Chapter 7 - Money and the Canadian Banking System

Foreign banks must have US$10 billion to set up entities in Vietnam

In the article that I found, it talks about Vietnams banking system. The State Bank of Vietnam (SBV) declared on June 5, that Vietnam will allow 100% foreign owned banks. But 100% owned foreign banks will not appear for another six months. If foreign banks want to establish themselves in Vietnam, the central bank of their country must sign agreements with SBV. The banks almost must prove that they have at least US$10 billion in total assets. There are also many strict requirements that the foreign banks must meet. So far, six foreign banks are willing to be established in Vietnam. They are from Hong Kongs’s HSBC, Australia and New Zealand’s ANZ, British Standard Chartered. The other three come from Taiwan and the Republic of Korea. Once the foreign banks have a license to operate in Vietnam, they will be treated like a domestic bank.

The foreign banks that are being introduced into Vietnam are very much like a chartered bank in Canada because the nations central bank allows other thanks the authority to lend money and accept deposits to businesses, government, and households. Canada introduced the Bank Act which gave restrictions to foreign investment from chartered banks. As long as Canada has this act in place, Canadian banks will most likely not open and operate any banks in Vietnam. The Bank Act also has restrictions for foreign owned banks. Since there are restrictions, there are not many foreign banks established in Canada because it will be hard to compete with the big banks. Vietnam on the other hand, will not have restrictions on foreign banks, in the article it states that foreign banks will be treated like a domestic bank. Since many parts of Vietnam are still developing, the new banks will hopefully help generate more money into the circulation. Tourists will feel more secure when in Vietnam because there may be banks they are familiar with from their home country. A disadvantage to allowing foreign owned banks to operate in Vietnam could be that they might try to have branch banks and take over or dominate Vietnam’s banking system. If the foreign banks branch out then the smaller domestic banks may be forced to shut down due to competition because the foreign banks will have lots of money since they are already big and successful in their home country.

I think that the idea of allowing foreign banks to establish themselves in Vietnam is a good idea because it will help the economy. People will have a higher ability to make loans and invest. This will increase spending and add circulation to the supply of money. Although I think that there should be some restrictions such as making sure that not all the money in the banks go to investments outside of Vietnam. That would result in money going outside the circular flow of money.


http://www.vneconomy.com.vn/eng/?param=article&catid=04&id=b007692b32fbd7

Chapter 6 - Determination of National Income

Blu-ray Possibility for Microsoft's Xbox 360 Game Console?

In the article i found, ITMedia, Microsoft head, Peter Moore talks about a rumor that the new Xbox 360 game console will have an add on blu-ray drive launched for it in the future. Right now there is a "DVD war" with HD-DVD and Blu-Ray, two of the newest advances in the video market, for the next standard of video disks. The new Sony Play Station 3 is currently using Blu-Ray (which was created by sony) and Microsoft Xbox 360 is using HD-DVD. Moore stated that if Blu-Ray wins the DVD war then it is most likely that there will be a Blu-Ray add on to the Xbox 360. Although the Xbox 360 prefers to use HD-DVD, it has an external DVD drive which allows them to adapt to whatever standard wins.

Now how does this have anything to do with chapter 6? Well first of all, there is a huge aggregate demand for video games. Almost every family household should have a game console. In order to buy one of the next generation consoles, you need money. When new video game consoles are released, they are usually priced around three hundred to seven hundred dollars. The distribution of income will affect the number of people who can afford one. If the consumer is wealthy, they will be able to buy the more expensive consoles by taking money out of their savings rather than transferred from other purchases. On the other hand, if the consumer is not wealthy, they might not be able to afford a console or the more expensive ones. Since the prices of newly released consoles will usually be fairly expensive, consumers can expect to have to save some money. But since consumers can expect prices to be high, they may want to wait for prices to drop. Which means no money going into the circular flow of money. Consumers might be persuaded to buy a new console because of psychological reasons. If all the cool kids at school have the latest gaming console, one could be influenced into getting a new console as well.

Microsoft is pressured to make changes in technology because it is expected that Blu-Ray is going to win the DVD war. Xbox will have to make replacements from their HD-DVD to Blu-Ray. I predict that the prices for the updated console will increase by a bit because of the cost of capital goods.

