China’s Yuan: Special Drawing Rights and another reserve currency in the making

Previously there have been four Reserve Currencies for use by the International community in trading or paying for goods and services rendered across country borders. These Reserve Currencies are: U.S. Dollar, Japanese Yen, Euro, and British Pound. The International Monetary Fund (IMF) has now recognized that the Chinese yuan or renminbi may be considered as another “Special Drawing Rights” currency

“Special Drawing Rights”, a basket of currencies used by the International Monetary Fund (IMF) as its unit of account.  Here’s a definition of “Special Drawing Rights” courtesy of Investopedia:

“An international type of monetary reserve currency, created by the International Monetary Fund (IMF) in 1969, which operates as a supplement to the existing reserves of member countries. Created in response to concerns about the limitations of gold and dollars as the sole means of settling international accounts, SDRs are designed to augment international liquidity by supplementing the standard reserve currencies.”

Read more: Special Drawing Rights (SDR) Definition | Investopedia http://www.investopedia.com/terms/s/sdr.asp#ixzz3vkTzRP1z

Bloomberg News outlines the IMF’s role in this monumental event:

http://www.bloomberg.com/news/articles/2015-11-30/imf-backs-yuan-in-reserve-currency-club-after-rejection-in-2010

Here’s an Asian viewpoint of this historical designation:

http://www.koreaherald.com/view.php?ud=20120720000920

The Economist magazine’s view of the new status of the Chinese yuan:

http://www.economist.com/news/business-and-finance/21679341-its-new-status-might-make-weaker-yuan-chinese-renminbi-joins-imfs

I have previously written two posts about reserve currencies and the Chinese devaluation of the yuan. Here are the links for your perusal:

What is a Reserve Currency?

China Devalues its Currency

Fed finally made their move!

What happened?

Basically the Federal Reserve Bank feels that the U.S. economy has recovered:

“The Federal Reserve hiked interest rates for the first time in nearly a decade on Wednesday, signaling faith that the U.S. economy had largely overcome the wounds of the 2007-2009 financial crisis.” Reuters: http://www.reuters.com/article/us-usa-fed-idUSKBN0TY2EX20151218

• The Federal Funds Rate has been raised to 0.25% (referred to as 25 basis points), that’s the interest rate that one bank pays another bank for funds kept at the Federal Reserve Bank. These are overnight deposits kept at the Federal Reserve Bank.
• Banks have raised the Prime Rate, that’s the rate that banks charge their “best” customers for borrowing money from the banks.
• Savings account interest paid to savers will NOT be raised by the banks.

What does it affect and what’s next?

Here’s a couple of links commenting on consequences of the Fed rate hike:

The Fed Raised Interest Rates so what happens next?

http://www.npr.org/2015/12/21/460536795/the-fed-raised-interest-rates-so-what-happens-next

Here’s an article from the New York Times:

Why the Fed Raised Interest Rates  http://www.nytimes.com/interactive/2015/09/12/business/economy/fed-rates-explainer.html?_r=0

FED RAISES RATES BY 25 BASIS POINTS, FIRST SINCE 2006 CNBC does a nice job of explaining the Fed’s move. http://www.cnbc.com/2015/12/16/fed-raises-rates-for-first-time-since-2006.html

“In addition to raising the funds rate, the committee pushed the interest paid on excess reserves to 0.5 percent and put the rate on overnight reverse repo operations to 0.25 percent, both in conjunction with the sale of securities that will be needed to push the rate higher.”

Here’s links to earlier posts that I have written about the Federal Reserve Bank:

Meet the FOMC committee: Federal Open Market Committee

When will the Fed finally raise rates?

Determining and beginning and end of economic cycles

 
Author’s note 8/12/16: Here’s an update on opinions that the Federal Reserve will raise rates again in year 2016. The belief seems to be at this time that one more rate increase could happen. Here’s the opinion of the Wall Street Journal: Wall Street Journal
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Obsessed

Eye Crosser #14: Current Account Deficit

In an earlier posting: Mega Eye Crosser: Trade deficits and a little bit about exchange rates, I outlined what is meant by “trade deficit’, ‘balance of payment”, ‘capital account”, “current account deficit.”  I will not repeat information about these items but I will offer a short video prepared by the KhanAcademy which offers a nice explanation in particular about the Current Account Deficit.

