As with any growing country, the demand for labor in Japan is increasing. The problem in Japan, however, is that the labor force is having a hard time keeping up. Already, unemployment rates are dipped to 2.8% at the beginning of this year- the lowest it’s been in over two decades. On top of this higher participation, elderly people are coming out of retirement to fill the void, not exactly the productive labor force you would wish for in a blossoming economy. Any economist will tell you that this is cause for inflation. The scarcity of workers will demand higher Continue reading Japan’s Struggling Labor Market
Economists in the past 20 years have examined the relationship between oil prices and inflation. The common finding has been one of “limited” or “modest” correlation between these two variables. Michele Cavallo wrote on this topic in the FRBSF Economic Letter and made the observation that in the “1970s and early 1980s, rising oil prices were accompanied by double-digit overall inflation in the U.S. and in several other developed economies.” There were studies conducted using data from 1960-2000 and the results were ambiguous as they showed a strong relationship between oil prices and inflation only before 1981. But since 2000 Continue reading Relationship between Oil Prices and Inflation
In Buenos Aires all eyes have been on newly elected Argentine president, Mauricio Macri to fix the inflated state of the country’s economy. Macri was elected in December and promised Argentina’s citizens that he would curb inflation. But 8 months later there were reportedly tens of thousands rallying in front of the presidential palace in an “anti-Macri demonstration.” Some labor leaders and citizens are angry at the trajectory of the economy and for good reason. INDEC, the national statistics institute, stated that prices went up by 4.2% in May and The Wall Street Journal reported that unemployment rose to 9.3%. Continue reading Argentina Eyes on Macri
Since the Great Recession rocked the U.S. and world economy in 2007, the federal funds rate in the U.S. has been at or near zero, falling from its pre-recession level of 5.25%. The hallmark of post-recession years has been the Fed’s strict adherence to low interest rates for fear that raising them could send the United States back into a recession. But now, this period may finally be coming to an end. For the first time in nine years interest rates may be set to climb as Janet Yellen announced at the Fed’s annual Jackson Hole meeting two weeks ago Continue reading What Increasing the Federal Funds Rate Means for the Stock Market
Pennies are useless. Actually, they are worse than useless. In a way, they are actually harmful. Why? Because they are supposed to function as money. Money is used to “facilitate the exchange of goods and services” and pennies simply aren’t valuable enough to do that. They used to, but thanks to inflation, the buying power of the penny is so small that its practically useless. When is the last time you saw a penny on the ground and actually bothered to pick it up? Never, I know. Simply put, the opportunity cost to pick up, sort and deal with pennies Continue reading Pennies Suck.
If you buy your own food, you may have noticed in the past couple years that food prices have been rising faster than the prices of other goods. Today, we’re going to pull apart an interview on food inflation into economic terms, that we can then turn back into real world discussion. If you’re not quite sure what inflation is yet, here’s a link to a previous post on inflation. Here’s the interview. It’s from Marketplace, with a guy named Matthew Boesler from Business Insider. In total, it’s about 5 minutes long. Food inflation, or, why bacon is a good investment by Raghu Continue reading Food Prices
Inflation. It’s one of those economic terms that gets thrown around a lot, but perhaps not explained as much as it should be. I’d like to offer an accessible and brief guide to understanding inflation, mostly for intro economics students but also for anyone that may find themselves in a situation where someone tries to tell you that inflation is “bad” or “good”. Inflation is a necessary part of our current and modern economy. It is neither good nor bad, it simply exists, and there are benefits and consequences to relatively higher or lower inflation. The debate on inflation should always Continue reading A Beginner’s Guide to Inflation