Macro Market Mercury:QUARTERLY PUBLICATION OF NEWS ARTICLES WITH A MACROECONOMIC CONNECTION.

VOL.I. . . No.1 NOVEMBER 15, 2015 GUY LAMBERT

A SENSE OF CRISISNOW IN A CHINESE

BOOMTOWN GONE BUSTBy FRANK LANGFITT

THIS ARTICLE ORIGINATED AT

NPR.ORG

ON SEPTEMBER 16, 2015

Article Summary

The city of Luliang, located in Shanxiprovince, southwest of Beijing inChinas coalfields has recently becomeone of many ghost districts in China.The once prosperous city had a GDP rateover 20 percent just 5 years ago, and wasset to become home to a $5 billion busi-ness and financial sector next year, but ismostly empty fields today with half builtroads going nowhere and empty apart-ment buildings. The government ran outof money, and the mayor who pushedfor the project was sacked for corrup-tion. Overcapacity has bankrupted theconstruction and real estate markets.China is building less roads and infras-tructure, which means less of a demandfor steel, and since coal is vital to theproduction of steel, coal prices haveplummeted, so when the government of-ficials pushed for more coal mines andhousing developments, GDP numbersinitially improved, providing them withpromotions and kickbacks, it eventuallycrashed Luliangs economy. People inChinas coal industry are saying about athird of Chinas coal plants need to close,but the government would rather sup-port a dying industry and see politicalstability than face its societal problems.

Editors Opinion

This is such a sad news piece, Id beshocked if I hadnt already seen this type

of thing so often in the U.S. Its alwaysdisappointing to see the shortcomingsof corruption and greed affect innocentpeople. The correspondent wrote the ar-ticle and took all the pictures himself,and listening to the broadcasted version,he sounded very matter of fact aboutthings. I dont think hes exaggerating thesituation at all. Corruption is a big prob-lem for China, a country with a long cul-tural history of giving gifts. It will behard for them to correct this behavior.

Macroeconomic Connection

Corruption, such as kickbacks the of-ficials of Luliang were taking, are ofgreat concern to macroeconomics be-cause corruption is empirically asso-ciated with lower levels of economicgrowth and private investment becauseof the uncertainty corruption generatesin a market. Corruption is also known toincrease levels of poverty and inequality,two problems that plague society. Thearticle also covers supply and demand,which are even more crucial to macroe-conomics because the concepts are thecore of what makes a market economytick. How much of a product or servicebuyers are willing to buy (demand) andhow much of it is available to purchase(supply) will determine how high or lowthe the price will be. The city of Luliangbet everything they had on coal, assum-ing demand and prices would continuegrowing, unfortunately prices fell, andso did their economy.

SWITZERLAND OFFERSCOUNTERPOINT ONDEFLATIONS ILLSBy BRIAN BLACKSTONE

THIS ARTICLE ORIGINATED AT

THE WALL STREET JOURNAL

ON OCTOBER 18, 2015

Article Summary

An economic anomaly some are call-ing good inflation is currently takingplace in Switzerland, its consumer priceindex the most common measure ofinflation has fallen for the last fouryears. Its hard not to call that defla-tion said Jennifer McKeown of Capi-tal Economics. Central banks tradition-ally try and avoid deflation at all costs,the notion being its bad for an economy,causing recessions, weak employment,and rising debt burdens, yet Switzer-land is experiencing the opposite withlow debt, low unemployment, and steadygrowth. Some analysts say the deflationis from an overvalued franc, others jokeabout it being the Alpine air, but Switzer-lands central bank has taken action toreduce demand for the franc with a NIRP(negative interest rate policy) of -0.75percent on certain deposits, challengingthe maxim of offsetting prices with neg-ative policy rates and showing deflationis not as harmful as most people think.

Editors Opinion

People are afraid of deflation because ofthe fear of a depression, which wouldbe due to consumers delaying spendingin hope of lower prices which wouldcause the economy to slow down andhalt, but those same people are comfort-able with the rapid decrease in the priceof big screen TVs and other electronicgoods over the past 20 years. Millionsof people dont think twice about spend-ing $700 on a new cell phone that will beworth half as much in 3-6 months time,and those companies are breaking salesrecords every year. I think Americansdont fear deflation, accept it as a fact oflife, and will continue spending regard-less.

