U.S. factories rebound, but Europe, China falter
Speaking of future predictions....
It looks like some numbers came out today indicating that Chinese export demand is slowing down, though still growing. In addition, China is on track to post it's lowest growth rate in 23 years, according to the article.
So why is this important?
These numbers are starting to indicate to the world (and to China) that perhaps the armor is not without its cracks. It wouldn't be too crazy to guess that China knew about these numbers a few days ago, which inspired some of the action taken at the forum on economic reform.
This is by no means a harbinger of doom. Rather, numbers like these simply increase the volume of the little voice inside economists' heads that keeps trying to whisper, "But what if...?"
Ah yes, "if." The least beloved uncertainty in the English language.
So to make things interesting, my little blogger voice is asking "What would happen if China simply collapsed, right this second?"
To answer briefly, the effects would be completely devastating. The sheer amount of foreign investments that would be lost would be staggering, not to mention the disruption in the trade which is crucial to both the US and China's economy. I believe that at this point, we are so interconnected that anything faster than a slow motion decrease in activity from China could greatly threaten our economic recovery.
These numbers aren't necessarily worrying anyone yet, but they do point to the potential for stagnation.
What do you guys think? Is stagnation a legitimate problem that could hurt China? Or if you're feeling more creative, what would happen if China simply collapsed?
Thursday, November 21, 2013
Monday, November 18, 2013
China’s economic reforms: What you need to know - CNBC
China’s economic reforms: What you need to know
The article outlines 5 of the major reforms made by China last week at their economic summit. The changes are being interpreted by analysts as being very substantial.
One of my previous posts said that China was facing many issues, which is still true. However, I think we should be worried by some of the reforms because of their likelihood of greatly enhancing China's economic position.
Basically the reforms are designed to gradually encourage increased private investment and economic activity. The reforms also fix problems with welfare and land owning while supposedly helping to modernize and liberalize the labor force.
When reading about the reforms, I can see how the plan would help China. We shouldn't forget that China is the second-largest economy and has the greatest number of people. Gradually transforming this population into a consumption-based society will generate great wealth for individuals as well as the government (which undoubtedly will continue taking percentages of profit from State-owned enterprises).
Another striking fact is the appearance of political unity. Because of their strict censoring, we would have no idea if different factions in China have different ideas or oppose certain aspects of the reforms. It is just such a marked difference from the globally-broadcast squabbles of the US government. I obviously don't want censorship, but I wish there was some magic way to keep our secrets and disagreements... secret.
Part of me fears the seemingly inevitable future in which China surpasses us as the greatest economy. Yet another part of me questions how long things can last for them. With so many people, and such tight control (no matter how gradually you loosen it), it begs the question if things will eventually burst, and if so, what the result of that will be.
What do you guys think? Is this tendency towards reform indicative of a future where China outpaces the US? Or do you think something is bound to go wrong? Post your thoughts below.
The article outlines 5 of the major reforms made by China last week at their economic summit. The changes are being interpreted by analysts as being very substantial.
One of my previous posts said that China was facing many issues, which is still true. However, I think we should be worried by some of the reforms because of their likelihood of greatly enhancing China's economic position.
Basically the reforms are designed to gradually encourage increased private investment and economic activity. The reforms also fix problems with welfare and land owning while supposedly helping to modernize and liberalize the labor force.
When reading about the reforms, I can see how the plan would help China. We shouldn't forget that China is the second-largest economy and has the greatest number of people. Gradually transforming this population into a consumption-based society will generate great wealth for individuals as well as the government (which undoubtedly will continue taking percentages of profit from State-owned enterprises).
Another striking fact is the appearance of political unity. Because of their strict censoring, we would have no idea if different factions in China have different ideas or oppose certain aspects of the reforms. It is just such a marked difference from the globally-broadcast squabbles of the US government. I obviously don't want censorship, but I wish there was some magic way to keep our secrets and disagreements... secret.
Part of me fears the seemingly inevitable future in which China surpasses us as the greatest economy. Yet another part of me questions how long things can last for them. With so many people, and such tight control (no matter how gradually you loosen it), it begs the question if things will eventually burst, and if so, what the result of that will be.
What do you guys think? Is this tendency towards reform indicative of a future where China outpaces the US? Or do you think something is bound to go wrong? Post your thoughts below.
Thursday, October 31, 2013
US Trade Deficit Widens Slightly to $38.8 Billion - ABC News
US Trade Deficit Widens Slightly to $38.8 Billion
This article is great for a very to-the-point analysis of how our trade deficit with China is doing, and for providing many specific figures.
A trade deficit is when a nation (like the US) is importing more from a certain country (like China) than it is exporting to that same country.
