Global Support, Internal Challenges – Current China Situation

The most arduous undertaking for any country or economy is the structural change and the act of rebalancing. The Dragon Economy has been focused on these for almost half a decade now – trying to transform its growth model, which is today based largely on exports and high investment into been driven by its own consumers. Accomplishment is indispensable if the economy wants to avoid the feared middle-income trap. It is the slowdown that most growing economies encounter when they reach the income levels comparable to that of  China as of today.

The domino effect has been diversified.

What Has Happened to The Commodity Prices, Why Are They Falling?

Oil prices have plummeted ~ 50% since mid of this year, worthy news for oil-importing nations, but evil news for exporting countries such as Russia, Venezuela, Nigeria, etc. 

Some attribute the price drop to the US shale-energy boom and others cite OPEC’s failure to agree on restrictions for the supply.

But that only seems to be part of the whole story. The price of iron ore, gold, and silver are down too. And let’s not forget the same is true for sugar, cotton, and soybean prices. In fact, the truth, not glanced by many is that most of the dollar commodity prices have fallen since the first half of the year. Not forgetting that a host of sector based factors affect the price of respective commodity, the fact that the decline is so broad – as is often the case with giant price swings, only suggests that macroeconomic factors are at labor.

So, what macroeconomic factors are we talking about, that could be driving down the commodity prices? Imaginably it is deflation. Though inflation is low, and negative in a few countries, something more is probably going on, because commodity prices are falling relative to the overall price level. In other words, real commodity prices are falling. 

Investment: Can it save Europe?

As opposed to the general assumption, economic growth in Europe remains disappointing even today. Virtually all Union members are expected to post higher output in the current calendar year but, according to the IMF’s latest projections, the growth rate in the eurozone will barely exceed 1%. In addition, whereas the British economy is displaying strong momentum of growth, its GDP has only now surpassed the pre-crisis mark. In per capita terms, European Union is still poorer than it was seven years ago.

In this framework, a new policy target has emerged INVESTMENT. Italian Prime Minister, who currently holds the Union’s presidency, has pushed for it, and Juncker, president-elect of the European Commission, has called it his first priority. His goal for the next three odd years is to mobilize an additional $134 billion per year, which is approximately 0.75% of GDP for public and private investment.

Investment is certainly a diplomatically appealing melody. It can hitch Keynesians and supply-side advocates; protagonists of public spending and supporters of private business can stand together and archaeologically low interest rates unquestionably provide a favourable opportunity to finance new ventures. However, it does not automatically follow that governments should pour money into public infrastructure projects or foster private investment by adding further incentives amid already auspicious market conditions. At a clock when incomes have shrunk, public resources are scarce, and debt burdens are substantial, plans to stimulate investment should have to be carefully dissected. Even seemingly, purposeful projects can backfire: a few years ago, Europe’s well-intentioned efforts to stimulate renewables resulted in a solar energy bubble of macroeconomic proportions. Although cutting greenhouse-gas emissions is necessary, the current generation of relatively inefficient renewables should not be deployed at the expense of the development of more cost-effective technology.

Footpath to Selflessness

Biologist at the Harvard, Mr Nowak has written, Cooperation is the architect of creativity throughout evolution, from cells to multicellular creatures to anthills to villages to cities.

As humankind now tries to solve global challenges, which create on daily basis, we must also find new ways to cooperate in some form or other. The basis for this cooperation must be selflessness (the toughest of all to achieve).

The aspiration to help other kinds without expectation of reflection for ourselves is not just a noble ideal. Generosity of that kind raises the quality and promotes the connotation of our lives, and that of the descendants to come; in fact, our survival may even depend on it. We must have the perceptivity to recognize this, and the fearlessness to say so.

The world in this case faces three monumental challenges:

• Ensuring everyone good order living conditions
• Improving life happiness
• Protecting our globe

Conventional cost-benefit thinking struggles to reconcile these necessitates, because they span different time frames. We worry about the economy from day to day; but we consider our delight over the course of a lifetime, while our concern for the atmosphere will mainly benefit future generations.

