Little Japan and Huge Deflation

With the United States ranking number 1 and China ranking number 2, Japan being the 3rd largest economy in the world has a gross domestic product of a mind blowing four trillion dollars per year. Japan is definitely a force to be reckoned with. This export based economy is home to some of the world’s most popular companies. Companies like Sony, Canon, Honda, Toyota and Sharp are world renowned and call the economic giant, Japan, home.

The Yen, which is the name of the currency used in Japan, has a reputation of being stable and safe. But even though Japan is the third largest economy on the planet, it is one of the few countries in the world that suffer from a major economic problem. That problem is called, deflation. Unfortunately, Japan isn’t a stranger to deflation for it has been experiencing deflation since the 1990’s.

Just in case you don’t know what deflation is, it is when overall prices of goods and services decrease over a period of time. It’s usually a side effect of a muscular (strong) currency. Especially in Japan’s case, having a strong currency is a very bad thing. Why? Because Japan is an export based economy, which means a lot of Japan’s capital comes from exporting their goods and services.

When a currency becomes too strong, that country’s goods and services will be more expensive to foreign countries. That’s why Japan must avoid a strong currency like a plague. Japan’s strong currency is also responsible for throwing the country into a deflationary spiral. Don’t forget, deflation is when the overall prices of goods and services decrease overtime and that is a bad thing as well. I know that it seems counter intuitive, but it’s true.

When overall prices for goods and services decrease over time, it also does harm to an economy for it gives an incentive for consumers to not spend money and an incentive for banks to not loan money. When citizens postpone buying and spending money, that can do some damage to an economy.

The Bank of Japan, Japan’s central bank, has been doing all it can to get Japan out of deflation. But all their efforts seem to be ineffective. Experts at the Organization for Economic Co-operation believe Japan may be in deflation until 2014. Only time will tell.

One thing the Bank of Japan can do is to do what the Federal Reserve has done and print more money to weaken their currency.

Does the U.S. Economy Really Need QE2?

The world economies have been rocked and devastated by the horrific financial crisis that took place toward the end of 2007. The United Kingdom, the European Union, Japan and China, along will countless other countries have been negatively affected by the major crisis. One economy that has been one of the hardest hit was the United States. The United States suffered from a major housing crisis, a historic banking crisis and a huge unemployment crisis. Countless homeowners started defaulting on their mortgages, banking institutions were going bankrupt and the national unemployment rate was reaching record highs. The country was in turmoil.

Due to the chaos that was taking place, the U.S. government bailed out the major banking institutions, investment firms and automotive companies to the tune of 700 billion dollars; money that was taken directly from U.S. taxpayers. That along with the Federal Reserve purchasing financial assets to help jump start the economy, one and a half trillion dollars were poured into the U.S. economy.

This all stated in 2008. After the money was spent, the U.S. economy did seem to start getting better; and so did the global economy. Now fast forward to 2010. The news starts getting bad all over again. The United States economy is starting to stall, the unemployment rate is stuck at a very high level and inflation is dangerously low.

As a result, the FED has announced that they are going to start pumping additional money in to the United States’ economy. This second action, known as quantitative easing 2 or QE2 has been getting a lot of coverage and publicity. Many think it’s not needed while some do. Here are the reasons why some do believe it’s needed.

As I mentioned above, the United States’ economy has started to falter and stall. The idea is that money needs to more accessible to help stimulate the economy and get things on a path to economic growth once again. The unemployment rate is way too high and inflation is way too low. Just by looking at those facts, quantitative easing 2 makes a lot of sense.

Here are the reasons why some don’t believe quantitative easing 2 is needed. One, it destroys the United States dollar. The United States dollars loses its value big time whenever the FED just starts making money out of thin air. Every person who uses the US dollar automatically becomes poorer. Two, it didn’t work the first time, so many believe it won’t work this time.

No matter what my or your opinion is, the FED already announced that they are going to go through with QE2. Will it work? Only time will tell.

One economist named Stephan believes that the FED is only keeping half of its mandate. The FED’s mandate is to promote maximum employment and ensure price stability. The United States’ economy has a high unemployment rate and quantitative easing 2should help lower it. Price stability, however, is not going to benefit.

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Multi National Businesses Moving To Panama

The Panama economy is booming big time, with the government reporting rates of around 8.5 per cent growth in the economy each year. When there is such strong economic expansion happening, it comes as no surprise that there are more and more multinational companies that are moving there and opening up offices and trade in the country.