Trade deficits can be harmful because they can give one side an advantage over the other. This is because the nation that is importing is left very vulnerable. For example, if we suddenly could not trade with China, we would be hurt more because we are more dependent on them than they are on us.
While the article discusses how the gap actually widened a bit in August (though only by $0.2 billion), the overall deficit is down 10.8% from last year's. This is a great sign because it indicates that American companies are making more money on their exports to China.
Personally, I think we can do even better. I believe that one way to curb the growing power of China is to slowly close the trade deficit. That way, either by increasing their dependence or decreasing ours (preferable), we will be protected if things go badly. Plus, increased mutual dependence can increase the likelihood of stability in our relations.
However, trade deficits aren't always a bad thing. As a consumer nation, having a trade deficit simply reflects the nature of our current economy which focuses on the sale of goods and services rather than the production of them. Trade deficits with certain regions also may imply we are maximizing efficiency by focusing on regions in which we can make the greatest profit.
What do you think? Should we always try to eliminate trade deficits? Do you think closing the trade gap with China is important? Thoughts appreciated.
Tuesday, October 29, 2013
China's economy: What change can we reasonably expect? - Fortune
China's economy: What change can we reasonably expect?
The article provided above goes into a significant amount of detail about what the future holds for the Chinese economy.
While I am nothing close to an expert on the Chinese economy (part of the reason I have chosen this subject for MP 2), I can take the perspective of an average US citizen. In my opinion, the information we're constantly being fed about China isn't necessarily that accurate, or perhaps is becoming less accurate because of recent events.
As you can read in the article, China is actually facing a substantial amount of issues. Its unique blend of Communist and Capitalist practices put it in a precarious position that is constantly being tipped one way or the other by political goals.
For example, while there are an excessive amount of small businesses, these businesses are unable to get loans from the state-backed banks in order to grow. In addition, many of the economic policies favor the elite and place much more money in their pockets (more detail here).
Also, "In the last five years, China's outstanding credit has grown from 130% to 220% of GDP since 2008." This is a huge number which may prove unsustainable, especially with stagnating growth.
The new leaders of china who came into power about a year ago are set to have a meeting regarding economic policies in early November. While many investors are hoping for a solid and specific plan (which would help reassure markets about Chinese stability and encourage foreign investment), the author of the article doubts any dramatic reforms would be made because they would have the potential to upset the delicate balance upon which the economy is currently resting.
As a competing country, we may feel inclined to see a potential Chinese disaster as a positive. However, we shouldn't forget that much of our production takes place in China and that the nation also holds a very high amount of our foreign debt. A Chinese collapse could spell disaster for the market, yet dramatic long-term reforms could propel them past us in the future, placing our interests, at least from a more casual observer's view, in slight conflict.
The article provided above goes into a significant amount of detail about what the future holds for the Chinese economy.
While I am nothing close to an expert on the Chinese economy (part of the reason I have chosen this subject for MP 2), I can take the perspective of an average US citizen. In my opinion, the information we're constantly being fed about China isn't necessarily that accurate, or perhaps is becoming less accurate because of recent events.
As you can read in the article, China is actually facing a substantial amount of issues. Its unique blend of Communist and Capitalist practices put it in a precarious position that is constantly being tipped one way or the other by political goals.
For example, while there are an excessive amount of small businesses, these businesses are unable to get loans from the state-backed banks in order to grow. In addition, many of the economic policies favor the elite and place much more money in their pockets (more detail here).
Also, "In the last five years, China's outstanding credit has grown from 130% to 220% of GDP since 2008." This is a huge number which may prove unsustainable, especially with stagnating growth.
The new leaders of china who came into power about a year ago are set to have a meeting regarding economic policies in early November. While many investors are hoping for a solid and specific plan (which would help reassure markets about Chinese stability and encourage foreign investment), the author of the article doubts any dramatic reforms would be made because they would have the potential to upset the delicate balance upon which the economy is currently resting.
As a competing country, we may feel inclined to see a potential Chinese disaster as a positive. However, we shouldn't forget that much of our production takes place in China and that the nation also holds a very high amount of our foreign debt. A Chinese collapse could spell disaster for the market, yet dramatic long-term reforms could propel them past us in the future, placing our interests, at least from a more casual observer's view, in slight conflict.
Tuesday, October 8, 2013
People under 25 should not be able to claim welfare, must be forced to ‘earn or learn’: British PM David Cameron - National Post (Canada)
People under 25 should not be able to claim welfare, must be forced to ‘earn or learn’: British PM David Cameron
I couldn't agree more Mr. Prime minister.
At his political party's annual conference, British Prime Minister David Cameron gave a speech regarding his party's economic vision for Britain's future.
