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Journaling_AssignmentStudent_Example.docx10
Journaling Assignment:
IB 210, CRN: XXXXX
Student Name
Journal One
Journal Entry (1), NPR Business News, Samsung Recall Woes (October 12, 2016)
Today, I found an article relating to the conspicuous and contemporary issue of Samsung’s recall on a particular device, and how this cease of production is affecting estimated profits.
The successful MNE Samsung was forced to recall one of its most popular products. This product was the Galaxy Note 7 smartphone and was ended because a number of them overheated and sparked fires only months after it was commercialized. This recall drastically affected the estimated profits for the company, decreasing them by almost 2.3 billion dollars! They have also asked all sellers domestically and internationally to cease selling the smartphone, as well as, for customers to return their potentially unsafe device. Samsung expects almost 1.5 million returned phones from the U.S. and South Korea as a result. Samsung has received 92 reports of the Note 7 batteries overheating, and it is still unclear what caused the overheating of the phone. Additionally, it is unclear what the company will do without the revenues of its flagship phone as mobile accounts for nearly 50% of Samsung’s revenue.
This article helps explain the topics that we have discussed in class about the negative aspects of globalization. Because of quick and easy flow of information, everyone has knowledge of these defective Samsung products. This conspicuous knowledge is harmful to the company’s brand name, and the trust and loyalty of many Samsung customers.
http://www.npr.org/sections/thetwo-way/2016/10/12/497731280/samsungs-recall-causes-profit-woes
In this article, I spotted yet another controversy regarding trading with China.
A blanket ban of imported Chinese goods is being demanded in some parts of India, but Commerce Minister, Nirmala Sitharaman, said this option is not feasible. She went on to explain, “Just because we may not like certain things about a country is not reason enough to block imports from that country. We could impose anti-dumping duties, but there are established ways to go about it and dumping has to be proved.” Currently India exported $9 billion to China, and imported $61.7 billion, leaving a trade deficit of 52.7 billion. The encouragement to boycott Chinese goods has been spreading on Indian social media. Although, Chinese goods have never been condemned by the Indian government and are favorable throughout the nation. To conclude, on the final day of the first BRICS Trade Fair, Sitharaman additionally expressed concern over the delay in signing the BIMSTEC free trade agreement between these nations.
This article was notable for three reasons. First, it explains once again the affects social media has on an entire nation. Complains of Chinese trade by regular Indian citizens occurred at such a rate, it was acknowledged by the Indian government. It is amazing to me that social media has become so prevalent, it can connect the popular thoughts of regular citizens, to the leaders of their nation. Second, this once again shows the anger and disapproval of China by many nations. This was seen by protests when China joined the WTO, numerous American politicians voicing disapproval of Chinese trade, and now the demand for blanket bans by the Indian populous. Lastly, it shows the dependence of the upcoming BRICS. India and China are both members of these emerging nations, and seem to be very respectful and appreciative of one another. If India followed their citizen’s desires and put a ban of Chinese goods, I think it would be detrimental to the BRICS, and an act that should not go unnoticed.
http://economictimes.indiatimes.com/news/politics-and-nation/blanket-ban-on-chinese-goods-not-a-feasible-option-nirmala-sitharaman/articleshow/54856507.cms
Journal Entry (3), BBC News (UK), Belgium snag for EU-Canada trade deal (October 14, 2016)
This article incorporates the worldwide desire or resentment of the increased interconnectedness and globalization topics discussed in class.
CETA, a landmark free trade deal hit a serious snag after a Belgian region rejected it, thus threatening this month’s signing. CETA is the European Union’s most ambitious trade deal yet, lifting most trade barriers. To briefly summarize CETA, it deals to end 98% of tariffs between Canada and EU, includes courts for investors, harmonized regulations, and access to public sector tenders. Although the deal is not completely signed, the EU agreed that certain parts will be implemented before all national parliaments have voted on it. Disapproval of CETA’s signing sprouts from the fear that once signed it will be used as a model to force an even more controversial deal between the European Union and the United States called TTIP. CETA remains a top priority for Canada, and they are working diligently with their partners to conclude this agreement. CETA is a progressive deal, and if Europe is unable to sign such an improvement deal with a country like Canada, this will send a clear and unfortunate message.
This article incorporates the progression of globalization through attempts to lower trade barriers between nations. In reading this article, it reminded me of the NAFTA agreement between the United States, Mexico, and Canada that we discussed in class. This NAFTA agreement is still highly controversial today similar to this CETA agreement.
http://www.bbc.com/news/world-europe-37657187
Journal Entry (4), NPR Business News, Questions Regarding Future Self-Driving Vehicles (October 13, 2016)
I noticed an article regarding questions about the future of the automobile industry and it immediately struck an interest.
