Demonstrators burn a poster of the deceased Colonel Gaddafi during the Libyan revolution.

For the past 42 years, Libya has been plagued by tyrannical rule. After submitting to such oppression and dictatorship, the people of Libya finally decided to take to the streets and demand change. The fall of the omnipotent Muammar Gaddafi put a resolute end to the eight-month long revolution, which was prompted by a staggering unemployment rate of 21%, widespread poverty and a general suppression of human rights. Although the people have gained a sense of freedom, the downfall of Gaddafi has also collapsed the only semblance of administration. The National Transitional Council (NTC) has begun the slow process of drafting a constitution that will construct an organized form of government in Libya, which will be based upon sharia law (Islamic principles). But a nagging question remains – will the revolution be justified with the NTC mending the current economic state that has weakened Libya today?

The end to the Gaddafi regime symbolized the end of oppression and the beginning of liberalization for Libyans – in the form of social freedoms and greater economic opportunities. Under Gaddafi, Libya was ranked the most-censored nation in the Middle East and North Africa by the Freedom of Press Index as political dissent was met with execution, by law. This should all change with the formation of various political parties and a new wave of democratic policies. Equally, if not more importantly, the Libyan people are searching for economic stability and sustainability. These immediate concerns have dampened the prospects of the oil-rich nation. Under Gaddafi, Libya’s oil and energy sectors were steady, but only due to the sheer necessity of these natural resource endowments. Although, the nation was not able to fully capitalize on these attributes due to concerns over political stability, Libya’s underlying socialist ideals, and mismanagement of economic resources. Now with a new government Libya has a chance to begin anew by inviting foreign investment and building new trade relationships.

China has long been interested in Africa’s development, as seen through their steady investment in the continent through recent years. China’s trade with the region surpassed USD 120 billion with foreign direct investment reaching USD 76 billion in 2010. When Gaddafi was in power, he mostly resisted the temptation of China’s economic imperialism in the region. That said, China still dabbled its hand in Libya’s energy sector and infrastructure but was never able to get a stronghold on a resource it much needs – oil. China depends heavily on foreign oil; with Libya’s plentiful oil fields and a government looking to rebuild a nation, China’s money looks terribly tempting. On Libya’s part, they have done quite well in resurrecting their oil industry as production has rebooted after an 8-month hiatus during the revolution. China’s foreign investment should decrease unemployment and bring in new technologies and techniques to Libya. Although, China is not the only player in this game: Libya’s oil is a highly coveted resource and undoubtedly other powers will come for it – namely the United States. With U.S. involvement in Libya already high with the deposition of Gaddafi, they hold a strong bond with the NTC. Although the two nations’ relationship may have been strained in the past, they will definitely carry this newfound liking for each other into the future, with the United States benefiting from oil trade and Libya profiting from foreign investment and trade opportunities. This relationship could parallel the one between the US and Saudi Arabia, as although their political ideologies may not be congruent, the economic benefits of such a relationship outweigh their political differences. It seems as if Libya’s economic prosperity hinges around their most valuable asset – oil.

Libya will also be looking to strengthen its trade relations within the region. Tunisia, which has gone through a similar ordeal, could be a target as relations between two liberalizing economies would be mutually beneficial. The hope would be for more bilateral trade opportunities rising from liberalized economic practices, which would bolster growth in both countries.

Muammaer Gaddafi is gone – the easy part is over. Now comes the time for Libya to pick itself up and begin life in a new era of political freedom and the hope for economic prosperity.

On Friday, March 11^th, 2011, at approximately 2:46pm, a massive 8.9/9.0 magnitude earthquake hit the Pacific Ocean nearby Northeastern Japan. This earthquake was extremely powerful trailing the Great Chilean Earthquake by a mere 0.5 on the Richter Scale. Along with the earthquake came blackouts, fires and a tsunami, leaving nearly half-million people in shelters. As of March 14^th, the current death toll is 2,000 however according to recent reports, that number is estimated to rise to at least 8,000.

Many wonder how this devastating natural disaster will affect not only Japan’s economy, but also the global economy. According to many lead economists, it appears that Japan is at serious risk of falling into a recession, but most are hopeful that Japan will have the ability to quickly recover and possibly spare the global economy of a significant shock. However, David Rea, the Japan economist at Capital Economics, puts the chance of Japan having its economy shrink in the first quarter at about 95%, even though the quake came with only three weeks left in the quarter.

The industrial base of Japan experienced the worst of the disaster, after Nissan Motor Co., Ltd. Halted production at four factories, Toyota Motor Corporation closed two assembly plants and a parts factory and Sony Corporation closed six factories in the area hit. The closing of these factories, most definitely has global affects, especially since Japan is the world’s third-largest economy, as measured by gross domestic product. The production of these vehicles and parts, can easily be taken elsewhere in the world, but that takes up not time, but money. The current economic turmoil in Japan is sure to soon ripple out to the global economy. The most immediate worldwide consequence to the quake was a drop in oil prices. On Friday, oil dropped 3.6% to $99.01 a barrel in New York.

