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.
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