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.