How Technology Ruins the Middle Class

Since the Great Recession officially ended, productivity of American work force and those getting lucky enough to have jobs has risen smartly. Nevertheless, United States still has approximately two million fewer jobs than before, the unemployment rate is stuck at levels not seen since the early 1990’s and the proportion of adults who are working is four percentage points off its peak.

This job drought has spurred pundits to wonder whether a profound employment sickness has overtaken and from there, it’s only a short leap to ask whether that illness isn’t productivity itself. Have we mechanized and computerized ourselves into obsolescence?

Are we in danger of losing the “race against the machine”?

Are we becoming enslaved to our “robot overlords”?

Do “smart machines” threaten us with “long-term misery”?

Have we reached “the end of labour”?

Of course, anxiety, about the adverse effects of technological change on employment has a venerable history. In the early 19th century, a group of English textile artisans staged a machine-trashing rebellion. Their brashness earned them a place, which was rarely positive in the lexicon, but they had sincere reasons for concern.

Canada in Darkness: Facing the Wave

Canada, a country having GDP of 1.7 trillion US dollars, sharing its borders with the Global leader and having a currency, which is amongst the most traded in the world. The mingled nature of this country certainly makes an impact on the global economy and any happening around the world should ideally be benefiting or hammering this economy too. Nevertheless, the said has not been the case, the monetary and fiscal policy have been so strong and vibrant that the Global Financial Crisis too did not affect this economy as it would have to other countries.

In recent times, the table seems to have turned. Investors are reacting in a different way than ever. Many investors have started shorting Canadian stocks & dollars and have resorted to buy Canadian government bonds in anticipation of a prolonged downturn. All of a sudden, why this perception. There are certainly substantial risks, which are faced by the Canadian Economy, but the forecast does not justify a prolonged Canadian downturn.

Investors seem to think that the Canadian Market is moving towards dark and duskiness. As American economy picks up after volatile decision on QE, bearish trades known as the great white shorts are gaining popularity in Canada. The question arises, are the investors thinking and acting rational in an expectancy that Canada is about to move from being a champion to chump?

Breadwinner & Rising Price Story of the States

“US is healing... if the Fed doesn't screw it up”, the buzz line is in the news all over, and the question arises, is there anything left to screw up, that the media is still hoping them not to screw it up. Absurd statement but that is the truth.

Fed Chairman Ben Bernanke, God of the Modern World, one statement on an issue and markets all around the globe react. His stances in recent times, which is challengeable and the same shall form the crux of this article, being that ‘quantitative easing shall have to continue until sometime now’. Obviously, after making a withdrawal statement in June, the reasons for reversal had to be issued, and that was, the dual mandate needs to be met, unemployment and inflation, was this not known before?

Both the mandates mentioned for continuing easing for a probable better present but surely an unfit future are vague and in the air. Unemployment is not high, its skyrocket and inflation is not low, it is already over the roof so, what mandates are we talking of?

Our god says, inflation in the United States needs to be higher. This seems to be an event of purposely hurting the middle class, which has been the game since Globalization in 1980’s. The official inflation rate in the United States is sitting at about 1% and yes, if that is what actually exists, then what Bernanke insists that such a low rate of inflation is not good for the economy certainly makes sense. However, what will never be admitted is that the official inflation rate is a counterfeit. The way inflation is calculated in America has changed more than 20 times since 1980’s. If we calculate the way inflation was calculated back in 1980, it would be a stunning 8%. However, carefree people, who have many other things to worry about, do not happen to notice and the claim that inflation is "too low" sustains.

Unemployment Crisis: There Are Millions in G20 Nations too

Unemployment is in current parlance only associated with the United States of America; in effect, the other countries of the world are either ignored or forgotten. Did we know, the total number of unemployed in the G-20 nations is approximately 100 million and the same increases every passing day?

Therefore, are we now seeing the truth of a systemic unemployment crisis, which is not only restricted to America but also faced by many other economies of the world?

The question arises, what is really causing this crisis and secondly, is there trust that the same will be turned around? To our fate, which is unfortunate, several long-term trends have been formulating since years and have paved way for bringing us to the point we are today.