Here’s the link: https://www.khanacademy.org/economics-finance-domain/macroeconomics/forex-trade-topic/current-capital-account/v/balance-of-payments-current-account

Signs of the Times #2: Front Porch Thieves

Have you heard about “porch pirates?” Have you been a victim of “porch pirates?” I recently watched the business news TV program Nightly Business Report on my local PBS station. Since people are shopping online and not personally shopping at a store, there is a problem with delivered purchases being stolen by “porch pirates.” To respond to this problem, dilemma, phenomenon, whatever you want to call it, there are new companies such as “Doorman” being started to help the purchaser actually get his/her purchases/paid for goods.

The link below is an ABC News story on the same delivery company. http://abcnews.go.com/Lifestyle/doorman-app-eliminates-holiday-package-theft/story?id=27142934

This posting is NOT an advertisement for “Doorman” or any other delivery service. Amazon is offering delivery alternatives in some areas and UPS is trying to adapt with security measures for its customers.

I think it’s wonderful that entrepreneurs are turning a nasty unlawful behavior into a business plan but it’s another sad commentary on our society here in the United States.

My blog is focused on the economic life of the United States. I don’t think this posting is a diversion from my blog vision. In fact, I think the existence of such thieves spotlights once again the morality of our current society. What are these thieves doing with their bounty; probably selling it at a flea market or on the Internet.

There was a newspaper cartoon character called Pogo who said “we have met the enemy and it is us.” While the cartoon creator, Walt Kelly, was championing the movement toward a cleaner environment, I think another meaning could be interpreted from the Pogo quote that indeed we are our own worst enemies toward ourselves and our neighbors. I’m not going to go “all preachy” here but come-on folks what are we doing to each other?  Quote source:  http://www.thisdayinquotes.com/2011/04/we-have-met-enemy-and-he-is-us.html

Is this yet another example of the “new normal” of our economy?
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Elusive
Cheat

 

Signs of the Times #1: Does Your Company offer College Tuition Reimbursement?

Once again I date myself. I come from a time in which many companies offered under-graduate college tuition reimbursement as an employee benefit. I had to receive a “passing grade” in order to get my tuition reimbursed by my employer. In other words, I personally paid for my tuition at the time of college course registration, and once I successfully completed the college course, I submitted my grades to my company and I was reimbursed the cost of my tuition for the course.  If I remember correctly the lowest grade accepted for anyone to qualify for reimbursement was a grade of “C.”

It took me eight years to obtain my bachelor’s degree. I was working full-time and attending college classes at night. That’s the way many young people received their college education in the 1950’s and 60’s.

I understand that tuition reimbursement is not offered as an employee benefit these days of the early 21^st century. I don’t know when tuition reimbursement ceased to be a “common” employee benefit offering. I do feel it’s an unfortunate loss for the interested and education-motivated employee.

Be mindful that tuition reimbursement was an expense for the company but probably seen as an investment in the employee.

In this particular article posted on Bloomberg.com, the programs being reimbursed are MBA-type, graduate degrees. www.bloomberg.com/bschools/content/feb2011/bs20110216_463962.htm#p2

An interesting thing that seemed to have  unfolded as I read through some literature, opinions, articles on this topic is that “graduate” school seems to be the level of education eligible for reimbursement in the last, say 20 years, whereas “under-graduate” school courses were eligible for reimbursement in the late 1950’s and 1960’s when I was taking advantage of this employee benefit.

Unfortunately, access to a full-time job also limits a person’s opportunity to tuition reimbursement. Part-time jobs are not “famous” for offering any employee benefits let alone a “plum” one such as tuition reimbursement. However, it appears that companies are starting to offer employees a “repayment of student loan” benefit. A piecemeal approach such as offered by tuition reimbursement is a much better way to handle college debt but the option of employer-financed payment of a student loan doesn’t sound too bad either.