Personally, I think that Blu-Ray is going to win the DVD war because it's so advanced compared to everything else on the market. I can guess that Microsoft will probably have an add on for Blu-Ray as well because it is getting very popular. I do not have one of the new gaming consoles yet because of the price. I am going to wait until they drop then i will consider buying a new console. I will probably go with Sony's PS3 if they have any better games comming out.

Chapter 5 - Economic Indicators

Today's Young Affluents Are the 'Want-It-All' Generation

The article I found is about the transition between the Baby Boom generation and the generation X. It talks about how marketers for luxury products are shifting from their previous target market (Baby Boom generation) to generation X. The people from the Baby Boom generation are getting closer to retirement and their views on luxury items are different from the younger generation X. Today, the younger generation spends more on luxury items then the previous generation, “2006 the 40-and-under young affluents spent 32 percent more on luxuries than the over-40-year-olds, an average of $65,294 as compared to $49,485” (paragraph 4). The incomes were nearly identical for both age groups. The article also talks about how the younger generations are more exposed and aware of the internet, which could be used to buy and sell internationally. This would create much more revenue for international companies since the generation X people spend more on luxury goods. Now marketers for luxury products must adapt to the new generation by figuring out their different views and spending habits on luxury items.

http://www.furninfo.com/absolutenm/templates/NewsFeed.asp?articleid=7484

This is tied into chapter five because it involves the close retirement of the Baby Boom generation which makes up a large percentage of our population. When most of them retire, there will be a higher participation rate wanted by employers from the dramatic loss of employees. This situation may also increase frictional unemployment because since there will be many opportunities for new jobs, younger people with underemployment may most likely be able to acquire those open positions that fully utilize their skills. Also, many more people from the younger generations will come out of hidden unemployment because there will be more jobs available that might be suitable for them. The large amounts of retirement due to the baby boom generation is a natural rate of unemployment. People get old, therefore they wont be able to work. Many luxury businesses will invest into research and development so they can satisfy the younger generations wants and needs. If businesses have not already done so, they should invest in new equipment such as using new technology. For example, the internet, it is widely used by the younger generation and will be a vital necessity.

I can easily predict that many counties GDP will drop because of all the Baby Boomer people retiring. Since they a large population will be retiring, they wont be able to work and have an income. There is not enough people in the younger generations to accommodate for the loss of spending that will occur. But, since the spending habits of the younger generations is much higher than the Baby Boom generation, I think that the decrease in GDP will be gradual. As well, there are always new advances in technology which makes production much more efficient.

Chapter 4

Fewer smokers’ means less tax revenue
More people are kicking the habit as states impose restrictions, higher cigarette tariffs

This article is all about smoking and taxes. In the United States of America, over one fifth of American adults smoked in 2005 compared to one fourth a decade ago. States collected 2.8 billion fewer taxes from cigarettes in 2005 than they did five years before. Minnesota’s tobacco tax revenue is expected to decline later this year. The drop in Minnesota’s government revenue may even go down quicker with the expected passage of a state wide smoking ban. Across the United States, states are putting their treasuries under risk by putting higher cigarette taxes and placing smoking restrictions, which appear to be discouraging people from smoking, as many health activists had hoped would happen. States could also save some money from medical issues because of reduced smoking, but there is no set amount yet, and the saved money from fewer smokers could balance the loss of revenue lost from raising the cigarette tax. “Minnesota’s Department of Human Services estimates it spends $295 million a year to treat smoking-related illnesses for 647,000 people on public assistance.” paragraph 9. The decline in loss of revenue from smoking won’t greatly affect the government because it is declining gradually since it is inelastic. The federal cigarette tax has dropped from $8.1 billion in 2002 to $7.7 billion in 2005, according to a study by the tobacco industry. Cigarette taxes are now “a lousy way to fund your government,” said David Brunori.

This article relates to chapter four because this form of taxing is an indirect tax. An indirect tax is a tax levied against someone (the supplier), and is expected to pay for by another individual (the consumer). An excise tax is an example of an indirect tax. The government needs to decide how much they should tax people for products. They do this by what is called the ability-to-pay approach. In this case, the government most likely won’t dramatically increase the tax on cigarettes even though it is inelastic because if they do, the population of adults who smoke in the United States will be unhappy and could even protest. Therefore the government party in charge will lose over twenty percent of their votes for the upcoming election. The tax of cigarettes is similar to a proportional tax since the percentage of tax remains the same regardless of an individual’s income. The States won’t need to have stabilization payments for their taxation on cigarettes because the chance of a large majority of people quitting smoking is small.

