Economics is fun !!

Don't believe me?? Check this out.

I mean who could have thought that legalizing abortion was the root cause that controlled crime rate in 1990's in USA. Moreover, the fact that this theory is being published in a freaking economics book titled "Freakonomics". This book, for me, is a revolutionary step towards the way we look at economics. Economics to some is a "dismal" science that is used with mathematical tools like graphs and charts to explain the cause and effect of growth, output, inflation etc. Generally, people consider economics to be the study of monetary and fiscal policies. But to some it is much more than that. People like Steven D. Levitt, the author of Freakonomics and the winner of "John Bates Clark Medal", consider economics to be an art which when when used practically can solve many mysteries and reveal the reasons behind many events.

Economics is fun. That's one message books like Freakonomics want to convey. It is fun to practice economics yourself and it is also fun to see others practicing it. Economics can be taught in entertaining ways rather than by boring graphs and mathematical equations. It can be taught in such gripping ways that it also appeals to the most social, literate and the most popular guy in the high school. Economics can shed light on the most exciting, sexy and eye-catching issues rather than reading endlessly on government budgets and deficits. Nothing in social life falls outside the purview of economics. The fun lies in studying things that you can see happening in front of your eyes or if you can relate to them and economics can be taught this way. This helps in imparting "out-of-the-box" thinking to the students which would yield better results when they arrive in the "real world".

Though we are still living in a traditional era as far as economics is concerned, students are still made to cram the monstrous mathematical equations and "learn by heart" graphs on demand and supply, however, the outlook of economists is changing. Now less people appear astonished when they see an article titled "More sex is safer sex " or "Why blondes make more money than brunettes?" or "Paying students to perform better" or "Daughters make you more conservative" published in an economics journal. There is a whole new spectrum of ideas to be explored in this field and loads of mysteries to be solved. What we need is creative thinking and "application oriented" teaching by the tutors. They need to spice up the topics by developing interesting theories which keeps students glued to this subject at their own will. Remember, that's when "true learning" takes place.

Read the previous article here "If not now, then when?"

WALMART - The high cost of low price !!

I was compelled to write this article after watching the documentary "Walmart - The high cost of low price" directed by Robert Greenwald. I believe you must have come across Walmart stories a couple of times before, but it needs to be told yet again. So here you go.

It starts with the then CEO of the company Lee Scott praising the company at a large employee convention. Following is an excerpt from his speech:

"It would be a pleasure for anybody to be the CEO of this company because when you come to this meeting year after year, you get to say we had record sales, we had record earnings, we had record reinvestment back into our company. You know i say all that, but let me tell you my friends, you better be ready to be better because today for whatever reason, whether it's our success or size Wal-mart has created fear if not envy in some circles. And that makes it all the more important that we focus on the right thing and on doing things right, every time. There are two things that we should do. Number one is tell the Wal-Mart story, get the message out and the second thing is stay the course. Wal-Mart is too important to individual families who are stretching the budget, too important to the suppliers who employ millions of people, we are too important to the associates whom we value so much and your company will continue to demonstrate our citizenship as a good employer and the member of the community that we serve so well around this world. Ladies and gentlemen I promise this, we are gonna stay the course and this company will continue to grow"

No one can doubt the success story of Wal-Mart. Founded in 1962 by Sam Walton this company has grown in leaps and bounds to become one of the most valuable American company. Wal-mart's revenues crossed 400 billion dollars in 2009, most by any company around the world. Consumers were never so delighted. They can purchase whatever they need at the lowest possible price from the Wal-Mart stores. Be it grocery items, hardware items, durables and non-durables, it has diversified into all the necessities of human lives. Like you can search on google for any information, you can go to Wal-Mart to buy anything you need. That scale is hard to absorb. But yes this company has proved that "Nothing is Impossible, it's I am possible". And it employs as many as 2.1 million people, largest by any firm in the world. But is Wal-Mart a success for America? Any company is a boon for its nation if it helps improve the overall quality of living of its people. Has Wal-Mart been able to do that?

