Germany’s Labor Market Shows Sign of Losing Steam

http://blogs.wsj.com/eurocrisis/2012/05/31/is-germanys-labor-market-losing-steam/

Germany, which has been keeping the euro zone afloat, is now showing signs of decline on the horizon. Unemployment has begun to rise after falling for several months which is a sign that the troubles created by Greece and Spain are starting to damage the German economy. Manufacturing has also begun to slow down due to a lack of demand in the other parts of the euro zone for which the slack has not been picked up domestically. The troubles in the euro zone are also hurting German consumer confidence. If the German economy were to sputter then the euro zone could be a lost cause.

This relates to the currency exchange we talked about in class as well as to GDP. The value of the euro is already disappearing quickly and German troubles were expedite that process exponentially. In terms of GDP, fewer employed people would decrease consumption and lower international demand would decrease exports which would both contribute to a lower GDP.

Reflection

a) I think the most applicable thing I learned in this class is that the entire world is connected economically. A rise in the value of one country's currency can mean a decrease in another. Just knowing that how the way one country conducts businesses can directly cause another country to alter their policy to fit better changes the scope of how all economics should be viewed. It has caused me to look at all economic actions for a more global perspective than from the narrow United States view and I think that new outlook will benefit me especially while I am abroad.

b) I think I would like to learn more about the currency market. It is so subject to fluctuation and it is effected by so many things that I would enjoy studying all things that effect it so I could make smart financial decisions when I am outside the U.S..

c) Some advice I would give to a future student is to let yourself enjoy the course. Everything you learn in this course is valuable and interesting information and the class turns out to be quite enjoyable if you fully turn yourself over to it.

German Business Confidence Fell In May On Greek Concern

http://www.bloomberg.com/news/2012-05-24/german-business-confidence-fell-in-may-on-greek-concern.html

The Ifo Institute released its business climate index last week. It dropped from 106.9 to 109.9 in April. This drop arose as a result of Greece's cloudy future. Pundits aren't sure whether Greece will be able to remain in the euro zone. That doubt is weighing down the business prospects of the other members of the euro zone. On a positive note, the German economy continued to grow and it is a source of pride for the euro zone.

In class we've talked a lot about currency and its value in the international market. If Greece continues you to falter, the value of the euro would likely fall which could lead to a multitude of both GDP and inflation problems.

Beware of Greeks Bearing Bonds

a) pg. 4
"For most of the 1980s and 1990s, Greek interest rates had run a full 10 percent higher than German ones, as Greeks were regarded as far less likely to repay a loan. There was no consumer credit in Greece: Greeks didn’t have credit cards. Greeks didn’t usually have mortgage loans either. Of course, Greece wanted to be treated, by the financial markets, like a properly functioning Northern European country. In the late 1990s they saw their chance: get rid of their own currency and adopt the euro. To do this they needed to meet certain national targets, to prove that they were capable of good European citizenship—that they would not, in the end, run up debts that other countries in the euro area would be forced to repay. In particular they needed to show budget deficits under 3 percent of their gross domestic product, and inflation running at roughly German levels. In 2000, after a flurry of statistical manipulation, Greece hit the targets. To lower the budget deficit the Greek government moved all sorts of expenses (pensions, defense expenditures) off the books. To lower Greek inflation the government did things like freeze prices for electricity and water and other government-supplied goods, and cut taxes on gas, alcohol, and tobacco. Greek-government statisticians did things like remove (high-priced) tomatoes from the consumer price index on the day inflation was measured."


