U.S. Stocks Tumble as Treasuries Rally on Budget Concerns (Personal WriteUp)

Article Summary

The issue that has arisen after the United States Presidential Election is the divide in the Nation by power due to the majority for the Republicans in the House vs. majority for Democrats in the Senate. Therefore, Obama’s Policies must thereby first be passed in the House before approaching the Senate, with such policies includes taxation. There is now an issue in the uprising of the New Tax Resolution of the United States as the Democrats wants to increase taxes, while the Republicans want to decrease taxes for all levels. The day after the United States Presidential Election, the Stock Market stumbled and fell. The Dow Jones makes its biggest drop in a year (dropped 2.4% in a day), the S&P 500 dropped 2.4% (lowest since August), the price of Oil dropped 5% (biggest decline of the year), Bank of America Corp. and JPMorgan Chase & Co. slid at least 5.6 percent, and Hewlett-Packard Co., Exxon Mobil Corp. and UnitedHealth Group Inc. lost at least 3.8 percent, and the KBW Bank Index sank 4.6 percent. Obama is now approaching Congress to increase the taxes by $600 Billion and spending cuts that threaten the growth of the United States economy. However, Obama must now negotiate with Republicans that intend a Tax-Cut Extension for All Income Levels.House Speaker John Boehner states that they will be willing to agree to a new revenue from a tax system that would generate faster economic growth which leaves a divide in the beliefs of taxation, as whether allowing Economic Growth as source of revenue or standard taxation policies. This divide is the exact conditions required to lead the United States economy to the great concerned Fiscal Cliff which in fact may lead to a global recession like that of the 2008 recession.

Relation to the Course

This article has much content related to this Economics Course. They are described in the following points:

This article also demonstrates a variety of different Economic methods. It demonstrates different examples of positive statements. Examples include the following:

Positive Economics (Descriptive Statement – facts portraying things as they are in the present or have been in the past): the Stock Market stumbled and fell. The Dow Jones makes its biggest drop in a year (dropped 2.4% in a day), the S&P 500 dropped 2.4% (lowest since August), the price of Oil dropped 5% (biggest decline of the year), Bank of America Corp. and JPMorgan Chase & Co. slid at least 5.6 percent, and Hewlett-Packard Co., Exxon Mobil Corp. and UnitedHealth Group Inc. lost at least 3.8 percent, and the KBW Bank Index sank 4.6 percent. This is a clear demonstration of a descriptive statement as it simple portrays stats as they were, perfectly meeting the definition.

 

This article also demonstrated a variety of different fallacies. Examples include the following:

Fallacy of Single Causation (a single factor caused a particular event when in fact there may have been other contributing factors): This article blames the result of the United States Presidential election as the sole cause for the fiscal cliff. However, there are many other contributing factors that would lead to the downfall in the economy such as the expiration of the Bush Era tax cuts and other external global economic influences.

 

Types of Economic Systems: Throughout the article, there were major discussions regarding the different approaches to Government Taxation. It highlighted how the Democratic approach was to earn government revenue through a upfront taxation, contrary to the Republican approach which believes that by lowering the taxation, we can push towards a faster economic growth, that with even a lower tax rate, can still earn more revenue. This is where there are the contrasting ideologies of Economic Systems. There is the Democratic approach which takes a more Command approach, opposed to the Republican approach which takes a more Market approach.

 

Types of Government: Throughout the article, there were major discussions regarding the different approaches towards government spending and approaches. The Democrats are a more socialist government party as they believe that by increasing taxes, they can invest in more social programs such as Medicare. On the other hand, the Republicans are more of a Capitalistic government party as their top priority is Economic growth opposed to social programs for the public.  

 

Comments

The reason I selected this article, like the past ones, was due to my personal relation with the content. Even before the election, I was personally greatly concerned with this matter. After doing a lot of research into the investment world after the great 2008 recession, there were great talks by analysts of what would be known as the “double dip”. After doing further research into the matter, analysts predicted if such a result occurred in the 2012 United States Presidential Election, then the double dip would be soon approaching. This set me on the high alert, as I was sure to do much more research into the matter when the time was approaching. This is why I selected this article, as I was greatly concerned into the matter.

