Sunday, May 31, 2009

General Motors Getting Bankrupt: May be it is Good

For quite some time, we have heard a lot of rumors about the problems of General Motors and other US automakers. According to a CNN report: General Motors on the brink. From the heading of the report written by Chris Isidore, you can easily understand what is going to happen. Many Americans considered GM to be an “icon of American manufacturing”. So, this icon is failing and falling very hard. If there is a take over from the US government then before that, GM needs to get some kind of bankruptcy protection from the court so that it can decrease many costs involving the stake holders. So, many workers would get much less money from the fallout and in the end, they are going to suffer a lot.

There is no doubt that many people will lose jobs in the coming months in GM. Also, the company will have to close down some factories to cut cost. Many retired workers will also suffer some kind of reduction in their pension. Many dealers and their workers (in dealer shops) will also suffer. So, it will send some kind of a shockwave to the US economy.

President Barack Obama will give a speech to the nation tomorrow and in it, he is expected to talk a lot about GM bankruptcy. He thinks that it is best for the company and for the US economy. I have similar idea too. I think that General Motors is in dire condition now. If the problem is not addressed at this moment then it can be too late to do something later. Do you agree with me?

Thursday, May 28, 2009

AOL and Time Warner: No Longer Together

It was perhaps the merger that created the biggest media buzz of last century or this century (depending on which way you think about the year 2000). The confirmation has come and it will take another few months for the demerger to complete.

I think that it will be good for both the companies to part way. AOL can become an independent company and would perhaps go to stock exchange and raise some capital and focus itself as a Internet based company. On the other hand, Time Warner will continue its business of big TV channels like CNN, film making activities, and printing magazines.

Now, it is perhaps the clear that this match was not made in heaven and it created a lot of problems in the last few years. In fact, they sold a number of small companies to competitors as they could not make profit. I still remember that before merger there was WCW wrestling and in 2001, it was sold to WWF for just $7 million.

So, it will be interesting for us to note what happens next to AOL. I guess that Time Warner will not suffer from this separation. AOL will face itself in to a challenging position because the Internet market is very crowded. However, it may be a blessing in disguise for AOL because then its decision makers will enjoy more freedom and would be able to actively scout for buying up start up companies that can become profitable in future.

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Wednesday, May 27, 2009

Economic Recession Will End in 2009: Most Economists are Wrong!

In a survey, most economists have predicted that economic recession in USA will end in 2009. National Association for Business Economics carried out the survey and 74% of economists thought that things would become better for the US economy in the next quarter. Well, I was going through most of the reports in major websites like Bloomberg, AP, CNN etc and I did not find anything to be excited about that the recession would end in the US in 2009. The economists perhaps feel that the stimulus package and increasing consumer confidence would help to make things OK again.

First of all, 5 months of the year is almost gone. The trend of job loss has not vanished. Rather job loss figures look as solid as it can be. Even in the survey, many economists felt that people will not get back their jobs right away. In fact, what I feel that many big companies are fighting to remain profitable. Major automakers are on the verge of bankruptcy. The banking sector is not in good shape either. President Obama may have offered a stimulus package but there is no substantial plan for creating new jobs.

As a hobby economist, I feel that creating new jobs will be the biggest challenge. Recession will only finish when this problem can be addressed. On the other hand, US economy is closely related to European and Asian countries. There is no good news for those countries. In the last few days, we have seen one after another Japanese company big annual loss. We have also seen very bad condition of economies of Germany and Britain. The same thing goes for China. In a global world, US economy cannot remain safe in an island.

Well, I am a hobby economist. Still, I understand that most economists failed to predict about the start of the recession. So, I will not be surprised if their prediction is wrong again.

US Consumer Confidence Helps Asian Stock Markets

Right now, among many consumers in America, there is a sense of optimism about the economy. They feel that the worst time is over and we will see better time in the coming months. Well, I cannot understand the logic behind this kind of optimism but the good news is that it is helping share markets around the world, mostly in Asian countries.

It started with new York stock exchange and when it was clear that consumer confidence is high compared to the last eight months, many investors in New York felt confident in spending more money and this resulted in good increase. The same thing happened in Asian markets.

