Chapter 10 Blog
http://www.ctv.ca/generic/generated/static/business/article1602721.html
Summary
Rumours have been speculating that China Eastern Airline is coming to a partnership with WestJet Airline Ltd. to cooperate in ticket sales and luggage transportations. WestJet will provide connecting, domestic flights in Vancouver for travelers traveling on China Eastern from Shanghai. WestJet also aims to come up with several international deals with other airlines to maximize its coverage of Chinese leisure travelers’ market. Forecast for WestJet joint-partnerships with the airlines is strong as China was recently granted approved destination status (ASD) from Canada and thus more Chinese tourists will be able to come to Canada. In addition, as Chinese average income steadily elevates and major events promotes stronger identity of global citizen, desire for Chinese to see foreign lands will continue to grow in the future.
Connection
Partnership is from of business where there are more than one owner in a business. However, this is not the case for China Eastern and WestJet. In this context, these companies are in a business partnership in which they share the same interests. These firms do not necessary has ownership in their partner, yet they cooperate. Furthermore, acquisition of partnerships by WestJet is targeted to fight against its biggest competitor, Air Canada. WestJet and Air Canada has dominated the Canadian domestic air industry. It is a very concentrated industry as it can be identified as an oligopoly. Partnership of WestJet will allow tourists travel more conveniently and economically, hence improve competitiveness of WestJet against Air Canada because customers will change their choices of airlines.
Reflection
I think WestJet has made the right decision to become partners with other airlines to expand its customer bases. First of all, because it is more convenient for customers to travel internationally and domestically in Canada through WestJet and its partners, WestJet becomes more competitive comparing to Air Canada. WestJet will be able to acquire more market share and thus increase their revenue. Moreover, Increase in sales also improve WestJet Cash inflow as most of the ticket sales are processed by cash or credit cards. WestJet is a public-traded corporation on Toronto Exchange and I predict this positive news will boost its share price up as investors have stronger forecast on WestJet. Last but not least, volatility of oil price might pose an advantage to them as oil price took a huge slump in the last months.
Monday, June 14, 2010
Monday, April 26, 2010
Chapter 8 Stabilization Policy
Chapter 8 Stabilization Policy
http://www.edmontonsun.com/homes/homesandcondos/2010/04/25/13716331.html
http://www.actionplan.gc.ca/eng/feature.asp?featureId=18
Summary
On April 24, 2010, federal government transferred funding of $9 million to Alberta to subsidize housing projects; this payment is part of the Canadian Economic Action Plan, which was first introduced in 2009 to fight against the economics downturn that was originated in 2008. This tax credit is aimed to aid people with general improvement, energy-efficiency upgrade and modification for people with disabilities on their accommodations. Home renovation credit does not only “ Improve quality of lives by improving living conditions, but also it stimulates the local economy by creating jobs.” The Ministry of Finance has reserved $1 billion to be transferred for social housing and over $800 million will be distributed among provinces and territories.
Connection
The home renovation and retrofits program is closely connected to the fiscal policy for the Canadian government. Fiscal policy determines government spending level and standard of tax rate. By introducing home renovation and retrofits, Canadian will be encouraged to spend more money on renovation because it is now cheaper for them to improve their houses or buildings. In addition, energy-efficiency upgrade qualifies for the criteria of renovation credit and this certainly does create an incentive for Canadian to go green and save more on their bills in the future. Although people will spend more, the reduced level of tax income will magnify government’s debt level problem.
Reflection
Although economists promote free market system, I find that government intervenes and regulations are necessary to stabilize the economy. Canada Action Plan is a multi-billion project to improve the economy by creating jobs and encouraging spending. Home renovation is an example of encouraging spending by reducing tax rate. However, as government constantly spending money to improve the economy, the deficit level is slowly escalating. These debts are not likely to be paid by this generation, but it will be carried over to the future generation. This accumulated debt will be a big load for the future generations. As economy is now picking up its own pace, it is likely tax benefits might be withdrawn soon to prevent further deficit. Take good use of these tax credits and spending money wisely will be the smart decision to be made currently.