The British will be having their next general election in 2015.
In addition to emphasizing conservative economic policies like cutting taxes, Cameron made the point that people who are under 25 should not be able to collect social security benefits.
He isn't saying just throw them out to the wolves, he's saying that young people must be provided with a better alternative than simply living the rest of their life on welfare. Instead of signing up for government programs, young adults need to have real, viable options which can put them on a path to prosperity.
He drew a parallel to the role of a parent. Not many would simply want their children to laze around and become dependent upon them. He says the same theory applies with the government. The government should push and prod the under-25s to fly out of the nest and should help point them towards a good future.
I think this is something the US could take a note from as well. We shouldn't, emphasis on shouldn't, want people, especially the young, to be dependent upon the government. By stressing the importance of making it on your own, and by possibly implementing policies which will encourage this, we may be able to help reform welfare and improve our country.
While I'm not saying everyone on welfare is lazy, etc. etc., I do feel that those who can work should work. My argument applies to them. From my perspective, taking welfare before the age of 25 seems like people who are already giving up. Instead of trying, and yes, perhaps even struggling, on their own, some young people want immediate assistance. This is understandable, because as young people, many of us can be lazy.
But the problem is when those in positions of authority (parents, government, etc.) succumb to our complaints and give in. No. We need to be pushed and maybe even get a little bruised, because in the end, that's the only way that we can all benefit.
I couldn't agree more Mr. Prime minister.
At his political party's annual conference, British Prime Minister David Cameron gave a speech regarding his party's economic vision for Britain's future.
The British will be having their next general election in 2015.
In addition to emphasizing conservative economic policies like cutting taxes, Cameron made the point that people who are under 25 should not be able to collect social security benefits.
He isn't saying just throw them out to the wolves, he's saying that young people must be provided with a better alternative than simply living the rest of their life on welfare. Instead of signing up for government programs, young adults need to have real, viable options which can put them on a path to prosperity.
He drew a parallel to the role of a parent. Not many would simply want their children to laze around and become dependent upon them. He says the same theory applies with the government. The government should push and prod the under-25s to fly out of the nest and should help point them towards a good future.
I think this is something the US could take a note from as well. We shouldn't, emphasis on shouldn't, want people, especially the young, to be dependent upon the government. By stressing the importance of making it on your own, and by possibly implementing policies which will encourage this, we may be able to help reform welfare and improve our country.
While I'm not saying everyone on welfare is lazy, etc. etc., I do feel that those who can work should work. My argument applies to them. From my perspective, taking welfare before the age of 25 seems like people who are already giving up. Instead of trying, and yes, perhaps even struggling, on their own, some young people want immediate assistance. This is understandable, because as young people, many of us can be lazy.
But the problem is when those in positions of authority (parents, government, etc.) succumb to our complaints and give in. No. We need to be pushed and maybe even get a little bruised, because in the end, that's the only way that we can all benefit.
The Menu of Disability Reform Options - National Review Online
The Menu of Disability Reform Options
The most shocking thing about this article is this:
"CBS observes that the budget for federal disability ($135 billion) is greater than the combined budgets of Homeland Security, the Justice Department and the Labor Department."
Are you kidding me?
In what universe does this seem like an acceptable scenario? The article goes on to list a few options for how the US can go about trimming some of the costs of Social Security Disability Insurance (SSDI).
I think the ideas presented are good ones. The first basically suggests that we increase the role of Private Disability Insurance (PDI). This would take the place of SSDI for up to two years and focus on preparing individuals for work. I think this is an excellent idea that wouldn't take too much to implement. If many workers would be able to be off of disability within two years, this strategy could definitely help lessen some of the load on SSDI. Plus, it encourages people to return to work and promotes self-sufficiency.
The second idea suggests raising the taxes for companies where a disproportionately high amount of workers enter SSDI, and lower the tax for companies where a disproportionately low amount enter. This would incentivize companies to try to accommodate workers in order to keep their own costs low. I believe this would ultimately result in higher employment and less abuse of the system.
An excellent third point is made: we should not reduce the benefits received from SSDI so rapidly once a small amount of income is made. This practice discourages people from finding work because the lower-level positions they may start out with (which could eventually lead to higher positions) would actually hurt them by decreasing their benefits. By making the system more tapered, we could help increase employment as people would be less fearful to get back into the workforce.
I'd love to hear your thoughts. I agree with the suggestions, but maybe you don't. Let me know.
Thursday, September 19, 2013
Obama's Illegal Scheme to End Welfare Work Requirements - Washington Times
Obama's illegal scheme to end welfare work requirements
I know that the above link sounds like conspiracy theory if you don't read the actual article. But you should read it, because it's really not.
