Smart-phone wars

Link: http://www.economist.com/business/displaystory.cfm?story_id=13832338

Summary
It has been recently announced that the mobile-phone industry will be suffering from a decrease in sales of 4%. Though, mobile phone companies such as Nokia, Palm, and Apple are still launching new phones out. Lately, Apple released their brand new Iphone, the Iphone S, along with many new features and “applications.” The price of the Iphone has been reduced from $199 to $99 in order to clear old inventory and at same time, attract customers who has wanted to purchase the phone at a lower cost. On June 6^th, two days after Apple’s Iphone S was released, Palm introduced their latest product called the Pre. The demand for smart phones has been growing rapidly and is not expected to slow down any time soon.

Relationship
Referring to Chapter ten in the text book, this type of competition that’s happening right now in the mobile-industry is called oligopoly. Oligopoly is define as a market form in which a market or industry is dominated by a small number of sellers (oligopolists). In this case, due to a small amount of mobile phone companies, each corporation is aware of the actions from others. This can be a bad/good thing, depending how well the company uses their information. By acknowledging other companies’ actions, you can construct a strategy where it beats the other competitors. However, the bad thing is that companies will sometime be able to predict what strategies and create a better one. For example, Apple knew that the economy was not doing well, and that Iphone was a hit, so they decided to lower their Iphone price from $199 to $99. This price drop entices new buyers, especially those who wanted an Iphone before, but couldn’t afford it. In addition, Apple is the only company that offers “SDK,” a membership program where it allows customers to make their own applications. This innovative, multimedia approach towards smart phones is something that’s new to the phone industry. Thus, because of Apple’s innovative approach to their products, it continues to beat other competitors, such as Palm, Nokia, and Sony Ericsson.

Conclusion
I believe that Apple will continue to attract new and old customers to buy their new Iphone. The things they bring to market are exactly what most people want, not to mention it is usually different from any other competitors. Also, I’m pleased to see companies continue to develop new phones, regardless of the economy. As for other competitors, good luck.

G20 stimulus spending on track, says IMF

Link: http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20090426.wstimulus0426/business/Business/businessBN/ctv-business

Summary
Recently, economic leaders from the world's richest nations, known as G20, gathered for a weekend meeting of the IMF (International Monetary Fund) and the World Bank. The meeting had brought up a stimulus package which is expected to meet their pledge to spend the equivalent of two percent of their GDP. $820-billion USD has been spent on these stimulus programs by members of the Group of 20 major economies in hopes of returning the economy to it's previous state.

Relationship
To regain economic stabilization, members from G20 has imposed a stimulus package, also known as economic stabilization programs. The purpose of devoloping this package is to stimulate spending. Referring back to chapter 6, when spending increases, the overal cash flow increases and employment rate increases. Therefore, more jobs will be created and chances of unemployment decreases. If everything goes well, we'll have a recovery in th first trimester of 2010. It is predicted that G20's fiscal assualt on the financial crisis will amount to "5.5 percent of of GDP this year and next." However, if the stimulus package fails to achieve it's goal of restabilizing our economy, we may face public debt that will definately affect current and future generations. Referring to Chapter 8, a public debt is simply the the total of the nation's debt: debts of local and state and national governments. Depending on how much debt is payed off, our current generation will be the ones to pay off these debts. These debts will ultimately be paid through our taxes.

Conclusion
Judging by the confidenct from the members of G20, I believe our economy will return to it's previous state. Other contributions such as the Olympics will definately help our economy by creating new jobs and increasing the cash flow. However, if I am wrong, there will surely be a public debt that will affect our current and future generations.

Retailers' pain in the cards

Link: http://www.vancouversun.com/business/fp/story.html?id=1393636

Summary
The recently announced news of probing credit and debit card fees from the Senate and Commons committe has brought the smiles back into small businesses. Consumers and retailers do not have to pay the increasingly high fee for their credit and debit cards. Also, businesses do not have to worry about the additional fees that comes along with it. Hence, the probing of credit and debit card fees will defininately relieve businesses of their financial issues and increase spending.

Relationship
Due to the popularity and the convience of credit and debit cards, it is reasonable that companies choose to use this method of payment more often than others. Though, this method of payment had a cost; consumers and businesses are required to pay interest and other additional fees. Now that the economy is in recession, prices are being increased and credit card interest rate shot up from 1.9% to 2.4%. This increase in interest is bad for economy as we learned in chapter 7. With economy already in recession, due to decrease in spending, having high interest rates will just add on to the problem. Not only will consumers stop spending, unemployment rates will increase. Businesses are already dealing with severe financial issues because they cannot generate enough money. Ultimately, banks will go bankrupt because businesses will not have the money to pay back loans.

Conclusion
Right now, I believe that we are heading the right direction with the decision of probing credit and debit card fees. This new system will definitately attract more businesses and consumers to spend. They no long will have to worry about interest rates and other additional fees when purchasing goods. Eventually, this will achieve stable businesses and increase in employment. An example would be car dealershops. Already, consumers are somewhat benefiting from the recession as interest rates for cars are lower; we no longer have to pay credit card fees to banks.