One of the biggest questions regarding self-driving cars is safety. In the blink of an eye, would the self-driving car instinctively endanger its occupant in order to save another driver or pedestrian? The oldest carmaker in the world, Mercedes-Benz, claims as its cars get smarter, they will be programmed to primarily save the occupants. Michael Taylor pointed out that carmakers have avoided discussing the topic of who lives and dies in a driverless car accident. The NHTSA is spearheading a movement to get United States Traffic fatalities to absolutely 0. This is a huge goal, and the NHTSA and Department of Transportation have both stated it will be the role of the federal government to regulate the codes of self-operating vehicles.
This article epitomizes the emergence of technology in our world and the way it is continuously affecting our future. This correlates with our class discussion as technology such as airplanes, trucks, and numerous other advances have led to quicker and more efficient distribution. This is great, but we are getting to the point where the constant use technology is not always beneficial. I find self-driving cars highly controversial. Especially after reading the first journal entry regarding Samsung’s technology recalls, I continue to question the legitimacy of depending on self-operating technology. If a self-operating car proves defective like the Samsung battery, it could lead to numerous unpreventable deaths. I continue to question if such a technological advance is worth the risk.
Journal Entry (5), NPR Business News, Obama Eases Special Limits on Cuban Products (October 14, 2016)
This article took an interest with me because it shows America in an ethical light, fits my views of how nations should interact with one another, and proves yet another success of the Obama presidency.
As of Monday, United States citizens that travel to Cuba will no longer be limited to bringing back good limited to $400- including $100 worth of tobacco and alcohol. President Obama set these orders into action, and such orders pave the way for Cuban-originated pharmaceuticals to gain US regulatory privileges. A senior White House official states the changes are meant to “open up space for Cuban’s to improve their livelihood.” The new rules cover a wide area of benefits, including widening the field of scholarships, grants, and awards that can be offered to Cubans or Cuban Americans. Also, this change will allow United States companies to begin attempting to develop or repair segments of Cuba’s infrastructure. US Secretary of Commerce, Penny Prtizker, states that the changes, “will create more opportunities for Cuban citizens to access American goods or services, further strengthening the ties between our two countries.”
I agree with and really appreciate these changes made by the United States. Cuban individuals have not always had the best livelihoods under the rule of Fidel Castro. Also, as a result of the Cuban Missile Crisis, strong ties between Cuba and the United States has been difficult. These changes allow the nations to becomes interdependent and benefit one another. I find this order by President Obama not only ethical, but the epitome of the purpose of globalization.
Journal Entry (6), Bloomberg Business Week, Ditching the Needle for a Less Painful Injection (October 6, 2016)
This article caught my interest and our classroom discussions of technological advances can be applied. This article revisits our discussions of to what extent such advances are beneficial.
Innovated by Patrick Anquetil, the needle-free injector is designed to allow individuals to deliver drugs through their skin using a small piston that according to the company, is less painful than the traditional hypodermic needle. Portal was invented by Antequil and co-founder Ian Hunter, who helped develop its first prototype. Portal says it plans to pitch its injector to drug makers for self-treatment of chronic diseases such as multiple sclerosis, rheumatoid arthritis, and hemophilia.
This new technology causes yet another controversy on its scrupulousness. To begin, I will discuss the benefits this product will have on the world. First, I believe Portal will develop into yet another MNE, and establish itself as a born global focal firm initiating this self-injector into other countries. This process of Adam Smith’s invisible hand will create jobs, improve standards of living, and benefit the world’s economies. Second, this product will also benefit pharmaceutical companies through B2B transactions, as well as the ultimate consumer, as it provides time and place utility, allowing the customers to take less painful medicine whenever and wherever they please. Although this technology has some harms. Most evidently, this technology causes greater competition for the medical services sector. Because most individuals will have the ability to give themselves medicines to chronic diseases, they no longer have to pay a visit to their doctor. I believe this fact will cause many doctors to be laid off as hospitals worldwide will lose revenue from these patients. Although, the transactions of this self-injector benefit international economies, what extent will this benefit be if medical industries lose profits and medical practitioners jobs are lost? Will the jobs created in the production of this self-injector be enough to account for the laid off doctors? Technological advances cause many controversies as seen by our class discussion regarding quick allocation of news through social media, and from this journal, the benefits and harms of self-operating innovations.
http://www.bloomberg.com/news/articles/2016-10-06/ditching-the-needle-for-a-less-painful-injection
Journal Entry (7), CNBC, Hyperloop One’s new investor to help company break ground in global transports (October 14, 2016)
I had no choice but to comment on this article.