Investors are looking at the Kobe earthquake, which struck Japan in 1995, to help predict Japan’s future. After the Kobe earthquake, the Japanese Yen, which fell initially, quickly reversed and closed stronger against the dollar as capital came flowing back into the country, boosting the yen to an all-time high. Another positive sign appears when looking at the Nikkei 225 index, which within six months after the Kobe earthquake lost 25% of its value, but by the end of 1995, had fully recovered.

As for the rebuilding and restructuring of Japan, nothing is yet certain. AIR Worldwide predicted an early estimate from catastrophe modeling, revealing that insured losses will be between $15 to $35 billion, while others estimate damages will run more than $100 billion. Japan is already weighed down by massive debt of more than twice their current GDP, however economists believe the government will spend what is necessary to recover the country, and worry about the financials at a later time.

In the midst of the recent global financial crisis, countless theories attempted to explain the collapse of credit markets all around the world. Many experts believed the actions implemented by the Federal Reserve in the 15-year period prior to the crisis were the fundamental causes of the housing market boom and the ensuing bust that froze the credit markets within the United States in 2007. Undoubtedly, the credibility of monetary policy within the United States was brutally criticized, and thusly, the principles of Keynesian economics were deemed, at least in a practical sense, ineffective in controlling extreme economic fluctuations. However, dismissing the credibility or relevance of monetary policy will not repeal misguided polices of the past. Only future, corrective policies that follow a structured agenda while focusing on an autonomous relationship from government and transparency in policy objectives can fully restore the credibility of modern US monetary policy.

Beginning in 2001, the Former Chairman of the Federal Reserve, Alan Greenspan, along with the Federal Open Market Committee, purposefully deviated from the standard practice of Taylor Rule inflation targeting to pursue a mandate that prioritized increasing consumption (see Figure 1). The Taylor Rule of inflation targeting refers to the setting of a desired Federal Funds Rate (i.e. the overnight lending rate in the United States) to a level that closely correlates between the output gap of GDP (the difference between real GDP and potential GDP) and the desired inflation rate. The rule, in its most basic form, dictates a negative correlation between the real interest rate and inflation.

After the attacks on September 11, 2001, the stagnation of the US economy and the fear of deflation prompted the Federal Reserve to maintain low interest rates in order to stimulate the economy. Although an increase in consumption did indeed result, the Federal Reserve maintained very low interest rates despite growing inflation in the housing markets. This inevitably led to instability within the housing market, and eventually, its collapse. The Federal Reserve’s lack of a structured agenda, or a primary set of objectives, and its inability to abide by standard practices raises the question of whether the Fed focuses on primary targets, or rather, uses subjective judgment to set short-term interest rates. An explicit agenda to implementing monetary policy does not seem realistic, and it probably is not, however the importance of certain primary objectives should always remain relevant when dealing with any adjustment in monetary policy.

The Federal Reserve currently enjoys an autonomous relationship with the federal government, but the threat of government intervention is not unwarranted given the present, unprecedented fiscal deficit. Further, if the Obama administration believes the central bank is unfit to manage monetary policy, it could be nationalized similar to other autonomous entities such as Fannie Mae, Freddie Mac, and AIG. Moving into the future, the central bank needs to maintain this autonomy in order to maintain its credibility as monetary policy objectives and federal fiscal objectives are clearly distinct in their respective purposes.

When first implementing the Troubled Asset Relief Program (TARP) in October 2008, the private sector had very little understanding of its description and its implications. Transparency in monetary policy is needed in order for society to act in the particular way monetary policies intend. An increase in transparency results in a lower amount of uncertainty, as well as counterparty risk, which was also labeled as one of the causes of the global financial crisis. Further efforts will be needed in relaying information from the central bank to the general public in order to sustain a harmonious, steady-growth economy. The more the public understands the policies being implemented, the more they can trust the policies, and the more credible the policies become.

Keynesian economics is not dead, nor is the effectiveness of monetary policy in creating a flourishing economy. However, changes need to be made in order to ensure success going into the future. As long as the Federal Reserve can abide by a structured agenda for policy implementation while maintaining an autonomous relationship with the federal government and increasing transparency in their policy objectives, the credibility of monetary policy can be restored and the economy of the United States can get back on track.

When Steve Walker, the new Republican Governor of Wisconsin, took office, he must have known that his proposals would cause some ire.  Under the new emergency Wisconsin budget, state employees would be required to put 5.8% of their salaries toward their pensions, and 12.6% towards their health-care premiums.  Currently, state employees make no payments towards their pensions, and only around 6% of their salary goes towards their health-care premiums.  However, these are not the provisions that are causing most of the protests.

