February 2007 - Posts

• Good News

  February 21, 2007 The Organization for the Cooperation and Economic Development, in their annual in Paris meeting, indicated that the 30 countries that conform the organization registered a 0.9% increment of their GNP during the fourth trimester of 2006. Italy among those countries showed a major increase of 1.1% during that period (the best in 7 years). Japan’s economy grew beyond 0.1% in between July and September to reach 1.2% in between the months of October and December. The European Union went from 0.6% in the third trimester to 0.9% in the fourth while in the 13 countries of the Euro Zone it went up from 0.5% to 0.9%, the United States economy meanwhile grew, in the fourth trimester, 0.9% from a 0.5% in the third trimester; good news in general we hope it stays that way. Posted Feb 22 2007, 12:44 AM by amparo with no comments

• The World Economy

  February 20, 2007 According to the Bundesbank the world economy is going through a very good moment, partly due to the expansion of the emergent economies and also because of the present up swing economic transition that first world industrialized nations are going through. The Bundesbank’s analyst believe that the high level of exports Germany experienced thru 2006 contributed to the growth of the German economy. The monthly report of the German Bank from Frankfurt emphasized that in Latin America, Venezuela and Mexico registered high level of profits from the oil business (production) while other Latin countries made good earnings by the sales of commodities to countries like China and India. To the bank 40% of exports in Latin America were related to oil production and sales. In the case of Brazil, this country during the fall of 2006 demonstrated an accelerated industrial growth. In reference to other parts of the world the Bundesbank mentioned the prominent growth in the South and the East of Asia. Where China’s GNP for instance went up to 10.5 during the fall of 2006 in comparison to the same period of 2005. The Bank finally indicated that the IMF forecasted for 2007 an average global economic growth of 5.0% and amount compatible with their own point of view. Posted Feb 22 2007, 12:39 AM by amparo with no comments

• This Weeks Economic Report

  The last University of Michigan Consumer Confidence index report that comes out by mid February was of 93.3, a figure inferior to the one from January. The amount expected by analyst for February was of 96.0. On the other hand wholesale prices showed in January the worst fall of the last three months, what probably caused an inflation decline of 0.6 last month. The low inflation rate was also due to a 4.6% fall in the cost of gas, natural gas and homes heating oil. Finally the Department of Commerce was kind enough to let us know that New Homes and Building Construction declined 14.3% during January. We could say that the economy is moving down as expected in what seems to be a soft landing process. Posted Feb 17 2007, 03:34 PM by amparo with no comments

• Deficit

  Our deficit for 2006 was of 763 thousand and 600 million dollars an amount that established a new record according to the Commerce Department. The deficit in the goods and services account reached 61 thousand 200 million dollars in December, 3 thousand 100 million more than the year before. In a recent article I mentioned that globalization had weakened our internal economic structure although strengthen the outer shell(investment abroad). Whole industrial sectors have been dismantled in order to transfer production to foreign countries where manufacturing is cheaper. The phenomenon of outsourcing has surely hurt our inner core and that’s why a degree of governmental protection might be necessary if we want to keep our economy from loosing more power, and also the country becoming more indebt. We no longer can trust the acquisition of more advance technology in order to improve production capacity since that same technology can go to China as well. India on the other hand is becoming a growing challenge to the information technology and service area. Japan long ago took away our leadership in the automotive and electronic sector. We need protection now while we figure a new strategy and before it is too late. Posted Feb 14 2007, 03:27 PM by amparo with no comments

• Environmental problems and Human Needs

  Maslow established in his theory of human needs the following categories: physical ones (physiological in nature), security (order, predictability and a safe environment), belonging (feelings of group belonging), self esteem and self actualization. This categorical-pyramidal need’s ordered level goes from the most important to the least in relation to the individual’s survival. The first three levels are related to basic survival needs while the last two are needs that unfold from the three first. The last two are related to our personality growth and development. In what concerns the first three it’s satisfaction releases tension while the last two are open and is in it’s fulfillment where culture plays a larger role. In a world with enormous environmental problems that threaten our survival we need to examine Maslow’s scale of needs(from a biological point of view and taking also into consideration how culture changes its fulfillment) making it part of every modern economic theory. Posted Feb 12 2007, 03:25 PM by amparo with no comments