-I found this passage to be very interesting because it gave a concise description of one of the major reasons that the Greek financial system is falling to pieces. Greece wanted to be treated like a properly functioning economy, but their actions were everything a functioning company shouldn't do. This also reflects badly on the Euro zone because they did not have anybody keeping up with the Greek finances as they went along. If they had done that then Greece might never have started their poor financial practices.


b) Greece has a debt of $1.2 trillion. That is a third of Germany's, the richest European economy, GDP. That debt is four times greater than the annual GDP of Greece. That makes it impossible for Greece to ever pay off her debt. The debt then falls upon the Euro zone members to pay off. Greece's debt along with that of Spain and Italy will lower the value of the Euro in the international market and it could lead to even greater debt in the other parts of Europe.


c) GDP=Consumption + Investment + Government Spending + Exports - Imports
Cuts in government spending would directly lower the GDP and increases in taxes would decrease the amount of spending cash held by the Greek public. Lower spending cash would decrease the levels of consumption which would further lower the GDP. 

Euro zone row gets fat pay raise for German workers

http://www.reuters.com/article/2012/05/20/germany-wages-idUSL5E8GK41Z20120520

The largest industrial union in Germany, IG Metall, has negotiated a deal that will raise the wages for its members by 4.3 percent. This is the largest wage increase in the industrial arena since 1992. The wage increase comes to combat the imbalances in the euro zone that have lead to increased sovereign debt. Analysts hope that this wage increase will offset the rapidly falling wages in countries like Greece. By offsetting them it may allow Greece to remain a member of the euro zone because the euro will maintain its strength.

This is very important economically. Higher wages will mean larger consumption which will hep to increase the GDP of Germany. Also in class on Friday we talked about currencies and exchange rates and how it is beneficial to a country to have a currency with high value. Since the euro is shared by most of Europe, Germany balancing it against Greece will benefit all the countries that use the Euro.

How Walmart is Changing China

http://www.theatlantic.com/magazine/archive/2011/12/how-walmart-is-changing-china/8709/?single_page=true

a) "Each is not only unelected, but also anointed with quasi-cultish Big Leader status to reign over a fundamentally authoritarian organization held together by an elaborate belief system or ideology bordering on the religious. And each presides over an enormous and complex apparat staffed by a professionalized core of operatives—namely, Party leaders and cadres in China, and senior executives and mid-level managers at Walmart."


-I thought that this package was very interesting because it shows how similar large companies can be to countries. The similarity arises because companies can command massive funds, have an ideological mission, and provide support for millions of people. I think this passage illustrates how leading such a company can lead to iconic status, similar to how Steve Jobs is viewed by some groups of people.


b) -There are 30,000 factories in china that produce goods for Walmart. This is bringing in money from other countries which will lead to an increased GDP for China thus driving the economy.


-Walmart and China both had desires to become greener. They helped work together to increase sustainability and to move both of their cultures towards protecting the earth more.


c) Multinational firms can cause wide spread change in both cultures and economies. The large amounts of money that one firm handles can be enough to sway the overall GDP of a country by driving up consumption and investment. They also influence culture by creating trends and fads. Nike alone has revolutionized the type of shoes worn by the youth of the United States and it continues to dictate what people where through using famous athletes as spokespeople. Apple revolutionized the American economy and culture when they introduced the IPod which shifted music from cd format to digital and it allowed everyone to listen to music on the go.

German Economy Driving European Growth in Business Services

http://www.sacbee.com/2012/05/13/4486644/german-economy-driving-european.html

German-speaking markets for business services still manage to grow despite the global market dropping over 20 percent in the first quarter of this year. This may be partly because in this time of uncertainty for the European economy investors are looking for a safe place for their money and Germany seems to be providing that. German industry is still growing and that is driving up the number of lucrative investment opportunities.

In class we talked a lot about GDP. Investment is a large part of the gross domestic product and the German economy is providing plenty of opportunity for that which will grow the GDP while the GDP's of the rest of Europe continue to falter.

German auto sales

Germany would be an ideal country to sell both the sedans and limousines in. However, the income is too high to make scooters a desirable product. Germany has a lot of paved roads and a large amount of drivers that would provide a good market for the sedans. Germany is also home to many CNN 500 companies and it his the home country of many millionaires and billionaires that could buy lots of limousines for personal and business use. Germany also has a good existing import infrastructure that is ready for the extra containers being brought in. They would most likely enter into the Port of Hamburg and then would be shipped via train to the destinations. As far as setting up the business, the rules and process in Germany would be very friendly to new businesses and there should not be much trouble. Germany is a good choice.