VOL.I. . . No.1 The Macro Market Mercury NOVEMBER 15, 2015 2

Macroeconomic Connection

Inflation and Deflation are at the core ofeconomics. During a deflationary pe-riod, a dollar will buy you less todaythan it will down the road, so people startsaving their money which means theyarent spending it, creating a series ofdomino effects resulting in a theoreticalcollapse of aggregate demand, leading tofalling prices, which leads to lower pro-duction and less jobs, which leads to adepression. In order to curb this, spend-ing must increase or maintain its currentlevel. Real interest rates are adjustedto inflation, and usually dont go belowzero to discourage people from keepingall their money in cash. When adjustinginterest to deflation, Switzerlands cen-tral bank used a non-conventional NIRPto create a negative real interest rate, soinstead of financial institutions gettinga return on interest from money in thebank, they must pay the bank a small per-centage to keep it there, essentially en-couraging them to create more loans andincrease spending.

MOROCCO POISED TOBECOME A SOLARSUPERPOWER WITHLAUNCH OF DESERT

MEGA-PROJECTBy ARTHUR NESLEN

THIS ARTICLE ORIGINATED AT

THE GUARDIAN

ON OCTOBER 26, 2015

Article Summary

Morocco is home to the largest concen-trated solar power (CSP) plant in theworld. Taking up the size of Moroccoscapital city, the plant is estimated to pro-duce 580 MW of electricity, and pro-vide a third its renewable energy sup-ply by 2020. The project was createdto reduce the countries dependency onimported fossil fuels which makes up94 percent of Moroccos energy, cost-ing around $9 billion, much of which

has come from international institutionssuch as the World Bank, its should ful-fill some of the needs for an indepen-dent Morocco. There are also hopes thatsome of the excess energy will be ableto be sold to neighboring countries andeventually Europe, but first theyd haveto build interconnectors which dont ex-ist yet, regardless of that, the idea of be-ing the country thats the leading pioneerof solar energy has become a source ofpride and joy for Moroccan officials.

Editors Opinion

In America, solar energy is a known asa status symbol among rich people, be-cause they are the only ones that can af-ford it. Solar works great, but the fun-damental problem with it is how muchit costs. Morocco doesnt have any lo-cal energy source, so this is better thannothing. However, I think Morocco gotduped into building a $9 billion solarmoney pit which might provide enoughenergy to pay the interest on the WorldBanks loan, assuming they figure outhow to invent the technology needed totransport it first. This whole thing re-minds me of how India loves to build hy-droelectric dams that cost a lot, and dontwork.

Macroeconomic Connection

Who controls the food supply con-trols the people; who controls the energycan control whole continents; who con-trols money can control the world.

Henry Kissinger

Renewable Energy is a big issue thesedays because so much energy is from fi-nite sources such as oil and coal whichunlike solar power, have negative envi-ronmental effects. Reducing a countriesdependence on foreign imports like oilis highly beneficial due to its high costs.Macroeconomics pays close attention tothings like energy because if an econ-omy is suddenly without energy, or evenif the price suddenly jumps, the effectsare immense and immediately noticeableand could range from a small increase inthe price of produce to not having anyproduce available to buy. Energy is of

Macroeconomic concern because it ef-fects the entire economy.

E.P.A. FINDS MORE VWCHEATING SOFTWARE,

INCLUDING IN APORSCHE

By JAD MOUAWADTHIS ARTICLE ORIGINATED AT

THE NEW YORK TIMES

ON NOVEMBER 2, 2015

Article Summary

The Environmental Protection Agencyfound software used to cheat emissionstests installed in VW, Audi, and Porschesin models as early as 2014 which feature3.0-liter engines manufactured by Ger-man automaker Volkswagen. VW dis-puted the claims, but said it would coop-erate with the E.P.A. to clarify the mat-ter in its entirety. VWs chief executiveresigned in September after U.S. regu-lators first disclosed findings about in-stalled defeat devices which VW admit-ted to installing in over 11 million carsworldwide. These new implications aredue to VW withholding information re-garding these models which only con-sists of around 10,000 passenger carsin the U.S. VW has already suspendingseveral of its high-ranking officials andset aside 6.7 billion euros and 7.4 bil-lion dollars to cover expenses for recall-ing and repairing its cars, but there aresome experts who think it will cost thecompany more.

