HeritaGE: The merger of Heritage and Genel

http://www.thestar.com/business/article/647834





Heritage Oil Ltd., a Canadian-based independent, international oil company, agreed to purchase and merge with Genel Energi A.S. Genel is a independent, private oil explorer and producer in Turkey. Since the agreement for the purchase of Genel with $3-billion, Heritage gained over 5 percent in shares. The focus of the new expanded company is placed in the oilfields of Iraq, Uganda, and Russia. The merging of the companies is expected to provide Heritage with the top position in northern Iraq's oilfields. Heritage stated that the expanded company was due to atleast obtain reserves for over 300 million barrels of oil in Iraq alone.



Connecting to chapter 10, first of all, Heritage could be described as a corporation. A corporation is a business held by shareholders one with opportunites of making big profits. Heritage, in addition to being a corporation is also a foreign investment of Canada. According to Chapter 10, foreign investments or companies owned by foreign countries strengthen the foreign-exchange value of that country's currency. The merger of Heritage and Genel is a form of foreign investment by Canada. A foreign investment can be described as money wagered on an asset or a factory in a different country. In this case Heritage through the merger, staked money and gained a monopoly on the foreign northern oilfields of Iraq. By merging with its biggest competition in the oilfield, control of the oilfields went to the new expanded Heritage.

The fact that companies owned by Canada in foreign countries are expanding is good news. In fact, the expansion of any Canadian-based company is probable good news for our economy. Instead of relying on our own industrial companies, our economy is too heavily reliant on foreign ownerships and exports. Canada is more of a supplier than a manufacturer as of yet.The expansion of companies such as Heritage is bound to increase the revenue generated and the money pool in Canada. This would be good news for the economy and Canadians because more money in the hands of the government would allow it to either boost spending or cut taxes. Both of these have the potential to either reduce prices or increase employment rates and encourage consumption. Expanding companies is a giant step forward for a country around half whose major companies are associated with foreign countries. While foreign ownership has its own benefits, I believe it is also equally if not more important to develop our own companies.

Chapter 8

http://www.itar-tass.com/eng/level2.html?NewsID=13845217&PageNum=0



This article relates to the stabilization loans Ukraine were due to recieve from the IMF (International Monetary Fund). Ukraine, one of the economies hit hardest by the recession, after months of heated debates persuaded the IMF to loan $16.4 billion. They were to recieve the loan in parts and recieved their first $4.5 billion last year. However, with political battles raging on and the opposing parties against the loan, the IMF has temporarily decided to withdraw from Ukraine. The IMF stated that they plan to study the situation more closely. They have left the matter of whether they plan to lend the second share of the money in the air. Upon the start of the recession, Ukraine's currency had immediately lost 40% of its value. Since then unemployment rates have nearly doubled.



First of all, this article relates to stabilization. The government's effort to borrow money and release it into circulation would increase the supply of money and promote consumption. The government by borrowing money is trying to revitalize the economy and increase employment levels. There is disagreement with this policy probably because employment and inflation are connnected and have a trade-off which is displayed by the Phillips curve. If unemployment were to be decreased it would most likely also create inflation and cause prices of goods to rise. The endeavor to increase the monetary supply is also a part of the monetary policy. And lastly, the concept of public debt can also be found in this article. As the government keeps borrowing more money, it will become harder to pay off and, eventually turn into a liability in the future. Loans are however a temporary measure and the boost it provides to the economy can carry on for lengthy periods of time.



With rising unemployment levels, the demand for loans have increased. Money, for countries, have become increasingly hard to obtain. The IMF lends money to countries that really need it and agree to spend it on solving their problems. In the case of Ukraine, even though the government had initially convinced the IMF, all her oppositional parties were against this. The government believes this to be a conspiracy against her with, the ultimate goal of reducing her political support. Although the IMF has decided to take a closer look at the situation they have withdrawn for now. When the wellbeing of a nation or even the world is at stake it should be all our jobs to work together. In the situation of Ukraine, political compromise will be necessary if they are planning to advance anytime soon. Regardless of whether or not the real motives of the opposition were negative, a common ground needs to be found. Recessions can damage an economy while, politics can destroy one.