This article has also helped guide my opinion on the matter. After doing further research to understand what this highly concerned Fiscal Cliff is regarding, it is a great matter of interest. Firstly if it was to happen, then there is a great possibility that there will be a global recession, which may personally affect my life and my living standards. Moreover, it is a greater concern for me as an investment. If I predict that the Fiscal Cliff was to happen, then I would begin to short-sell stocks for mass profit, and purchase mass quantities at the trough. This opens an endless world of opportunities for me in the investment world, as I can utilize such a tragic event for personal maximum profit. Therefore, this article is of great importance to me, as it gave me a clear understanding on the Fiscal Cliff and its relation to the Investment world.  

The True Cost of Poverty (Article)

October Article

http://www.investopedia.com/financial-edge/1012/the-true-cost-of-poverty.aspx#axzz2FST1JSv3

During this presidential election campaign season, candidates have stepped up their rhetoric regarding just how much support should be afforded to lower-income Americans. One of the more controversial issues has revolved around a presidential candidate's assertions that poor people have a safety net in place, and therefore do not deserve as much concern as the middle class. This begs the question: Do lower-income people truly have a "safety net" in place?

 

What Is "Poverty?"

Many people may identify themselves as "poor" simply because they cannot take that Caribbean vacation or eat at fancy restaurants more than twice per week. But the true definition of poverty is much more extreme than that. While there are several methods used to measure and identify poverty, one of the most widely-referenced definitions of poverty states that a four person household in 2011 earning $23,021 or less qualifies as poor, according to data provided by the United States Census Bureau. Using this definition, the "official" poverty rate of the United States was 15% in 2011, meaning that roughly 46.2 million people lived in poverty. This is significantly lower than the median household income from 2006-2010 of roughly $52,000 per year.

What Sort of Benefits Do Lower-Income People Receive?

Households that qualify as "living in poverty" are eligible for certain benefits and subsidies from the U.S. government. Indeed there are several programs in place to ease the burden of poverty. Some of the more familiar social programs include food stamps, as well as healthcare assistance through Medicare and Medicaid. While these are the largest government programs in place, they are not the only benefits available. Lower-income Americans are also eligible for subsidized housing, student financial aid and tax breaks such as the Earned Income Tax Credit. Thanks to these programs, millions of people have been lifted out of poverty. In fact, if you were to treat food stamps as income, they would have lifted almost 4 million people out of poverty. If you were to consider the Earned Income Tax Credit as income, then almost 6 million people would be lifted above the poverty line. Despite the pundits, social programs such as food stamps and the Earned Income Tax Credit have improved the lives of many lower-income people.

 

Less Obvious Costs of Being Poor

Despite the "safety net" offered by social programs to help poor people make ends meet, lower-income families face many challenges that go beyond basic needs such as food and healthcare.

 

Employment Challenges

Finding work with a standard schedule is challenging for lower-income people. According to a survey conducted by the Urban Institute, roughly 40% of working parents held jobs with hours considered standard (i.e. weekdays between 8 a.m. and 6 p.m.). Nonstandard working hours may complicate childcare options. This survey also revealed that lower-income people feel as though they are limited in terms of employment opportunities; thus, they take any work they can find and they prioritize holding onto their jobs. This type of employment insecurity is very different from the concerns of higher-income households, which have a bit more flexibility when it comes to choosing how they spend their professional time.

 

Trouble Finding Affordable Childcare

Another obstacle faced by lower-income people is finding affordable childcare. Among families with young children living in poverty, roughly one-third of monthly income is spent on childcare costs, according to a study by the Carsey Institute. As mentioned above, there are childcare subsidies in place to ease this financial burden. A person who receives subsidies spends somewhere in the neighborhood of 14% of his or her income on childcare. A person with a higher-income spends only about 7% of his or her income on the same costs.

 

High-Quality Food May Be Harder to Come By

Access to high-quality nutrition is another cost to being lower income. Busy lifestyles combined with the lack of easy access to fruits and vegetables contribute to diets that are insufficient in vitamins and minerals. Many lower-income people need to work much harder to find fresh and healthy food that will meet their nutritional needs.

 

The Bottom Line

There are several social programs in place that give a boost to lower-income families. It is important, however, to remember that the true cost of poverty is much less obvious. Lower-income people often pay an intangible price for being poor, as they tend to have fewer employment opportunities. Childcare costs account for a large chunk of their budgets, and access to high-quality food may be limited.

