1. TRANSPORT ECONOMICS!!! — having been a victim of traffic in the South…hehe…I’ve started to be passionate about traffic, cars, the LRT and MRT and transportation in general. I just love how mobility facilitates economic growth!
2. BEHAVIORAL ECONOMICS, especially crimes haha — I am very interested with the demography of criminals and the economics behind it..It’s really very very interesting for me, especially when I read why should suicide bombers get life insurance in SuperFreakonomics…I like how economics can reveal a lot about our criminal side/our bestiality..hehe
3. INFORMATION ECONOMICS – I just found out there is such several seconds after writing the statement above. I just speculated about the possibility of its existence then when I searched it online, lo and behold! there really is such a field as information economics! Anyway, in relation to what I have just mentioned in number 2, I like how powerful information is. With economic tools I’m so sure it would even be more powerful.
In most industries the law of supply and demand is an accepted theory to explain the price of products and services. One industry that overlooked the significance of the law of supply and demand in the past is the stock market. Experts attributed the Stock Bubble of the 1990s to an overly simple theory; it was believed that rising prices in stocks were caused by an underlying rise of companies’ value. The price of stocks in the 1990s is today better understood as derived from a shortage of equities in the market (Oswin, 2005). The law of supply and demand is a fundamental concept in economics that explains market factors such as the quantity of a product or service demanded by consumers, the supply of products or services that suppliers are willing to produce and the relationship between supply and demand to create market equilibrium. The law of supply and demand also tries to explain what conditions in the market create changes in quantity demand and supplied in the market (Colander, 2008).
In his essay, The Relative Shortage of Equities, Oswin (2005) describes some of the conditions that affect stock market activity and explains the theories behind the demand and supply of equities, which drive the prices of the market. According to Oswin (2005), the law of supply and demand is the cause behind bear and bull markets. Investors use the term bear market to describe markets in which the prices of stocks are stubbornly declining. A bull market is characterized by a strong upward trend in the prices of stocks. According to the law of supply and demand, the increase in the price of a product is caused by a shortage of supply or excess demand, and a decline in price is associated with a surplus in supply or a decrease in demand (Colander, 2008). Oswin (2005) states that during the Great Stock Bubble “ Investors’ determination to buy equities exceeded issuers willingness to satisfy their demand for stocks” (p. 4). Furthermore, Oswin (2005) notes, “issuers competed with investors in buying back company shares, contributing to the shortage” (p. 4).
What is unique about the stock market is that the value of securities is largely dependent on speculation. In essence market expectations are what drive the demand and supply of securities. Thus, understanding how the law of supply and demand affects stock prices is much more complex than in other industries. To simplify, it can be said that when investors expect market prices to rise and believe they can make a profit, the demand for securities will also rise, the opposite is true when individuals expect declining prices. The law of demand also states that when prices are lower demand rises, and this is also true for securities when combined with reinforcing market expectations. A lower price for a security, especially when that security is expected to increase in value will cause a rise in demand. On the supply side, issuing companies are more apt to sell securities when the price of their stock will be high as to maximize capital to finance growth. This is in accordance with the law of supply that states supply increases when prices are high and profits are expected to increase. However, the demand for supply is also affected by outside forces such as a company’s need for raising capital. If a company has enough capital to finance growth operations and does not need to borrow, there will be no need for companies to issue additional securities. In a booming market, in which corporate profits are steady and growing, and the need for issuing additional securities is low, stocks will be in high demand and prices will rise. Additionally, sellers and buyers of securities in the secondary market create supply in the market. When prices are rising, investors are willing to hold on to their stocks for longer periods of times and there is a shortage of sellers. When prices are declining, investors are more eager to sell their securities to protect their paper profits or to minimize exposure. Equilibrium of price is created when potential buyers willingness to pay for a security matches what suppliers are willing to sell their securities for.
References
Colander, D. C., (2008). Economics (7th ed.). New York: McGraw-Hill.
Oswin, J. (2005). The relative shortage of equities. Capital flow Analysis. Retrieved onMarch 13, 2010 from: http://www.capital-flow-analysis.com/investment-theory/shortage-of-equities.html
Economists call for growth as a remedy to the recession. With the current economic recession winding all-too-slowly down, I have heard some economic experts telling the media that we need “more growth, more and faster growth”. How long does anyone think we can continue to fix our economic problems by “developing” (or is it “blighting”) more land and burning up more resources? Isn’t that just pushing down on the gas pedal as our car heads straight towards a cement wall? Where do the media find these so-called experts? How can the “growth mantra” be expected to continue indefinitely in a finite world? What proportion of the population are smart enough to understand this and similar issues, and how can it be increased? In the United States, we can’t keep our current infrastructure in good repair. How do we expect to take care of even more after we build it?