A new heavyweight Hyperloop One investor will help the futuristic transport company achieve its goal of moving cargo sustainably and efficiently, according to co-founder and executive chair Shervin Pishevar. Hyperloop received $50 million in a funding round led by Dubai-based DP World group, which specializes in global trade infrastructure and conducts about 77 ports around the world. Brent Callincios states that he believes the world will become an autonomous ecosystem and that Hyperloop is one of the companies that is a piece of the puzzle in solve the problems with urban congestion and sustainable transportation. Pishevar agrees that finding more sustainable ways to transport goods could vastly reduce congestion and pollution. He ended by saying the world can expect the first full-scale, functioning cargo Hyperloop in the first quarter of 2017.
This is the epitome of globalization. Hyperloop strives to connect the world with a means of fast, efficient, environmentally beneficial transportation. One of the risks of international business we discussed in class is the commercial rick. A major reason for this is because of the time it takes to travel from nation to nation. This makes it hard for a manager of an MNE to manage all the functions of their business on a daily basis, thus leaving their trust to another remote individual. The possibility of this individual being corrupt, or failing to run the business causes a huge risk. Hyperloop can solve this risk by allowing a manager to transport back and forth from their mergers and acquisitions in various countries. With a transportation system that can move over 750 miles per hour, imagine how easily the world can connect.
Journal Entry (8), CNBC, Playstation is launching mobile games on Android and iOS to take on Nintendo. (October 14, 2016)
Lastly, this article explains our class topics of analyzation of global markets, technological advance, and international competition.
Sony’s Playstation gaming is aiming to release over five smartphone games, following in the steps of Nintendo as the Japanese electronics giant aims to take a piece of the lucrative mobile games market. Console makers have been struggling in Japan, the third largest games market where mobile games make up over 50 percent of the $12.4 billion market, according to the games research firm Newzoo. On the other hand, consoles make up about 38 percent of the market, a number not typical in other countries worldwide. And 61 percent of the country’s 69 million customers spend money, which is very attractive to Sony. According to Serkan Toto, CEO of Japanese gaming consultant and advisory group Kantan Games, said, “Japan is a market where Sony and other console makers are struggling to sell units. Sony had to react. People are consuming smartphone games like there is no tomorrow.”
This article explains the concepts we discussed in class of analyzing international markets. The consumption of goods varies by nation. This example is shown by the difficulty of console makers to sell in Japan. This is a huge contrast from the American gaming market where selling consoles is hugely profitable. Playstation’s successful analyzation of Japan’s unique market demand led them to develop games for the mobile games market. The demand of one of the greatest technological advances thus far, the smartphone, forced Sony to respond. Also, globalization has caused worldwide competition between companies, shown by the competition of Nintendo and Sony. Sony is fighting to take control of the mobile games market in Japan, which is currently controlled by Nintendo.
References:
Glinton, Sonari. (2016). Samsung’s Recall Causes Profit Woes. NPR Business News.
http://www.npr.org/sections/thetwo-way/2016/10/12/497731280/samsungs-recall-causes-profit-woes
IANS. (2016). Blanket Ban on Chinese goods not a feasible option: Nirmala Sitharaman. The
Anonymous. (2016). Belgium snag for EU-Canada trade deal Ceta. BBC News.
http://www.bbc.com/news/world-europe-37657187
Glinton, Sonari. (2016). Carmakers Question The Future Of The Automobile, The Driver And The
Industry. NPR Business News. http://www.npr.org/sections/thetwo-way/2016/10/13/497756762/carmakers-question-the-future-of-the-automobile-the-driver-and-the-industry
Chappell, Bill. (2016). Obama Eases Special Limits On Cuban Products, From Drugs To Rum And
Cigars. NPR Business News. http://www.npr.org/sections/thetwo-way/2016/10/14/497936063/obama-eases-special-limits-on-cuban-products-from-drugs-to-rum-and-cigars
Belfiore, Michael. (2016). Ditching the Needle for a Less Painful Injection. Bloomberg Business
Week. http://www.bloomberg.com/news/articles/2016-10-06/ditching-the-needle-for-a-less-painful-injection
Wang, Christine. (2016). Hyperloop One’s new investor to help company break ground in global
transports. CNBC News. http://www.cnbc.com/2016/10/14/hyperloop-ones-new-investor-to-help-company-break-ground-in-global-transports.html
Kharpal, Arjun. (2016). Sony Playstation is launching mobile games on Android and iOS to take
on Nintendo. CNBC News. http://www.cnbc.com/2016/10/14/sony-playstation-is-launching-mobile-games-on-android-and-ios-to-take-on-nintendo.html
Journaling Assignment:
IB 210, CRN XXXXXX
Student Name
Journal Two
Journal Entry (1), NPR News, Study Finds Many Companies Require Non-Compete Clauses For Low-Wage Workers. November 7th, 2016.