http://www.edmontonsun.com/homes/homesandcondos/2010/04/25/13716331.html
http://www.actionplan.gc.ca/eng/feature.asp?featureId=18
Summary
On April 24, 2010, federal government transferred funding of $9 million to Alberta to subsidize housing projects; this payment is part of the Canadian Economic Action Plan, which was first introduced in 2009 to fight against the economics downturn that was originated in 2008. This tax credit is aimed to aid people with general improvement, energy-efficiency upgrade and modification for people with disabilities on their accommodations. Home renovation credit does not only “ Improve quality of lives by improving living conditions, but also it stimulates the local economy by creating jobs.” The Ministry of Finance has reserved $1 billion to be transferred for social housing and over $800 million will be distributed among provinces and territories.
Connection
The home renovation and retrofits program is closely connected to the fiscal policy for the Canadian government. Fiscal policy determines government spending level and standard of tax rate. By introducing home renovation and retrofits, Canadian will be encouraged to spend more money on renovation because it is now cheaper for them to improve their houses or buildings. In addition, energy-efficiency upgrade qualifies for the criteria of renovation credit and this certainly does create an incentive for Canadian to go green and save more on their bills in the future. Although people will spend more, the reduced level of tax income will magnify government’s debt level problem.
Reflection
Although economists promote free market system, I find that government intervenes and regulations are necessary to stabilize the economy. Canada Action Plan is a multi-billion project to improve the economy by creating jobs and encouraging spending. Home renovation is an example of encouraging spending by reducing tax rate. However, as government constantly spending money to improve the economy, the deficit level is slowly escalating. These debts are not likely to be paid by this generation, but it will be carried over to the future generation. This accumulated debt will be a big load for the future generations. As economy is now picking up its own pace, it is likely tax benefits might be withdrawn soon to prevent further deficit. Take good use of these tax credits and spending money wisely will be the smart decision to be made currently.
Wednesday, April 7, 2010
'World's factory floor' to raise minimum wage
http://www.ft.com/cms/s/0/4262374c-32f6-11df-bf5f-00144feabdc0.html
Summary
Financial Times has reported a 20% raise of average minimum wages in Guangdong, the biggest export centre in China. The provincial government launched the policy primarily due to massive unfilled jobs positions as factories were rushing to complete “surge in orders since February. The enforcement of raise in minimum wages aimed to attract workers to fill vacant positions and improve their living conditions as CPI in February rose 2.7% comparing last year. Factories in Guangdong have started to move to poorer regions in Western China to take advantages of cheaper taxes and lower wages. Plus, less workers will work in Guangdong as they can now work closer to home. Au Yiu-Chee, who owns a factory in Guangdong, claimed the minimum wage policy was unexpected and he was now in a less favoured position comparing to manufacturers in Cambodia. Forecast for the “world’s factory floors” remains challenging in the 2010.
Connection
Minimum wages and CPI were mentioned in the article and they are closely related to the indicators of economics. First of all, CPI stands for Consumer purchases index and it reflects how prices have changed on daily consuming goods. Some of the examples are milk, pork and beat. It serves as an indicator which can be used to determine the minimum wages because workers will need enough purchasing power to sustain their lives. Ideally, minimum wages should be parallel to the CPI level. Minimum wages impacts both the labour force participation and unemployment rate because if minimum wages are set at workers’ desired level, lots will be more willing to look for a job or work again because they will receive the same minimum amounts of wages regardless of their performance or positions. Keep in mind that because of increase expenses for business, businesses might hire fewer employees to compensate the increasing wages. Eventually, unemployment rate might rise again. It is a dilemma that government has to consider thoroughly before implement minimum wages.
Reflection
The drastic increase in CPI was mainly due to 40% inflation in RMB currencies for the past year. Reasons why China has been the “world factory floors” are its abundant supply of workers and cheap currencies. Cheap currencies allow China factories to stay competitive as we are one of the biggest exporter in the world. China has now faced pressure both within and oustide the country. Foreign countries, like U.S., are forcing the inflation of RMB.On the other hand, in order to resolve complaint from workers and supply factories with workers, the Guangdong Provincial government decided to implement the raise in minimum wages level. Nonetheless, in order for Chinese factories to stay competitive, I don’t think minimum wages should be implemented. Instead of raising minimum wages, factories can negotiates with workers and government by providing foods, shelters and potential medical benefits to avoid a raise in minimum wages. In addition, factories should organize social events so that workers are more loyal to their factories. If workers are pleasant with the wages with all the benefits, raise in minimum can then be prevented and factories can remain competitive although there is an increase in RMB currency.
