Growth of the National Economy Analysis - Assignment Example

Running Head: The Wall Street Journal Name Course Instructor Date Describe the recent attempts by the Obama Administration to stimulate the economy and identify five leading economists with their assessment of its impact on the long-term growth of the national economy. The $ 787 billion stimulus package was design to jumpstart the economy and help in saving millions of jobs. The administration aimed at instilling confidence which was needed for economic growth. Leading economist was of the opinion that the biggest challenge that faced the Obama administration was the softening of recession, the stimulus package that was put in place was not enough to create the impact, it only led to ballooning of the national debt. The planned was blamed for both failing to reduce the unemployment by a threshold of nine per cent and adding the debt to levels which were considered threatening. There is enough evidence to show that stimulus package that was put up by the government inspired the confidence which was needed to keep the economy going. By economic indicators the stimulus was a succeed, the GDP had risen to 3.9 per cent ,the Dow had risen to 10428.Economists argue that not all of the success can be directly be attributed to the Obama administration stimulus package, emerging markets and expansive monetary policy also played some part in helping to turn around and boost the economy. Mark Zandi in his studies claimed that stimulus helped in saving millions of jobs and as a result prevented the economy from going to deeper recession According to John F. Cogan and John B. Taylor, the available data highly confirms that the stimulus programs did not work; they concluded that the enactment of these policies was only a win for Keynesian wishful thinking. The feel that although the policy debate focused in the multiplier’s size, indicators show that dollar volume of government purchases which has been generated did not have a negligible effect. Mr Cogan is a senior fellow at Hoover institution and Mr Taylor is an economics professor at Stanford. James Feyyer and Bruce Sacerdote of Dortmouth College concluded that the stimulus measures put in place by the Obama administration had varied effects in terms of employment the two economists in their study concluded that it had a positive and significant effect The overall stimulus was between 0.47 and 1.06 figures they concluded are high enough to be considered as a success given the level of recession that the country had previously experienced.. Gabriel Chodorow-Reichof Berkeley, Laura Feiveson of MIT, Zachary Liscow OF Berkeley and William Gui Woolston of Stanford University in their study concluded that fiscal aid part of the stimulus had a positive effect on employment, the additional matching funds helped to increase the rate of employment by 3.5 job years. They concluded that the multiplier effect for the funds was around 2. Source: John F. Cogan And John B. Taylor (2010) The Obama Stimulus Impact? Zero, Wall Street Journal Dec. 9, 2010 Veronique de Rugy, May 12, 2011 Ugly Modeling: Will spending cuts ruin or improve America's economy? Wall Street Journal 2. Trace the direction of inflation using the U.S. Consumer Price Index (CPI). Is the inflation rate rising or falling? What are three major factors that have influenced the direction of the inflation rate? The consumer price index measures how the consumers spend their money ranging from gasoline, medical bills etc,Wall Street Journal notes that in the month of march ,this year (2014) it advanced by 0.2 % a figure which was more than what had been reported the previous month at 0.1%. According to the Wall Street journal report, the CPI index report showed rise in prices for the month of March. Economists have described this as moderate inflation, something which they describe as a sign of health which highly encourages business to hire and also pump in some money in form of investment. According to Wall Street Journal the rise in inflation in the month of March can be attributed to the rise in basic commodities; food and housing. The food prices rose by 0.4 per cent largely due to weather patterns where some parts of United States and Brazil experienced drought which greatly affected the agricultural output. Wall Street Journal quotes Joshua Shapiro, an economist at consultancy MFR Inc who says that inflation will increase to 2 % or higher as the year progresses. The graph and table below show the recent movement of the Consumer price index Recent Consumer Price Index for USA Year jan feb mar apr may jun jul aug sep oct nov dec ann 2014 233.916 234.781 236.29 2013 230.28 232.166 232.77 232.531 232.945 233.504 233.596 233.877 234.149 233.546 233.069 233.049 232.957 2012 226.665 227.663 229.39 230.085 229.815 229.478 229.104 230.379 231.407 231.317 230.221 229.601 229.594 2011 220.223 221.309 223.46 224.906 225.964 225.722 225.922 226.545 226.889 226.421 226.23 225.672 224.939 2010 216.687 216.741 217.63 218.009 218.178 217.965 218.011 218.312 218.439 218.711 218.803 219.179 218.05 Jonathan House (2014) Consumer Prices Rise Slightly U.S. Price Pressures Remain Muted Amid Weak Economic Growth, April 15, 2014  3. Trace the weekly movement of the Federal Funds rate, the 3-month