This assignment begins with an article regarding non-compete clauses for low-wage workers. I will later evaluate the positives and negatives of such a clause, and explain the manner in which such a clause is a huge factor of our American culture. I will expend very detailed and extensive arguments for this article, as I find it very notable and interesting.
It is a standard that a company requires employees in certain positions to sign non-compete agreements. This means that employees cannot seek employment with direct competitors until a certain amount of time has passed. Such a concept is not new, as even in the medieval era, a master craftsman would make untrained apprentices sign agreements where after their apprenticeship they could not open up a smith shop of their own in the same town. Evan Starr found that 18 percent of the total United States workforce is currently bound by such non-compete clauses. Also, among low-skilled workers (workers without a college degree) it is almost 15 percent. In the article, the example of Jimmy John’s non-compete clause is explained. Jimmy John’s required its workers to sign away their right to work at any sandwich shop within three miles of any franchise for up to two years of leaving the company. The White House asked for states to put a ban on such clauses, but for only low-wage workers.
I decided to comment on this article with such detail because I find it extremely controversial . To begin, the reason for such clauses are easily notable and personally, make sense. The driving force behind American capitalism is competition. Each business strives to be the best in its respective industry. Therefore, it makes since why companies with such drives would not permit its trained employees to move on to other competitors. As an entrepreneur, I would be very angry if I trained an employee of my specific competitive advantages, only for them to pass it along to a fierce competitor. As a result of this, I indirectly enhanced the rise of another competitor, which hurts my own business. On the other hand, such non-compete clauses can be extremely detrimental. When the employee is done working with my specific company, they will have great difficulty finding another job. Under such clauses, all the skills they learned from my business would go to a complete waste, as they cannot use them anywhere else. This can be a very serious problem for low-wage workers, who sadly are the main target of non-compete clauses. These individuals are not only categorized as having “low-skill” but the skills they learn cannot be transferred into another position. This leads to serious unemployment and harm of the United States economy. In summary, I understand the importance of such a policy from an entrepreneur’s standpoint, along with the resulting disparities of low-wage workers. To answer the ethical manner of non-compete clauses, I will use concepts learned in class in the next paragraph.
First, I believe that such a policy is unethical in the way it is being used. I will explain this by using Kantian theories. These theories ask that if every single nation acted with a certain behavior whether it would still be ethical. If every company decided to incorporate non-compete clauses, millions of frictionally and cyclically unemployed individuals would continuously be out of work as they would have to wait numerous years before they could transfer their acquired skills to another company. But, to apply lessons of international business, I would like to argue that non-compete clauses are not well suited in a low-context culture. I argue this because in low-context cultures, personal relationships are seen inferior to business practices. I believe it is unfair to train an employee, use them as a means for profit, terminate their employment, and then coerce them to non-compete clauses. This is unscrupulous because it leaves an employee with new skills, that they are unable to use for a substantial period of time. I believe such a clause is only fair in high context cultures. If you are going to prohibit an employee from benefitting from their learned skills, you should respect them as a worker, and provide them with a long-lasting option for employment. In high context cultures, workers would be less concerned with non-compete clauses, as they have established meaningful relationships, and would not like to work for another company. This relationship is positive for both the entrepreneur and the worker. In an absence of such trust, an employee is greatly harmed when trying to find another job, while the entrepreneur has only benefitted from their work.
Second, I believe non-compete contracts are a huge factor of certain principles in American culture. To explain, the capitalist nature of American culture is very conspicuous in this issue. Most high-skilled workers (workers with college degrees) are free to move from competing companies. But isn’t it much more harmful to a company for a COO to transfer their skills to a competing company rather than a first-line worker? Then as a result, it is easy to believe that the individuals that should be subject to non-compete clauses should be highly skilled workers rather than the low-skilled. But sadly, the latter are the ones that are the primary targets of non-compete clauses. Those with lower skills are made even more vulnerable, while those with higher skills are free to move as they please. This is shown to me by the capitalistic principles of America which support individual freedoms of the wealthy, over the overall well-being of the majority. Although, low-skilled workers are in no way forced to enter a position with non-compete clauses, that of which I agree. Non-compete clauses are detailed to such an extent, they prohibit the future of employees even after the employment agreement is ended. This explains the American tendency to put extreme detail into contracts as a result of our common law system. In noticing this, there is a possibility I am making too large of an issue out of these clauses. Perhaps employees respect such specific agreements in American culture and are fine with agreeing to such prohibitory terms. This viewpoint can be completely explained as a result of the American tendency to plan out each fine detail and contingency in contracts. In conclusion, I believe that these clauses are understandable in the perspective of a business owner, yet can be harmful to low-wage employees in low-context, capitalistic societies. But, in a common law system, employees have the freedom to agree or disagree with unique contracts. If they agree with surrendering the right to work for competing companies, then that is there right, and even though I feel it is unethical, it is a decision that must be respected.