It is good news but I’m not that much optimistic because the economic recession is it still very real and there is no possibility that it will end in 2009.

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Tuesday, May 26, 2009

Too Cheap is not Good for Consumers in the Long Run

First of all, I want you to read this report of BBC: The far-away food factories. It has talked about the experience of a student from UK who recently visited a fish processing factory not as a tourist but as a worker. That factory supplies fish for some supermarkets in England and the Indonesian workers have to work very hard to meet the strict standards of England and EU in terms of hygiene and cleanliness. Very nice to see that the consumers get clean products and can enjoy their meals. After all, they pay for it and they are entitled to getting quality products.

There is nothing wrong or unethical about it. What is so bad is that the workers in the fish factory gets very low salary. Of course, Indonesia is not a rich country and you cannot expect that the workers will get good salary. However, the salary they get is really pathetic. Some of them even cannot live with their families. Some of them are too poor to make a bus ride to another part of the district to see their children. Still, they cannot or wont leave the jobs because this is the best deal they have got. If they did not have this job then life would have become even worse. The factory owner is a bit helpless too. May be he is getting some healthy amount of profit but in the end of the day, he cannot bargain hard with the British supermarkets because then the supermarkets would go for another trader or producer.

The consumers in England are very happy to get fish in an affordable price. So, in the end of the day, everyone is happy. However, on a second thought, we have to remember that it is inhuman that some people cannot even see their children for many days just because you want to have cheap fish. From ethical point of view, this is bad and even immoral. However, let us take a look from the business of point of view. First of all, as a consumer, you will get habit to cheap products. Secondly, the consumers of the rich countries have to work and earn money. They have to produce some goods and services that people of the poor countries will have to buy. However, if the consumers of rich countries destroy this balance then the workers of poor countries will never have any real purchasing power.

I feel that more than the credit crunches in USA, this kind of bad consumerism caused the global recession. Of course, I am a hobby economist and you do not need to take my view seriously. In China and India, still more than 1.5 billion people do not have a car. On the other hand, in USA, auto makers like General Motors are on the verge of getting bankrupt. They are getting bankrupt because they cannot sell their products. If they could sell a car to just even 10% of that 1.5 billion people of India and China then they would have much better condition right now.

Saturday, May 23, 2009

Credit Card Reform: Is it Addressing Just one Side of the Coin?

Sen. Chris Dodd must be a very happy man because he could finally get President Obama to make credit card reform a law. Mr. Dodd has fought bravely for this law and he had to be against lobby groups who are very active to preserve the interests of banks and credit card companies. In the new law, the credit card companies will have to maintain some restrictions and will surely not be able to charge like the past. Thus, it will save a lot of money for the ordinary people. Now, Mr. Dodd wants more and he will try to make life easier for the consumers.

What I feel is that this law is just addressing one side of the coin. Of course, the companies have to lower their rates and make less profit. Many people in USA get bankrupts every year because of spending too much money on credit cards. So, there should have been some kind of reforms over due long ago. Mr. Dodd should get a lot of applause for his heroic role in this regard. However, I think that we all are forgetting the other side of the coin. Millions of Americans take credit card for granted. They think that it is near to free and they do not need to pay it back. This kind of mentality leads to free spending and as a result, many families get broke and the companies in order to make up the loss charge more on the customers who pay regularly.

I wonder what Obama administration would do about the second side of the coin. Will they make some new rules that people who cannot afford to pay back money should not be issues new cards. Or even better, some people should not be given credit cars in the first place? I know that this is radical idea and it is not a popular idea. However, what I believe is that Obama should try to address both sides of the coin. Otherwise, it can lead to a new kind of economic disaster after a few years.

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Friday, May 22, 2009

Unemployment Rate: Is USA becoming a Third World Country?

I admit that the title I gave the title to create some excitement in the mind of my readers but unemployment rate of 11% should not be in a state like California. After all, it is among the richest states in America. Secondly, it has both Silicon Valley and Hollywood and a very flourishing agriculture sector. So, what is going wrong? In any case, 11% unemployment is perhaps too high for any rich country. Condition of some other US states is not good either.