Summary
Financial Times has reported a 20% raise of average minimum wages in Guangdong, the biggest export centre in China. The provincial government launched the policy primarily due to massive unfilled jobs positions as factories were rushing to complete “surge in orders since February. The enforcement of raise in minimum wages aimed to attract workers to fill vacant positions and improve their living conditions as CPI in February rose 2.7% comparing last year. Factories in Guangdong have started to move to poorer regions in Western China to take advantages of cheaper taxes and lower wages. Plus, less workers will work in Guangdong as they can now work closer to home. Au Yiu-Chee, who owns a factory in Guangdong, claimed the minimum wage policy was unexpected and he was now in a less favoured position comparing to manufacturers in Cambodia. Forecast for the “world’s factory floors” remains challenging in the 2010.
Connection
Minimum wages and CPI were mentioned in the article and they are closely related to the indicators of economics. First of all, CPI stands for Consumer purchases index and it reflects how prices have changed on daily consuming goods. Some of the examples are milk, pork and beat. It serves as an indicator which can be used to determine the minimum wages because workers will need enough purchasing power to sustain their lives. Ideally, minimum wages should be parallel to the CPI level. Minimum wages impacts both the labour force participation and unemployment rate because if minimum wages are set at workers’ desired level, lots will be more willing to look for a job or work again because they will receive the same minimum amounts of wages regardless of their performance or positions. Keep in mind that because of increase expenses for business, businesses might hire fewer employees to compensate the increasing wages. Eventually, unemployment rate might rise again. It is a dilemma that government has to consider thoroughly before implement minimum wages.
Reflection
The drastic increase in CPI was mainly due to 40% inflation in RMB currencies for the past year. Reasons why China has been the “world factory floors” are its abundant supply of workers and cheap currencies. Cheap currencies allow China factories to stay competitive as we are one of the biggest exporter in the world. China has now faced pressure both within and oustide the country. Foreign countries, like U.S., are forcing the inflation of RMB.On the other hand, in order to resolve complaint from workers and supply factories with workers, the Guangdong Provincial government decided to implement the raise in minimum wages level. Nonetheless, in order for Chinese factories to stay competitive, I don’t think minimum wages should be implemented. Instead of raising minimum wages, factories can negotiates with workers and government by providing foods, shelters and potential medical benefits to avoid a raise in minimum wages. In addition, factories should organize social events so that workers are more loyal to their factories. If workers are pleasant with the wages with all the benefits, raise in minimum can then be prevented and factories can remain competitive although there is an increase in RMB currency.
Monday, March 1, 2010
Treasury Bills
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=anX_AW2lZBHE
Summary
Latvia, a member of European Union in northern Europe, finally sold 8 million Lati (15.3 million) worth of two-year treasury bills on February 24, 2010 for the first time since May 2007. The bills delivered “an average yield of 6.07%” which almost doubled the rate that U.S offered. In addition to the sale of two-year bills, Latvia also sold 16 million treasury bills with different maturity periods. The success of this auction was primarily because of Latvia’s acquisition of 7.5 billion Euros (10.2 billion) funding from a union formed by European Commission and IMF. The Latvia financial markets showed sign of stabilizing and investors are regaining their confident on Latvia’s grasp on recovery. The interest rate for Latvia one-year Treasury bill dropped from 14.75% to 5.6% on February 18th.
