Article: Fed keep rates at record lows; upbeat on economy - http://www.google.com/hostednews/ap/article/ALeqM5g_S5cSA_kwYiaPl9e-FmlENxHSxwD9FC9TU81
Summary: The US Federal Reserve is deciding to keep interest rates steady. The Federal Reserve voted 9-1 to keep interest rates at a record low to help energize and stimulate the US' fragile economy. Thee Fed said that the job market is starting to pick up and that unemployment is stabilizing. They warned however to be very cautious as people are still experiencing sluggish income gains and tight credit which is hurting consumer spending. Commercial real estate is also fragile and bank lending is continuing to shrink.
Connections: Chapter 8 talks about stabilization. Whether its increasing, decreasing or keeping steady, interest rates are one way to stabilize an economy. In this period after the recession, stabilizing an economy is crucial if a country wants to return to post recession levels. The US, which took the worst of the recession, has a long way to go before it makes a full recovery, and the last thing they should do is hike interest rates. Once unemployment rates go down, and the economy becomes more stable, the Fed can once again start raising interest rates.
Reflations: I think that the Fed's decision to keep interest rates at record lows is necesarry for recovery. I don't think there is any other way around it. Keeping interest rates steady will encourage people to spend more money to stimulate the economy, and those who need moneey can borrow more easily thatn before. A commitment to keep interest rates low for an extended period gives consumers further confidence in the Fed's commitment to save the economy.
Tuesday, April 27, 2010
Tuesday, April 20, 2010
Chapter 6: Determination of National Income
Article: Canada's recession less severe than other G7 countries http://www.montrealgazette.com/business/fp/Canada+recession+less+severe+than+other+countries/2909946/story.html
Summary: According to Statistics Canada, Canada experienced a recession less severe than any other G7 nation. Statistics Canada also said that this recession was no where as severe or as long as the downturns that Canada faced in the 1980s and 1990s. During the midst of the recession, Canada's GDP fell by just 3.3% while the United States experienced a 3.7% drop in GDP. The drop in GDP was much worse in Europe and Japan. Despite this recession being dubbed as "The Great Recession", the downturns in the 1990s saw a nearly 5% drop in GDP. Statistics Canada says that the key reason that we did better than most countries during the recession was because Canada's governments and companies had better balance sheets than their industrial counterparts.
Connections: Chapter 6 talks about the determination of national income. GDP is one of, if not the biggest factor in determining national income. Since GDP is a measure of the total goods and services produced by a country in a given year, it is a very good way of determining the amount of income a country generates. Seeing how a country performs during a recession is also a good way to see if a country can still earn income during a recession. The fact that Canada suffered the least of the G7 nations shows Canada's ability to make income while still being safe.
Reflections: I am quite amazed at how Canada suffered so little during "one of the worst recessions since the 1900s". This shows Canada's ability to maintain a well-structured economy. Before the recession, other nations thought of Canada to be too "safe" but now, Canada is marveled for having one of the best economies in the world. I believe that it is very good for Canada to have such a good economy. Investors who are seeking safer investments may go to Canada to search for one, which will put more money into our economy. Immigrants from other countries may be more willing to move to Canada since they have a stable economy and a reliable job market.
Summary: According to Statistics Canada, Canada experienced a recession less severe than any other G7 nation. Statistics Canada also said that this recession was no where as severe or as long as the downturns that Canada faced in the 1980s and 1990s. During the midst of the recession, Canada's GDP fell by just 3.3% while the United States experienced a 3.7% drop in GDP. The drop in GDP was much worse in Europe and Japan. Despite this recession being dubbed as "The Great Recession", the downturns in the 1990s saw a nearly 5% drop in GDP. Statistics Canada says that the key reason that we did better than most countries during the recession was because Canada's governments and companies had better balance sheets than their industrial counterparts.