Editors Opinion

I think its shocking, I feel disgusted, anda bit curious as to how I might get myhands on one of these defeat-devices. Ithink VW should have to pay for the re-calls, repairs, and come up with a wayto improve the air quality around theworld. I think its ironic the cars VWequipped with the pollution hiding soft-ware were higher end luxury cars be-cause some studies have shown possess-ing wealth the kind your would need

VOL.I. . . No.1 The Macro Market Mercury NOVEMBER 15, 2015 3

to afford these models of cars increasesa persons sense of entitlement, theyremore likely to run a stop sign, cheat atgambling, and steal candy from a jar la-beled for children, and Id bet they wouldbe more likely to intentionally cheat anemissions test.

Macroeconomic Connection

Air is essential to all aspects of life, andits the duty of our government to providethe environmental protection it needs tostay clean. The EPA has been enforc-ing the Clean Air Act for over 40 yearsby setting limits on certain air pollutants,including how much can be in the air atany given time. It also has the authorityto set and enforce emission limits of airpollutants from factories and passengervehicles. The benefits of the Clean AirAct far exceed its costs as it has helpedcut pollution, protect the health of citi-zens, as well as build the economy, andcreate jobs.

WHY IS HI-TECH JAPANUSING CASSETTE TAPES

AND FAXES?By MICHAEL FITZPATRICKTHIS ARTICLE ORIGINATED AT

BBC NEWS

ON NOVEMBER 3, 2015

Article Summary

Japan is known for its cutting edge tech-nology, but their offices severely lo-tech,using software and technology laggingbehind by as much as 5 to 10 years.Its not that Japan lacks the knowledge,skills, or funds to improve their digitalliteracy, its because their economy isdriven by small and medium sized en-terprises which make up 99.7 percent oftheir 4.2 million companies. Burningsoftware to a disc which is then sent viapostal mail and hand-writing facsimilesare common procedures often encour-aged by managers in Japan. An anony-mous global logistics employee explains

that the, Japanese hesitate to use any-thing new in the office. and the atti-tude tends to be vincible ignorance,in other words, they choose not know.As a consequence Japans entrepreneur-ship is stifled, and non-manufacturingproductivity is about half of that of theUS, the worst among OECD countries.On the bright side, in order to makeup for low productivity, companies of-ten overstaff, which keeps the unemploy-ment rate down at 3.4 percent. The coun-try fascinated by robots will probably bethe last country to replace their work-force with them.

Editors Opinion

This article isnt the best piece of jour-nalism. I have my suspicions about afew things dont make sense to me. As-suming everything said is in fact verycommon and widespread in Japan, en-couraged even, why are employees hushhush about it and speaking anonymouslyas if theyre some kind of whistleblower?The statistics dont make sense either, ac-cording to the 2011 U.S. Census Bu-reau data, 99.7 percent of U.S. compa-nies are small to medium sized, the sameas Japan. Human traffic lights? Amer-ica has those, usually near elementaryschools, and what about the infamousblue traffic lights in Japan? I remem-ber the traffic lights specifically becauseof the interesting fact the Japanese lan-guage doesnt have a word for the colorgreen, just blue to cover both colors. Iget the feeling there is some truth to thisarticle, unfortunately, its probably thepart about robots taking our jobs soon,except in Japan.

Macroeconomic Connection

Labor is a scarce resource, and the mea-sure of its productivity is vital to theeconomy because any increase translatesto accomplishing more with less. Keep-ing track of these measurements alloweconomists to find trends and predictnumbers like GDP and the future levelof growth a country might have withgreater accuracy.