The national unemployment rate for USA in April was around 9% and it is not good either. Of course, in some third world countries this rate can be almost 25% or even 30%. So, USA is not becoming a third world country. However, the reality is that if the US economy has to go out of the economic recession then more jobs have to be created first.

Thursday, May 21, 2009

Stephanie Flanders about UK Economy and General Election

Stephanie Flanders is the economics editor of BBC. I think that it was in 1988 March or April that I started to listen to BBC World Service Radio and I still have to the habit of considering BBC as my number one source for news. The only thing that has changed is that at that time, I used to listen to radio but I watch now the same thing perhaps in TV. Stephanie Flanders has written an excellent entry in her blog: Going to the country.

She has mainly discussed about the condition of the British economy and its impact on the upcoming general election. A parliament election is perhaps due and the announcement can come any day in the next few months. The opposition Conservative Party wants an immediate election because now they are in a very strong position in the opinion polls.

Prime Minister Gordon Brown is in desperate condition in every way. On the one hand, his government is facing a lot of criticism over too much expenses by some MPs. Then, the condition of the economy is becoming from bad to worse. Almost every week, the Britons hear some kind of negative news about their economy.

Poor Mr. Brown. He is at the wrong time in wrong job. He contributed immensely behind the success of Tony Blair’s government. Now, because of economic recession, he is helpless about the economy.

California: Tax Increase, Bankruptcy or Bailout?

California is the largest state of USA. It is perhaps the richest too. The famous Silicon Valley is in this state. Don’t forget Hollywood too. These two bring generate a lot of money and also create many jobs for the people. California is also very rich in agriculture. So, it is very surprising to me to find that the state government is in the brink of getting bankrupt. The people recently voted about tax increase and they rejected the plan of Governor Arnold Schwarzenegger’s plan. Arnold Schwarzenegger put this plan to get some more revenue so that his state government could fight against the huge budget deficit.

California is the home to companies to like Intel, Google and Yahoo. So, you can easily understand that it has some of the richest people and companies. It seems to me that President Obama will have to think of another bailout to save this state. Otherwise, if California suffers bankruptcy then it will bring disaster for the overall US economy.

Part of the problem is that Arnold Schwarzenegger is from the Republican Party but the legislature assembly of the state is now run by the democrats. So, there is bipartisan conflict and it is not helping anyone.

Healthcare Costs Going Up even During Economic Recession

In the time of recession, people are struggling and trying to just maintain a normal life. Seeing the job loss data does not make anyone happy or does not bring any hope or assurance in the mind of ordinary people. You have perhaps already noticed that the price of oil has decreased substantially in the last one year not only in the US but also in whole world. So, the price of many things has decreased. However, the only thing that is still rising is the cost of healthcare in America. Because of high cost, now, almost 50 million Americans do not have health insurance.

Obama government has taken this issue seriously and they could get the industry on board too. However, there is no sign of hope because there is danger that unless something substantial and effectives steps are taken, the number of uninsured people in this sector may increase to nearly 65 million within 10 years. What is very confusing to me is that during time of economic recession how healthcare cost go up. It shows that there is some problem in this sector and US government needs to address it seriously. A new bill is on the card from the Democratic party but it will not receive support from the industry and the Republicans.

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Wednesday, May 20, 2009

Oil Price More than $60: Is it good for the Recession?

When economic recession started, at that time most people were worried about the high price of oil which reached to $150 a barrel. Then came the crash and the price fell below even $40. It did not make the oil producing countries very happy but the rest of the world was excited and had a sigh of relief. Now, many people have got some kind of expectation that the most part of the economic recession is over and they can have better future. Perhaps, because of the expectation, the price of oil has for the first time gone up to more than $60.00 in new York in many months.

I do not think that it will be good for the U.S. economy because yet, the sign of recovery is not very strong and at the same time, we should not forget that many people are still losing jobs every month. At this moment, the price of oil should not become a very high or else it can bring disaster for the global economy because most of the countries are still fighting against the economic crisis. For example, earlier today, we noticed that the Japanese economy is suffering a lot.