Reinventing the Bazaar

a) p.44 "Two kinds of market frictions arise from the uneven supply of information. There are search costs: the time, effort, and money spent learning what is available where for how much. And there are evaluation costs, arising from the difficulties buyers have in assessing quality. A successful market has mechanisms that hold down the costs of transacting that come from the dispersion of information."

-I really liked this passage, especially retrospectively because it gave a good summary of the main point of the readings. It takes a very general explanation of why the bazaars don't act to benefit the consumer without actually mentioning the bazaar.

b) Transaction costs refer the extra costs that can't be seen in the purchase price. Things like search costs and traveling costs that can't  be directly seen in the actual purchase price.

-You hear about a store 50 miles from home that's selling a t.v. for $150. Your local store that's one mile away sells the same t.v. for $175. You decide to take two hours off of work from your job where you make $15 an hour to get the distant t.v.. It costs you $10 in gasoline. So you have $40 in transaction costs to save $25, but those $40 are not seen in the cost of the t.v. because they are transaction costs.

c) Imperfect information will lead to prices that are different from from the equilibrium price. Uninformed sellers might not realize that customers are willing to pay $10 for something they sell at $5. It could also benefit them by allowing customers to buy their item for $5 while others sell it for $1. It could hurt customers in the same way, lack of information raises transaction costs for customers and it could cause them to overpay for goods because they don't know where the lowest prices are.

A Fez of the Heart

a) pg. 11
"Not that you would have guessed by the 1990s, when Pomegranate had traveled so far toward a European ideal, modern and liberal, that the old names had fallen away, such associations with the past no longer sustainable, terminally broken by the sheer weight of Naf-Naf and fried squit."

-I chose this passage because to me this was most representative of the reading. It concisely describes the transition experienced by Pomegranate, from traditional Muslim to modern European chic. You can tell just from this one sentence that the modern Pomegranate holds no similarity to the Pomegranate of the past and that alteration is due to new economic and cultural influx.

b)
-when tourists first began going to Pomegranate, people tended to let them stay in their homes for free because hospitality was just part of their way of life, but people soon realized that they could make money by charging the tourists for things and the tourists didn't mind paying. Thus the traditional hospitality made way for modern economic opportunity

-the residents of Pomegranate stoned people that dared wear bikinis inside town because that was against traditional Muslim rules, but when the residents realized the economic girth of these scantily-clad Europeans they became more than willing to accept the sight of their skin and even encourage it

-the restaurant host as forced to wear a fez because it was good for business. They were making a mockery of the old Turkish garb, despite its lack of legality, for the chance to increase their profit margin

c)
-The leading tourist destination in Germany is Berlin. People go to Berlin because it is the largest city in Germany and has been such an important site in German history and is still considered one of the nicest and most modern cities in the world.

-Another destination for tourists is the Auschwitz Concentration Camp, people tend to go there to honor those who were unjustly murdered there and to help remember what can happen if the wrong people are in power.

-Another major destination is Dresden. It is called the "Florence on the Elbe" due to its sheer beauty. It is widely considered to be the most beautiful city in Central Europe and that's despite being almost entirely destroyed during World War II.

German unemployment falls

http://www.seattlepi.com/business/article/German-unemployment-down-to-7-percent-3526574.php

German unemployment has reached its lowest April number in the past 20 years. It dropped .2% from the March figure of 7.2% to 7%. The German labor agency claims that the credit for this wonderful employment spike can be given to the traditional springtime job spurt and the overall strength of the German national economy. This unemployment rate means that there is now less than 3 million unemployed Germans. Germany has had the strongest economy in the Eurozone and has experienced economic growth in the past two years. The unemployment rate is an indicator of Germany's economic strength relative to the Eurozone, Germany's 7% compared to the Eurozone's 10.9%. The German labor agency has calculated that with the burgeoning German economy, unemployment levels will continue to fall.

