Immigration: The Human Cost | The Onion - America’s Finest News Source

Free trade, labor mobility, globalization: scary words! Watch this harrowing story of the insufferable losses imposed on American workers due to immigration, then post your comments. What impact does immigration have on American jobs? Should the US take greater steps to protect Americans like Mr. Boyle from the threat of cheap labor from poor countries? Who is truly harmed by labor mobility and who benefits?

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US dollar plummets against euro as ECB rate hike becomes likely — Shanghai Daily | 上海日报 — English Window to China News

“THE US dollar has dropped to a 27-month low against the euro… The United States currency also tumbled to its weakest level against the British pound in 26 years”

What’s happening to the US dollar? The article claims that “interest rate differentials” are causing the weakening of the dollar relative to the Euro and the Pound. How can this be explained? First of all, why is the US Fed predicted to cut rates in the near future?

“The dollar’s losses last week accelerated after a US government report showed that consumer prices excluding energy and food moderated last month. That contrasted with reports from the United Kingdom and New Zealand indicating accelerating price pressure.”

What’s the connection between slowing inflation in the US, accelerating inflation in Europe, falling and rising interest rates, and the exchange rate? At this point in the AP course, you should be able to explain all of these connections.

How can we explain how the following economic trends lead to a weakening of the dollar and a strengthening of European currencies?

“The yield advantage of 10-year Treasury notes over similar-maturity German bunds dropped to 0.47 percentage point last week, the lowest since November 2004. A narrowing yield gap dims the allure of dollar-denominated assets.”

“The economy in the euro zone will grow 2.3 percent this year, beating the 2.2 percent estimate for the US…”

“ECB council member Axel Weber told Handelsblatt newspaper that an ‘extremely positive’ economic outlook meant the bank can’t signal it’s finished raising rates.”

If you can read, understand and explain this article right now, they you probably understand most what what you need to understand from Chapter 38. Let’s hear your comments, folks!

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Globalization for Whom? (July-August 2002)

Thanks to Katie Daily for posting the above article to the new Wikinomics page “AP Econ in the News”. Several very interesting articles were linked to this page over the weekend, but this one just jumped out at me as particularly interesting.

This piece looks at the question of whether globalization reduces poverty. Many critics of globalization (you know, those union members and see turtle costumed folks who protest at WTO and IMF meetings, and millions like them in the develop and developing worlds), claim that the record of the 1990s shows that a more integrated global economy does not necessarily mean less poverty in poor countries. The author here claims that while global poverty may not have been eliminated during this decade of global integration, this is only because some of the poorest countries have not yet become “globalizers”, rather have remained “non-globalizers”

“…countries that have the best shot at lifting themselves out of poverty are those that open themselves up to the world economy.”

The author points to several figures supporting the positive impact globalization has had on countries that have chosen to participate in the integration of global markets, such as China and India.

“By selling its products on world markets, China has been able to purchase the capital equipment and inputs needed for its modernization. And the surge in foreign investment has brought much-needed managerial and technical expertise. The regions of China that have grown fastest are those that took the greatest advantage of foreign trade and investment.”

Read: SHANGHAI folks. This article points perfectly to the phenomenal growth we’ve observed here in our own home. China’s decision in 1978 with Deng’s “Reform and Opening” to participate in, rather than isolate itself from the global marketplace has resulted in a doubling of life expectancy, a near doubling in literacy rates, rapid development of the country’s infrastructure and the emergence of China as a dominant and undeniable force in the economic and political landscape.

The author explores the idea that China’s (as well as its East Asian neighbors’) economic emergence may have been achieved by shunning free market principles and turning instead to protectionist methods such as quotas, tariffs on imports, subsidies to domestic producers, etc…

Perhaps China has unlocked a secret of successful integration in the global economy. Despite the West’s desire to liberalize and open the economies of all poor nations and their claim that this is the best means to eradicate poverty rapidly, China’s experience shows that a healthy dose of government control and protectionist policy may actually result in the greatest economic gains for the world’s poorest countries. I’m interested to know what students think about China in the world today. Does the high level of government control over the economy stifle further growth and prevent the total eradication of poverty? Or should the government continue to meddle in the market, protecting domestic industries and hope that its interference does not limit the country’s growth, thus halting continued improvements in standard of living experienced by the majority of Chinese over the last 40 years? This may be a good topic to bring up over dinner with your families this week! Share your thoughts here!

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Well, probably not at this moment, but a changing global economy may mean China turns to the US less and less as Europe, Africa and other regions become more important to the Chinese export market.

China Leans Less on U.S. Trade - New York Times

So here’s the perfect article for our last unit in AP Macro! After reading chapter 37, this article should make pretty good sense. The Chinese economy, unsurprisingly, is very dependent on the US as a source for its exports. But as the dollar weakens against the yuan, and Americans erect new barriers to trade, China is turning to other parts of the world to export its output to.

While the European Union has restricted certain imports, particularly shoes, American trade barriers have drawn more attention.

“The U.S. government is still trying to protect its own markets,
unlike Europe, which is very free,” argued Huang Yasong,
international sales manager for the Hubao Group

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Jobs much stronger than expected - Apr. 6, 2007

This article has some very up to date stats on the employment situation in the US. Overall it seems the job situation is as strong as it’s been in years. Unemployment has dipped to 4.4%, the net job growth is positive, even though certain sectors have lost jobs in the last few months. Read this article, connect it to what you know about full-employment, unemployment, and other topics from Ch. 8.