What the above article does is outline how President Obama's administration directed the Dept. of Health and Human Services to issue waivers to the work requirements set out in the Welfare Reform that occurred under President Clinton.
During the Clinton era, the TANF (Temporary Assistance for Needy Families) law was passed. One section in this law required that at least half of those receiving welfare in a state needed to be working or preparing for work. This provision was purposely placed in a section of the bill that made it impossible to grant a waiver to. Yet, the Obama Administration, instead of submitting its proposal to Congress, where it could have been approved or rejected, illegally circumvented the law and granted exemption from the federal work requirement. Even so, no states who had previously expressed interest in the waiver have actually formally applied for one
So why would we want to drop the work requirements?
The government needs people to need it. While conservative thinkers push for independence and a smaller government, many liberal thinkers (i.e. the current administration) constantly push for further dependence upon the government, particularly on the part of the poor. When individuals work they can obtain a sense of pride as well as an income that no longer needs to be subsidized by the government. This should be the goal: more citizens working and less government spending.
TANF has been deemed one of the most successful domestic policies in modern American history.
The level of those on Welfare has significantly dropped and employment for single mothers and African Americans was at an all-time high thanks to the reforms brought about by the working provision of TANF.
Yet by attempting to grant waivers to the federal work requirement, the Obama administration is indicating that it would rather have individuals stay at home while collecting government benefits.
People respond to incentives. If someone is paid for doing nothing, why should he or she feel compelled to actively pursue work? Yet, if this same person is told that he or she will still have to work or train for work in order to obtain welfare, this person is much more likely to pursue work which will pay more than they are collecting on welfare. This means a better situation for their family, our economy, and our tax revenues.
Supposedly waivers were being considered for states who wished to try out experimental programs for increasing job placement, and the government would do a thorough investigation to ensure legitimacy. However, in today's era of scandals (IRS, Benghazi, etc.) the phrase "thorough investigation" has lost a lot of its credibility.
We have a program that has demonstrated results over many years. Why would we change it and replace it with an alternative that subverts what our goals as a nation should be? Especially when that change is done in a way that has specifically been stated as illegal (the specifics are here). I wholeheartedly support keeping a work requirement, and it's frustrating when rules are put in place and simply broken without legal consequences. The government's job is to implement the laws that are passed. Not to find ways to get around them.
I know that the above link sounds like conspiracy theory if you don't read the actual article. But you should read it, because it's really not.
What the above article does is outline how President Obama's administration directed the Dept. of Health and Human Services to issue waivers to the work requirements set out in the Welfare Reform that occurred under President Clinton.
During the Clinton era, the TANF (Temporary Assistance for Needy Families) law was passed. One section in this law required that at least half of those receiving welfare in a state needed to be working or preparing for work. This provision was purposely placed in a section of the bill that made it impossible to grant a waiver to. Yet, the Obama Administration, instead of submitting its proposal to Congress, where it could have been approved or rejected, illegally circumvented the law and granted exemption from the federal work requirement. Even so, no states who had previously expressed interest in the waiver have actually formally applied for one
So why would we want to drop the work requirements?
The government needs people to need it. While conservative thinkers push for independence and a smaller government, many liberal thinkers (i.e. the current administration) constantly push for further dependence upon the government, particularly on the part of the poor. When individuals work they can obtain a sense of pride as well as an income that no longer needs to be subsidized by the government. This should be the goal: more citizens working and less government spending.
TANF has been deemed one of the most successful domestic policies in modern American history.
The level of those on Welfare has significantly dropped and employment for single mothers and African Americans was at an all-time high thanks to the reforms brought about by the working provision of TANF.
Yet by attempting to grant waivers to the federal work requirement, the Obama administration is indicating that it would rather have individuals stay at home while collecting government benefits.
People respond to incentives. If someone is paid for doing nothing, why should he or she feel compelled to actively pursue work? Yet, if this same person is told that he or she will still have to work or train for work in order to obtain welfare, this person is much more likely to pursue work which will pay more than they are collecting on welfare. This means a better situation for their family, our economy, and our tax revenues.
Supposedly waivers were being considered for states who wished to try out experimental programs for increasing job placement, and the government would do a thorough investigation to ensure legitimacy. However, in today's era of scandals (IRS, Benghazi, etc.) the phrase "thorough investigation" has lost a lot of its credibility.
We have a program that has demonstrated results over many years. Why would we change it and replace it with an alternative that subverts what our goals as a nation should be? Especially when that change is done in a way that has specifically been stated as illegal (the specifics are here). I wholeheartedly support keeping a work requirement, and it's frustrating when rules are put in place and simply broken without legal consequences. The government's job is to implement the laws that are passed. Not to find ways to get around them.
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