Time = Money

http://www.recordonline.com/apps/pbcs.dll/article?AID=/20090401/BIZ/904010335





This article talks about the time bank in Woodstock. The Woodstock Time Bank started in April 29, 2007. This bank supports a type of bartering system which uses time instead of money. Time Dollars were invented by Edgar S. Cahn in 1980. So far, over 6,300 hours of service has been exchanged. People trade services for services and, by helping someone in need they end up recieving help in their time of need. Time money has been widely accepted by people in regions where they have been implemented. They provide people with an alternative and allow them to retain their stash of money.

The time bank relates to the use of the barter system and a new currency. By commuting an hour to the bank the volunteer earns an hour of service. The time bank uses time as a currency. Time used as money is durable, simple, not easily copied, recognizable, and divisible. Most people would accept it as a way of payment and would consider it to be valuable. Furthermore, by trading services and time, no real money is either used or involved. This is especially appealing because no exchange of money means no taxation or involvement of other agencies. Lesser exchanges made with money while beneficial to many people, don't affect the GDP and could actually be detrimental to the economy. As people lose faith in money it is only natural for them to turn to other systems such as bartering.


The Time Bank seems like an idea with lots of potential. Time buys money and money buys others' time. By directly trading time for time, taxation can be avoided and the transaction can be made more smoothly and efficiently. For example, if a builder needed some plumbing work done he could just go and build something for someone else and, have in return, a plumber come in and fix his problem. Had the builder tried to fix his plumbing problem by himself he would end up wasting more time and even then, there would be no guarantee that he would succeed. Trading services allow people to save more of both money and time. Moreover, if someone who needed service couldn't afford it he could just pay for it by time. The only downside of Time money to consumers is probably the fact that it cannot be used to purchase goods. However, if the idea keeps gaining popularity it may even be possible to buy and sell Time money in the future. The concept of Time money is very interesting and I, myself, wouldn't mind using time as currency.

The paradox of thrift

http://biz.thestar.com.my/news/story.asp?file=/2009/2/28/business/3368323&sec=business


This article claims that the current recession has been especially bad for savers and that, it has been worse than previous ones. The article sums up some of the highlights of the current recession. It reports that the recession was brought on and made worse by people saving money. According to it, this in turn caused the value of investments to fall by about 50%. America, itself, lost $2.4 trillion during the first ten years of 2008 in mutual funds. Housing prices fell and unemployment rates rose worldwide. The articles states that it should be in the best interest of everyone to spend more money and stop saving. The government, itself, should spend more money to promote this. Highly industrialized countries such as Japan and Germany were among the countries that were hit hardest.



First of all, the article is in keeping with the paradox of thrift. It states that due to people saving more money, consumption rates decreased summoning the current recession. This lower consumption caused the aggregate demand curve to shift to the left resulting in a surplus. As businesses suffered from lower revenue and increased inventory they fired employees. This further decreased the sense of financial security in people, and consequently urged people to save more money. With more savings, the chain just continues to repeat itself. This article also relates to the aggregate demand and the recessionary gap. As the demand curve moves to the left from equilibrium, the recessionary gap widens and employment opportunities decrease. Finally, as a whole, the article can be summarized using the Keynesian economic theory, which states that it is necessary for the government to spend money to preserve demand for goods.



The current recession has taken a huge toll on the world economy and has left economists speculating everywhere. When we decide to save money we are reserving that money and taking it out of circulation. This increases the unemployment levels and decreases the amount of job opportunities available. It is a paradox and in order to get out of it, consumers must regain their confidence. While the government can help promote these by spending more money on increasing the demand of goods in the end, it is up to us to start consuming and stop saving. As individuals when we all are spending money, we are keeping the demand of goods up and indirectly investing on employment insurance. Keynes was once noted to have said that "Whenever you save five shillings, you put a man out of work for the day." In Canada the recession hasn't hit as hard yet, but if we start roosting on our money now fearing that we will lose our jobs, we actually probably will.

Banks in UK Taking a "Pounding"

http://news.bbc.co.uk/nol/ukfs_news/hi/newsid_7880000/newsid_7883200/7883255.stm





This article addresses the current decline in the economy of UK and what the bank's response towards this subject is. The governor of the bank of England stated that rate cuts in interest may not help anymore and that the recession may be deeper and longer than what most people had initially anticipated. Despite attempts to stimulate the economy by cutting down interest rates by 500% the value of the pound hasn't gone up. The bank stated that new "unconventional methods" may need to be introduced in the near future. The bank also believes that the resolution lies in increased exports and investment instead of consumption. While the banks are expecting the economy to start recovering by 2010, business leader are even more pessimistic. A member of the Institute of Directors, Graham Leach, said that "we are well into the financial crisis but the economic crisis is only just beginning."