In my own opinion, the increase in tax for cigarettes is a good idea because even though it won’t stop all people from smoking, it will stop some. I also believe that the decrease in smokers will make people healthier and reduce the need of intense medical assistance. I think that this will balance a portion of the loss in revenue for the government but not a majority because there is always second hand smoke. In my personal life, right now I am getting ill because of too much second hand smoke (nothing serious). I won’t explain the details of how I took in too much second hand smoke but I was breathing second hand smoke for about five hours at a party in a room next to a handful of people who were smoking. To make things clear I do not smoke and I don’t intend on starting it because of this personal experience. I highly encourage people to not or stop smoking because it is bad for your health and also your wallet. You can also think of it like this, if you stop buying smokes then the government won’t make any revenue from their high taxation on cigarettes, so you can stick it to the man!

Link to article: http://www.timesleader.com/mld/timesleader/living/16737988.htm

Chapter 3

Nuclear energy could help clean environment

The article that I have, explains about how Gary Lunn, federal Minister of Natural Resources, wants to look into the use of nuclear alternatives as a main source of energy. Lunn says that modern nuclear power plants are safe, efficient, do not generate greenhouse-gas emissions and are an environmentally friendly alternative to power plants run by fossil fuels. Gary Lunn states, “This will set us on the path to energy independence, and be a step in the right direction toward cleaning up our environment and reducing our impact on global warming”.

He also tries to persuade the public into using nuclear resources by saying how the excess energy created can be transformed to hydrogen; this would also aid us from depending on fossil fuels. He also says that all the nuclear waste produced from the beginning of the time we used nuclear power can be stored in an area the size of a high-school gymnasium.

(Link to article)
http://www.canada.com/theprovince/news/letters/story.html?id=1624e5cc-176c-4a5a-bc71-63544d12d51a

This article relates to chapter three (The Role of Government in a Market Economy) in the book “Working with Economics” because in the book, it talks about natural monopolies. For those of you who don’t know, natural monopolies are those industries in which it is more efficient to have only one company or supplier of a product or service. Gary Lunn is trying hard to get the public to understand why they should have a nuclear power plant because currently, most countries rely on energy produced by fossil fuels or hydro power. Since the production of energy is a natural monopoly, he can’t just go ahead and build an extra nuclear power plant because it wouldn’t be efficient.

There are also third-party effects to having a nuclear power plant. Like Lunn said, “Modern nuclear plants are safe, cost-effective, produce no greenhouse-gas emissions and are an environmentally friendly alternative to coal and natural-gas- fired power plants”. All of these reasons would be considered a positive third-party effect. But is nuclear power really going to solve those problems? The emissions from nuclear power can actually produce significant amounts of radioactive and hazardous pollutants and greenhouse gases from uranium mining and milling, transportation and conversion of uranium to nuclear fuel. We would also have to maintain the radioactive waste from nuclear plants for at least several hundred thousand years. The third-party effects of a nuclear plant would be controversial because there are both pros and cons.

Another issue that could come up is what if a private company tried to build a nuclear power plant in our city? Vancouver currently has a privatized energy resource owned by Terasen Gas, a company originating from Texas. Would we allow a nuclear plant to be run in our city? The pros of having one seems like it would be a good idea. But what if a disaster occurred? The rivers and oceans would be contaminated and many negative third-party effects would come into play. Many people could lose their jobs as fisher men and we could all be exposed to radiation. So should we really let a private company own such an important resource everyone needs?

All in all, I think that Canada should not operate nuclear power plants because of the negative third-party effects could be catastrophic. Right now in Vancouver, we should continue to use hydro power since we are near the cost and have access to many rivers and the Pacific Ocean. I hope in the near future, we will develop more efficient ways of producing energy that are environmentally friendly because global warming is occurring at a fast rate. A big portion of the ice in the arctic has melted. There was an iceberg the size of Texas that has already melted and knowing that is frightening. If we don’t find a quick solution to save the environment whether it’s by using solar and wind power, there might just be too much water for us to use our hydro power.