Tuesday, May 19, 2009

Economic Recession: 10 Lessons for American People to Learn

USA is in the midst of economic recession and there is no debate about it. It is the worst economic crisis after the great depression of 1930s. It is now almost certain that the US economy will not be out of the crisis in 2009. 2010 may become a better year but still, there is a long way to go. Large companies are suffering and millions of people are also suffering. Every month, nearly half million jobs got lost for the last few months. This has become a monthly ritual for the people to read about job losses of the previous month.

I was thinking about the lessons that American people can learn from the economic recession and here, I have made a list of 10 possible lessons.

1. Recession is real and can come again

The great depression started in 1929 and naturally, most people have not seen that with their own eyes. So, the idea may have come to many people that USA is the richest country on earth and economic recession would not touch its economy. The year 2008 perhaps taught these kind of people a crushing lesson that it can happen anytime to any country.

2. Living with Family has some advantages

Most people in America do not live to live with their family. In fact, this has some advantages. It ensures personal freedom and can keep you out of many family related problems and quarrels. However, I feel that living with or next to other family members have some advantages. The first advantage that you can get is that you can decrease your expense. If you live with your parents then surely, it will decrease many of your expenses. Secondly, in times of trouble and recession, you can get mental support from your family. In fact, in most Asian countries, family members and relatives try to help each other when someone loses his or her job.

3. Spirituality can help you to pass tough condition

This is obviously my opinion. I feel that in American society, there is a lack of spiritualism. People have really become materialistic. There is nothing wrong in it but the main problem is that when you give too much importance to your job and money then when you lose your job and you see that the economic condition is bad then surely, you will lose your mental strength. By spirituality, I am not just indicating religion. Instead, you can be an atheist but you can have some kind of idealism and passion for something. Life should be more than earning money and spending it.

4. When USA is in trouble then the rest of the world too. Don’t forget them

This is a very thing for the global economy. After recession hit America, naturally, the people of the country became worried about their future and it caused a big problem to those countries who export to the US. For example, India, China and Japan all of them suffered as their export orders decreased from Europe and America. Many people in China have lost their jobs and have returned to their villages after their factories were shut down. Some workers in Indian diamond industry have committed suicide after losing jobs. Try to think about them and then you will see that at least you are much luckier than them.

5. Save Money for the future

Many people think that they should try to increase their money all the time. As a result, they enter into risky places like Forex Market or Stock Exchange. Many of them do not have any idea about the risks involved with these markets and often lose money just like gambling. This is very bad and instead of risking their money, they can keep it in bank and then nothing will happen to it. So, do not take unnecessary risks especially in the markets that you do not have idea about.

6. Don’t become addicted to your credit card

I do not need to emphasize this matter because it has already become a national problem for USA. It happens from early teenage life for many people. They feel that whatever they like they should buy with their credit cards and then they can pay back. Several million people have lost jobs in the last one year and many of them are now finding it difficult to manage their credit card related credits and expenses. The credit card companies are getting smarter and they are trying to find a way that people cannot declare themselves bankrupt after failing to repay the loans of their credit cards. Understanding the gravity of the situation, US Senate just passed a bill that would sharply curtail credit card issuers' ability to raise interest rates and charge fees.

7. Travel to a poor country and be satisfied and spend less money

You do not need to travel to Africa or Asia. Instead, just visit some poor places of Mexico or even Haiti. Then you will notice that these people manage their life by spending just 10% of what you do or even sometimes less. Yet, they are happy and satisfied. You do not need to focus on the poorest people of those countries. Instead, take a look at their middle class people. They also spend much less money then you. Yet, they are becoming educated and living a decent life.

8. In recession, government cares only for the big companies not poor individuals

This is perhaps the biggest lesson to learn for American people. Obama announced a huge stimulus package, G20 countries also came up with $1 trillion package to create some life in the economies of those countries. However, all the money were for big companies and industries not for individuals. $1 billion dollar would happily head to save a bank but not $10,000 to save an individual. So, remember that you are on your own.

9. Don’t become crazy for buying a house

Credit crunch that came from the real estate sector pulled the trigger for the economic recession. I cannot understand the craziness of American people for buying a house by taking huge amount of loan from bank.