The True Cost of Poverty (Personal WriteUp)

Article Summary

During the 2012 United States Presidential Election, one of the largest growing topics was poverty in the United States of America, as Presidents had to address such a concerning topic the nation is facing at. The latest statistics on the United States Poverty showed that nearly 47% of Americans live either below or at the poverty line. But what is of great concern is what is defined as poverty by the United States Government? Though many different approaches may be used to calculate and come to a consensus, the most actively used method of approach defines poverty as ‘a four person household in 2011 earning $23,021 or less qualifies as poor’. With such a definition, 15% of the United States population (46.2 million people) live in poverty. However, though an unfortunate event, there are many great benefits introduced by the United States government to help those in poverty. There are many programs introduced for those in poverty such as food stamps, and Medicare (healthcare program). Moreover they are subject to less income tax as they are able to qualify for ‘for subsidized housing, student financial aid and tax breaks such as the Earned Income Tax Credit’. These programs have helped increase the living standards of people in poverty in the United States of America. However, there are still many challenges that the people of the United States in poverty still face. This includes childcare and the ability to purchase healthy and quality foods. It is estimated that those in poverty spend nearly 1/3 of their minimal income on childcare alone. A quote that best represents the scenario for their food challenges is provided in the article as the following: ‘Busy lifestyles combined with the lack of easy access to fruits and vegetables contribute to diets that are insufficient in vitamins and minerals. Many lower-income people need to work much harder to find fresh food’. Demonstrating the challenges faced by those in poverty, this article in a summary establishes the growing concerns of poverty in the United States and its effects on living standards.

Relation to the Course

This article has much to relate to the economic concepts covered in class. The following are example of its connections to the course content:

Fiscal Policy: This article has heavy connection to the fiscal policy concepts covered in class. It demonstrates the fiscal policies used by the United States Government, to attack such a large and growing concern for the United States population. The United States Government is handling this issue by adapting its Fiscal Policies. It has begun to use an Expansionary fiscal policy to address this large growing concern. It has decreased its level of taxation on the poor to stimulate their finances and allow future potential growth. In addition, it has increased government spending into social welfare programs to help those in poverty. In a nutshell, this article demonstrates how the United States Government has executed an expansionary fiscal policy to help those in poverty in America.

GDP Limitations: Another connection that this article made to the content studied within the course was GDP and Living Standards, particularly the limitations within them.  It demonstrates how large the GDP of the United States of America is, marking as the largest GDP in the world, stating it as the largest economy in the world. Theoretically, the largest nation in the world, should provide to its people, and have the highest living standards in the world. But this is not the case in this situation as there is a vast wealth gap between the population. There are those that are extremely rich, and of course there are those that are in poverty.

Unemployment Rate: As discussed in the course, this article highlights the unemployment in the United States Government. It highlights a very high level of unemployment in the United States which is what has let to such high levels of poverty. Moreover, it blames the high level of unemployment from the economic downturn in 2008, a cyclical type of unemployment as discussed in the course. It furthermore highlights the social and economic drawbacks of high levels of unemployment, such as a falling economy, and high rates of poverty, leading to low living standards for the nation as a whole.

 

Comments

The reason I selected this article was due to my personal interest in the matter. I am personally very interested in politics and have followed along with the United States Presidential Election since the Republican Campaign began. With such a strong interest in the whole matter, I was interested on seeing the candidates stand’s on domestic and global issue, to make a more informed and educated decision on whom I would support in the election. One of the concerns I had was the issue of unemployment in America. I was interested on seeing the candidate’s stand and plan of action on such a vital issue. But in order to understand their stand on the matter, I had to first fully understand the problem itself. In fact I didn’t read this article because of the assignment; I read it to better understand the unemployment in America. I find this topic very interesting as it is a large and global concern, and this article has helped me better understand the unemployment in the world’s largest economy (the United States of America) better than ever before. In fact I found a lot of things interesting in the article such as the fact that 47% of Americans live either at or below the poverty line. I knew that unemployment and poverty existed within America, but I never knew it was to such of an extent. By coming to the understanding of how crucial this matter is in reality, I have come to make a more informed decision on the matter with respects to the political playing field. When I first heard that the United States spends $553 billion on welfare a year, and that Obamas plan is to increase welfare spending to roughly $800 billion, I was in great awe and disappointment as I believed that $553 Billion was enough and that the additional funds can help towards better and more crucial spendings. But after reading the article and understanding what a large issue this is, I do agree with Obama’s stand on the matter, as this is unacceptable. As a greater life lesson, I first came to a conclusion on the matter without doing further research, but after reading the article and becoming more informed on the topic, I believe I have to a better conclusion and stand on such a crucial affair.  In conclusion, this article has helped me better understand the unemployment in America, and has further devised me to make greater decisions to help fix such a large and problem.