Lowering unemployment can be very beneficial to a country's GDP. In the traditional GDP = Consumption + Investment + Gov't Spending + Exports - Imports, lower unemployment means that more people are collecting money and there will be increased levels of consumption which will drive up the GDP

Part II of Rivoli

a) The textile industry has had various locations throughout history. From Great Britain to the Far East, textiles have rewarded many different locations. The changes in locale of the textile industry show something about the global economy. Nothing is fixed. If it was, textiles would never have left the shops in England, there is always going to be someone willing to manufacture the same goods at a lower cost. That fact is enough to shift markets and manufacturing hot spots as with textiles, they went east for cheaper production costs.
b) Postive: Industrialization provides a source of income for many people. It is able to provide jobs. "In 1980, the industry's peak employment year, nearly 400,00 people were employed in Hong Kong's textile and apparel industries."
Negative: Industrialization can also take jobs away. As more and more countries become industrialized more and more people need jobs and recently industrialized nations are able to provide cheaper labor than established ones. Companies realize this and relocate to the cheaper countries taking jobs away from the established workers.
c) "Globalization's skeptics are quick to point out that even if the conditions in apparel factories are a step up from those on the farm, it does not follow that workers in developing countries should simply accept their fate, working day and night in poor conditions, for pitiful wages and with limited rights. While free trade advocates may wish to isolate the activists as an uniformed fringe element, research shows that most Americans have reservations about the slippery slope in the race to the bottom of the working conditions in overseas apparel factories." pg 120

-I thought this quote was interesting because it is a very sensitive issue in today's world. Yes the working conditions might be poor but are they still better off than they wold be without the jobs? It is a very difficult question to answer and the correct response might never be truly understood.

The World is Spiky

a) Richard Florida does not believe in the flat-world theory of globalization. He sees the world as spiky, filled with economic mountains and valleys.The largest and richest cities in the world, especially in the United States, account for the large majority of the world's economy. As human society continues, these "mountainous" cities continue to grow while the valleys they create continue to deepen. He sees globalization as a fact, just not in the flat manner that has become globally accepted.
b) The idea of a spiky world is almost identical to the Central Place Theory. Both involve people going to large population centers to do their business which is why larger cities would have higher mountains represented on Florida's maps.
c) My study abroad plans involve going to Bonn, Germany. Bonn would most likely be considered a regional metropolis. It has an international airport and a population of about 324,000 people. But it is also smaller than the nearby Cologne which would be considered a larger regional metropolis. The closest nearby national metropolis would be Berlin. Some smaller nearby cities are Aachen and Leverkusen.

Details of Germany

1. Water Transportation
1. The largest ocean port in Germany is the port in Wilhelmshaven. It is the only one that can handle the largest ocean tankers on the modern ocean.
2. The largest port overall in Germany is the port of Hamsburg which is located on the River Elbe. It is the second largest port in all of Europe. Other ports are also located in Bremen and Bremerhaven.
2. Land Transportation
1. Germany has 40,826 km of railroads within its borders. It has adopted the standard gauge for easier transport between neighboring countries.
2. For passenger transport, trains stop in almost every village regularly. They are also very reliable and are private companies with all shares being owned by the government.
3. Germany has 65 cars per 100 people and over 650,000 km of roads. Germans traveled 2 trillion km in their cars in 2005 which was by the most common method of travel.
3. Air transportation
1. The two major international airports in Germany are the Frankfurt International Airport and the Munich Airport and are major international hubs in Europe.
2. Some other major airports are Berlin Tegel, Berlin Shonefeld, Dusseldorf, Hamburg, Cologne-Bonn, Leipzig/Halle.