I will write another email to my government representatives on this. Uncontrolled and unthinking growth is self-destruction, in the final tally. I want my grandchildren to have as good a life as possible, though I currently believe it will be no better than I have today, and possibly much worse. I encourage you the reader to contact your representatives and push them to think long-term and recognize that most of what we consider changing now, such as reducing carbon emissions, does little in the face of the global population explosion. The correction to that, and the only one that seems to have the potential to move us towards sustainability, is for people to have smaller families. I can’t think of anything else with any probability of success. I also think we all want to deal with overpopulation ourselves as opposed to letting Mother Nature deal with the problem for us.
The situation is not hopeless. I have written before about the factors that have been proven to reduce family size: education, birth control, and better economic situations. If we put a small part of the resources and funding we put into wars and war-like activities into those three factors, especially in the developing world, I think we could make a big positive difference in our descendants’ lives. Unfortunately our mostly-unregulated form of capitalism puts extremely powerful interests behind short term measures and often-destructive endeavors that benefit them, but harm all of us in the long run. We have a chance if we *all* get involved and make our voices heard. We created government to protect us, and if we don’t stop the subversion of our government for corporate profits we will all suffer, and our descendants will suffer far more. Please write your congresspeople.
As the name says, something is accounted for the current period of study. Usually a financial year. What do we do in accounting? Calculate inflows and outflows. Current account is exactly the same. It’s just the accounting for a country’s inflows and outflows.
Current account = balance of trade + Income (a.k.a Factor Income) + Transfer Payments.
Balance of trade – difference between the export and import of a country. It does not include the financial transfers or investments.
Income- Income earned on investments made by a country abroad like interest earned or dividends received. This will be accounted as (+) value, and paid to foreigners by a country will be accounted as (-) sign. (You should note that this will take only income out of investments. Original investments/capital investments will be accounted in a different head Capital accounts) The Income, also includes the infamous Remittances made by our Non residents… (Thanks to millions of SW geeks and labors from across the globe. – We might even say a malayali chai shop or someone working in a construction site, in Arab countries, indirectly influences the Moody’s rating for India J
Transfer of Payments- cash transfers from abroad like foreign aid, charity aid etc… Money spent on society directly than on economy.
So in short,
A current account deficit occurs when Imports are more than Exports (when a country’s total imports of goods, services and transfers is greater than the country’s total export of goods, services and transfers.)
A current account surplus occurs when Exports are more than Imports. (When a country’s total exports of goods, services and transfers is greater than the country’s total import of goods, services and transfers.)
We (India) are in a deficit situation every year… Might be we would have been in surplus before the East India Company or the Moguls ventured in . Currently our fiscal deficit stands at 5.8 billion USD.. .. needless to say, the Chinese are in huge surplus of 284 billion USD, and they say it has come down from 368 billion USD.. and guys, we have more or less the same work force compared to china….( hmm… its all the government /ruler who makes the difference…)
In the next post , lets see about what is balance of payments…
According to the Washington Post, bankers and lobbyists are out in force in Washington, determined to defeat or greatly weaken Sen. Dodd’s Financial Reform legislation.
If not for the sea of navy business suits and the hotel ballroom’s chandeliers, the gathering Wednesday morning might have seemed more like a pep rally than a meeting of the American Bankers Association. But the 900 bankers were preparing to storm Capitol Hill, and they were getting revved up.
“We have a lot of work cut out for us,” David Bochnowski, an Indiana bank executive, said to the troops, who had assembled just after 8 a.m. in the Grand Ballroom of the Renaissance Hotel downtown. “Our job is to have an impact on the Hill. Are we going to have that impact?”
“Yeah!” the bankers shouted, as applause broke out.
“We need to shape what’s in and what’s out of any reform legislation,” Michigan banker Art Johnson told his peers from every corner of the country. “All of us know what’s at stake. It’s really about our industry’s future . . .[...]
The bankers soon headed to Capitol Hill, talking points in hand — white folder for House visits, blue folder for Senate visits. They were to protest the creation of a new consumer financial protection regulator, to argue that national banks should remain exempt from state consumer laws and to advocate that the Federal Reserve keep oversight for some state-chartered banks, among other issues.
While the bankers showed up in force this week, they are not the only ones with a hefty stake in the financial regulatory overhaul under consideration in Congress. Investment banks, hedge funds, student loan firms, coal companies, automakers and credit card companies are among those seeking to influence the reforms.
Of course, partisan politics reared its ugly head, once again, as Republicans signaled their rejection of any Democrat-sponsored legislation. At the gathering of bankers before they left for Capital Hill, House Minority Leader John A. Boehner (R-Ohio) acted as their pep rally leader, urging the crowd to “stand up for themselves” and defeat Sen. Dodd’s legislation.
