Sunday, September 27

Economy

Wage Violations are Shameful
All Posts, Economy

Wage Violations are Shameful

There has been a drastic increase in worker violations since the onset of COVID-19. The American employer has responded by seemingly being passive with regards to the exploitation of their labor as times have become especially dire. There is no time to be prideful with fighting for their deserved liberties, as now COVID has led many to the mentality of survival. Many workers are grateful for just having a job, as with an unemployment rate of about 8.4%, getting too picky can easily lead to them being one of millions not having a stable source of income. The Washington Center for Equitable Growth published a paper on some potential violations. The typical worker on the wrong side of these violations lost approximately 20% of their hourly wage.  Furthermore, more than 20% of work...
Why Does the Fed Target 2% Inflation?
All Posts, Economy

Why Does the Fed Target 2% Inflation?

Since January 2012, the Federal Reserve has maintained a target of 2 percent inflation for the US economy.  The target allows the Fed to perform its congressionally mandated jobs of maintaining price stability and maximum employment.  Before the 1970s, economists believed inflation and unemployment had a permanent negative correlation so that low inflation and low unemployment could not be achieved at the same time.   However, the 1970s oil shock brought on a period of high inflation and unemployment known as stagflation.  With the high rates of the 1970s, the Fed needed a new way to control inflation.  At the time, most central banks used currency pegging to control inflation by controlling the value of currency.  Relatively stable currency values ac...
Dry Powder: Economic Threats in the Post-Pandemic Era
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Dry Powder: Economic Threats in the Post-Pandemic Era

As part of the historic 2nd quarter contraction in the US gross domestic product, investment spending decreased by a massive 49% under the duress precipitated by the COVID-19 pandemic.  Poor general economic conditions translated to uncertainty in the minds of investors.  Meanwhile, investors received government relief aid that they did not use to invest.  As a result, there is now an estimated $1.5 trillion in unused capital in private equity funds alone that could be invested as soon as negative economic conditions recede. This massive glut of capital could create an explosion of investment and is therefore referred to as dry powder.  Pandemic induced uncertainty has contributed to a buildup of dry powder in the global economy, something that economists are concer...
Stock Splits, Why?
All Posts, Economy

Stock Splits, Why?

For many people, the stock market seems daunting, regardless of how much money you have or do not have. The number one concern investors have about any stock is the price. Lower priced stocks are more attractive to investors for a multitude of reasons, but there is one main reason: they can buy more shares with the same investment. Smaller share prices make it more attractive for small investors to buy shares of a stock. Companies know this truth about investing; for that reason, the most popular stocks, including Apple, Google, and Amazon, have all split multiple times in the past.  Split? Yes, all of these titans of industry have split up their shares into multiple shares of stock before. For the main reason of attracting investors by offering a smaller price per share. However,...
European Central Bank Ramps Up Asset Purchases in Light of Pandemic
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European Central Bank Ramps Up Asset Purchases in Light of Pandemic

On June 4, 2020, the European Central Bank (ECB) announced it would increase its envelope of asset purchases by €600 billion to a total of €1.35 trillion. The increased purchases will further the central bank's policy of monetary easing in order to help households and businesses deal with the economic effects of the COVID-19 pandemic. The increase comes in response to disinflation and fears of a possible deflationary spiral. The ECB plans to continue asset purchases until it believes the coronavirus crisis is over and plans to reinvest any payments from maturing assets into further purchases. European interest rates will remain unchanged with deposit rates still negative. The ECB expects to keep rates at current levels or lower until inflation nears its 2% target.
Negative Interest Rates: A Novel Solution or a Novelty Item?
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Negative Interest Rates: A Novel Solution or a Novelty Item?

In the wake of the economic downturn caused by the COVID-19 pandemic, some in the United States, including president Donald Trump, have called on the Federal Reserve to push interest rates below zero.  Negative interest rates would be unprecedented in the US but they have become established monetary policy in Europe and Japan.  Such rates represent a logical extension of expansionary monetary policy while also breaking key economic laws.  This counterintuitive policy raises more questions than it appears to answer.  How do negative interest rates work? could we really be paid to borrow money? and most importantly, can negative interest rates pull the world economy out of recession? Historically, negative interest rates have been used as an expansionary monetary poli...
Economy

COVID-19: A New Kind of Economic Challenge

COVID-19–the highly contagious respiratory illness–has rapidly become a global pandemic, with countries closing borders, restricting domestic and international travel, closing businesses, and even enforcing national quarantines. While the top priority of every country is to treat the ill, develop a cure, and ultimately distribute a vaccine for the virus, the U.S. government is also taking action to address the economic crisis caused by the Coronavirus.  In a short period, the pandemic is already having a devastating effect on the U.S. economy. Jan Hatzius, chief economist at Goldman Sachs, has predicted an unprecedented 34% decrease in Gross Domestic Product (GDP) for the second quarter of 2020. Furthermore, between the period of February 23rd to March 23rd the Dow Jones Indus...
Economy

Coronavirus and the Economy: A Forced Recession?

For years, many have talked about the inevitability of a recession. Throughout my time at Vanderbilt, discussions regarding how it will be difficult to find a job when we graduate always came up. In this unprecedented time, it seems as if the global economy is on the verge of collapsing. From sports’ leagues shutting down for an undetermined amount of time to the demand for gasoline falling to the Dow Jones industrial average tumbling, nothing seems to be going right economically. There are not many people, or companies, who are profiting right now. Of course, money should be the least of anyone’s concerns right now. However, a burning question permeates my mind: will we be able to recover when this is all over? At the moment, the United States is technically not going through a re...
Economy

The Federal Reserve September Meeting

On Wednesday, the Federal Reserve concluded its September meeting in which it lowered the target range for the federal funds rate from 2 percent to 2¼  percent to 1¾ percent to 2 percent. In its statement regarding the decision, the Federal Reserve indicated that a weakening global economic outlook combined with low inflation motivated its decision.   The Fed had been targeting 2 percent objective for inflation, but it remains below that level.  Despite unemployment remaining low, the Fed decided to lower rates, which represents a stimulation of the economy, due to the lack of inflation.  In addition, the Fed indicated that the global economic outlook is worsening despite positive signs domestically. The move comes as President Donald Trump has been pre...