All posts filed under: Finance

Liberals' Minimum Wage Laws: A Plan to Increase Approval Ratings in View of the Next Election?

On October 1st 2017, Ontario’s minimum wage rose to 11.60$ an hour, from a previous level of 11.40$ an hour. This minimum wage comes from a proposed plan of Ontario’s Liberal premier to ensure more security for its workers by the name of “Fair Workplaces, Better Jobs”. The bill was proposed in May 2017 and it has since created a lot of debate in the Legislative Assembly at Queen’s Park. If passed, it would cause the minimum wage to rise to 14$/hour on January 1st, 2018 and, successively, 15$/hour on January 1st 2019. The question on minimum wages has been hotly debated for a long time, with advocates saying it will reduce poverty and increase the standard of living of the working class, while opposers fearing that it will reduce employment due to the higher cost of labor faced by businesses. The minimum wage policy is usually aimed towards low income and poor families whose wage is not enough for the current cost of living. That said, this policy might actually hurt their employment. Businesses …

Crisis in Venezuela: The Repercussions of Nostalgic Nationalism

It is the year 1994; Venezuela is in the midst of a major financial crisis brought on by lax financial regulations. Venezuelans across the country prayed for an angel to bless them from the depths of purgatory. With inflation spiraling out of control, more than 70,000 businesses went bankrupt. Their prayers seemed to have been answered, when Hugo Chavez swept into power in 1998.  Minimum wage was more than doubled and the poor basked in the glory of their savior. It is the year 1921, the British Empire stretched to a quarter of Earth’s total land mass (37 million square kilometres), encompassing 570 million people. It was called the empire on which the sun never sets. London was the centre of the world, and millions from across the globe flocked to Britain to bask in the shimmer of wealth.   These might seem like completely different stories, but its folklore has resulted in problems that are occurring today. People are drawn to the idea of past glory, and tend to make irrational decisions in an …

Israeli Gas: The Tug of War for Energy Security

Israel’s fourth Prime Minister Golda Meir once lamented that  “Moses dragged us for 40 years through the desert to bring us to the one place in the Middle East where there was no oil.” With the development of the Tamar and Leviathan gas fields, this fate has been rewritten, entrusting Israel with a sum of 532 Billion Cubic Meters (BCM) of natural gas, some of which will begin flowing from the offshore platforms by 2019. Alongside a new report by French consulting firm Beicip-Franlab that estimates 2,120 BCM’s of gas in Israel’s territorial waters, another recent discovery at Daniel East and West has revealed an additional 252 BCM’s. In stark contrast to Meir’s perspective, Prime Minister Netanyahu has called the gas “a gift from God,” but this seemingly divine power demands the responsible management of Israel’s domestic needs alongside the rewards offered by export.   On 14 February, 2016, Israel’s relationship with its partners for gas production and exploration came to the forefront when Prime Minister Netanyahu took the extreme length of appearing before the …

China’s Devaluation Game: A Highly Political Exchange Rate Policy

By: Declan Walker   The yuan depreciated in value by 1.9% on August 11th, and then again by 1% on August 12th, marking the biggest two-day drop in value against the dollar in over 20 years. Consequently, the devaluation was met with intense scrutiny by the international economic community. But are China’s motives really as rapacious as many believe? Although the recent discussions surrounding the devaluation of the yuan are most likely to pertain to the turmoil surrounding its stock market, the reality is that the impact of China’s exchange rate policy is not confined purely to the sphere of economics, and other views which have equally profound implications are worth exploring. In order to attain a proficient understanding of the contemporary ‘currency wars’, and China’s impetus for engaging in them, it is first useful to provide a brief analysis of the Chinese political economy. What many fail to realize is that China’s ardent policy of maintaining a low yuan may be every bit a political move as it is an economic one. To many, China’s …

Greece: Stuck in Economic Purgatory

  By: Declan Walker  In the past week, it appears that the realities of a Greek exit from the euro – Grexit – have diminished substantially, and a third bailout looks almost inevitable at this point, amidst current negotiations. Although continued austerity is certainly not what the majority of the Greek public wanted, a Grexit may have been just as – if not more – undesirable in the long run. Ultimately, neither a third bailout nor a Grexit are ideal for the Greek economy. The structural fallacies of the eurozone system (i.e. the impossibility of paying off austerity-induced debt absent of any monetary policy tool) is, among other factors, largely responsible for bringing Greece to its current position. However, the reality is that the past can not be undone, and this reality must be calculated into the cost-benefit analysis of determining whether Grexit would have been feasible. If current developments remain constant, and the terms of a third bailout are agreed upon, it would appear that the lesser of two evils will have prevailed. The …