GM auditor raises spectre of bankruptcy

Link: http://www.cbc.ca/money/story/2009/03/05/gmannual.html

Summary
Again, General Motors Corp. is facing a financial issue. GM workers are in fear for their jobs as they are facing a high chance of bankruptcy. A hint from the General Motors Corp.'s auditors said that they have raised "substantial doubt" about the troubled automaker's ability to continue operations. It is a reasonable prediction as GM has been facing recurring losses from operations, even after the bail out. Hence, it is a likely situation that GM will go bankrupt because of its inability to generate sufficient cash flow to sustain its operations. Currently, General Motors Corp. is finding bankruptcy protection and other solutions to overcome the situation if they again, fail to restructure a plan. Moreover, workers are still being laid off. Another total of 47,000 workers will be laid-off.

Relationship

As we all know, General Motors Corp. is facing another severe financial issue that may cause them bankruptcy. The question "why?" can be easily explained with the relationship to chapter 6's circular flow of money diagram. Referring to the flow chart, we can see that "household" and "business" are interrelated. When there is a lack of spending from consumers, businesses are not making any profit. As a rule of thumb, economic activity will always try to achieve equilibrium in GDP. In this case, due to increase of people investing and saving, businesses will lay off workers to regain balance in economy. Thus, this explains why there is a massive job loss in the company. This also refers to the paradox of thrift. The paradox of thrift explains the significance of attempting to save money and how we actually end up saving less. Reason for this is because less money is injected into the circular flow of money. In order to prevent anymore job losses, people need to spend more or at least provide GM with more money. In this case, the government has generously offered a bail-out not too long ago, but as we can see, it's not helping. People are still unwilling to purchase cars, not even from foreign countries. If foreign countries are unwilling to purchase cars, than we are unable to export goods. This is crucial as exports cause GDP to increase. Our GDP will only increase if the total amount of money injected into the circular flow exceeds the leakages from the circular flow, the level of GDP will increase. Hence, when the level of GDP is increasing, spending is up, jobs are being created, and the unemployment rate is likely to be low. However in today's economy, we are spending less, so less jobs are being created and the unemployment rate is high.

Conclusion
Due to expectation of future prices and job losses, it is evident that people will definitely spend less and save more. Although this may seem to be the right thing to do, Chapter 6 proves that this is actually something we need to avoid. Already, it is explained why we need to spend more instead of saving as it leads to job losses. To prevent this situation, we first need to provide more money for businesses so that they will maintain or create more jobs. To show the significance of an individual's spending (Expenditure Multiplier), I will use "Bob" as an example.

• Bob purchases a $1000 audio equipment (GDP=$1000)
  
• Owner may use the money you spent on other purchases (+ (MPC) x $1000)
• Another person will be the recipient of this spending and will, in return, spend part of what the individual receives (+ (MPC) (MPC) x $1000)
  
• GDP increases more than $1000. (+ (MPC) (MPC) (MPC)....x$1000)

The same effect results when government lowers the rate of tax because consumers and businesses will have more money to spend (tax multiplier).

Secondly, more government involvement such as lowering interest rates for loan will increase borrowing and spending rate. Currently, some auto dealer shops such as Honda are doing this. They are offering 0.9% interest towards any car you buy for a limited time. Moreover, government should deduct tax %. It doesn't make much sense to take more money out of people's pockets, especially to people who are currently laid-off at times like this. All in all, GM and GM workers will be defendant on consumer's spending patterns. We need to spend more and save less.

Canada lost 129,000 jobs in January: StatsCan

Link: http://www.cbc.ca/money/story/2009/02/06/januaryjobs.html

Summary

Canada's job losses in January has been the worse compared to the previous economic downturns in the 1980s and 1990s. Currently, almost more than 120,000 full-time jobs are lost. These job losses include in specific areas such as motor vehical manufacturing, production of furnitures, and computers and electronics. All these areas of unemployment are effected in British Columbia (18,000), Quebec (30,000), and in Ontario (71,000). The unemployment rate has increased by 0.6 percent in January to 7.2 percent. This increase of job losses will continue to grow and thus, leading to a major recession. Economists has described the situation during January's job losses as "horrible" and "shockingly poor." As bad as this sounds, there is still hope. A BMO economists has predicted that "Canadian unemployment rate to break through eight per cent by the end of this year." That being said, BMO plans to announce another interest rate cut in March.

Relationship
In chapter 5, we learn the importance of employment and unemployment. In this case, it is obvious that the economy is facing an increased amount of unemployment as people are being laid-off. To determine an approximate amount of unemployment and employment in Canada, we use the Labour Force Survey. It provides monthly data on Canada's unemployment rate which is calculated with a formula: unemployment = unemployed/labour force
The survey provides information on the number of unemployed, but not on the number of job vacancies. That is, the solution to the unemployment problem depends on the number of job vacancies available. Thus, if jobs are available, then a way will have to be found to match the unemployed workers to the available opportunities. This relates to the article as many people are being laid-off are in need of jobs. Also, in the chapter, it states that sex and age are affected differently. In 2002, men who were 25-44 years old had an unemployment rate of 7% while women of the same age had an unemploymnet rate of 6.7%. In this case, it is not true as the whole economy is affected the same way. People are losing their jobs either if they were male or female, ages 24 or 50. In addition, in the article, economists have stated that Canadian job losses has gotten even worse compared to previous years. To give a general idea of how bad it has been for the past couple of months, the unemployment rate was only 3.4% in 1966, 5% in 1990s, and 5% in 2002. Compared to now, we currently have an unemployment rate of 7.2% a 15 year high according to Bureau of Labor Statistics.

