International Business Between Oct 24

¶ … international business BETWEEN Oct 24 to Nov 7 from Wall Street Journal.

The Long-Term Economic to-Do List

Currently, the American economy is improving at a very moderate and tepid pace. Unemployment, although steadily declining, is far from the ideal levels for economic growth that prevailed prior to the economic collapse. Housing, a large indicator for economic growth is also beginning to improve as home purchases on an annualized basis reached over 350,000. This improvement however is threated by numerous headwinds that could potentially threaten the impending economic prosperity. This Wall Street Journal article enumerates many of the significant economic issues still prevailing within the American economy. The article first focuses on the quickly approaching fiscal cliff, and the government's ability to mitigate it affects on American society. The fiscal cliff, as the article indicates, is a combination of spending cuts and tax increases that could potentially drive the economy into another recession. The tax increases, many pundits argue will significantly reduce discretionary spending within the United States. Since 2008, the median household income has declined from $51,000 to $48,000. Likewise, due to accommodative monetary policy, commodity prices have increased substantially. Prices of gas, energy, and food have all risen since 2008. If the tax increases were allowed to prevail, consumers who are already struggling will become more constrained. This constriction would further reduce consumption which accounts for 70% of the U.S. GDP.

Furthermore, due primarily to spending cuts; the individuals who will need government assistance will be unable to receive such help. Assistance programs such as unemployment benefits, and welfare would all be substantially cut. In essence, government will be unable to provide assistance during the period in which the country desperately needs it. This lack of liquidity, pundits argue, will plunge the economy further into a recession, mitigating the economic improvements that were realized over the last four years.

I agree with many of the arguments presented in the article. However, there are some aspects that are not given as much attention as should be warranted. Society, I believe should be particularly worried about inflation and its implications on the purchasing power of the dollar. Currently, due in part to prevailing market conditions, governments have embarked on a path to massive fiscal ease. Governments, including the United States, Japan, Europe, and China have all engaged in massive stimulus operations. These operations are designed to help build consumer confidence while also enhancing the overall appeal of risky asset classes. For instance, the United States has kept interest rates near 0% for the past two years with an expectation of low interest rates until 2015. This low interest rate environment makes alternative assets such as stock, bonds, and real estate more attractive on a relative basis. High dividend paying stocks for instance, offer a yield of roughly 3% which is nearly double that of the 10-year treasury. These massive stimulus efforts however, have yet to enhance economic activity as previously anticipated. As such, the massive asset purchases created by the government may result in rapid inflation as more currency is circulating in their respective economies (Tobin, 1969). As governments continue to print money, the relative value of this money will continue to decline, ultimately harming the consumers it was intended to help. Furthermore, this low interest rate environment is harming those who depend on their savings to generate income. With interest rates at record lows, and savings accounts generating very little income, inflation will erode the purchasing power of these savings (Robert, 1988). Inflation could further erode an already shrinking middle class. The median income as I indicated earlier is already shrinking. Further constriction of purchasing power would cause more damage to the confidence of consumers and their willingness to purchase goods and services.

Part 2

Read CNN article DRUG_TESTING_GOES_OFFSHORE and summarize:

What you think are the advantages and disadvantages of offshoring some of these trials?

Many of the advantages of drug testing offshore correspond directly with the advantages of globalization within a market economy. First, drug testing offshore can be conducting cheaply and inefficiently. This allows consumers to save more money while receiving comparable services in regards to their health. In addition, drug testing offshore is much quicker than their domestic counterparts. As the article indicates, patients can receive routine services much more quickly than they otherwise could within their home country. In many instances patients can fly to foreign countries to receive cheaper and quicker service than they otherwise could in their home country. For many routine tasks, the quality of the service of foreign operations is on par or better than that of their domestic counterparts. The disadvantages pertain mainly to ethics, standards, and training. In many instances, these services are cheaper as the countries have less oversight in regards to their implementation. This lack of oversight could potentially put patients at risk as routine tasks are performed without due diligence and care. In addition, many facilitators may act unethically in regards to patient records, operations, and oversight.