The controversy centers on Governor Walker’s proposal that public employees should lose their collective bargaining rights, except for wage negotiations.   However, nominal wages would not be allowed to rise any faster than the rate of the Consumer Price Index.  Furthermore, most police, firefighters and state troopers would be exempt from the bargaining reform.  This exemption has enraged many Wisconsinites, as those three unions happen to be the only three unions that endorsed Steve Walker’s bid for governor.

14 Democrat senators have fled the state in a bid to prevent the senate from maintaining quorum.  This tactic has prevented the matter from being voted on in the Senate, though the House has recently passed their version of the bill.  While the actions of the senators may seem destructive and churlish, the fact that they resorted to such an action demonstrates just how divisive the current proposals are.  Yet there is a much larger theme present than just a fight between employees who want more money and benefits, and employers who want to give as little as possible.  It is a fight between the populace’s desire for greater rewards and the government’s current need for budget cuts.  In that sense, these protests are not very different from those in Greece and in the United Kingdom.  The conflict is very difficult to resolve since the voters’ are concerned with only how proposals affect them in the short-term, whereas politicians have to deal with long-term costs and effects.

There are few, if any, developed countries who are still wondering whether or not to implement budget cuts.  The question has moved from “why” to “what”.  This analyst believes that some of Governor Walker’s proposals, such as the removal of collective bargaining rights in many cases and the exemption of some unions from the reforms, are bad proposals that strip public employees of the rights that they deserve, and carry with them a huge element of partisanship.  However, when it comes to the real salary reductions for most public employees in the state of Wisconsin, this analyst can only hope that this sort of fiscal responsibility spreads throughout the United States and beyond.

Early November last year, 150 marines backed by helicopters took down the notorious leader of the Mexican Gulf Cartel. Ezequiel “Tony Tormenta” Cardenas was the 4^th kingpin to lead the Gulf Cartel in its operations of trafficking, extortion and assassination across Mexico and Central America. The death of Cardenas has given little relief to President Felipe Calderon, who has led the war against organized crime since 2006. Since his initial campaign to crush organized crime, a shocking 31,000 people have been killed in relation to the drug war. As bullets riddle the streets of inhabited cities, a daunting truth unfolds for Mexico and its economy.

Mexican drug cartel activity occurs all throughout the nation as well as in cells throughout the United States. However, the majority of operations take place in Northern Mexico; its industrial hub. Many American industrial companies are focused there for manufacturing processes. Of these companies, 15% have postponed investment plans and 80% have realized the violence and drug war as a long-term threat to business in the country. Even more concerning, a third of the companies have experienced extortion from the cartels and at least half of the companies have been affected by drug-war related violence.

This unstable socio-political environment poses dire implications for Mexico’s already weakened economy. Foreign investment from the US flows into Mexico solely for the advantage of low cost labour and close proximity to consumers and markets. With violence from the drug-war, these American companies are forced to increase expenditure on security as well as expenses for extortion and abduction of employees. Some companies have also had reductions in sales and revenue. These higher costs make manufacturing in Mexico less attractive as opposed to emerging Asian nations that have lower labour costs. The withdrawal of these American companies will result in hundreds of thousands of newly unemployed Mexican workers. Mexico’s economy, after starting to recover from the recession, will be stripped of the foreign investment that pumps a vital lifeline of income and jobs.

The turmoil and violence caused by the drug-war acts as a deterrent to trade and investment. Exports will ultimately decrease as American firms leave and the country will encounter an increase in their trade deficit. This will mean increased taxes to support the deficit and a curb to private investment as average wage income is decreased. Even more dangerous to Mexico`s economy is the possibility of American firms relocating the bulk of their manufacturing processes to other more stable nations. China, Taiwan and other Asian nations offer lower labour costs and fairly stable political environments. These developing Asian countries also now have greater intellectual property protection and business regulations that provide a fertile environment for foreign investment. If the majority of American companies realize that Mexico`s drug-war violence is too great a risk to business, they will have to relocate production across the Pacific.

It now comes to a cost-benefit analysis for firms where they consider whether low costs and proximity to Mexico is worth risking extortion, theft and even murder. Moving production to Asia will mean higher shipping costs and shipping time, but a decrease in labour costs and violence related risks.  This relocation of most American firms to Asia will facilitate excessive unemployment in Mexico as well as a decrease in economic activity in the nation. The only clear move by the federal government is to increase national spending on law enforcement to hinder the drug-war violence. Mexico should realize that they are in a full-fledged war and if left unchecked, their once prosperous nation will be decimated by the dark hand of the drug cartels.