slowing economy mean for Africa?
Perse Economics's insight:

Luoying: Sub-Saharan Africa’s economic growth has slowed to the its lowest since 1999, which can be seen as a result of China’s negative growth. This is significant as China has been a major investor within Africa, mainly in infrastructure but more recently, in its natural resources. Nowadays, for precious metals, the price rise was above 300%, and for agricultural commodities over 100%. Chinese low demand for commodities was a key force behind these rising prices. Now Zambia has been forces to raise its interest rates to 15% in attempt to curb inflation, which is as a result of the weakened currency from a decline in copper exports. How strongly can we correlate this to the state of China's economy? How can Africa recover from this independently? I love Andrey 

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Multiplier Evidence and Multiplier Denial

Multiplier Evidence and Multiplier Denial | Macroeconomics | Scoop.it
European austerity was special.
Perse Economics's insight:

TGW- Recently, although people have challenged the Multiplier effect, this has been proven to be effective when the perfect conditions arise (which is very rare) ; just because there is no proof for the multiplier effect over a few years, does this mean it doesn't exist? With austerity rife throughout Europe, of course it doesn't. 

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Trying to count China's jobless

Trying to count China's jobless | Macroeconomics | Scoop.it
New research claims that China's real unemployment rate might be more than twice as high as officially reported.
Perse Economics's insight:

AW-The article discuses how China have been disguising their real unemployment rates, by only registering citizens who apply for the Honkou schemE negating the majority of the population. 

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Is cycling putting the economic recovery at risk?

Is cycling putting the economic recovery at risk? | Macroeconomics | Scoop.it
People are using personal loans to fund their cycling habit – but the potential economic consequences aren't as big a pothole in the road to prosperity as you may think, writes Andrew Critchlow
Perse Economics's insight:

JO- This article introduces the idea that cycling may have a negative impact on the economy as a result of large loans being taken out in order to pay for an expensive new bike which immediately loses value as soon as you ride it- therefore meaning that if you re-sell it, it will no longer cover the re-payment of the original loan. This can then have a large impact on the firms lending the money as there is now a large percentage of the total loans given that will be used to fund bikes - and therefore a larger percentage of people that may not be able to re-pay their loans as a result.

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UK student numbers surge in Netherlands - BBC News

UK student numbers surge in Netherlands - BBC News | Macroeconomics | Scoop.it
Dutch universities are running open days for English students wanting lower tuition fees.
Perse Economics's insight:

Many students are now debating the benefits of going to a Dutch University. Going to a university in another European country helps to not only improve their chances in the job market as you return with better language skills, a good education, willingness to learn and an improved perspective of other cultures, but they don’t leave university with huge debts that they will be paying back for years. If everyone returned having learnt a foreign language, we would be able to increase our productive capacity, working with other countries, however a negative is the chance of these students leaving our economy for good if they enjoy living abroad. Having read the article I think that for the economy there is a risk, but my overall judgement is that there are many positives that outweigh these negative effects. - ISMC

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Eurozone inflation data raises prospect of fresh ECB stimulus

Eurozone inflation data raises prospect of fresh ECB stimulus | Macroeconomics | Scoop.it
European Central Bank could expand quantitative easing and cut deposit rate further, while Fed is expected to raise US rates after strong job growth figures
Perse Economics's insight:

PG: In light of modest inflationary figures of around 0.1% in November, the ECB has decided to expand its QE project, whereby the ECB creates electronic money, using it to buy back government bonds form banks. Banks then have more money, which they can loan out.

 

At the same time, the ECB further cutting its deposit rate. Its deposit rate is currently at -0.2%, meaning banks have to pay to have reserves held by the ECB. The hope is to encourage banks to increase lending, boosting investment.

 

Meanwhile, the US Federal Reserve is likely to up interest rates, in part because of strong employment figures (private sector employment up 217,000). A testament to US economy's recovery, especially when compared to slowdown in China and weaknesses in Europe.

 

Will the prospect of a rise in interest rates in the US cause a massive panic in the markets, as it did in September?