One of the things that has been attracting international investors to the country is that the banking system there is strong and has not suffered any of the collapses that have been seen in some other Latin countries in the recent past as well as in North America and European countries too.

Another reason that many companies are also coming to the country is that the canal is being expanded and the vast amount of resources and personnel that are required to make that happen and continue on schedule means that there are huge business opportunities for many global companies. In fact, the current expansions are larger than the original canal project back in the early twentieth century.

For big trading companies it is important to realize that the country has the world’s largest merchant navy and fleet and they are likely to be getting even bigger in the near future with the expansion of the canal. In addition to this, the country is the second largest free trade area behind Hong Kong. In the Americas it easily takes the region’s crown.

A further point to take into account when looking at why investment in the country is booming is that behind Hong Kong it is the largest free trade zone in the world. It also has the largest merchant navy and fleet internationally. There are also plans afoot to build five international airports in the country to facilitate the current demand and all for more flights to land and take off all the time.

On top of the infrastructure and benefits that are put into place by the government, there are other things that can attract people to the country. Some of these things are the geographic location, which is effectively a hub between North and South America and Central America and the Caribbean. As well as this it is not an earthquake danger area and it does not have hurricanes or other natural disasters that are countries in similar regions are prone to.

The economy is increasing drastically and there is more investment than ever before. There are so many compelling reasons for multinationals to be based in the country and lots of companies are only now beginning to understand the benefits to doing business there.

The economy has been growing at an impressive rate thanks to the work of the national government to take full advantage of the natural benefits the country has and the position that it can place itself on an international scale. With more and more multinational companies choosing to open up in Panama, it is likely that we will see the economy continue to grow well into the future.

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A Look At The Present Outlook Of The Panama Economy

During the course of the recent global economic crisis, there have been many countries facing difficult economic challenges. Some countries, however, have managed to weather the storm. A close look at the Panama economy reveals a country that has made its way through the crisis and is primed to emerge in an excellent economic position. Fiscal discipline, massive investment projects, and solid industrial performance, has allowed Panama to keep its economy growing as countries all around it have flounder.

Panama’s economy grew a modest 2.4% in 2009, down from the 8% to 11% rates of the previous few years. But any growth at all is significant in a global economic climate where many of Panama’s neighbors, and many other countries around the globe have been experiencing negative growth. Meanwhile, government projections for growth in Panama this year remain at 5%, and forecasts from other sources range from 2.5% to 5%.

Two main contributing factors for Panama’s continued growth are its strong financial sector and its active construction industry. In other countries, these sectors have seen sharp declines. The telecommunications sector has also made a good showing in Panama. Overall, Panama’s real income and employment rates have been steadily increasing and will undoubtedly serve to re-energize consumer activity in the country. From 2003 to 2009, Panama’s unemployment rates constantly decreased. While it rose in 2009 from 5.6% to 7.1%, many of its neighbors, and many countries around the word saw double-digit employment rates at the same time.

An important piece in Panama’s economic growth story is the $5 billion dollar project to expand the Panama Canal, which has improved domestic and foreign confidence in the Panama’s economy. The project has supplied the country with jobs and contracts that have contributed directly to current growth, and in time it will become an important source of National revenue.

Another key factor in the development Panama’s recent economic confidence and strength has been the government. President Ricardo Martinelli’s center-right administration implemented sound fiscal policies and key tax reforms that have helped to increase revenues, reduce debt, and expand investment projects. President Martinelli’s popularity has slipped recently in response to rising crime rates, and a recent increase in value-added tax, but his approval ratings remain comfortably high.

The rest of the world has begun to take note of Panama’s economic successes as well. Late in 2009, Standard and Poor’s raised its credit rating outlook for Panama to positive. More recently, Fitch Ratings gave Panama its first-ever investment grade rating. These ratings will likely help boost foreign investment in Panama’s ongoing projects, thus continuing to boost the country’s growing economy.

Panama is already a primary destination for foreign investment. The impressive Canal project is part of an ambitious five-year, $12 billion investment plan launched by the government. The plan will fund projects all across the country designed to upgrade infrastructure and public works, and improve Panama’s fiscal sustainability. At the same time, while Panama’s public debt ratios are relatively high, its net debt is less than 2% of the GDP.

The economy of Panama is one of the fastest growing economies in the region and in the world. Tax reforms and impressive investment projects have kept Panama moving forward economically, even through the current global crisis. As it continues to attract foreign investment and maintain sound, disciplined fiscal policies, Panama will continue to keep its economy growing for some time.

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