China Manufacturing May Expand at Faster Pace This Month (Article)

December Article

http://www.bloomberg.com/news/2012-12-14/china-s-manufacturing-may-expand-at-faster-pace-in-december.html

China’s manufacturing is expanding at a faster pace this month, suggesting the factory recovery in the world’s second-biggest economy may withstand a slowdown in exports.

 

The December preliminary reading was 50.9 for a purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics. That compares with the 50.8 median estimate in a Bloomberg News survey of 12 economists and a final reading of 50.5 for November, the first time in 13 months it was above the expansion-contraction dividing line of 50.

 

Chinese stocks had their biggest gain in three years as the report bolstered confidence in the economic recovery even as November’s trade and new loans trailed estimates. The data add to signs of a strengthening rebound including factory output and retail sales, which may smooth the transition to China’s new leadership headed by Xi Jinping.

 

“China’s ongoing growth recovery is gaining momentum mainly driven by domestic demand conditions,” Qu Hongbin, chief China economist at HSBC in Hong Kong, said in a statement. At the same time, a drop in new export orders and last month’s below-forecast overseas shipments suggest “external headwinds” are persisting, Qu said.

 

“This calls for Beijing to keep an accommodative policy stance to counter-balance the external weakness, provided inflation stays benign,” he said.

 

Work Conference

China’s top leaders may gather in the coming days for the central economic work conference, an annual meeting to set a policy framework for the following year. Officials “seem content with the current pace of growth” and are likely to maintain their language of a “prudent” monetary policy and “proactive” fiscal stance, Capital Economics Ltd. said in a Nov. 30 note.

 

The preliminary reading, called the Flash PMI, is based on 85 percent to 90 percent of responses to a Dec. 5-12 survey of more than 420 companies, according to HSBC. The final number will be released on Dec. 31.

 

A separate, government-backed index (SHCOMP) of purchasing managers in manufacturing rose last month to 50.6, the highest since April. The December figure is due Jan. 1.

 

The benchmark Shanghai Composite Index of stocks advanced 4.3 percent, paring the decline so far in 2012 to 2.2 percent.

 

Growth Rebound

China’s economic growth is poised to rebound this quarter from the weakest pace in three years after the government deployed measures including interest-rate reductions and the acceleration of investment-project approvals. The nation’s new home prices rose in November by the most in four months, according to SouFun Holdings Ltd., the country’s biggest real estate website owner, even as the government maintained restrictions on purchases.

 

Gains in the HSBC and official gauges show “the positive change is not a one-off phenomenon,” Ding Shuang, a Hong Kong- based economist with Citigroup Inc. who previously worked at the International Monetary Fund, said in a Bloomberg Television interview. “More broadly, data since September confirm that economic activity is improving and it appears that the cyclical economic upturn is gaining momentum.”

 

Gross domestic product may expand 8.4 percent this quarter from a year earlier, up from 7.4 percent in the July-September period, Zhang Zhiwei, Hong Kong-based chief China economist for Nomura Holdings Inc., said in a note today. Growth momentum is being “underpinned by expansionary monetary and fiscal policies,” while inventories are shrinking to “more normal levels,” Zhang wrote.

 

Mixed Picture

November data released earlier this week gave a mixed picture of the economy. Industrial production accelerated for a third month, climbing 10.1 percent from a year earlier, while retail sales expanded at the fastest pace in eight months, statistics bureau data showed. Meantime, exports, new yuan loans and money supply all trailed forecasts.

 

Hyundai Motor Co., South Korea’s biggest automaker, said on Nov. 27 that it plans to increase production in China by 40 percent in three years and add higher-end models as it seeks to gain market share in the world’s largest market.

 

Operating conditions will improve in China’s steel industry, the world’s largest, this quarter and next year after nine months of losses, the official Xinhua News Agency reported last month, citing the China Iron & Steel Association.

 

While the economy is stabilizing, it will “face various challenges that should not be underestimated” next year, the ruling Communist Party’s Politburo said in its first assessment under Xi, according to a Dec. 4 Xinhua report. The government will keep macroeconomic policies stable and adjust them as needed, Xinhua said.