Connections: Chapter 6 talks about the determination of national income. GDP is one of, if not the biggest factor in determining national income. Since GDP is a measure of the total goods and services produced by a country in a given year, it is a very good way of determining the amount of income a country generates. Seeing how a country performs during a recession is also a good way to see if a country can still earn income during a recession. The fact that Canada suffered the least of the G7 nations shows Canada's ability to make income while still being safe.
Reflections: I am quite amazed at how Canada suffered so little during "one of the worst recessions since the 1900s". This shows Canada's ability to maintain a well-structured economy. Before the recession, other nations thought of Canada to be too "safe" but now, Canada is marveled for having one of the best economies in the world. I believe that it is very good for Canada to have such a good economy. Investors who are seeking safer investments may go to Canada to search for one, which will put more money into our economy. Immigrants from other countries may be more willing to move to Canada since they have a stable economy and a reliable job market.
Tuesday, April 6, 2010
Chapter 5: Economic Indicators
Article: Inflation surprise gives Bank of Canada reason to hike rates earlier: http://network.nationalpost.com/NP/blogs/tradingdesk/archive/2010/03/19/inflation-surprise-gives-bank-of-canada-reason-to-hike-rates-earlier.aspx
Summary: Higher than expected inflation is causing the Bank of Canada to consider hiking interest rates. The CPI is rising at a rate of 4.2% per month. This led to the rise of core inflation above 2% for the first time since December of 2008. A core CPI rate of 4.2% is much higher than the Bank of Canada's ideal rate of 2% per year. This could cause an interest rate increase as early as the 2nd Quarter of 2010. According to Krishen Rangasamy of CIBC World Markets, this is nothing to get worried about and is being overblown like the thought-of deflation of the economy during the recession.
Connections - The book talks about CPI and inflation. These are very good economic indicators and are good ways on seeing the progress of a nation's economy. Inflation is when there is a general increase in the price of goods and services. The CPI index measures the average price of goods and services purchased by a household. As you can see, these 2 indicators are very similar and are both closely related. Problems can arise if the CPI and inflation rise too quickly and the Bank of Canada must act to control the rate of increase.
Reflections: I find it interesting how only 2 years ago, people became so scared that the global economy would plunge into a recession. Now, some are beginning to get concerned over inflation rising too fast! However, I do agree that inflation and core CPI levels need to be kept in check. If it rises too quickly, thse on fied incomes can suffer greatly. I also like the fact that inflation is generally easier to control than a recession. Interest rate changes can quickly keep inflation in check.
Summary: Higher than expected inflation is causing the Bank of Canada to consider hiking interest rates. The CPI is rising at a rate of 4.2% per month. This led to the rise of core inflation above 2% for the first time since December of 2008. A core CPI rate of 4.2% is much higher than the Bank of Canada's ideal rate of 2% per year. This could cause an interest rate increase as early as the 2nd Quarter of 2010. According to Krishen Rangasamy of CIBC World Markets, this is nothing to get worried about and is being overblown like the thought-of deflation of the economy during the recession.
Connections - The book talks about CPI and inflation. These are very good economic indicators and are good ways on seeing the progress of a nation's economy. Inflation is when there is a general increase in the price of goods and services. The CPI index measures the average price of goods and services purchased by a household. As you can see, these 2 indicators are very similar and are both closely related. Problems can arise if the CPI and inflation rise too quickly and the Bank of Canada must act to control the rate of increase.
Reflections: I find it interesting how only 2 years ago, people became so scared that the global economy would plunge into a recession. Now, some are beginning to get concerned over inflation rising too fast! However, I do agree that inflation and core CPI levels need to be kept in check. If it rises too quickly, thse on fied incomes can suffer greatly. I also like the fact that inflation is generally easier to control than a recession. Interest rate changes can quickly keep inflation in check.