The Box

1. I thought the part about how WWII created high demand while also lowering the amount of economic competition. I found it interesting to know more about how far the effects of war an reach into other sectors of the world, especially on the economic side.
2. I think the author sees the container as being essential to the globalization of the world economy. Its versatility has allowed more goods to be shipped to more places more efficiently. The sheer effect it has had on shipping has created a more unified product dispersion that has helped connect all the corners of the globe.
3. In the short run, the shipping container has increased both imports and exports so that effect would be negated. But the increased amounts of both would cause an increase in consumption which would in turn drive up the GDP.  In the long run it would probably drive up he GDP due to the increased global trade which is essential for increasing the GDPs of countries around the world.

T-Shirt Part 1

1. The main thing that separates the cotton trade as represented in part 1 of Rivoli is the prevalence of subsidies in the American cotton industry. In a pure market system, the cotton growers would be left to fend for themselves and only the greatest growers would succeed. The subsidies give the growers a boost to produce more goods which is in clear violation of the true market philosophy.
2. One example of culture clashing with economics was Ned Cobb's reluctance to transition from mules to tractors in his cotton production. He had only ever known the use mules and had become emotionally attached. Him not transitioning to tractors lowered the potential output of his cotton fields.
3. It was very surprising to me how important the American cotton industry was. I knew that Americans grew cotton but I didn't know that it was to the extent that it is. I assumed that the cotton in my t-shirts was grown somewhere overseas and it was almost shocking to me that it probably came from a fellow American.

In Germany, some reject role as financial rescuer

http://www.washingtonpost.com/world/europe/in-germany-some-reject-role-as-financial-rescuer/2012/04/02/gIQAAbBhsS_story.html

1. For the last 20 years, since the reunification of East and West Germany, western Germany has funneled $2 trillion dollars worth of aid to the former communist state. East Germany had been a communist state that was left in poverty when the Soviets collapsed. Despite the aid, the east has still trailed far behind the west with an unemployment rate twice that of the west. The lack of success is causing many west Germans to call for an end to the aid that is scheduled to carry on through 2019.  Now the rest of Europe is facing a similar problem with the financial collapse of Greece. Many pundits are calling for German aid due to their strong economy, but with their own problems they seem to be unwilling to lend their aid to the struggling parts of the continent.
2. A few classes ago we talked about the subsidies that the US government has been giving to its cotton farmers. This is similar to the aid that west Germany has been giving to eastern Germany. Except that the US subsidies have been more successful than the German aid.
3. I think that he aid would be better spent on worker training than improving the infrastructure. Infrastructure improvements have not been working for the past 20 years. So the change should be more toward labor improvement over roads and buildings..

The Social Responsibility of Business is to Increase its Profits

1. Friedman's main points are that businesses should not be the ones that have to worry about social issues. They exist for the purpose of making money and when they worry about social issues then they tend to do the opposite. He also believes that social responsibility falls upon the individual, if they want to devote their time and resources to social issues, then that's their prerogative, but they shouldn't use the resources of their company and shareholders to accomplish that.
2. Some of the cultural values that are most important to Friedman are individualism, hierarchy, monochronic time, a median between meritocracy and ascription, a median between activity and people, tradition, a median between formality and informality, personal efficacy, and directness.
3. I am able to see a conflict between business and social responsibility. Attaching to any social issue has the capability to alienate some customers and employees of businesses from the company due to disagreeing beliefs. On the other hand though it could possible endear more customers who like the decision. But I believe that the best decision for businesses would be to focus on profit and not on fixing social issues, if they focus more on profit they can pay employees more who can decide what to do with their social consciousness. 