Having an employer repay student loan debt is not, in my mind, a positive motivating reason to accept a job offer but on the other hand, the loan gets repaid as it should be. Of course there is the opposite side of the coin which is the irresponsible colleges that pressured loans upon students and/or students acting in an irresponsible way about taking on loan debt in the first place.

I’m sad that tuition reimbursement is not offered by many companies in 2015 but I’m happy that companies recognize helping employees by offering some type of loan repayment benefit is a “win-win” proposition also.

Part 5B: Jobs Training and search for solutions

An old song School Days, School Days referred to readin’, and riten’ and ‘rithmetic, it was written around 1907 by Edwards and Cobb. Around the 1980’s “plus C” was verbally added to this notion of a complete education, “C” being the symbol for computers. Even though there were issues or challenges of language communication within the U.S. educational system, reading and writing and arithmetic and later computers seemed to work for the masses. The Germans, Italians, Swedes, Irish, Poles, and Latin Americans who immigrated to Chicago, IL, appeared to “get it.” Get an adequate education that is. What has happened? Why does Chicago contain a local population of possibly 53% illiteracy? We have a three “Ls” issue: language, literacy, and learning capability. My best friend taught 1^st grade for 25 years in the parochial school system in Chicago. One time she told me she had 10 different languages in the classroom. I asked her how she could teach a student with whom she could not communicate. She said “Very patiently.”

Somewhere along the line, the educational system broke down and we have never been able to rebuild it properly. In the training and development field, we, the instructional designers, are taught to separate “need to know” from “nice to know”. It’s a grueling part of the design process when gathering information and knowledge to include in a job training event or lesson.  The “need to know” items are called the enabling components of a training event. In other words, in order to train a mechanic how to tune-up a Ford Focus car, what are all the items that are involved in the tune-up, how do they properly work, how do they sound or look or feel when not properly working, what tools are needed to do the tune-up job properly, how do you properly use each tool to perform the tune-up. You get the idea.

If the population is not prepared with what instructional designers call the “prerequisite knowledge”, they will not succeed in being properly trained, given that the training event is properly defined. The trainee or learner must bring adequate language, level of literacy and learning skills to be successful. If a car is out of alignment, it is adjusted and realigned to put it back on the right track. Think of a scaffold and its supporting ladders. The scaffold is the minimum knowledge required by the learner to successfully fulfill a training event. Every rung of the ladder BELOW the scaffolding is the enabling knowledge required by the learner. If any rungs on the ladder are missing or broken, it’s a problem for the worker climbing the scaffolding ladder. It’s the same for the learner, no amount of repeat training events will aid the learner if he/she does not speak English adequately, read English at the appropriate level, and of course have the capability to perform at the expected level of learning capability.

There are solutions to the current American employment dilemma. We need long term solutions not quick start band aids. U.S. companies need certain skilled labor now, the short-term needs are possibly clouding the long-term vision. Unfortunately there are unemployed that cannot be re-trained for needed jobs. There are certainly others who can be re-trained but they need time to travel through the necessary “learning curve” for the available jobs. We are challenged as to how to aid Corporate America to have available now the appropriate candidates to meet their needs yet allow for the internships or apprenticeships necessary to train those who are “trainable.” There are those who suggested that something like the Works Progress Administration (WPA) of the 1930’s be reestablished to put the unemployed to work. Some of that probably wouldn’t be a bad idea either. It really isn’t a good idea to have unemployed collecting money and not doing anything. A person’s ego comes so much from the idea of self-worth and that comes from working.

I hope that you have enjoyed reading my series about jobs training issues. Since I spent part of my life teaching adults and designing job training experiences, I guess this particular subject has been my passion. The advents of the “Personal Computer Age” and on its heels, the “Internet Age” have rocked the world economically, physically, and psychologically, not just intellectually. May I quote from Yoda, “May the Force be with you.” In this case, I mean the force of knowledge, intelligence and education for everyone.