Journal Entry (2), NPR Business News, Three Ways President Elect Donald Trump May Shake Up Trade Policy. November 9th,2016.
The election of Donald Trump has taken the world by storm. This article talks about this breaking news, and talks about the effects Donald will have on world trade.
During his campaign, Donald Trump was very fuzzy on his details of his economic plans. But he was clear about one goal: getting much tougher on trade relations with our most important partners, ie., China, Canada and Mexico. Edward Prasad, professor of trade policy at Cornell University said, “We are definitely shifting to a world where the landscape is less favorable to trade.” The first step Trump is likely to take in this new environment is killing TPP. Second, Donald will most likely renegotiate NAFTA - or withdraw from it. He wants to aggressively achieve this by using enforcement mechanisms to hassle companies. Lastly, Trump will probably impose tariffs. These tariffs have the goal of stopping companies from laying off workers in order to relocate into other countries. Moody’s Analytics says, “Such tariffs would hurt many U.S. industries, particularly autos, oil and technology, which rely heavily upon international supply chains…… However, it would be positive for industries facing severe import competition, such as steel and manufacturing subsectors." In conclusion, such tariffs could force partners to retaliate, making it harder to sell U.S. goods and agriculture products around the world. According to Keith Wade, “we are likely to see……. a trade war break out as the president raises tariffs on China and Mexico,"
I do not agree with Donald Trump’s proposed policies by any means. To explain, this is because it goes against all the great things that we have been talking about in class. Donald Trump’s policies will indefinitely hurt worldwide globalization. From the great things I have heard in class about competitive and comparative advantages, cultural connections, partnerships, and other amazing qualities of globalization, I do not like the idea of straining such principles. I really do not like Donald’s attempt to kill TPP as I heavily plan to conduct business in Japan. In contrast, it is incorrect to say that such policies have no merit. The United States has lost numerous jobs to other countries, and that has negatively impacted our economy. Hopefully, I will be wrong about such policies, and they will actually help bring back and/or create more American jobs. But for right now, it seems like the wrong move.
Journal Entry (3), Bloomberg Business Week, Is China Repeating Japan’s Missteps?. November 3rd, 2016.
This article discusses Japan so I took an immediate interest.
After more than two decades of stagnation, Japan is a fading global power that can’t seem to revive its fortunes. By contrast, China’s rise to superpower status appears relentless as it gains wealth, technology, and ambition. Yet these Asian neighbors have a lot in common, and that does not bode well for China’s economic future. The sad case of Japan should serve as a cautionary tale for China’s policymakers. Beijing pursued almost identical economic policies as Tokyo’s to generate its rapid development. Now China’s leaders are repeating the same missteps the Japanese made that tanked Japan’s economy and thwarted its survival. “Just like Japan, we believe China will eventually face a period of much slower growth,” Goldman Sachs investment strategists said in a report earlier this year. Analysts at ratings agency Moody’s, writing in May, warned that China could suffer “a prolonged period of sub-optimal economic growth and persistent deflationary pressures, or possibly even economic stagnation.” The methods Beijing employed to generate rapid growth—directing finance, nurturing targeted industries, and promoting exports—are replicas of Japan’s. And since the state in China’s “state capitalism” plays an even larger economic role than Japan’s officious bureaucracy does, the Chinese government interferes with markets to a greater degree.
