U.S. Federal Reserve Keeping Interest Rates Steady: Good for The Global Economy?

Even though it raised uncertainty in the stock markets, does the Fed decision to hold interest rates steady be eventually good for the global economy? 

By: Ringo Bones 

Even though economists has describe the Fed’s decision to keep interest rates steady as “dovish”, many also said that the Fed chair Janet Yellen deciding to hold interest rates steady after their September meeting could eventually be good for the global economy in the long run for a number of reasons. Even though the rise of “emerging economies” during the past few years is largely fueled by the infusion of “cheap money” by the world’s various central banks adopting the policy of quantitative easing as an exit strategy from the global credit crunch of 2008.  

Many said that global economic worries – especially the China economic slowdown – is the main reason why the Fed decided to hold interest rates steady for now despite promising that sometime before the end of 2015 it might raise the cost of borrowing money. Other said that if the Fed decided to raise interest rates after their September meeting, the recent employment rate recovery of the United States could be affected negatively, but the main beneficiary of the Fed keeping the cost of borrowing money at an all time low could be emerging economies and other small economies elsewhere in the world. 

Bangko Sentral ng Pilipinas (B.S.P.) – the Philippine’s central bank – Governor Armando M. Tetangko, Jr. recently said in an interview that inaction from the U.S. Federal Reserve will ease some pressure off the Philippine government paying off its billions of dollars worth of debts from the United States, thus allowing the Philippine economy an easier time and use those funds intended for debt servicing to be invested into something more economically viable.    

Volkswagen: Still Economically Viable?

With the recent Volkswagen emissions measurement scandal, is it time to be pessimistic about the future economic viability of the famed German car manufacturer? 

By: Ringo Bones 

Ever since German engineer Rudolf Diesel patented his diesel engine, the industrial world was quick to embrace it with open arms given that your typical diesel engine burn about 25-percent less fuel in comparison to a gasoline engine of similar horsepower rating, not to mention that diesel fuel, as a byproduct of crude oil refinement, is around 4 to 5 times cheaper than gasoline when a barrel of crude oil produces 19 gallons of gasoline and 12 gallons of diesel fuel when it is refined. And given this “ energy utilization efficiency”, diesel engines by their very nature only produce a quarter of the carbon dioxide produced in a typical gasoline engine – which is now of paramount importance in our increasingly climate change conscious world. But sadly, diesel engines are inherently way dirtier than gasoline engines when it comes to oxides of nitrogen and particulate emissions. 

From an economic standpoint, Volkswagen could be fined up to 37,000 US dollars per car and 482,000 of Volkswagen’s diesel cars have already been recalled in the United States and its share value plummets by 30-percent since the emissions measurement scandal became headline news a few days ago. With 12 separate brands and 600,000 employees, cleaning up Volkswagen could be a monumental task. Three days ago, Volkswagen CEO Martin Winterkorn resigns and has since been replaced by Porsche CEO Matthias Mueller. But is it good time to buy Volkswagen stocks given that their value is at an all time low? Sadly, hedge fund managers who invested pension funds beholden to them in Volkswagen are not quite terribly pleased of the resulting reduced economic viability.  

The row over whether diesel engines – as in diesel fueled cars and trucks – are really more environmentally friendly than their gasoline engine counterparts recently came to light in the form of the recent Volkswagen emissions measurement scandal where the famed German automaker was caught by the U.S. Environmental Protection Agency back in September 21, 2015 when Emissions Analytics, an internal combustion engine / automotive emissions testing lab recently uncovered that the latest models of diesel fueled Volkswagen cars sold in the United States employ a “cheating software” on its electronic engine management system that automatically reduces the engine’s power output and thus the resulting emissions output when it detect that the car is mounted on a tachometer – a device used to statically test the power output and combustion byproducts of cars under test. The Volkswagen “cheating software” allowed their late-model diesel cars to produce up to 40 times less oxides of nitrogen and particulates in a lab testing setting when compared to being actually driven on the road. 