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Study finds honesty varies significantly between countries - Press Release - UEA

Study finds honesty varies significantly between countries - Press Release - UEA | Macroeconomics | Scoop.it
Research from the University of East Anglia has found that people’s honesty varies significantly between countries.
Perse Economics's insight:

WC - A study that shows how a country's honesty rates effects their economy. There are some flaws with the study, such as a 5$ reward is worht significantly more in poorer countries such as india, which encourages people to lie more. Full paper here https://www.uea.ac.uk/documents/3154295/7054672/Honesty+paper/41fecf09-235e-45c1-afc2-b872ea0ac882

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How climate change could make you poorer:

How climate change could make you poorer: | Macroeconomics | Scoop.it
Temperature change will leave the average income around the world 23% lower in 2100 than it would be without climate change
Perse Economics's insight:

A global temperature increase of as little as 1.5 degrees celsius could stimulate a global GDP loss of up to $50 trillion. These figures are already shocking as they stand, and they might be a huge understatement. The fact  that the figures are based on global temperature rises in the past means that they might be woefully innacurate, because the civilised World has never experienced a temperature rise this catastrophic.

 

In my opinion, climate change is likely to completely wreck the global economy, due to many economically important cities such as New York and Hong Kong being lost in the rising sea levels. Are you worried about the imminent consequences of climate change? Leave a comment below. 

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A post-Brexit London would need fewer new homes, says housebuilder

A post-Brexit London would need fewer new homes, says housebuilder | Macroeconomics | Scoop.it
London-focused upmarket housebuilder Berkeley said on Friday the capital would need fewer new houses if Britain were to leave the European Union due to what it believed could lead to a slowdown in economic growth.
Perse Economics's insight:

JJR- This article claims that if Britain is to leave the EU in 2017, demand for housing in London from foreign investors would drop. The article states that "London's status as a world city would be diminished", which might slow down the city's rate of growth. This could have a significant contractionary impact on the number of homes that need to be built in the UK capital, however it could also affect other large cities such as Birmingham, Manchester, and Leeds.


What do you think the other consequences of the Brexit would be? Your view matters! Don't hold back! Leave a clever comment below.

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Perse Economics's comment, December 4, 2015 6:31 AM
Very interesting and well chosen article. I think that while the housing market would be effected, there are also many positaves of leaving the EU that should also be taken into consideration
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Yellen says US economy can handle rate increase - BBC News

Yellen says US economy can handle rate increase - BBC News | Macroeconomics | Scoop.it
Federal Reserve chairwoman Janet Yellen tells the US Congress that the economy is reaching a point where it can handle an interest rate rise.
Perse Economics's insight:

DJM-

After the 2008 financial crisis, the federal reserve cut interest rates significantly to stimulate the US economy.

 

Recent data has convinved Janet Yellen, the chairwoman of the fed, that the US economy is now at a point of recovery where it can handle a rate rise.

 

However, with a slowing global economy, strengthening dollar and fears of terrorism, do you think a US rate rise is appropriate? Comment below.

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UK services growth hits four-month high, PMI survey shows - BBC News

UK services growth hits four-month high, PMI survey shows - BBC News | Macroeconomics | Scoop.it
Growth across the UK's services sector was at its fastest in four months in November, according to the latest Markit PMI index.
Perse Economics's insight:

JAMI: The growth across the UK service sector rose to 55.9 in October, according to the latest 'Markit purchasing managers' index. This is significant as is rose over the 50 mark, showing that the service sector is expanding. This shows that the UK is globalising further, specialising in its service sector, which accounts currently for 79% of GDP.  

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Japan Economy Contracts 0.8%, Returning to Recession

Japan Economy Contracts 0.8%, Returning to Recession | Macroeconomics | Scoop.it
The economic data was worse than economists expected, and put the country into its fifth recession since the financial crisis of 2008.
Perse Economics's insight:

AJD: With the world's third largest economy, Japan, falling back into recession for the fifth time since the financial crisis, will Japan ever be able to sustain positive growth. However, it is questionable as to whether this "technical" recession is just part of the economic cycle, or that negative growth will become a general trend for Japan, due to their contracting and ageing workforce.

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UK foreign investment at lowest for a decade - BBC News

UK foreign investment at lowest for a decade - BBC News | Macroeconomics | Scoop.it
UK firms cut their foreign investment by the largest amount in a decade last year, official figures show.
Perse Economics's insight:

JT: With overseas investment dropping by 10 billion from the UK over the past year, Britain can no longer rely on these investments abroad to counter our traditionally poor level of exportation. 

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Australian economy picks up pace on exports - BBC News

Australian economy picks up pace on exports - BBC News | Macroeconomics | Scoop.it
Australia's economy grows more than expected, picking up pace in the third quarter as exports rose.
Perse Economics's insight:

The Australian economy is growing more than expected due to an increase in exports.  Interest rates are maintained at a record low of 2%.

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