Conclusion
As we can see, the labour Force Survey is an important tool to our country and economy. It helps determine an approximate percentage of employment and unemployment. Most importantly, it shows us what we have to work on. If in this example, economy is suffering from a recession and many people are losing jobs, then we need to start finding solutions and providing more jobs. Though this info is useful, it is not necessarily accurate. Many factors such as participation rate affects the result of these surveys. Thus, economist still make approximations to help balance our economy.

How Canada can beat tough times

Link: http://www.nupge.ca/node/805

Summary
Currently, as we all know, our economy is facing a recession. The world slowdown triggered by the US subprime mortgage debacle dragged Canada into a financial crisis. Economists believe that the economy will continue to decline for at least another few years. Moreover, Canada’s parliamentarians plan to gather next week to debate the federal budget and how they will increase benefits to the economy. Many issues were brought up to question as to who/what will be funded by the federal government.

Chapter 4 Relationship
Referring to chapter 4, having the federalist system is important. Giving limited powers to provincial governments and more power to federal government helps balance levels of issues. In this case, due to national crises, federal government has forced itself to intervene in the situation to assist provincial governments. Public services such as health care, education and public services need to be properly funded, as it is the second highest expense. “It is important that intelligent policy decisions be taken to carry us through tough times while protecting past gains and ensuring a better future.” This statement is very true and is extremely important. Even if we manage to relieve the economy recession, we may face the same situation in the future if we do not plan carefully. What we need is a national public services investment plan funded by initiatives and coordinated between levels of government. Having this service plan will help shelter people’s money, allowing it to build-up on interest. Another connection with the chapter is borrowing money. Right now, some business can’t borrow money because of reduction in credit. The reduction in credit is mostly because businesses have not been making much money from scared consumers. People are afraid of spending money, as some already face the issue of household debts and unemployment. If workers are fearful for their job they are more likely to save rather spend. Like James said, “spending is the economic motor. When economic spending declines it is because spending is slowing.” This is a major problem for businesses because they need to borrow money in order to purchase goods to make profit. If they cannot make profit, the most likely situation for these businesses is bankruptcy. Also, many people will be laid-off like we have seen already in the public sector.

Reflection
Right now, there are several solutions brought up. We can either wait for the world to bail us, wait for businesses to increase spending and investments or have government borrow and invest money in our future. In my opinion, the third option makes most sense at this time. “The federal government today has greater fiscal room to stimulate the economy than virtually every other nation” (Clancy, 2009) Therefore, the governments have an opportunity to provide Canadians with more secure returns on financial bonds. If governments imposes a new tax free savings account which will pay competitive rates with no service charges, people will be attracted to it, thus spending will rise again. Subsequently, the rise in spending will lead to many benefits for businesses.

Prospect for U.S. auto bailout dims as Senate races clock

Link: http://www.cbc.ca/money/story/2008/11/19/usautos.html?ref=rss

Summary
Currently, automakers are facing a dangerous decline, which would lead them to bankruptcy. The Republican U.S senators, with White house support, provided a last minute plan to give $25 billion US dollars to bail out U.S automakers. If the plan succeeds, then automakers will have enough money to pass before the end of the week. Unfortunately, it is predicted that the bailout would have to wait till the new Barack Obama administration takes over in January. Also, another issue had been brought up about the fact that the government had chosen to bailout banks, but not the automakers. "Barney Frank asked how the government could justify a bailout for banks and insurers,but not the automakers."

Chapter 3 The Role of Government in a Market Economy
This article ties into the chapter of the role of government in a market economy perfectly. As stated in the summary, automakers such as GM, Ford MotorCo., and Chrysler are now in desparate need for a bailout from the government. Keep in mind, these automakers are privately owned, which means that government does not own it. In this type of issue, even though the automakers' company is privately owned, government can intervene when issues get out of hand. Right now, the government is debating whether they should bailout these automakers. If the government does bailout these companies, there would be positive third party affects. Current employees would be able to keep their job and earn a living. It would somewhat avoid anymore declining in economy, but if it fails, many people will be laid off and economy would decline even more.

Reflection
I think that government will bailout these automakers. There are many news ads on this article and everyone is aware of the situation. Public opinions may make an impact on the government's decision. The reason is because if they don't, more people will be laid off, which affects the economy negatively. People would avoid purchasing any goods, due to the lack of income. Also, I agree with Barney Franks's statement. If the government is willing to bailout bank companies, why not GM, Ford Motors, or Chrysler? These are all big companies that make big money. Thus, it would be the best interest for everyone if the government initiates the $25 billion bailout.