The giant retailer's low prices often come with a very high cost. Wal-Mart's relentless pressure has crushed the companies it does business with and has forced them to send jobs overseas and the result is unemployment. Not to mention, this giant whale has not only bitten but killed several small fishes, owing to its extremely low prices. The small grocery and hardware stores simply couldn't survive the competition. And thus had to shut their stores down. Family businesses which had been running successfully for over half a century have come to a halt and the people are left unemployed and helpless. All this at the cost of one company. What adds to the agony of these people is that the majority of Wal-mart's products are not even produced in America. They are all imported from China.

Wal-Mart wields its power for just one purpose: to bring the lowest possible prices to its customers. At Wal-Mart, the goal is never reached. The retailer has a clear policy for suppliers: On basic products that don't change, the price Wal-Mart will pay, and will charge shoppers, must drop year after year. But what almost no one outside the world of Wal-Mart and its numerous suppliers knows is the high cost of those low prices. Wal-Mart has the power to squeeze profit-killing concessions from vendors. To survive in the face of its pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of outsourcing products from overseas.

Neither the suppliers nor the Wal-Mart associates are happy with the companies policy. Despite being one of the richest companies they have been frugal while giving it back to their employees. Its expensive health insurance package against low wages has added to the pain of the employees who work really hard and take pride in working for Wal-Mart. And their efforts to form unions to negotiate the wages and insurance policy of the company have been suppressed. Many associates are not happy with what they are getting in return for their arduous work but they have no choice as they need a job to support their family.

This company is shutting down "The Great American Dream" of children earning more than their parents. Is this what Sam Walton visioned when he founded the company in 1962 ?

Deflation: A serious concern for Europe !!

You must have come across the news of countries going bankrupt as a result of hyperinflation, for example Zimbabwe which suffered from a 24000% inflation and it's currency became almost valueless, even less than the value of paper. Deflation can be equally killing. Deflation has a unique spiral effect. It occurs when there is a shortage of money supply in the market. Thus people have less disposable income to spend and there is a decline in the demand for products which in turn results in unemployment and further reduction in incomes and so on. It has the potential of bringing an economy to a halt. Japan is a good example of a country under deflation since many years which has resulted in a fall in the GDP of Japan and we see many countries surpassing Japan in terms of output growth.
European Central bank has a primary responsibility of keeping inflation under control. But it has become so obsessed with this task that it is ignoring a greater threat at it's disposal: DEFLATION. Economists regard deflation to be more serious than inflation. It is also bad for countries like Greece and Portugal which are under debt pressure to repay as deflation makes the currency more valuable. Most countries argue that they need to cut the money supply in order to reduce their deficits but what is the need of the hour?.The real challenge for policy makers will occur in the coming months and years as Spain, Greece and Portugal struggle to regain their competitiveness on international markets. Without their own currencies to devalue, they have little choice but to cut wages and keep them well below those in countries like Germany and France. Pay cuts and lower government spending will put downward pressure on prices. Spanish core inflation already turned negative in April. A mild decline in prices in a few euro zone countries can be managed, economists say, but it will add to the risks of deflation.And the central bank will face more difficulty than usual in devising a monetary policy that fits both the ailing countries and the faster-growing economies like Germany and France.

The Great American Dilemma !!

Ever since the recession started with the break-out of Lehman Brothers in September 2008, Chinese have been teasing the superpower in one way or the other. USA doomed by it's financial instability has been caught off guard by the Chinese, who are leaving no stone unturned to harass the Americans. Chinese has been manipulating their currency right since the beginning, but it is only now that it is causing tremors in the American and European economies. They have deliberately regulated their currency to keep it at a lower level in order to boost it's exports. As a result of which the demand for cheap Chinese products have increased astronomically, and that of the costlier domestic goods has declined drastically. Dead are many american manufacturing industries because of this. Europe is also reeling under pressure created due to excessive demand for Chinese exports which are much much cheaper than their own. This has in turn raised the unemployment level to an all time high.