Treasury bill rate, and the prime rate. What is the future prospect of these sensitive interest rate indicators? Federal funds rate is the interest rate which financial institutions lend balances at overnight. It is usually determined by the Federal Open Market Committee (FOMC).In the month of January 2014 it averaged at 0.07,in the month of February it was at 0.07% and in March it was at 0.08% .It has been on an increase, though slight. Rate of return on a 3 Month T-Bill. Treasury Bills are basically used as cash-equivalent liquid assets by corporate. In a situation where we have low rates it basically means that companies are in their possession more Treasury Bills. The rate has been on an average of: 0.04 %, 0.05%, 0.05 %, 0.04%, for January, February March, April respectively. Prime lending rate has been 3, 25 % for the first quarter of the year. The sensitive interest rate indicators are expected to stabilize in future an indication of a brighter future in terms of the economy. 4. Trace the daily movement of the United States dollar. What three factors have caused the dollar to increase or decrease? The dollar has remained relatively stable in the first quarter of the year; the prevailing economic conditions have greatly influenced the value of the dollar. The relative volatility of the currency is also attributed to rise in food prices as well as demand in houses and gas. 5. What is the Federal Reserve doing with our money? Please summarize five articles that underscore the importance of the central bank implementing monetary policy. Federal Reserve has the role of implementing the monetary policy; through doing this it influences the amount of credit and money in the economy. The objectives of the monetary policy are to promote stable prices, maximum employment and moderation of the long term interest rates. An effective monetary policy will help the Central bank achieve these objectives. NY Fed’s Dudley: Fed in No Rush to Tighten Monetary Policy In an article written by Walter Mathews, Wall Street Journal even as the economy show signs of improvement, the central bank is yet to start tightening the monetary policy. Synchronized Boom, Synchronized Bust: Bad U.S. monetary policy had global consequences. In this article Marc Faber argues that the best policy that should be applied by the Federal Reserve was to do nothing and freely the market would collect itself. Further intervention, he argued would only lead to prolonged agony which can result to another slump. Tapering Without Tears—How to End QE3 by Ronald McKinnon Article observes that the Fed have an important role in raising the short term interest rates ,they conclude that this should be the first step followed with phasing out the bond buying program. Through this the Fed would have allayed the fears and ended the quarter on a high note. How Fed Policy Roils Emerging Markets The article points out that Federal Reserve has the capacity to propel job creation through slowing down in its assets purchases which are in tune of $ 85 billion a month. Taper talk stirs fresh anxiety, but there will be life after Quarter three. Some countries, though, will fare better than others. Economists Split on Start of Fed Pullback The article predicts that Federal Reserve is about to exercise one of its roles through an initial pullback of easy-money policies. The Wall Street Journal analysts expect that the central bank will move cautiously in its attempt ease off the country monetary policy. The economist who participated in the survey expected the Federal Reserve to make it public the plans to reduce the pace of buying the bonds. Benn Steil and  Dinah Walker (2013) How Fed Policy Roils Emerging Markets Wall Street Journal Dec. 9, 2013 Ronald McKinnon (2013) Tapering Without Tears—How to End QE3 Oct. 27, 2013 Walter Mathew (2014) NY Fed’s Dudley: Fed in No Rush to Tighten Monetary Policy, Wall Street Journal Faber Marc (2009) Synchronized Boom, Synchronized Bust: Bad U.S. monetary policy had global consequences. Wall Street Journal Feb. 18, 2009 Sudeep Reddy (2014) Economists Split on Start of Fed Pullback Wall Street Journal, Jan. 16, 2014 6. Trace the daily movements of crude oil and gold. What are three major causes of petroleum and gold price movements? Crude oil market has been rising since 2008 with slight fall in some periods in between. Price volatility was at its lowest in 2013 and the beginning of 2014.The factors that have been contributing to price instability were the crisis in the Middle East and increased demand in different parts of the world. The mitigation of the causes such as near stability in Libya and increased production in United States may have seen a reduction in price volatility in the recent past. In April 2013 Wall Street Journal reported that Gold has recorded the biggest percentage drop in one day for the last thirty years. Analysts said that this could be a pointer of an economic meltdown. The Gold futures for the month of April we down to a low of $ 1360 an ounce. The highest prices were recorded in 2011 but in the recent past the prices have gone down by almost $205 an ounce. The same has been reported this year with a two per cent drop in prices, a decline that has not been witnessed since December 2013. Christian Berthelsen, David Wessel and