Chapter 2

Drug-danger 'league table' revealed

This article is about the dangers of alcohol, illegal drugs and cigarettes. The UK Science and Technology Select Committee say that alcohol and cigarettes are more harmful than ecstasy, LSD and cannabis. These scientist collect twenty different types of legal and illegal drugs to analyze the social and physical damage they cause based on scientific evidence. They put the various drugs into catagories from highest consequences for having possession and dealing. There are three classes which are class A, B and C. Class A is highest and class C is lowest. Drugs that are classified as class A are alcohol, heroin, cocaine, tobacco, LSD, ecstasy, magic mushrooms and street methadone. Class B drugs include speed and barbiturates. Class C drugs are cannabis and some tranquillisers. Today tobacco and alcohol are considered more harmful than ecstasy and LSD. The UK drug classification system want the government to take their studies into consideration and clear the relationship between drug classification and criminal penalties for possession.
(here is the link for the website)
http://www.newscientist.com/channel/being-human/drugs-alcohol/mg19125633.100-drugdanger-league-table-revealed.html

This article is relevant to chapter 2 because addictive drugs are inelastic because they cause the person using the drugs to have craving for it. Usually when the supply for a product go down the price goes up. When the price is high for certain products people usually dont buy it anymore or dont buy as much of it. But for drugs that cause addiction the people using them can't just stop buying the drugs or buy less because the drugs force your body to consume more of it to satisfy your body. As a result of this the person taking the drugs will lose their money continuously buying drugs. Then our economy will slowly decrease if this continues and starts to spread. Many dealers have sneaky ways of tricking people into trying their drugs by giving free samples to get the consumer hooked. Then the dealer will start selling their drugs at a low price until the customer continues to buy and be dependant on the drug. If drugs werent addictive then they would be elastic because people could easily quit.

In the end, i believe that people should not even try a drug to begin with because most of them are highly addictive even though you will probably think you wont get hooked on the first try. But it is very easy to get addicted to class A drugs. Also for the people who rely on drugs as an anti-depressant, i would advise that you find some trustworthy friends and family members to help you straighten out your life because drugs are only hurting yourself and the people around you.

Chapter 1

Growing wheat scarcity may send prices skyrocketing

In this article, it talks about the price of wheat increasing because of droughts in Australia, Ukraine, and the US. The price of wheat increased up to fifty percent this year. The countries most affected by this crisis are China and India. this is bad for China and India because they spend more money on products produced by wheat more than we do. The expenses for Canadian bread has gone up thirty five percent, the highest in a decade. Many people suspect that new records are going to be broken in two to three years because of global shortages. World inventories would decrease in June by forty three percent to 119.3 million tons. The US department of agriculture said earlier this month that this has been the lowest since 1982.
(Here is the link to the article)
http://www.busrep.co.za/index.php?fSectionId=&fArticleId=3513088

This article is connected to chapter 1 because the supply for wheat can't meet the consumers high demand. A dramatic drop in the production of wheat puts a very negative effect on products that contain wheat because wheat is a raw material. Farmers will have to buy more land in order to keep the production of wheat balanced. This has a positive effect and a negative effect for society. On the positive side there will be a higher demand for labour. More people will be hired to work on the fields because more land will be bought. On the negative side if too much land is taken up then sooner or later when the weather conditions are ideal for growing wheat, the company will have too much wheat. Therefore the supply will be high and the demand will be constant which will lead to decreases in prices for wheat products. The shortage of wheat and high prices will also effect the capital because as people continuously come to restaurants the company must buy more expensive bread which will lead to a decrease in their revenue and profits. It would be a good idea for companies to come up with direct costs and opportunity costs for alternative products instead of wheat, especially restaurants because it can greatly change their profits.

in conclusion, i think that many small countries and cities are going to be more affected than us because our economy is high and we have a high standard of living. I feel that people are still going to buy wheat products even though are will be an increase in price. Lucky for me i dont eat alot of bread so it wont effect me very much. i believe that global warming is causing the droughts in Australia, Ukraine, and the US. Now we should put in a greater effort in trying to be environmentally friendly.