SAN FRANCISCO VOTERSREJECT AIRBNB

INITIATIVEBy ALEJANDRO LAZO

THIS ARTICLE ORIGINATED AT

THE WALL STREET JOURNAL

ON NOVEMBER 4, 2015

Article Summary

Airbnb, a San Francisco based com-pany spent $8 million to successfullypersuade voters to reject proposition F,the ballot measure known widely as theAirbnb Initiative which would havelimited short-term housing rentals to 75nights a year, and authorized the city tofine home-sharing sites for listing thatwerent registered with the city as ashort-term rental. The company said themeasure wouldnt have affected the af-fordability of housing, and that the vot-ing results are a victory for the middleclass.

Editors Opinion

If you bought a place in San Franciscotoday, and rented it out at a fair marketprice, it would take 50 years before youstarted to turn a profit. Compare thatto 8-16 years for the rest of the state,things have got out of hand and its nowonder all the housing is getting turnedinto short-term rental units which canmake up to four times as much comparedto long-term leases. Airbnb is essen-tially allowing people to sidestep hous-ing and hotel laws which is great if itmeans San Francisco residents can sup-plement their income by renting a bed-room out to overnight guests, but thereis something fundamentally wrong withSan Francisco if people need to do thisin order to make ends meet. Fortunatelythats not the case, unfortunately its aworse case, most of the people utilizingAirbnbs service are professionals withmultiple listings. To give you an ideaof what kind of force these cities are upagainst, Airbnb spent somewhere around$600 per vote to get this ballot measurerejected. I think San Francisco should

VOL.I. . . No.1 The Macro Market Mercury NOVEMBER 15, 2015 4

embrace the idea of short-term rentals,and turn the whole city into them, maybechange the name to Air Francisco.

Macroeconomic Connection

The housing market in San Francisco is aclassical example of government failure.

The city of San Francisco has failed tosupply adequate housing for its citizensthrough improperly zoning and datedrent control laws which have made it in-credibly hard, and expensive to find anapartment, its no wonder Airbnb origi-nated this in city. Proposition F was an

attempt by the government, backed byspecial interest groups, to remedy someproblems of past government failures.The voters chose to solve their problemswith the free market instead of more gov-ernment regulations.

VOL.I. . . No.1 The Macro Market Mercury NOVEMBER 15, 2015 5

References[1] Langfitt, Frank. A Sense Of Crisis Now In A Chinese Boomtown Gone Bust npr.org 16 Sep. 2015. Web. 15 Nov. 2015.

http://www.npr.org/sections/parallels/2015/09/16/440822077/a-sense-of-crisis-now-in-a-chinese-boomtown-gone-bust

[2] Blackstone, Brian. Switzerland Offers Counterpoint on Deflations Ills. The Wall Street Journal 18 Oct. 2015. Web. 15Nov. 2015. http://www.wsj.com/articles/switzerland-offers-counterpoint-on-deflations-ills-1445189695

[3] Neslen, Arthur. Morocco Poised To Become A Solar SuperpowerWith Launch Of Desert Mega-Project. The Guardian 26Oct. 2015. Web. 15 Nov. 2015. http://www.theguardian.com/environment/2015/oct/26/morocco-poised-to-become-a-solar-superpower-with-launch-of-desert-mega-project

[4] Mouawad, Jad. E.P.A. Finds More VW Cheating Software, Including in a Porsche The New York Times 2 Nov.2015. Web. 15 Nov. 2015. http://www.nytimes.com/2015/11/03/business/some-porsche-models-found-to-have-emissions-cheating-software.html

[5] Fitzpatrick, Michael. Why is hi-tech Japan using cassette tapes and faxes? BBC News 3 Nov. 2015. Web. 15 Nov. 2015.www.bbc.com/news/business-34667380

[6] Lazo, Alejandro. San Francisco Voters Reject Airbnb Initiative. The Wall Street Journal 4 Nov. 2015. Web. 15 Nov.2015. http://www.wsj.com/articles/san-francisco-voters-reject-airbnb-initiative-1446622854