Given the immense aid that the U.S. provides poor countries throughout the world, it sounds odd to say that the U.S. might be perpetuating global poverty. However, there are unintended consequences that come with directing food to impoverished areas. Additionally, it is assumed to not be in the interest of U.S. jobs to level the playing field in agriculture. Those are the two main reasons why we might be the problem, rather than the solution.
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Aaron Johnson Archive
Are We Headed for Another Recession?
The Bureau of Economic Analysis (BEA) released their preliminary report on economic activity on Friday, July 29th and it was expectedly dim at 1.3 percent. Typically, we want to see economic growth of at least 3 percent and this is far short of that figure.
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Why debt ceiling matters
It appears that we are making progress in crafting an agreement for Congress to raise the debt ceiling from its current level of $14.3 trillion. Since reaching that level on May 16, the U.S. Treasury was unable to issue bonds to meet spending obligations. However, it is Republican leadership’s goal to tie any increase in the debt limit to spending cuts. Even before the spending binge during the early stages of the Obama administration to deal with the financial crisis, deficits have long been projected to unsustainable in the near future.
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Albany employment numbers deceiving
On Thursday, June 23, the Georgia Department of Labor released their May labor report for Metro Albany. It showed the unemployment rate increasing from 9.8 percent to 10 percent. While a quick glance would appear that our local labor market took a step back relative to the rest of the state, I would assert that Albany’s job market is improving at a faster rate than the state and our nearby competitors.
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Labor market gaining steam
The U.S. job report was very favorable in March and exceeded expectations. While the unemployment rate only dipped a tenth of a percent to 8.8 percent, it was encouraging to see 216,000 new jobs. That occurred despite further contraction of government jobs with the private sector adding 230,000 positions. Ideally, we need to see a consistent trend of job growth closer to 300,000 jobs added per month to revert back to pre-recession levels, but it should be noted that this figure is the highest since May 2010. We can attribute most of these gains to increased economic activity from exports, business investment, and consumer spending.
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Japan fallout: economic cost
In my first segment, an assessment of Japan’s earthquake dealt with environmental cost. As the crisis continues, we learn more specifics, such as radiation possibly affecting water supply. As time passes, we will continue to assess the damage on the overall environment. Now let us shift our thoughts to the possible economic damage to Japan and the global economy.
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Japan fallout: environmental costs
Editor’s note: This is the first of a three-part series.
The global economic impact of Japan’s earthquake cannot be underestimated with disaster efforts estimated to exceed Hurricane Katrina, which was estimated at $125 billion. The official loss of lives is currently at 8,199 as of March 20, but there are still 12,272 more unaccounted for. As we reflect on the economic implications of this catastrophic event, there are so many complex forces in play that it is too numerous to condense into one blog entry. Therefore, this first part of the analysis will focus on the environmental damage to not only Japan, but also to the U.S. and Europe.
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All Eyes on Saudi
As we see gas prices rise across the U.S., we can blame most of it to turmoil in the Middle East. Uprisings in Tunisia, Egypt and now Libya threaten monarchical rule. Markets have responded with crude oil prices rising beyond $100 per barrel. One can speculate that some of the rise can be attributed to speculation as political risk significantly increases. Political risk refers to the potential of disruption of governmental rule and usually occurs when rebellion or war takes place. As clairvoyantly reported in the February 28th, 2011 edition of Bloomberg Businessweek, the future trend in oil prices lie with Saudi Arabia.
The oil reserves in Saudi Arabia vastly supersedes those in Libya and Tunisia. Of course, unrest there impacted markets. However, severe reverberations will be felt if opposition leaders are successful in disrupting oil supply in Saudi Arabia. That is one of the main reasons why stock markets tumbled heavily on Thursday, March 9th. Of course, market analysts are prone to overreaction and the current uprising is not that significant yet. As pointed out by Bloomberg Businessweek, King Abdullah of Saudi Arabia has many resources at his disposal to quell any social unrest.
King Abdullah’s main strategy is to lavish his people with the extensive wealth earned through crude oil revenue. He recently announced $36 billion in jobless benefits, education, housing subsidies, and debt write-offs. This is quite extensive when recognizing that Saudi Arabia currently produces between $592.6 billion and $622.5 billion a year in economic activity (gross domestic product). It is still questionable whether these efforts will be enough to minimize significant income inequality that threatens to tear the social fabric of the country. Saudi authorities are also implicitly pointing blame at current U.S. foreign policy of encouraging peaceful assembly as an universal right. They believe the current stance of the U.S. is emboldening protest movements that now threatens their political stability.
It is difficult to measure the extent of income inequality in Saudi Arabia, but it is assumed to be high. According to the Heritage Foundation’s Index of Economic Freedom, their living standards are relatively high at $23,221 being their GDP per capita figure. Certainly, this ranks below the U.S. and other advanced nations in Europe, but is above Mexico and other middle income countries. Though, that can be deceiving and most analysts believe that income inequality is quite severe as pointed out by this study by economists from the University of California at Santa Cruz. Despite the efforts from Obama and U.S. State Department officials, there have been slow efforts in addressing this gap and that is cause for the current turmoil.
As we look to the future, the tenuous U.S. recovery will be heavily contingent on how Saudi Arabia weathers the storm. If King Abdullah is able to maintain order and hopefully direct economic reforms that can improve the plight of his people, then the spike in oil and energy prices will eventually moderate. Otherwise, we can expect a sustained period of high energy prices that will punish consumers and businesses alike.
That is an alternative that could dampen economic prospects in the U.S. and globally.
Inequality may be root of U.S. problems
According to University of Chicago economist Raghuram Rajan and his Money Magazine interview with David Futrelle on Nov. 24, he believes income inequality is the main problem with the U.S. today. This is a trend that started in the 1980s as tax code changes and technology dramatically transformed the economic landscape. Also, the rapid decline in delivering goods across the globe led to the rise in globalization and the diminishing influence of unions. As for fighting income inequality, the question focuses on whether to create a larger safety net or emphasize strategies on improving the productivity gap.
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‘Tis the season to penny pinch
Even in Southwest Georgia, we can see the changing trend in our weather. The Georgia heat is subsiding; the landscape is slowly transforming from brown to bare; and the short-sleeved shirts are being traded in for sweaters. It must be time to bring out the red and green and celebrate the birth of Christ. As Christians, we understand how the spirit of Christmas encourages us to give. It is my belief that we receive more blessings when we give, but it is important that our giving comes from our personal sources of income, rather than through debt.
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