Gregory Zuckerman (2013) Gold Plunges as Fears Over Inflation Fade, Walls Street Journal, April 16, 2013 7. What is the unemployment rate in the national economy? Identify and summarize five articles about the direction of unemployment. Zachary Karabell (2014) Ignore the Unemployment Rate, Wall Street Journal, Feb. 7, 2014 The article says that unemployment rate is a indicator that greatly shapes the politics of United states..Although it observes that the unemployment rate has eased since 2008, the totemic statistic is archaic and most misleading. Neil Shah and Jeffrey Snapshot (2013) Employers Gain Confidence to Hire,Wall Street Journal, Dec. 6, 2013 The article reports that unemployment rate falls to seven percent as more than two hundred thousand jobs were added to the market .This is an indication that the employers were gaining confidence especially in the fields of construction and health care. Victoria Mcgrane (2014) The Downside of Lower Unemployment, The Wall Street Journal, Feb. 2, 2014 The article points out that unemployment reports show that there has been a decline in unemployment rates but observes that the drop could be linked to a number of issues such as ,people giving up job search as well as an end of benefits. During the survey these people are not counted as unemployed, therefore the figures may be underrepresented. Ben Leubsdorf (2014)Jobs Rebound Eases Fears of Spring Stall, Wall Street Journal, March 7, 2014 The article reports that United States job market has expanded with creation of more than 175,000 jobs in the month of February despite the harsh weather. Stephen Fidler (2014) Taking Stock of Labor Markets on Both Sides of the Atlantic,Wall Street Journal Feb. 13, 2014 The article observes that unemployment rates in Europe may be higher than United States making its labor market worse than it appears. 8. Trace the daily movement of the Dow Jones Industrial Average and the Standard and Poor’s 500 Index. Summarize five articles that incorporate the market as a leading indicator of national economic performance. Tomi Kilgore (2014) Stocks Wobble but End Session Higher, Wall Street Journal ,April 15, 2014 The article points out the movement of the stock on a day that saw the Dow Jones Industrial Average move up by 235.81 to stand at 1842.98.The performance of Dow Jones Industrial Average is an indication of the economy performance and is influenced by several factors. Jeremy j. Siegel (2009) The S&P Gets Its Earnings Wrong, Wall Street Journal, Feb. 25, 2009 The article reports that the stocks may be cheaper that they look based on the announcement that was made by Standard & Poor. The news shocked the investors as the figures which were indicated were the lowest since 1936. Matt Phillips and E.S .Browning (2011)Tech Sends Stocks Soaring, Wall Street Journal, July 20, 2011 The article points out on the factors that influence the performance at Dow Jones and the impact this has on the economy. Google to Join S&P 500 A Wall Street Journal news roundup, March 24, 2006 This news article announced that Standard & Poor's said will add Google Inc. to the Standard & Poor's 500-stock index. This was to happen in April 2006.The news sent the shares of the internet high-flier's soaring. Repligen Corporation Set to Join the S&P Small Cap 600, Wall Street Journal, April 15, 2014 The article announces the joining of a company to S &P small cap 600; this is an indication of growth and points out that the economy is back on the track. 9. Please identify and summarize three recently released books about economics as reviewed by The Wall Street Journal staff. Yee Kuan Yew: The Grand Master’s Insights on China, the United States, and the World The book gets its key insights from speeches and interviews as well as other books published by the author. The book covers a comprehensive assessment of China, its future, the impact of technology on United States and how Asia will open itself to the world, Joseph E. Stiglitz,The Price of Inequality: How Today’s Divided Society Endangers Our Future Joseph E. Stiglitz observes that America is currently the most unequal society and a country with the least equality of opportunity among the developed countries.Stiglitz states that market forces have a role in this but politics shape those forces. In his book he aims at explaining how this situation affects and is affected by national policies. Michael L Ross: The Oil Curse: How Petroleum Wealth Shapes the Development of Nations Michael observes that nations which have rich oil resources have less economic and political stability. He explains this as oil curse which can be fixed and be turned into a source of blessing. 10. Select one major corporation that is traded on the New York Stock exchange. Please trace its daily price movements throughout the semester and comment on its performance. Bank of America, (BAC) is one of the companies that are listed in the New York Stock Exchange. Its share has been stable, opening the year with a price of 16.74, in the month of February, it was trading in an average of 16.52, March it rose to a monthly average of 17.20 before falling in the month of April where it has been trading at an average of 16.32 A graph showing the Bank of America stock price movement from January to April 2014 Read More