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Fuel, food prices lift CPI but core CPI in line with target - Mar. 16, 2007

As we learned in chapter 8, inflation rears its ugly head in a couple of ways. Here’s a recent article the rising price level in the US. Read it, and post your comments and analysis. Which kind of inflation is discussed in this article?

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Marco’s IB Economics Blog: Class Discussion Continued

Marco, in the above post, brings up some serious questions about the science of economics. Good insights, as always Marco. I tend to agree with him on his main idea, that economics as a science tends to perhaps unwittingly make value-based judgments even as economists claim to be objective observers of some fundamental law or principle.

The risk with broadening economics’ focus to the Aristotelean “metaphysical” level that Marco speaks of is that a science rooted in the law of scarcity is scarcely equipped to deal with metaphysical resources beyond those very physical resources we deem to be finite (land/labor/capital).

Some economists, such as Julian Simon, have explored the idea of the infiniteness of resources due to the creativity and innovation of the human mind, claiming that any physical scarcity that may exist on our finite planet can be overcome as human ingenuity (the “ultimate resource”) constantly develops new and better means of employing those otherwise finite resources. Even this venture beyond classical economic thought runs the risk of shattering the foundations of the basic science, that is the belief, the TRUTH, that “scarcity exists”. If we accept this truth, and we accept that the market mechanism is an effective means of dealing with scarcity, then we have no other choice than to embrace the price mechanism in all its materialistic and dehumanizing, “Machiavellian” glory.

“…as a social study, economics studies society and the world around us. However, that does then not mean that we should only perceive the world in terms of economics, and economics today connotes profit maximization.”

As Marco says, “we should not only perceive the world in terms of economics”. On this point I could not agree with him more. Indeed, economics may not provide you or me with answers to life’s most basic questions, like where I’ll go when I die; but one question this imperfect science will help answer is how will my basic needs be met while I’m here on this earth burdened with the curse of scarcity? The answer? Markets. Alas, the invisible hand of which Smith spoke may not be that of God, rather that of the Almighty Dollar.

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Damage control:

Greenspan: Global growth could cushion U.S. economy - Apr. 16, 2007

Paulson: Economy to grow this year

Here’s a follow-up to my last entry, where I hinted at my developing theory of America’s affliction with “savior syndrome”. A few months ago former Fed chairman Alan Greenspan uttered the “R” word to a group of businessmen in Tokyo, and within hours the US stock market fell by almost 3%. If American investors place so much weight on the words of one man, could it be that the pessimism of American consumers about the future stems solely from Greenspan’s statements in Tokyo?

This article couldn’t have been more timely… only a day after 64% of Americans claimed they believed a recession to be just around the corner, Mr. Greenspan reportedly rescinds his Tokyo statements! Obviously Mr. Greenspan understands the sway he holds over the hearts, minds, and pocketbooks of American consumers. Despite his having stepped down as Fed chairman almost two years ago, Greenspan is indeed still the savior and the saint of the macro economy!

The short article here also touches on an important point from Chapter 37 (tonight’s reading) about the importance of services to America’s export market.

“Greenspan said growth in the rest of the world is creating demand for services from firms such as Microsoft”

While America’s manufacturing sector has surely suffered as labor intensive factory jobs have moved overseas, the service sector has boomed as the developing world has turned to the US as a source of intellectual, technological and entrepreneurial innovation. After reading chapter 37, refer to this article and post your comments. Do you think American’s suffer from a “savior syndrome”?

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Americans united in recession fears — Shanghai Daily | 上海日报 — English Window to China News

Here’s an interesting article with which one could launch a case study into the American psyche. It also connects to AP Economics in that it seems to support the Rational Expectations Theory that firms and households will respond to expectations of future economic conditions by altering their behavior now, thus accelerating the onset of those very conditions; a sort of self-fulfilling prophecy, if you will.

The irony of America’s current economic situation is, however, that while 60% of Americans predict a recession in the near future, these predictions seem wholly irrational when we consider the state of the economy at this very moment! Unemployment is at its lowest level in five years, 64% of Americans surveyed said their own finances were very secure, and 57% seem to think the economy is doing well. So why the fears of recession?

Interesting article, all told. The American people seem to have things as good as they’ve been in years, yet there’s this predominant fear of things turning for the worse any day. If rational expectations theory is correct, then it’s a safe bet that American’s pessimism in itself could trigger a recession, in which case we’ll all get just what we didn’t want, but somehow failed to avoid due to our irrational expectations!

I have another theory about what may have triggered American’s pessimism in the first place; it has something to do with something I call the “savior syndrome”… but I’ll save that one for another posting!

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How Uncle Sam Spends Your Tax Money

…lots of unlucky Americans are mailing their tax returns (or procrastinating doing so) to Uncle Sam. April 15 is the dreaded “Tax Day”

“Of the $2.7 trillion federal tax coffers, about 20% goes to military spending, 20% to Social Security payments, and 15% to Medicare for theelderly and disabled. An additional 35% funds education, government agencies, and a range of social programs. And the remaining 10%? That’sfor interest payments to service the debt from all that spending.”

“Costs exceed revenues by far, but the Defense Dept. budget just keeps increasing. That means bigger interest payments on our debt.”

“To service the $9 trillion-and-growing national debt, the U.S. government spent $406 billion on interest in 2006, up 13% since 2001. All told, about 15 cents of each tax dollar is spent on interest payments.”

Read this great article, it fits perfectly with our latest unit in Macro. Gives lots of current numbers about government spending and the national deficit.

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Okay guys, here it is… I promise, you can count on it… the new home for Welker’s Wikinomics Blog!