Whether the “cheating” is deliberate or not, from a scientific viewpoint, diesel engines still produce less carbon dioxide – a potent greenhouse gas and the primary cause of the ongoing climate change – than their gasoline counterparts, but the oxides of nitrogen and particulates produced by diesel engines also have a deleterious effect on our environment and of human health. The oxides of nitrogen produced by diesel engines can promote the formation of smog and increases the acidity of rain and can also do nasty things to our lungs due to its corrosive nature. And also oxides of nitrogen, the same one that gives a nuclear blast mushroom cloud its orange-brown color, are usually produced by extreme high-temperature processes that occur in the earth’s atmosphere both man-made and natural like lightning and the since retired supersonic airliner Concorde’s Olympus jet engines which can also deplete ozone in the Earth’s ozone layer giving everyone a higher risk of getting skin cancer. 

Particulates that are the byproduct of diesel combustion can increase anyone with a compromised immune system to catch pneumonia. Diesel engines may be more fuel efficient and produce less carbon dioxide than gasoline engines, but clean they are not. Another “environmental fallout” of the recent Volkswagen Emissions Measurement Scandal is that it could empower climate change skeptics like the U.S. Republican Party which will eventually point out that the supposedly earth friendly commercial institutions – like the German automaker Volkswagen – cheated in order to bolster its green credentials.   

Crowdfunding: A New Business Paradigm?

With recent calls for regulation, does crowdfunding represent a new business paradigm? 

By: Ringo Bones 

For the benefit to those who are still not in the know, crowdfunding is the practice of funding a project or a venture by raising monetary contributions from a large number of people typically via the internet. One early-stage equity expert described it as “the place of raising funds from two or more people over the internet towards a common service, project, product, investment, cause and experience or SPICE".

The crowdfunding model is fueled by three types of actors: the project initiator who proposes the idea and/or project to be funded; individuals or groups who support the idea and a moderating organization – the platform – that brings the priorities together to launch the idea. In 2013, the crowdfunding industry grew to be over 5.1 billion US dollars worldwide. According to WordSpy.com, the earliest use of the word “crowdfunding” was by Michael Sullivan in funday log in August 2006. 

The Crowdfunding Centre’s May 2014 report identified the existence of two primary types of crowdfunding – rewards crowdfunding where entrepreneurs pre-sell a product or service to launch a business concept without incurring debt or sacrificing equity / shares and equity crowdfunding where the backer receives shares of a company, usually in its early stages in exchange for the money pledged. The company’s success is determined by how successfully it can demonstrate its economic viability – as in 2005 era wisdom of the crowd business paradigm.  

During the first quarter of 2015, they had been calls for reform of the burgeoning online crowdfunding scene due to the alarmingly high failure rate of hastily set-up equity based crowdfunding schemes. Adrian Hillcoat, chief executive of e-Go has a quarter of a million pounds invested via crowdfunding in his company whose current “crowdfunded project” is a powered ultralight aircraft. According to business pundits, start up companies has a higher failure rate than day trading. By way of comparison, for every 8 day traders, there is one successful day trader, while 7 of them will lose all of their money. At present, the UK has the strictest crowdfunding rules in comparison to the rest of the European Union and to the rest of the world.   

Fujitsu: The Gold Standard For Corporate Social Responsibility?

Even though it was voted the most socially responsible company of 2014, does Fujitsu represent the “gold standard” of corporate social responsibility?

By: Ringo Bones 

Often seen as a “box ticking exercise” of giving back a significant fraction of the billions of dollars of profits that they earn by big and wealthy corporate firms, corporate social responsibility has been a buzzword a couple of years before the 2008 global credit crunch. And given that Fujitsu was voted as the most socially responsible company of 2014, what are the various highly visible give-back-to-the-local-community programs that the firm had recently performed to deserve such accolade? 

According to Duncan Tait, head of Fujitsu’s Europe, Middle East and North Africa branches, Fujitsu is currently spending 2.1 billion US dollars to tackle some of the world’s biggest problems. Like providing affordable food and clean drinking water to the world’s poorest in an environmentally friendly and sustainable manner. Fujitsu is also one of the main “talent scouts” of the poorest parts of the world where they are notable for finding and hiring talented people from these deprived regions whose skills could contribute to their company and provide these people career advancement regardless of their race, religion or sexual preference. At present, Fujitsu is the world’s biggest information technology firm closely followed by IBM and Hewlett Packard.