The Economist's Digest 33

Jobless agonistes

Originally from The Economist July 8th, 2011

Summary:

After the 2008 financial crisis, there had been improvement in economy and job markets. However, the employment rate has worsened recently and it became the same as the before-recovery one. There is also a trend of worsened payment and shorter working time. It seems that America doesn’t have recovery after the recession.

We also found that while private sectors provide job offers, government agencies lay off their staff to avoid overspending.

The rising unemployment may be caused by interrupted supply chain caused by Japanese tsunami and rising oil prices. After all these things are past, the employment data should be improved. Nevertheless, the deleveraging process, especially the deleveraging of government debt, will worsen US economy. America just starts to limit their government debt, which is also the cause of the public sector lay off.

After two parties in US reached consensus for tax policy, the budget stress seems to be soothed a little. However, a tight fiscal policy will be implemented for sure. One the other hand, Federal Reserve still worries about the rising unemployment rate after the end of QE2.

Comments:

Monetary policy provides no help with structural unemployment, according to economic textbooks.

Fed implemented quantitative easing because they believed that the unemployment of America was caused by temporary economic depression, that is, cyclical unemployment. However, if the industrial structure of the world has changed after2008, the bottom rate of unemployment of US would be different form 5.8%, the before-crisis level.

In the article, it mentioned an important idea---deleveraging. In the last decade, from 1998 to 2008, the asset-backed security, especially the mortgage-backed ones, has thrived. Once the market starts to shrink due to deleveraging, two things will happen and they will change US basic employment level. First, the financing resources of housing market will shrink, and it will cause shrink in housing market, which contributes 12.7 % of US GDP. Second, the shrinkage of housing market will cause revenue of other related industries diminish. Finally, these things will reduce tax revenue of US government; then the government will be forced to contract fiscal spending, even reducing job offers of public sectors.

If US government can’t find a new way other than boosting housing and mortgage market to improve output, the new bottom rate of unemployment would be 9%.

The Economist's Digest 32

Leaders

The end of the Space Age

Originally from The Economist June 30th, 2011

Summary:

The realm of the Earth is enlarged by man-made satellites, which expand the Earth by 36,000 km diameter. On the other hand, technology has been revolutionized in many aspects such as agriculture, telecommunications, weather forecasting...etc. However, people who dreams about space travel in the past now start to perceive the limit of human in space exploration. There are three traits to see this:

First, those who supported development in space before now oppose commercialization of space travel because it is not cost effective. Second, this year, 2011, there is the last space mission launched by US, which represents the end of America’s space-shuttle program. Third, the ISS (International Space Station) will be de-orbited in 2020.

In short, the passion for space has gone, at least for America and Russia. China may inherit the passion, while the passion may fade after decades. Even though human will not go further in outer space, people still will develop inside the geostationary orbit.

Comments:

Why do people in US lose their space dream? It relates to the slowdown of US economy. In recent years, after 2008 financial crisis, even though US economy is recovering, it cannot grow as fast as it did before. On the other hand, China is on the stage of development that is the same as the US once experienced. Thus, it is China’s tern to pursue space dream now.

However, there are other important reasons for people to give up space dream. Most of them are economy, or even life maintenance problems such as food and energy crisis. Space projects seem to be donated by rich people and the government to fulfill space scientists’ dream, but it actually cost all the people’s money, through tax and transfer payments. As mentioned in the original article, these projects are paid by the public. We know these projects cost a lot.

If mankind can’t find a way to ensure sustainability, we can’t---and we shouldn’t go further because it will worse disparity problem and bring more turbulence.