The Eurozone: Doomed from its Inception

  By: Declan Walker Many tend to think that the failures of the eurozone can be attributed to the crises which have dominated headlines for the better part of three years. Events like the 2008 financial crash and the Greek debt crisis of 2010 are often designated as causal factors. However, the assignment of blame on contemporary crises is incorrect, with the reality being that the failure of the eurozone had its roots in its original structuring and implementation in 1992 and 1999, respectively. The fallacies of the eurozone can be attributed primarily to three key structurally-related outcomes: the emergence of a false fixed exchange rate, which is based on trade imbalances; driving debt-to-GDP imbalances and permitted irresponsible fiscal policy; and the inability of individual countries to impact their own monetary policy to combat inflation. In that regard, it can be concluded that the economic crisis currently plaguing the eurozone is not the result of contemporary events, but rather the failures of the mechanisms which have been present from the system’s very origins. The original goal of the eurozone’s proposal as a mechanism of the European integration process was …

Declining Crude Prices: A General Overview of the Effects

Despite OPEC’s decision in November to keep production constant at 30m barrels a day, output did fall marginally by 122,000 barrels or 0.4% in December, 2014. The price of the WTI and Brent standard stood at $51.96 and $55.78 respectively at 9:25 pm on January 4th, 2015. All this follows in the wake of oil prices decreasing during 2014. The effects of this decrease have reverberated in global markets around the world, and governments have responded in different ways. Asian Economies: Ulterior Motives The decline in the price of crude oil over the past three months has affected countries very differently. For instance, Indonesia, an emerging economy that used to be a member of OPEC, but then suspended its membership in 2009 in the wake of increasing internal demand and declining production of petroleum, implemented additional measures to reduce subsidies following their November announcement to limit diesel subsidies. As per the latest announcement, the government has stopped subsidizing gasoline, and has implemented a fixed diesel subsidy of $0.08 as of the first day of 2015 …

Spring Cleaning: Re-establishing Libya’s Successful Energy Sector

By: Filipe Carvalho Libya’s potential to become a major energy source may be the key to helping fix its economy, and the country itself. The Recent History of Energy Security The rise in demand for oil and natural gas throughout the 20th century escalated the importance of energy in global affairs. Fuel exporters came to notice the inelastic demand for oil, and thus maintained low levels of production in order to hike up prices. Western powers, most notably the United States, became dependent on oil supplies coming in from Saudi Arabia, Qatar, Kuwait, and Libya, amongst other exporters. During the Cold War, the United States defended authoritarian middle-eastern regimes that provided the West with stable and affordable oil prices, leading to what analysts refer to as “Arab Exceptionalism.” However, the Western backing of Israel during the Yom Kippur War led to an oil embargo by the Organization of the Petroleum Exporting Countries (OPEC) in 1973. The 1973 oil embargo, as well as its 1979 successor, led to robust increases in oil prices. The economic shock …

Economic Disruption Caused by Conflict in Ukraine and Syria

The negative effects of infrastructural damage caused by the recent conflicts in Syria and Ukraine continue to transgress borders, ultimately damaging the global economy. By Bruno Cervantes Conflict often yields economic disruption. World War I culled the world’s first attempt at globalization. Similarly, World War II brought never-before-seen destruction to Europe. Just a few decades ago, the collapse of the Iron Curtain (1989) and the dissolution of the Soviet Union (1991) were seen as the end of an era of continuous proxy wars. Nonetheless, the fear of nuclear annihilation has been replaced with that of terrorism, and the violent cycle continues. A rational economic perspective discourages heavily militarized conflict. Excluding isolated countries such as North Korea and, to a lesser extent, Cuba, the cost of economic sanctions and disruptions in balances of trade should discourage any type of aggression. Unfortunately, conflicts like the Iran-Iraq and Vietnam wars, as well as the United States’ incursion in Afghanistan, demonstrate how ideology and third-party profit can coerce countries into open conflict. Currently, the Syrian civil war and the …

Biting the Hand that Feeds Them

Russia’s embargo on agricultural imports: who wins, who loses, and what it all means On August 5, Russian President Vladimir Putin announced a list of bans on agricultural imports from countries that have recently imposed sanctions on Russia. These retaliatory measures are part of a series of tit-for-tat moves set in motion by Russia’s annexation of Crimea in April 2014 and the Kremlin’s subsequent support of separatist rebels in eastern Ukraine. Russian Prime Minister Dmitry Medvedev said the embargo, effective immediately, would be valid for one year. It covers imports of meat, fish, vegetables, fruit, nuts, and dairy products from the US, Australia, Canada, Norway, and the 28 countries of the EU.   Adding insult to injury The effect that these bans will have on each economy is uncertain. David Cohen, US Treasury undersecretary for financial intelligence, says the biggest loser will be Russia. “What the Russians have done here,” he said, “is essentially impose sanctions on their own people.” The Russian economy is already not as strong as Putin makes it out to be. …