This article discusses the second and third largest economies of the world that were discussed in class. China as one of the BRICS, has been claimed as the country most likely to overtake the United States in economic power. But this article poses an argument contrary to such beliefs. China has been rising to an amazing extent, and seeing them suffer a period of stagnation would create a huge effect on the world. Just as we discussed in class, the stagnation of China would be a contagion to other nation’s economies. The article poses that China has implemented the same economic growth policies of Japan, and predicts it will suffer an even great fate than Japan as a result. This would have a drastic effect on the world. There is no doubt that China’s stagnation would negatively affect United States based focal firms with established FDI in China. This shows a great example of the negative country risks we have discussed in class. On the other hand, I feel that stagnation in China could potentially have a positive impact on the United States’ workforce. A lot of controversy has surfaced regarding job losses as a result of United States’ MNEs outsourcing in China. But hopefully, as these firms see stagnation in China, they will return its primary operations in the United States, and repatriate its benefits to our economy.
http://www.bloomberg.com/news/articles/2016-11-03/is-china-repeating-japan-s-missteps
Journal Entry (4), Bloomberg Markets, Trump’s Win May Be Asia’s Loss, November 9th, 2016.
This article explains potential harms of the economies of the Asian region, notably China.
Just when China's economy seemed to be stabilizing, Donald Trump's election as U.S. president poses significant new risks. Not just for Chinese growth, but the entire Asia region. As a result of the president elect’s campaign policy platform centered on protectionism, Trump wants to slap punitive tariffs on Chinese goods and label the second highest global economy as a currency manipulator. Asia is the world’s manufacturing hub and many nations are export-dependent, putting them at risk if trade barriers start rising. The Philippines and South Korea stand to lose the most from Trump’s proposed policies. “Trump has criticized a 2012 free-trade agreement with the country, saying it has destroyed almost 100,000 American jobs; and he has vowed to force South Korea to meet the full cost of security guarantees provided by the U.S., which may add to fiscal woes there,” Nomura said. The Philippines faces risks because of possible immigration restrictions. The United States is home to 35 percent of the total number of Filipinos working abroad.
As seen by the bar graph, establishing trade barriers with China would have a substantial impact on the American economy. China is America’s biggest trading partner, with over $600 billion dollars’ worth of trade in 2015. Such tariffs would harm China’s exports and weaken the yuan. Also, these trade barriers would affect substantial Asian trading partners including Japan and South Korea. Many Asian business will be negatively affected, as well as, numerous immigrants that the United States hosts. This is yet another example of country risk that can be present in international business. As discussed in class, the transfer of power between leadership positions drastically change policies. An Asian company that leaned on American consumption of goods will now be dramatically affected in such a short time period. As John Monk mentioned before, an Asian company may have been planning for months to conduct business in America, but as a result of Trump’s trade barriers, their plans may no longer be feasible and they may have to suspend their projects.
http://www.bloomberg.com/news/articles/2016-11-10/trump-s-win-may-be-asia-s-loss
Journal Entry (5), The Economic Times, Egypt devalues its currency, at last, November 3rd, 2016.
This article talks about the devaluation of the Egyptian dollar relative to the UK pound, and the solutions that this long-awaited decision makes. Also, it talks of the practices Egypt used to attempt to correct and improve its economic conditions.
On November 3rd, Egypt made its most difficult decision yet: to allow a big devaluation of the Egyptian pound. For months, the official exchange rate sat at 8.8 pounds to the dollar. Although, in March, an overly cautious devaluation provided only temporary relief, but this time the government went further, letting the pound fall to about 13 against the dollar. Foreign reserves have fallen nearly half since the revolution of 2011, which scared away tourists and foreign investors, two big sources of hard currency. Also, the recent suspension of deliveries of cheap oil from Saudi Arabia, and the government’s pledge to spend $1.8bn to ease food shortages, exacerbated the problem. The shortage of dollars had left businesses scrambling. Some firms were unable to buy vital imports, while others had to shut down production due to rising foreign-exchange losses. In order to keep dollars in the country, the government set capital controls and banned some “luxury” imports. It also asked foreign energy suppliers for more time to pay its own bills. The devaluation has already brightened the mood in the business community. Egyptian stocks jumped after the central bank’s announcement. But the mood in the rest of the country is less than sanguine. Officials fear that the weaker pound will exacerbate already high inflation. Food prices have soared, as Egypt has to import many staples. The government raided several food companies accused of hoarding in October and seized thousands of tons of rice and sugar, which it is now selling at a discount. The situation became absurd when a man in Cairo was arrested for carrying 10kg of sugar, an amount deemed to exceed what is reasonable for personal use. The government has tried to appease the public by setting prices, seizing goods and taking over entire industries. This has dented the confidence of some foreign investors. A more responsible fiscal and monetary policy should ease some of that concern—but the results may, for a time, further inflame the public. So the government is in a tricky spot. Loosening the red tape that strangles business and making welfare programs more efficient would help. Those reforms must continue even after the IMF delivers its cash.