Firstly, this article relates to recessions and how they affect the general economy. A country's stated to be in a recession if it faces two subsequent periods of decreasing GDP along with a drop in economic activity. In addition, the article also talks about inflation and the bank's effort to stop it. The value of the Pound has gone spiraling down with the recession increasing the prices of goods. This decreased consumption and as a result, forced companies in order to retain profits to slash down their work force. This brings up the concept of unemployment by creating demand-deficient unemployment and decreasing the participation rate. These are all negative and many countries are currently being confronted with these problems.





In the world's current state of economic recession most countries have suffered as UK has. This decreased economic activity caused many countries to cut down the amount of goods they import, even further harming the global economy. As individuals the recession has decreased our sense of financial security and has made it harder for the general population to land a job. Interest rates have been cut in banks worldwide and although this makes it more worthwile for the public to borrow money it hasn't done much to resusciate the world's economy. The recession affects everyone and even those who don't have a job can feel its profound effects upon entering a store. Remaining optimistic while the world is currently falling in terms of economy many people are expecting it to recover next year. After all, the night is always darkest before dawn.

Flat Versus Progressive

http://www.nypost.com/seven/01182009/postopinion/opedcolumnists/the_word_is_flat_150734.htm



The article posted above promotes the use of flat tax and discusses how it could alleviate much of the economic problems US is facing right now. The article refers to the current tax system in the US as a "maze of confusing, complicated, counterproductive federal taxes" and recommends the flat tax, because it would motivate people to work harder. Also since the current tax system acts as a negative incentive and makes it harder to run businesses, it argues that the flat tax would be able to create an economic boom through the increased number of businesses and the jobs that come along with it. According to the article, the result would be one flat fair tax that would treat all businesses equally and banish all the other innumerous taxes such as the excise tax, inheritance tax, and import duty.


This article ties in with the economic concept of taxation and their battle for superiority. The USA currently runs a progressive tax system, a system in which the tax rate increases along with the amount of money made. The flat tax ,which is recommended in this article, on the other hand charges an equal rate for all amounts of money made. The pros of progressive taxes are that, it decreases poverty levels and seems more fair while the cons include the fact that it acts as a disincentive, and that, it is not constant. The pros of flat tax are that it acts as an incentive and reduces complications while the cons include higher poverty levels. Tax equity is important in order to meet everyone's needs, but yet, it is nearly impossible to achieve.


In my opinion, I think the implementation of the flat tax would not be a very good idea despite the fact that it could improve the current economic condition of the US. Such a system would be hard to initiate and would surely be met with rebellions. In addition, while the flat tax would act as an incentive to get people working harder, it would also make it less fair for the people with jobs that don't pay as much. Consequently, this would result in lower demand for these jobs and force their providers to increase their price or suffer in turn. While I am a firm believer of the fact that the US needs to reform their tax system in order to pull their economy back up, I just don't think that the flat tax is the way to go.

--Rafaat Mir--

Government interventions

http://money.cnn.com/2008/11/20/news/economy/jobless_claims/index.htm





This article, talks about the fact that the unemployment rate in the United States is increasing. The US department of labor reported that the number of people signing up for state jobless benefits has increased to 542,000, the highest since 1992. The labor department also reported that the economy lost 240,000 jobs during October alone bringing the total count of jobs lost to 1.2 million for the year. The job losses can be explained by the recent global recession and companies trying to cut down their supply costs. Bob Brusca, an economist, predicted that the job market getting even worse in the near future.



This article has to do with government interventions that take place when third-party effects and income differentials come into play. With reduced employment the positive third-party effects associated with a healthy job market are not felt as prominently. For instance, an employed population with money to spend can afford to pay taxes, and make purchases that will ultimately prove good for the economy. To control the effects brought about with job losses the senate have already taken a vote to extend state jobless benefits at the expense of government taxes. Distributing incomes efficiently is essential to avoid a rising poverty level and a weak economy.



The global recession has created job losses, economic instability, and deficits in numerous countries across the world. The ripple effect and opportunity cost of this recession affected everyone to some extent. The recession which decreased the output of industries forced them to make job slashes, which in turn, made it harder for families and individuals to find new jobs and retain financial stability. The money, which we pay through our taxes, and will now be used to support some of these people could have been used on something more beneficial for everyone. In addition, if the situation continues heading downward as it is now, the world may even be thrown into a depression.