Here are links to the rest of my “Jobs” series:

Part 1: Jobs, jobs, jobs, and the Mono-economy of the New Millennium

Part 2: Some past prescriptions to the jobs employment problem

Part 3: Jobs, jobs, jobs and the job training dilemma

Part 4: Jobs and jobs training, the more things change, the more they stay the same

Part 5A: Jobs and the Re-tooling of an Industrial Titan: Chicago

Part 5A: Jobs and Re-tooling Industrial Titan: Chicago

Chicago is having an identity crisis. Along with a local budget crisis and a State monetary crisis, there are seismic changes happening in the “City of Big Shoulders.” But first a little retrospective of the city:

Currently land once known as “South Works” and owned by U.S. Steel  resides in Chicago on the Southeast side ensconced along the southern edge of Lake Michigan. To quote the Chicago Tribune “(T)he site…once employed 20,000 people.” The plant site encompasses 589 acres of land and has been vacant since 1992 when the steel plant finally shut down.

In the 19^th century, Chicago was the meat packing center of the U.S. The meatpacking district was 475 acres in size and employed more than 25,000 people. Chicago coincidently also became the railroad capital of the country. It was the place where all east and westbound trains converged. To quote the Chicago Historical Society encyclopedia, “More lines of track radiate in more directions from Chicago than from any other city.” And over 30,000 Chicagoans worked for the railroads in the 1930s.

Besides meat packing, Chicago was also an important food processing center with companies such as Armour and Swift, plus the mail-order empires of Sears Roebuck and Montgomery Ward. Eventually what happened to the displaced workers as these industries downsized, right-sized, out-sourced, closed down, merged, and retooled for technology and posterity?

Technology, innovation, cost, and demand influence an economy. The expansion of air flight allowed faster travel in shorter time spans. Instead of spending days traveling on the “rails”, one could fly the same distance in hours. The advent of mini-mills sealed the fate of massive complexes such as the “South Works” steel plant. The catalog giants Sears and Montgomery Wards moved from mail order to retail stores to almost extinction (Sears) or absolute oblivion (Wards). Changes in distribution and decentralization of meat distribution sealed the demise of the Chicago stock yards.

In the 20^th century, Carl Sandberg poetically called Chicago the “city of big shoulders.” One could say it was in reference to its blue-collar citizenry. In the 21^st century, Chicago’s high tech community is ignited because Chicago startups like Groupon are helping to reengineer Chicago’s identity from a rust-belt economy to a technology centered economy. The reason the label “rust belt” was coined was because the Midwest of the United States did not respond efficiently and/or expediently to changes in international trade as well as regional or national economic conditions.

Two references in the Encyclopedia of Chicago, “Work Culture” and “Work” speak to how Chicago approached educating or vocationally preparing the young for the work world. There is no reference to any service or mechanism for retraining of the work person moving from one job to another. It is interesting to note that because of scientific management and the “division of labor” into very small tasks, an “unskilled” labor force was probably not seen as a negative influence on the local economy. A ‘blue-collar” worker could flow from one job to another fairly easily. Local “connections”, politics, and/or just plain luck landed you another job. Only as the post-industrial age advanced into the computer and now Internet Ages, are unbalances more and more noticeable between labor skills, job openings, and educational requirements of the workforce. It’s the ever increasing velocity of change and cacophony of choices to which changes respond, that are combining to challenge the definition of “job readiness” now.

One solution to Chicago’s ongoing labor vacuum might be another Washburne trade school type solution as mentioned here but with a 21^st century “twist”.

Here are links to the rest of my “Jobs” series:

Part 1: Jobs, Jobs, Jobs, and the Mono-economy of the New Millenium

Part 2: Some past prescriptions to the jobs employment problem

Part 3: Jobs, jobs, jobs, and the job training dilemma

Part 4: Jobs and jobs training, the more things change, the more they stay the same

Part 5B: Jobs training the search for long-term solutions

Part 4: Jobs Training, more things change, they stay same

First a little background:  in the year 2011, United States Senator Coburn spearheaded an awareness of the complexity of the U.S. job training strategies as implemented by various then-current laws and mandate legislation. I wrote the following commentary in 2011:

The current fiasco over the U.S. debt ceiling, amount of debt owed to creditors and the amount of revenue available for the current and future government check book, has raised the responsibility of job (lack of) training effectiveness and appropriateness to the level of presentation and focus during the debt ceiling legislation discussions over the weekend of July 30, 2011. During a happenstance viewing of C-SPAN I caught Senator Coburn’s presentation to the Senate regarding the current (year 2011) state of Federal job training initiatives.  Senator Coburn made reference to his report entitled “Help Wanted: How Federal Job Training Programs are Failing Workers”   “Help Wanted: How Federal Job Training Programs are Failing Workers” and also a report written by the GAO entitled “January 2011 Multiple employment and training programs report.”

Senator Coburn’s criticism of current (i.e. year 2011) and previous jobs programs is their poor record of effectiveness, impact on job training, widespread lack of focus and, unfortunately, gross examples of fraud. The good news, it is felt that job training programs are a good idea, it’s the execution, administration, duplication, policing, and application of Federal funds that are being criticized. These management skills are not easy to execute in a small company let alone by the Federal Government from, perhaps, one thousand miles away from the program’s recipient. In fact, an example in Senator Coburn’s report features a job training program (“16. Bureaucracy Curtails Employment Options for DC Youth, Causes Job Lay-Offs”) right in WashingtonD.C.

A common theme of the focus of job training is its target of a specific population such as “low income” or minority populations. Training any “population” for jobs that aren’t “there” (which incidentally was the criticism of some of the programs outlined in Senator Coburn report) is a waste of time, money, human capital and undermines any future incentive for offering job training. Employment opportunity is a local thing. Training people for jobs you hope will “appear” and not the jobs that local employers are offering and anticipating in the near future, defeats the purpose of job training. Warren Buffett stated in a year 2011 interview with Bloomberg News that “You hire when you have demand. You respond to demand.” Ergo, job training should respond to demand. There should be an “understanding” of time needed to fulfill the training process, it’s called the “learning curve.”

One solution to trimming the expense of job training programs is to “co-locate” in facilities with other like-minded programs. In the highlights of the GAO report it states “An obstacle to further progress in achieving greater administrative efficiencies is that little information is available about the strategies and results of such initiatives. In addition, little is known about the incentives which states and localities have to undertake and whether additional incentives may be needed. What is concerning is the idea that states and localities need “incentives” to offer job training programs or reasons to cut physical plant costs that make sense. One could refer to “keeping a finger on the pulse” of a local economy and the myriad of businesses that reside there. It has been mentioned by others that the community college system and even high school vocational programs have worked in the past with local businesses to train future employees.

It’s at least a two-prong approach that’s needed: 1. education to teach people to read and write (if they can’t write, they can’t READ writing either); 2. job training that is obviously focused on skills that business needs an employee to have in order to be productive. OK, let’s make this a 3-prong fork, business needs to offer job training also, and this could be considered enhancing the human capital of the company. As long as the education and training of people is considered an “expense” and not an “investment,” things are not going to change in the United States. So getting back to Senator Coburn, cutting programs and chopping off money is not the answer, changing focus, mindset, and direction is.

Here’s a year 2012 fact check regarding Mitt Romney’s reference to a plethora of government funded job training programs:

http://www.politifact.com/truth-o-meter/statements/2012/may/16/mitt-romney/mitt-romney-said-there-are-49-different-federal-jo/

In conclusion, this is the year 2015, soon to be year 2016, a Presidential election year in the United States. The ‘jobs” issue is becoming more and more complicated because of a new trade  agreement signed by President Obama called the Trans Pacific Partnership:  https://ustr.gov/tpp/.

In the next part of this Jobs series, I bring it quite local featuring the City of Chicago and its “job readiness” strategies or “lack of”.

Here’s the links to earlier postings in this series:

Part 1: Jobs, jobs, jobs and the Mono-economy of the New Millennium

Part 2: Past prescriptions to the employment problem

Part 3: Jobs, jobs, jobs and the Job Training Dilemma

Part 5A: Jobs and the Re-tooling of an Industrial Titan: Chicago

Part 5B: Jobs Training and the search for long-term solutions