Tuesday, March 2, 2010
Chapter 7
Article: Canada Holds Key Rate Steady - http://online.wsj.com/article/SB10001424052748704548604575097422816639734.html?mod=WSJ_latestheadlines
Summary: Canada's interest rates are being held steady at 0.25% following a pledge to keep the key interest rates steady. Canada's Central bank states that the key lending rate will not rise at least until the end of the 2nd quarter of 2010. This decision was made due to the fact that core inflation was slightly firmer than expected.
Connections: Chapter 7 talks about how the government plays a huge role in the money in Canada. The Bank of Canada controls interest rates for different reasons. Keeping interest rates low helps stimulate the economy by encouraging consumers to spend more. If interest rates were high, it would only encourage people to keep their money locked up to collect interest.
Reflection: I agree in what the government is doing to control interest rates. It is a good plan to help stimulate the economy and encourage consumers to spend more. I believe that once public confidence is restored, the Bank of Canada can start raising interest rates again to post-recession levels so that people can begin investing profitably again.
Summary: Canada's interest rates are being held steady at 0.25% following a pledge to keep the key interest rates steady. Canada's Central bank states that the key lending rate will not rise at least until the end of the 2nd quarter of 2010. This decision was made due to the fact that core inflation was slightly firmer than expected.
Connections: Chapter 7 talks about how the government plays a huge role in the money in Canada. The Bank of Canada controls interest rates for different reasons. Keeping interest rates low helps stimulate the economy by encouraging consumers to spend more. If interest rates were high, it would only encourage people to keep their money locked up to collect interest.
Reflection: I agree in what the government is doing to control interest rates. It is a good plan to help stimulate the economy and encourage consumers to spend more. I believe that once public confidence is restored, the Bank of Canada can start raising interest rates again to post-recession levels so that people can begin investing profitably again.
Wednesday, January 20, 2010
Chapter 3 - Government and the Free Market
Article: Global economy healing but on government life-support http://www.theglobeandmail.com/report-on-business/global-economy-healing-but-on-government-life-support/article1436664/
Summary: The global economy is recovering, but is relying on government stimulus, historically low intrest rates and bailouts. The Canadian central banks kept interest rates at 0.25% as they said that increasing the rates could hinder the economic recovery. Also, in order for the U.S to sustain an economic rebound, companies would have to create more jobs for households to have an increase in income large enough to support a sustained increase in consumer spending. The only downside is that governments would have an even larger national debt.
Connections: Chapter 3 explains how governments play a role in the economy and how certain goods are better provided by the government while others are better provided by the free market. This article is showing how governments need to be involved in issues such as economic recovery. Without government support with bailouts and stimulus packages, the economy could plumet back into recession. For example, the Canadian government released its stimulus package called Canada's Economic Action Plan. This plan will pump almost $30 billion into the Canadian economy with funds going to things like infrastructure, reducing taxes, and housing construction. The U.S on the other hand spent $787 billion on their stimulus package.
Reflection: I agree that governments need to help stimulate their economies with stimulus packages and bailouts, but I also think they need to be careful in deciding how much money to spend. Spending too much could actually hurt the economy in the long run. The U.S is already over a trillion dollars in debt and the debt is growing by the second. For example, the government may have to raise taxes to get the money they used to stimulate the economy and to pay down the debt. This would in turn leave taxpayers less disposable income to buy goods and participate in the economy.
Summary: The global economy is recovering, but is relying on government stimulus, historically low intrest rates and bailouts. The Canadian central banks kept interest rates at 0.25% as they said that increasing the rates could hinder the economic recovery. Also, in order for the U.S to sustain an economic rebound, companies would have to create more jobs for households to have an increase in income large enough to support a sustained increase in consumer spending. The only downside is that governments would have an even larger national debt.
Connections: Chapter 3 explains how governments play a role in the economy and how certain goods are better provided by the government while others are better provided by the free market. This article is showing how governments need to be involved in issues such as economic recovery. Without government support with bailouts and stimulus packages, the economy could plumet back into recession. For example, the Canadian government released its stimulus package called Canada's Economic Action Plan. This plan will pump almost $30 billion into the Canadian economy with funds going to things like infrastructure, reducing taxes, and housing construction. The U.S on the other hand spent $787 billion on their stimulus package.