10. Invest on Education and Improving your Skill

US companies are outsourcing jobs on a regular basis to remain profitable. This may bring more profit for the companies but for the individuals, it is just disaster. I read a report in Yahoo: No Outsourcing Here: How to Train for the Best American Jobs. All these jobs need you be highly educated and highly skilled.

As the title of this blog suggests, I am just s hobby economist. I have written this entry for providing some food for thought. If you do not agree with me or feel that I have got the thing wrong then let me know your idea in the comment section.

Monday, May 18, 2009

Healthcare is less Important than Global Warming

One of the perhaps major problem about US economy is that misplaced attention and focus are given in some basic things. Many people, business leaders and political leaders give a lot of importance to healthcare issues. Still millions of people in the country cannot afford to have insurance. Obama has got the private sector with him but I do not think that any significant change will happen in this regard in the next 4 years. I have this kind of idea because the decision makers do not want to accept some real facts. Just look at the fast food and junk food industries. What benefit does a soft drink bring? What benefit does a burgher or pizza bring?

On the other hand, global warming is something that is really affecting the world but many people in the country want to close their eyes. They forget that being healthy means living in a good and clean environment. If the environment gets polluted then it will bring hazard for every American and the financial cost will be huge. So, they must focus on the environment more. If they want to avoid this problem then in future it will become bigger and will bring disaster. More than everything else, environment is directly related to health.

So, instead of arguing about the global warming and climate change, the decision makers should sit to find to minimize the negative impacts.

Sunday, May 17, 2009

Jeff Sachs about a New Global Currency

Whether you like it or not, global economy is too much tied to the US currency dollar. Even those countries that do not have good relationship with America, the people there use dollar a lot. So, when the US economy is weak or is in a problem then it affects everyone badly because of the close relationship and involvement with the currency. So, may be it is time that all of us think seriously about the emergence of a new global currency.

I found an interesting article of Jeff Sachs in Economist’s View (Mark Thoma’s blog). The idea is interesting. The problem is that most people are afraid of something in any field. In the case of economics, it is even more problematic because if any crisis happens then it can lead to disaster. Anyway, I feel that current crisis is itself a big disaster and that is why, everyone should think of a global currency.

Friday, May 15, 2009

Technorati Claim for this Blog

I know that until now, there has been no reader to this blog. So, it is perhaps the best time to claim the blog in Technorati. I am just supposed to put a code which I am doing here in the following:

Technorati Profile

So, I hope this is it.

Monday, May 11, 2009

Can Health Care industry Save $2 Trillion for Obama?

It is big news now in USA that health care industry is going to join US government’s effort to ensure a better form by saving a lot of money. Barack Obama has got the support of almost all the stakeholders of this industry and they have informed him with collective effort, in the next 10 years, $2 trillion will be saved. This news will surely make many people in USA very happy. America may be the richest country on earth but the reality is that nearly 50 million people still do not have health insurance.

We have to wait for the next few days about the detailed plan. It is still not clear how this huge amount of money will be saved. The basic idea is cutting cost and using the resources more efficiently. It is still not clear that what extra ordinary things will be done now that could not be done until now by the same industry.

British Prime Minister Gordon Brown Criticized for £150 plumbing work

These days, some Parliament members in England from both the ruling and opposition parties are in an embarrassing situation because a recent news report by a newspaper informed the people that some MPs were wasting a lot of money at the expense of the taxpayers’ money. This matter has caused a lot of controversy and anger among ordinary people. If you want to know about the expenses that have caused anger among people then you should visit this link of BBC: MPs' expenses in detail. About the expense claim off Prime Minister Gordon Brown it is written:

Claim: Gordon Brown also claimed twice for the same plumbing work within six months of each other.

Response: The House of Commons Fees Office said the mistake had been inadvertent and apologised for having not spotted it. Gordon Brown is understood to have repaid the sum involved - believed to be £150.

£150 only? I wonder what the lobbyists in the UK do!

What can US Banks learn from HSBC?

