Haven’t wrote about economic observations lately so here are some:

China has been in the news lately because of two related topics. They are slowly allowing their currency to appreciate and their workers are beginning to demand higher wages. With these two events gradually occurring, China is becoming less and less of a developing country; it is projected to be one of the world’s largest consumption country. Of course this all makes sense because major American companies are already trying to get a foot in with the Chinese (e.g. Apple).

That being said, in the next 20 years, China’s economic comparative advantage is no longer going to be cheap labor. With an appreciating currency and rising labor prices, the developed world is going to have to look for other sources of cheaper labor. My prediction for where everybody is going to find cheap labor is Africa. Most of Africa is considered the third world so labor prices are even cheaper prices there, than in China. Both parties would benefit; Africa is in desperate need of 21st century infrastructure (their bandwidth capacity was just doubled) and Global companies would be able to reduce their costs.

I do acknowledge that there are unforeseen costs in doing business in Africa, such as the added cost of the instability, but I do believe that the benefits will outweigh the costs. Investment in Africa should only theoretically increase stability and allow the continent to be developed if done the right way.

Busy with school work and other stuff but here’s a quickie:

I am not one to watch much television or even streaming television online, but I noticed that there are rumors going around that Hulu is going to start charging for content.  This is a stupid idea because there are other options that exist for Hulu.

They have the technical capability to make it so that you have to sit through videos and can’t fast forward through it, but they only show a few short commercials or one semi-long one.

Why don’t they actually just show more commercials and make consumers sit through them?  The primary reason why consumers go online to watch television shows is time-shifting, not saving time/avoiding commercials.  Its a convenience!  Hulu should take advantage of this and tax consumers with more commercials.  ”If you want to watch our shows at your convenience then you can get slammed with a tax.”

Obviously, don’t add more commercials to exceed the length of the show as if it was watched on-air.  If it is a 30 minute show on-air, make it a 30 minute show online.

There is always the economics argument against this that if the supply of ads increases, then prices will drop.   If Hulu used targeted advertising, as I suggested the newspaper industry do in this post, they will be able to charge a premium for advertising.

Obviously, Hulu can also create a premium account with no advertising, but not having a free model is like a death sentence; illegal video websites will win out over a pay only model.

When people talk about “sustainable business,” they are usually talking about “green.” Sustainable business is not just about green; it’s also about long term planning and responsible decisions.

The current recession, or whatever you want to call it, was caused by companies not taking into account the long-term implications of their decisions. They were focused only on short-term growth and profit. I ask, “Were they focusing on short term growth for their own personal gain or was it to please investors who are not in it for the long run?” I’d say it’s a combination of the two. Either way, this practice is not sustainable for an economy as a whole; focusing on short term growth will only cause economic calamity in the long run.

It is time for America to start thinking about its economic future. If we want to remain a world powerhouse, we are going to need a huge economy behind us. We have to first start by cutting speculation. The past boom and bust cycles have been caused by speculation. If investors invest in companies for the long run, then companies would be able to focus on long run growth and innovation. Mark Cuban wrote about this in a post last month. He recognizes the difference between financial engineering (speculation) and investing. Whether the tax he proposed on investments of less than five years is right or wrong, he is certainly looking in the right direction.

In more recent times, the DOW surpassed 10,000 points, only a year after the “meltdown”. Everybody looks at the DOW and is saying, “Oh, the economy is looking up now.” False! The DOW is probably the worst indicator of economic growth because at the moment is almost entirely investors speculating and setting up for the next economic crash. The DOW is not a measurement of American’s quality of life or the unemployment rate. America needs to stop focusing on speculation and think about where we are going as a country. Consumers are already beginning to hint that they are thinking long term and increasing their rate of saving. That’s a good sign, but we have a long way to go until our economy and business find a groove of continued, sustained growth.

I wrote this a few months ago. Then I saw the video below today and the only thing I can say is, “I told you so!”

If approximately 80% of the American population is insured, they pay $X amount of money to be insured. The insurance companies then take U% of $X as profit, leaving $C as the cost of insuring that mere 80%. The cost of insuring 100% of the American population is $Y. The question at hand is what’s the difference between $X and $Y? I bet its a lot smaller than a lot of people think. If the government can find a way to make up the difference between $X and $Y in the ridiculously complex budget then universal healthcare could actually be a reality.

Of course doctors and professionals in the medical field still have to recieve competitive salaries in order to pay off their education loans, so the government can’t save money there. Can’t cut money from the medical research field. Someone has to pay for the other 20% to be insured, but who? Do we raise income tax or do we impose a tax on a specific good or service? I really don’t know, but the first thing we can do is change Americans’ life styles: encourage physical activity and eating healthy. Parents have to start teaching their kids from a young age and it must be reinforced in the schools. Do you really think teaching kids about the food pyramid alone is going to really help them stay healthy and active?

Several companies around the country have started employee fitness and welness programs. What the government should be doing is creating financial incentives to encourage these programs as they are going to be one of the key factors to decrease the cost of healthcare for all. If everyone put in a little bit more effort to stay healthy, it decreases the cost of healthcare, allowing the concept of universal healthcare to become more and more feasible.

*I would also like to note that encouraging digital records will further streamline the medical industry, allowing savings on provoding healthcare. The government is already begining to do this, but should most certainly continue to do so, as we do live in the 21st century.