On one hand US government is criticized for adopting protectionist policy and at the same time, this ploy by the Chinese is their game plan to overtake the US economy. One would say that lowering of prices is good for the consumers, but the question to be asked is How long an economy can survive the negative output growth due to reduced demand for domestic products. Ultimately consumers are also producers. They earn through producing and consume using their disposable income. If all the goods we consume are from other countries, what will be the source of income for our men. If it's only USA which is expected to consume the Chinese products and Indian services, what would our men do? Developing countries on the other hand encourage their citizens to save and also provide considerable incentives for that matter. Is the whole world contemplating to overcome recession only through US spending?. President Barack Obama has got a lot of work to do to keep the American expectations alive. He needs to handle the matter diplomatically and try to put international pressure on Chinese to remove unwarranted regulations on their currency to make the playing field leveled for everybody.

How did Apple beat Microsoft?

Apple Inc shot past Microsoft Corp as the world's biggest tech company based on market value, the latest milestone in the resurgence of the maker of the iPhone, which nearly went out of business in the 1990s.

Shares of Apple are worth more than 10 times what they were 10 years ago, as it has profited from revolutionizing consumer electronics with its stylish, easy to use products such as the iPod, iPhone and MacBook laptops.

The last time Apple had a higher market value than Microsoft was December 19, 1989, according to Thomson Reuters Datastream.

Microsoft, whose operating system runs on more than 90 percent of the world's personal computers, has not been able to match growth rates from its hey-day 1990s. Its stock is down 20 percent from 10 years ago.

Apple, which struggled for many years to get its products into the mainstream, resorted to a $150 million investment from the much larger Microsoft in 1997 in order to keep it afloat. At that time, Microsoft's market value was more than five times that of Apple.

Microsoft still leads Apple in sales. In the latest quarter, Microsoft reported $14.5 billion in revenue compared with Apple's $13.5 billion.

Cupertino, California-based Apple is now the second-largest company on the Standard & Poor's 500 index by market value, behind energy behemoth Exxon Mobil Corp.

Facebook Threatened !!

Facebook which is adding users astronomically has been recently threatened with the news of Google launching a facebook competitor. The rumour mill began churning after Digg founder Kevin Rose posted a tweet last weekend (saturday to be precise), saying, "Ok, umm, huge rumor: Google to launch facebook competitor very soon 'Google Me,' very credible source."

Wondering how Google Me will really work? Experts believe that Google already has almost 30 different social properties that it has acquired or built including YouTube, Picassa, Google Profiles, Google Docs, Google Friends Connect and Google Latitude. So, the company largely has almost every component that it requires to built a Facebook killer. All it needs to do is a bit of organisation and create a common platform for all these networks.

With facebook keen on expanding it's operations and having already spend millions on the blueprint of the expansion palns, this news can shake it financially. Google is known to give a tough competition in whatever field it enters.

Writes eWeek's Clint Boulton, "Google challenging Facebook in social is like Facebook challenging Google in search," he writes. "People are comfortable socializing on Facebook, which is where their friends (and their friends of friends are) and they are comfortable searching on Google, which is where all of the data about businesses, places and other facts live. Unless and until there are technological improvements on both sides, paired with practical user behavior shifts from consumers, never the twain shall meet."

While analysts may continue to debate the issue, the rumour has been further fanned by Adam D’Angelo, former Facebook CTO and now founder of Q&A service Quora (on Quora only).

Here's what Angelo wrote on Quora.

* This is not a rumor. This is a real project. There are a large number of people working on it. I am completely confident about this.

* They realized that Buzz wasn't enough and that they need to build out a full, first-class social network. They are modeling it off of Facebook.

* Unlike previous attempts (before Buzz at least), this is a high-priority project within Google.

* They had assumed that Facebook's growth would slow as it grew, and that Facebook wouldn't be able to have too much leverage over them, but then it just didn't stop, and now they are really scared.