Reflection: I agree that governments need to help stimulate their economies with stimulus packages and bailouts, but I also think they need to be careful in deciding how much money to spend. Spending too much could actually hurt the economy in the long run. The U.S is already over a trillion dollars in debt and the debt is growing by the second. For example, the government may have to raise taxes to get the money they used to stimulate the economy and to pay down the debt. This would in turn leave taxpayers less disposable income to buy goods and participate in the economy.
Friday, November 27, 2009
Chapter 2 - Supply and Demand
Article: Gold to Advance on Lower supply, Increasing Demand, Hambro says
Summary: This article shows how, despite a record price on November 16, gold prices may go even higher due to increasing demand and a lower supply. Although there are certain companies who are able to replace their gold reserves each year, most cannot. This is ultimately leading to a shortage in gold. This along with an increase in demand for gold products is leading to an increase in the price of gold.
Connections: The law of supply and demand is present in almost all goods. When an item is readily available, the cost of it is cheap, but when it is hard and costly to find,(like gold) the cost increases.
Reflection: Gold has been viewed as something that retains its value over time better than cash. This article further supports that by showing that as the economy worsens, more people go to gold because of its safety as an investment. Now with the economic crisis, more and more people are turning to gold instead of cash.
Reflection: Gold has been viewed as something that retains its value over time better than cash. This article further supports that by showing that as the economy worsens, more people go to gold because of its safety as an investment. Now with the economic crisis, more and more people are turning to gold instead of cash.
Tuesday, September 15, 2009
Chapter 1: Scarcity
Article:Record-low sockeye return expected for the Fraser River
Summary: Normally during the course of the summer, millions of salmon travel across the Fraser River. This summer, however, saw less than half of its normal salmon run. No one yet knows the cause of this low run, however they beleive the problem lies in something that happened in the ocean. Runs have been declining steadily since 2007 and 2011-2013 are all expected to be bad years for the salmon industry. Experts have ruled out the overfishing, higher temperature in the Fraser River, and freshwater survival as causes for the low run.
Connections: Scarcity is a major factor in determining the prices of everyday items such as food. When there is little supply of something, the price of the item is increased to make up for the decrease in supply. When something like salmon takes an 86% decrease in spawnning, imagine what that will do to the price! Since salmon is a raw product, it can be made to make many other foods like sushi, and since the price of salmon of so high, restaurants will have to charge more for their sushi which could hurt the restaurant business!
Reflection: I think this problem will be hard to solve since they don't know the cause of the low salmon runs so there's nothing we can really do until they find out the cause. One thing the government could possibly do is to give tax right-offs to those affected by this shortfall. Once they discover the cause of this low run, then they may be able to do more about the problem.
Summary: Normally during the course of the summer, millions of salmon travel across the Fraser River. This summer, however, saw less than half of its normal salmon run. No one yet knows the cause of this low run, however they beleive the problem lies in something that happened in the ocean. Runs have been declining steadily since 2007 and 2011-2013 are all expected to be bad years for the salmon industry. Experts have ruled out the overfishing, higher temperature in the Fraser River, and freshwater survival as causes for the low run.
Connections: Scarcity is a major factor in determining the prices of everyday items such as food. When there is little supply of something, the price of the item is increased to make up for the decrease in supply. When something like salmon takes an 86% decrease in spawnning, imagine what that will do to the price! Since salmon is a raw product, it can be made to make many other foods like sushi, and since the price of salmon of so high, restaurants will have to charge more for their sushi which could hurt the restaurant business!
Reflection: I think this problem will be hard to solve since they don't know the cause of the low salmon runs so there's nothing we can really do until they find out the cause. One thing the government could possibly do is to give tax right-offs to those affected by this shortfall. Once they discover the cause of this low run, then they may be able to do more about the problem.
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