While most American banks are under a lot of financial stress and need a lot of tax payers money to survive. This matter is causing a lot of resentment and anger among ordinary people in USA. On the other hand, HSBC is the leading bank of England and like most banks they suffered in the last quarter of 2008. Now, it seems that HSBC has passed the worst time and the first quarter of 2009 brought better condition for the bank compared to one year ago. It has not yet asked for any kind of support from the British government. It also shows that it has good financial health at this moment.

I wonder what American banks can learn from HSBC? Well, I feel that the most important thing that American banks can learn from HSBC is that Asia is an important region for banking industry. HSBC has very strong presence in most Asian countries and the main growth of the bank is coming from Asia.

"Asia has proven resilient, with China and India continuing to grow robustly, particularly China where stimulus initiatives have clearly had a direct domestic impact,” these words came from HSBC Group Chairman Stephen Green.

I would have been happy if these words came from the Chairman of any American bank.

Health Care: Paul Krugman, Government Bureaucrats and Private Sector

New York Times has an excellent Op-ed by the famous economist Paul Krugman with the title: Harry, Louise and Barack. He has talked about the new proposals of the private industry players about healthcare system in USA. It is needless to say that healthcare is one of the top issues in the country today. President Barack Obama promised that he would carry out some major changes in this sector and he would make things easier for the American ordinary people to have better medical facilities paying less. Of course, it sounds attractive but providing it is a huge challenge for any government.

Paul Krugman has discussed all sides of the coin in the column. He talked about some mistrust that he has about the industry players. He has mentioned that in the past, these big companies created obstacle for people to get better insurance deals. So, he is surprised that now, these companies are trying to do the opposite thing. Naturally, some decision makers are excited and happy that they will not face any big difficulty from the industry in implementing the vision of President Obama about healthcare reforms. Mr. Krugman has also expressed his satisfaction over the matter but at the same time, he has urged the government bureaucrats on one thing:

I would strongly urge the Obama administration to hang tough in the bargaining ahead. In particular, AHIP will surely try to use the good will created by its stance on cost control to kill an important part of health reform: giving Americans the choice of buying into a public insurance plan as an alternative to private insurers. The administration should not give in on this point.

He is right. Obama government should never agree to any proposal that would limit the American people about their medical options.

Sunday, May 10, 2009

Welcome to Hobby Economist Blog

All my life, I studied in humanities and Economics was my most favorite subject in high school and college. When the time of studying in University came, I had the opportunity to any subject in my university but I selected English Literature and Language instead of Economics. Well, I live in a poor country and my parents felt (and I agreed) that English has better prospect than any other subject in the humanities field in terms of career prospect. There was a second reason too. I wanted to be a journalist or a writer and English seemed to be a better choice. I even wanted to study journalism and English seemed to the best option for my future.  

I am happy that I decided to study English literature because it gave a career boost to someone like me who comes from a lower middle class background. On the other hand, I have got some skill in this language. This skill of English has helped me a lot to be passionate about knowledge and information. The reality is that you cannot find enough good quality books on any subject in any language in South Asia from where I come from. So, studying English in university level has given me a good base for the future.

I have been professionally blogging for more than 3 years and I always tried to write something related to South Asian Business. I still have blog about this topic and the url is:

A couple of my entries got linked by two leading blogs on Economics: Mariginal Revolution and Economist’s View. I felt very happy for this matter and my interest and passion grew about Economics. That is why; I decided to open this blog.

You may be surprised with the name of this blog: Hobby Economist. Well, I liked the name because it correctly depicts my condition. On the one hand, I like to become some day a real economist and until that time, it is just my hobby.

What will be featured in this blog? I like to mainly write about the US economy. I have to admit that I am not an expert on this field. However, I know that I am a keen observer of US economy and I have tried to remain updates about US economy for the last 2 decades. Of course, being updated means reading reports and columns on newspapers or listening about US economy in BBC Radio, BBC World Television Channel and CNN- nothing academic; rather pure hobby.

In our time, US economy is totally related to the global economy. You cannot separate them. Whenever, you want to discuss about European economy or Asian economy, sooner or later you will find the relationship with America.

I like to write for the ordinary readers. If you are looking for some serious discussion or observation then this blog may not satisfy you. Still, you are most welcome here because at the end of the day, economics is one of the most important things that govern our personal and social life.