Musings of Rick Schweder

1. Key Points and Themes
1. The world has become more globalized since the fall of the Berlin wall and the countries that were trapped behind the iron curtain have adopted cultures more similar to the western ones of Atlantic Europe and the United States.
2. Shweder is a "confusionist" and believes that the knowable world will always be incomplete and there will always be an incoherence related to the knowledge of all the world's cultures.
3.  It used to be that trade could be done without caring about the culture of the trading partners where as nowadays countries are always trying to impress their beliefs onto their less cultured business partners.
2. Indicators of Global Change
1. A good indicator of the direction of global change is the number of trade partners and the amount of overall trade being done. This is because if countries are trading goods then they are probably trading cultural ideas and increased amounts of trade will lead to greater global, cultural change.
3. Cultural Shaping of Economic Outcomes
1. I believe that culture is very important in shaping economic outcomes. Some cultures preach isolationism and others encourage international interaction. Professor Shweder mentioned on good example of this. China had been one of the leading technological powers, but in the 15th century they withdrew from the world of global trade and when they rejoined in the 20th century they had fallen far behind the developed world. China's isolationist culture directly effected the economy of their country.

More About Germany

1. Resources
1. Germany does not have an abundant source of natural resources. The two most prevalent natural resources in Germany are natural gas and coal. Germany produces 12.65 cubic meters of natural gas per year and is 36th in the world in that category. 
2. Germany has a labor force of 43.54 million people. They are spread across the industries in the manner of, 1.6% agriculture, 24.6% industry, and 73.8% service.
3. Some capital held by Germany is arable land. 33.13% of the country is arable land. They also have an abundance of electrical equipment and a large amount of financial capital.
2. International Trade
1. Germany exports $1.408 trillion worth of goods each year. Their primary exports are motor vehicles, machinery, chemicals, computer and electronic products, electrical equipment, pharmaceuticals, metals, transport equipment, foodstuff, textiles, rubber, and plastic products.  Their main receivers of exports are France (9.4%), the United States (6.8%), Netherlands (6.6%), the United Kingdom (6.2%), Italy (6.2%), China (5.7%), Austria (5.5%), Belgium (4.7%), and Switzerland (4.4%).
2. Germany imports $1.198 trillion worth of goods each year. The main things imported are machinery, data processing equipment, vehicles, chemicals, oil and gas, metals, electric equipment, pharmaceuticals, foodstuffs, and agricultural products. Their major partners are China (9.7%), Netherlands (8.4%), France (7.6%), the United States (7.6%), Italy (5.7%), the United Kingdom (4.7%), Belgium (4.2%), Austria (4.1%), and Switzerland (4.1%).
3. The currency used in Germany is the euro and the most recent exchange rate or 2011 was 0.7107   Euros per American dollar.
3. National Income Accounts
1. Consumption makes up 37.6% of the GDP
2. Investment makes up 18.8% of the GDP.
3. The government makes up 43.6% of the GDP

Facts about Germany

1. The GDP of Germany is $3.085 trillion.
2. The GDP per capita is $37,900.
3. The life expectancy is 80.19 years.
4. The percentage of people below the poverty line is 15.5%.
5. The literacy rate is 99%.
6. The unemployment rate is 5.7%.
7. The rate of inflation is 2.2%

All information obtained from the CIA World Factbook.

Why Did Human History Unfold Differently on Different Continents for the Last 13,000 Years?

A) Diamond's major themes and key points

• Eurasia had the largest landmass and thus the most resources
• The east/west orientation of Eurasia allowed for knowledge and resources to be transported more efficiently
• The north/south orientation of both the Americas and Sub-Saharan Africa acted as a barrier to effective movement of knowledge and resources
• Australia's small size and lack of domesticable organisms prevented the people from becoming more technologically advanced
• There aren't great enough biological difference between the people of different regions to explain why some were more technologically advanced than others
• Eurasia had a much larger number of domesticable organisms

B) What does he identify as the most important determinants of a society's success?

• The most important factor is the environment the society is placed into. The Eurasian peoples were placed in an environment that gave them the greatest ability to advance due to the overall geography and the prevalence of domesticable organisms.

C) How can these ideas be applied to today's global economy?

• This can be used to prove that no one society was biologically superior to another. There is no discernible difference between the intelligence levels of varying societies that can explain why some advanced more quickly. It was luck that some ended up in areas better suited to support human populations. This knowledge can be used in fair business practices because it provides support that no group of people should be subjugated to suit the wants of another group.