Connection
Treasury bill is promissory note which bears no interest but can be sold on a discount basis. For example, it is possible for buyers to purchase treasury bills of $100000 with only $950000. However, government or central bank itself will place a reserve bid to avoid underbidding for these bills. Upon the maturity date, which can be varied from months to years, the bearer of T-bills will receive their investment based on the face value on T-bills. It is one of the most secure investments for investors because these bills are issued by the government, although it is not a guaranteed return due to the possible financial dysfunction of the issuing government. In the case above, because public was not convinced that Latvia would be able to handle the financial crisis, no successful sales of treasury bills had been made since 2007. Later, Latvia was forced to raise the one-year bill average yield to 14.75% attract investor but which, in another way, meant there is a high risk accompanied. Nonetheless, sales were still not made and Latvia had to acquire loan from European commission to sustain their economy. A treasury-bill is a way for government to acquire loan from the public.
Reflection
In my opinion, acquisition of treasury bills is an alternative investing opportunity for the public because it generally has a higher yield than GIC or term deposit and relatively safer than investing in stock markets and mutual funds. Every investor can purchase T-bills through banks at a smaller amount and receive the same yield central government offered to banks. In spite of the relatively safer return, I personally prefer buying stocks because of its greater return. In lots of cases, if investors do their homework and be patient enough, it is never too hard to find a company that can double or even triple in a year or so. After learning about T-bills, I found out that T-bills can be used as an indicator for people’s forecast on the countries’ future performance. Countries with high T-bills rates might signal that they are in desperate need of cash and they are running into some financial difficulties.
Summary
Latvia, a member of European Union in northern Europe, finally sold 8 million Lati (15.3 million) worth of two-year treasury bills on February 24, 2010 for the first time since May 2007. The bills delivered “an average yield of 6.07%” which almost doubled the rate that U.S offered. In addition to the sale of two-year bills, Latvia also sold 16 million treasury bills with different maturity periods. The success of this auction was primarily because of Latvia’s acquisition of 7.5 billion Euros (10.2 billion) funding from a union formed by European Commission and IMF. The Latvia financial markets showed sign of stabilizing and investors are regaining their confident on Latvia’s grasp on recovery. The interest rate for Latvia one-year Treasury bill dropped from 14.75% to 5.6% on February 18th.
Connection
Treasury bill is promissory note which bears no interest but can be sold on a discount basis. For example, it is possible for buyers to purchase treasury bills of $100000 with only $950000. However, government or central bank itself will place a reserve bid to avoid underbidding for these bills. Upon the maturity date, which can be varied from months to years, the bearer of T-bills will receive their investment based on the face value on T-bills. It is one of the most secure investments for investors because these bills are issued by the government, although it is not a guaranteed return due to the possible financial dysfunction of the issuing government. In the case above, because public was not convinced that Latvia would be able to handle the financial crisis, no successful sales of treasury bills had been made since 2007. Later, Latvia was forced to raise the one-year bill average yield to 14.75% attract investor but which, in another way, meant there is a high risk accompanied. Nonetheless, sales were still not made and Latvia had to acquire loan from European commission to sustain their economy. A treasury-bill is a way for government to acquire loan from the public.
Reflection
In my opinion, acquisition of treasury bills is an alternative investing opportunity for the public because it generally has a higher yield than GIC or term deposit and relatively safer than investing in stock markets and mutual funds. Every investor can purchase T-bills through banks at a smaller amount and receive the same yield central government offered to banks. In spite of the relatively safer return, I personally prefer buying stocks because of its greater return. In lots of cases, if investors do their homework and be patient enough, it is never too hard to find a company that can double or even triple in a year or so. After learning about T-bills, I found out that T-bills can be used as an indicator for people’s forecast on the countries’ future performance. Countries with high T-bills rates might signal that they are in desperate need of cash and they are running into some financial difficulties.
Wednesday, January 20, 2010
Financial Report of Canadian Government
http://www.fin.gc.ca/afr-rfa/2009/afr-rfa09_1-eng.asp#highlights
Summary
In the fiscal year of 2009-2009, the Canadian government reported deficit of $5.8 billion comparing to the “budgetary surplus of $9.6 billion in 2007-2008”. The huge leap was caused by the worst global recession since World War II. Global recession resulted in a decrease of $9.3 billion or 3.8% from 2007-2008 on Canadian government revenue. The most significant descending figure of revenue was corporate income tax, which decreased by 27.4%. Recession stroke Canadian business hard and businesses were having a hard time to sustain their operations. On the other hand; although payment toward public debt has descended by 7% due to low interest rate, federal government expenses escalated by 2.6%. Funds were directed to Canadian Economics Action Plan, which was introduced in 2009 to improve the economy. For example, money was spent to enhance EI benefit to help the unemployed and support the “financing for Canadian households and business” like renovation tax cut. Moreover, by injecting immense infrastructural projects, government created more jobs in constructional areas.