This article was very notable as it related to various concepts that were discussed in class. First, this article explains just how important the exchange rate of currency is. The article discusses how the currency increase of the pound scared away tourists and foreign investors, making it more difficult for Egypt to get hard currency. Also, this shortage of dollars left business scrambling. Now I understand the importance of the currency exercise we did in class. International currencies must be constantly monitored and tracked because changes can cause major issues. As discussed in class, currency risk can be very detrimental. In addition, the government seizure and red tape policies of Egypt reflect the teachings of class. Egypt became extremely involved as it raided food companies and seized thousands of tons of rice and sugar, allowing the government to sell it at a lower price. It became too extreme when a man in Cairo was arrested for carrying ‘too much’ sugar. These are both strong examples of the country risks discussed in class. Both of these practices would be completely unethical in the American legal system, but in Egypt, there is obviously a completely different system. If attempting to move into Egypt, a company will definitely have to be aware of such seizures and regulations. It definitely would not expect to be raided, or arrested in the United States for obtaining too much of a good.
Journal Entry (6), The Economic Times, Our election your problem, November 12th, 2016.
This article talks about the effects of a Donald Trump presidency on the world economy. It offers different viewpoints and arguments from other articles that are very notable.
When Richard Nixon ended the post-war system of fixed exchange-rates that had America at its centre, his Treasury secretary, John Connally, told European leaders, “The dollar is our currency, but your problem.” This election result, to paraphrase Connally, belongs to America but is potentially a bigger economic problem for everyone else. The scale and nature of that problem depends on the interplay of the two main elements of Mr. Trump’s economic populism. The first is action to boost aggregate demand. Mr. Trump favors tax cuts and extra public spending on infrastructure. The second element is trade protectionism. To the extent that he leans more on the first element and less on the second, the immediate damage to America’s economy will be limited. But even in that event, the net effect of a Trump presidency on economies outside America is still likely to be harmful. As it became clear that Donald would win the presidency, the USD fell against rich-country currencies such as the euro, yen, Swiss franc and pound, as investors sought a haven from policy uncertainty in America. A deal between Mr. Trump and Congress to cut corporate taxes, goes the logic, would spur flush American companies to repatriate retained profits held offshore. It would also allow them to increase capital spending in America, because they would have more ready cash; and consequent profits would be taxed more lightly. But in international markets, China will suffer greatly from Trump’s proposed policies. China accounts for roughly a half of America’s net trade-deficit, so in Mr. Trump’s zero-sum reckoning, it has a lot to lose should America launch an all-out trade war. In fact, the resulting disruption to global supply-chains would badly hurt American firms, and higher prices on imported goods would squeeze American consumers, especially poorer households, which spend proportionately more on them. The whole world has much to fear from Mr. Trump’s threats to tear up trade agreements and impose punitive tariffs on imports. Like the Brexit vote, Trump’s policies make an alarming step away from a liberal, open economic order towards more isolationism and less prosperity.
This article covered a great deal of information and had insights that many other news reporters did not touch on. America really is a superpower of the world, and our economic decisions affect the prosperity of the entire world. Trump’s policies are beginning to end trade liberalization, and that is sparking fear in many countries. Trump’s policies strive to make business better for individuals in the United States as he is using the expansionary policy of cutting taxes and increasing aggregate demand to reinforce American companies to repatriate profits. As a result, the stock market rose in expectancy of a Donald Trump presidency. Certain American businesses have the ability to prosper from such policies, but sadly, that is not true for everyone. China has a lot to lose from trade protectionism policies. As well, poor Americans will greatly be hurt from Trump’s policies. This article brought in more positive aspects of Trump’s policies on America, but I still feel it is not the right way to go. It really does promote isolationism, and increasing the prosperity of the wealthy, while further weakening the poor. Hopefully, Trump will stick to his policies of government spending on infrastructure, as our inner cities will definitely need help as a result of this proposed trade war.
Journal Entry (7), NPR Business News, Is A Shifting Political Climate Slowing Global Trade?, November 8th, 2016.
This article again explains global trade and how it seems to be slowing.
For decades, global trade has been transforming the world’s economy, but the days of this explosive growth may be at an end. According to the World Bank, the dollar value of world merchandise exports fell from $19 Trillion in 2014 to $16.6 trillion last year, a decline of 13.3 percent. But thankfully, much of that can be explained by the drop in commodity prices, especially oil. According to Dean Baker, “it hasn’t been so much a collapse in trading volume as a collapse in prices. And that’s a very, very different story.” Although, the reasons for the drop are complicated and are up for debate. One factor is what economists call the slowdown in the global supply chain. Another reason proposed by Gary Hufbauer claims, “I think by far the biggest reason for the drop in trade growth relative to GDP growth is that we haven’t had much liberalization of trade recently.” According to Christine Lagarde, International Monetary Fund Managing Director, “it is easy to blame trade for all the ills afflicting a country – but curbing free trade would be stalling an engine that has brought unprecedented welfare gains around the world over many decades." In conclusion, “it’s not that we've come to an economic end to liberalization and growth. We've come to a political end," Hufbauer says. "Trade liberalization has basically come to a stop."