With 900 bankers and thousands of lobbyist, all carrying sacks of money with which to influence Congress, it’s going to be nearly impossible to get good legislation that actually does regulate the banking industry…and brings some sunlight into shadow banking. But good legislation that protects both consumers and investors and brings a lot of the risky financial instruments out in the open and manages the level of risk any bank can take with customers’ money is a necessity.
I hope voters care enough about their wallets and savings to stand up to the bankers and tell their Congress members to stand firm for the American people. After all, bankers are not Gods and should not be treated as such!
Oh, and in case anyone has forgotten what happened over the last two years ago, here’s a reminder of why regulation is necessary.
With the heated back and forth of the health reform, very little has been reported on the new financial reform bill….Sen. Dodd and some Repub from Tennessee are quietly negotiating for the passage of a financial reform bill….now that it is pretty close Dodd has hit the airways to try and block any “tea bag”-esque attacks that the health reform bill has received.
I was going to write a piece trying to explain Dodd’s lame attempt to regulate the thieves but the Washington Post beat me to it and theirs is a lot simple and more understandable than mine would have been:
1 A Consumer Financial Protection Bureau, housed inside the Federal Reserve, would write and enforce rules protecting borrowers from abuse by lenders.
WHAT IT MEANS: The location of the agency is a nod to Republicans and conservative Democrats who oppose the creation of a free-standing consumer agency, but everything else about this proposal is designed to please liberals, giving the consumer agency sweeping powers and imposing few checks on that authority.
2 A Financial Stability Oversight Council, chaired by the Treasury secretary, would coordinate federal efforts to identify and manage risks to the financial system and the broader economy.
What it means: Dodd wanted to give the council broad responsibility for policing systemic risks. After massive administration pressure, he agreed instead to give much of that power to the Fed. The oversight council will instead function essentially as the Fed’s board of directors on regulatory issues, signing off on its decisions.
3 A new process would allow for the liquidation of large, failing financial firms.
WHAT IT ME ANS: Companies could be liquidated by joint agreement of the Treasury Department, the Fed and the Federal Deposit Insurance Corp., which already administers bank failures and would play a similar role in the new process. Costs would be paid from a $50 billion pool of money gathered from large financial companies.
4 Credit-rating agencies would be regulated and liable for errors.
WHAT IT MEANS: Breaking with the administration and the House version of financial reform, Dodd’s bill would hold Moody’s, Standard & Poor’s and other rating agencies potentially liable for their judgments about the safety of bonds and other investments. The industry also would be regulated by the Securities and Exchange Commission.
5 Banks would face new limits on trading and investment activities.
WHAT IT MEANS: The bill would restrict banks from running their own investment portfolios or hedge funds, an administration proposal known as the “Volcker Rule” that Dodd initially had rejected. The bill also would regulate the massive trade in derivatives, increasing the proportion of such trades that are publicly reported.
6 Some renovations would be made to the structure of federal banking regulation.
WHAT IT MEANS: Dodd abandoned his earlier proposal to create a single banking regulator after critics argued that the upside was not worth the effort. The bill still would eliminate the Office of Thrift Supervision. The Fed’s authority over smaller banks would be split between the FDIC and the Office of the Comptroller of the Currency.
Is something better than nothing? I hear a lot of the henceforths and heretowiths …..in other words legal-ese and the “too big to fail” group will still have its relief valve….US, we will still be on the hook whenever they screw up….I guess it is a start….but like health reform…..it is NOT reform….it is a tweak of an already broken system.
This art exhibition is opening at the Museum of Sydney next week – it looks fascinating.
From the link above:
Skint! Making do in the Great Depression, a Museum of Sydney exhibition that opens on March 27, traces this period, which began with the New York sharemarket crash of 1929. More than 80 years later, mementoes of this period still draw an emotional response, even from those not directly affected.
An example of the items from the era is a Depression peg, which was fashioned from remnants of wire and sold door-to-door by the unemployed. In some cases men would steal wire from farm fences or suburban gates. It’s a grim reminder of how desperate people were. Another poignant symbol is the toy train made from scraps of timber, including a fence paling. It’s a prime example of the “making do” philosophy.
My grandparents were children in the Depression (in the US). They weren’t personally too badly affected, as my granddad’s family kept their farm going, and my grandma’s father kept his job (as a grocery buyer). I’ve always been very moved by stories from tis time, and will definitely be checking this exhibition out, and posting my thoughts.
. Currently our fiscal deficit stands at 5.8 billion USD.. .. needless to say, the Chinese are in huge surplus of 284 billion USD, and they say it has come down from 368 billion USD.. and guys, we have more or less the same work force compared to china….( hmm… its all the government /ruler who makes the difference…)