Connection
The importance of government intervention is emphasized in both Chapter 3 and Chapter 4. During these hard times, people feared to spend their money; therefore they tended to save all their money for further use. Fewer transactions will mean a severer recession- Depression. Governments had to step up and initiated different economics plan to stimulate financial activities. For example, the support of “financing for Canadian households and business” were tax credit which encouraged consumers or business to spend their money in different products or services, so that the economy can rehabilitate faster. Other than tax credit, federal government also spent money on EI benefit. The unemployed could sustain their lives with these EI. Without government intervention, unemployed would be suffering from these crisis and free-market system wouldn't be able to take care of them. Political instability could be detonated because lack of support for the unemployed.
Reflection
Personally, I think the Canadian government takes care of citizens too much that to a certain extent we are handicapped. Different social welfare programs and EI has been directed to help unemployed and low-income people. These created an incentive which prevents people from working. If they are getting paid and taken care by the government, why would they find jobs to sustain themselves? In addition, people have get into a habit of complaining the government. Government should educate people how to save and spend properly. They can impose strict saving rules which withdraw portion of their income instead of paying income taxes. This money will then be given back to tax payers in a certain period of time. I am also suggesting that less money should be spent to social welfare programs. Surplus can then be spent in different areas like public transportation and renewable energy to enhance Canadian’s competitiveness in the world. More investment in Canada will result in greater economy in Canada and all can be benefited from it.
Summary
In the fiscal year of 2009-2009, the Canadian government reported deficit of $5.8 billion comparing to the “budgetary surplus of $9.6 billion in 2007-2008”. The huge leap was caused by the worst global recession since World War II. Global recession resulted in a decrease of $9.3 billion or 3.8% from 2007-2008 on Canadian government revenue. The most significant descending figure of revenue was corporate income tax, which decreased by 27.4%. Recession stroke Canadian business hard and businesses were having a hard time to sustain their operations. On the other hand; although payment toward public debt has descended by 7% due to low interest rate, federal government expenses escalated by 2.6%. Funds were directed to Canadian Economics Action Plan, which was introduced in 2009 to improve the economy. For example, money was spent to enhance EI benefit to help the unemployed and support the “financing for Canadian households and business” like renovation tax cut. Moreover, by injecting immense infrastructural projects, government created more jobs in constructional areas.
Connection
The importance of government intervention is emphasized in both Chapter 3 and Chapter 4. During these hard times, people feared to spend their money; therefore they tended to save all their money for further use. Fewer transactions will mean a severer recession- Depression. Governments had to step up and initiated different economics plan to stimulate financial activities. For example, the support of “financing for Canadian households and business” were tax credit which encouraged consumers or business to spend their money in different products or services, so that the economy can rehabilitate faster. Other than tax credit, federal government also spent money on EI benefit. The unemployed could sustain their lives with these EI. Without government intervention, unemployed would be suffering from these crisis and free-market system wouldn't be able to take care of them. Political instability could be detonated because lack of support for the unemployed.
Reflection
Personally, I think the Canadian government takes care of citizens too much that to a certain extent we are handicapped. Different social welfare programs and EI has been directed to help unemployed and low-income people. These created an incentive which prevents people from working. If they are getting paid and taken care by the government, why would they find jobs to sustain themselves? In addition, people have get into a habit of complaining the government. Government should educate people how to save and spend properly. They can impose strict saving rules which withdraw portion of their income instead of paying income taxes. This money will then be given back to tax payers in a certain period of time. I am also suggesting that less money should be spent to social welfare programs. Surplus can then be spent in different areas like public transportation and renewable energy to enhance Canadian’s competitiveness in the world. More investment in Canada will result in greater economy in Canada and all can be benefited from it.
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