• Carry trade

  The Yen weakness could owe its cause to a giant speculative Bubble that is deflating too quickly and that could bring about a degree of chaos to the financial world. The main factor that helped create this Bubble is known as a "carry trade". Japan has one of the lowest interest rates (0.25%) in the world, which shows a great difference in between this country and other large world economies. Some investors borrow Yens at a very low price and place this money in markets around the world that pay a considerable higher interest, afterwards they pay off the Japanese's Bank and keep the difference. Because this practice known as carry trade is such a great business it has grown considerably, some analyst consider the figure to be (the total amount) around 250 billion dollars while some others believe it to go as far as one trillion dollars; an amount equivalent to the GNP of Canada or Spain. A sudden increase in the Yen's value could bring serious problems to the economies of countries like Iceland or New Zealand who offer high interest rates to Carry Tradeinvestors. On the other hand the yen's appreciation could make Japan's exports vulnerable (more expensive) perhaps 100 yens per dollar instead of 121 as it is right now. We surely hope the yen will go through a slow recuperation that could bring the situation to a healthy state of affairs, in other words a soft landing instead of a Bubble's burst. Posted Feb 10 2007, 03:22 PM by amparo with no comments

• A process that need to change

  February 9, 2007 Globalization because of its competitive nature has as its aim the attainment of lower and lower product prices. This characteristic reduces inflation more and more and in some cases (as in Japan) one could say brings about a fear of deflation. To remain competitive companies search for cheaper labor offering smaller salaries to workers in countries like China or Vietnam; in order to hold on to world markets and to get better profits for their share holders. A situation such as this although apparently a good thing for buyers around the world in real life is not as good as it seems. A very low salary for foreign workers in many countries barely helps them get something to eat, ( certainly do not allow them to save) while it also helps outsourcing to grow bringing about the dismantling of many of our industries. Hopefully democrats will help slow down the speed of this process and give us a chance to find strategies that will allow us to become more competitive. Posted Feb 10 2007, 12:49 AM by amparo with no comments

• Economic Landing

  A couple of days ago the department of commerce had good news, factories request went up in December 2006 (above expectations) and also spending indicators went up sharply. Inventories rates however declined again. Factories request went up 2.4% in the month of December 2006 and 5.3% in the year 2006; during 2005 the rate was of 8.1%. the mix figures shows a gentle economic landing. Posted Feb 03 2007, 08:21 PM by amparo with no comments

• Unemployment and Manufacturing Activity

  Last Wednesday the feds left interest rates intact as it has since June while in January the economy created 111 thousand new jobs an amount considerably inferior to the 206 thousand in December; analyst expected 150 thousand new jobs and an unemployment rate of 4.5% and not 4.6% as it is now. On the other hand manufacturing activity declined in January reaching 49.3% lower than the 51.7% expected by analyst. Nevertheless if we take into consideration the 3.5% of vigorous economic growth that took place by the end of 2006 we could come to the conclusion that the economy is experiencing a very soft landing. Perhaps we should thank our commercial partners that still have faith in us and invested heavily in the U.S. and also thank god or El Niño for the low oil prices. Posted Feb 02 2007, 08:20 PM by amparo with no comments

• Globalization

  Globalization is not responsible for all the bad things many analyst blame it for. During the past 5 year the world economy has experienced a growth that was never seen before. Cheap labor new technologies and the capacity to transport raw material or articles partially build to countries that could complete a certain stage of the manufacturing process for the most reasonable price are the reasons behind the new development. It is true that we are going thru now an economic slump in our country and that most probably the world economy will go through the same down turn. However this is part of the same cycle that almost all economies go thru in time an up cycle and a down one afterwards. Of course in every economical transformation there winners and losers, but I think that globalization has benefited a majority of countries in the world and only a minority unfortunately has not been able to profit from it. Posted Feb 01 2007, 06:18 PM by amparo with no comments