Yet another article shows a possible decrease in the globalization of international markets. Trade liberalization has been a huge benefit to the world’s economy, and I think that it should be increased. But, it seems that the world is ending trade liberalization. With reduction of trade liberalization, nations will make it much more difficult to trade with each other. This will lead to trade wars, more expensive goods, and less global connectedness. I do not think this is the right move for our world.
http://www.npr.org/2016/11/08/501187616/is-a-shifting-political-climate-slowing-global-trade
Journal Entry (8), The New York Times, Crowds Line Up at India’s Banks to Exchange Banned Rupee Notes, November 10th, 2016.
Here is another article regarding international currencies. It provides great examples of the effects of currency and country risks.
Thousands of security forces were deployed on Thursday to keep peace at India’s banks, where crowds of people had formed jittery, snaking lines in the early morning, desperate to exchange now-useless currency notes. In a surprise move on Tuesday, Prime Minister Narenda Modi withdrew 500 and 1000 rupee bills from circulation aiming to shrink the country’s vast, informal “black” economy. The cash market, which by some estimates amounts to 30 percent of the gross domestic product, is used by many Indians to avoid paying taxes and to pay bribes. For the next two weeks, citizens will be able to exchange 4000 rupees a day, or about $60. But they will have difficulty converting large cash holdings because they will have to declare them to tax authorities. The two bills being withdrawn make up over 80% of the cash in circulation. Many financial analysts hailed this plan as no other Indian leaders have been able to reduce the country’s supply of cash so drastically and abruptly. “I am in a very foul mood, and for business, this government is not good at all,” said Ayush Singhal , 26, a trader in packing tape, whose shop was all but deserted after the currency was withdrawn. The Old Delhi wholesale market, one of the largest in Asia, operates almost entirely on a cash basis, Mr. Singhal said. “We have to figure out some other way of conducting business,” Mr. Singhal said, his face grave. “For now, I am at a loss for words.” Also, poor migrants to the city said the sudden move had stranded them without money to eat.
This article explains just how detrimental currency and country risks can be. While India’s move of withdrawing 80% of its currency may have been praised by financial analysts, it greatly hurt businesses and citizens. Citizens fought in the streets because they were worried that their exchanged bills would run out. Most notably, it affected Mr.Singhal’s business in such a negative, sudden fashion. This legislative act of India’s Prime Minister forced his business to adapt. Currency risks such as this can happen instantaneously, and can potentially end an entrepreneur’s business. This article proves the sudden nature of country and currency risks, and how it can be very damaging.
http://www.nytimes.com/2016/11/11/world/asia/india-rupee-ban-narendra-modi.html?ref=business&_r=0
References
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Anonymous. (2016). Egypt devalues its currency, at last. The Economic Times.
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http://www.economist.com/news/finance-and-economics/21709980-trump-presidency-will-be-bad-world-economy-and-worse-places-outside
Barry, Ellen. (2016). Crowd’s Line Up at India’s Banks to Exchange Banned Rupee Notes. The
New York Times. http://www.nytimes.com/2016/11/11/world/asia/india-rupee-ban-narendra-modi.html?ref=business&_r=0
Curran, Enda., David, Roman. (2016). Trump’s Win May Be Asia’s Loss. Bloomberg Markets.
http://www.bloomberg.com/news/articles/2016-11-10/trump-s-win-may-be-asia-s-loss
Geewax, Marilyn. (2016). 3 Ways President-Elect Trump May Shake Up Trade Policy. NPR
Business News. http://www.npr.org/sections/thetwo-way/2016/11/09/501464785/three-ways-president-elect-trump-may-shake-up-trade-policy
Schuman, Michael. (2016). Is China Repeating Japan’s Missteps?. Bloomberg Businessweek.
http://www.bloomberg.com/news/articles/2016-11-03/is-china-repeating-japan-s-missteps
Zarroli, Jim. (2016). Is a Shifting Political Climate Slowing Global Trade?. NPR Business News.
http://www.npr.org/2016/11/08/501187616/is-a-shifting-political-climate-slowing-global-trade
