Chapter 7 - Money and the Canadian Banking System
"Profits of Canadian Western Bank rise 37 per cent", CBC News - June 1, 2006
The Canadian Western Bank, based in Edmonton, has been making profit for 72 consecutive fiscal quarters in the past 18 years. This year, in their second quarter, the Canadian Western Bank's profits have risen by 37%, where their net income in this quarter has greatly exceeded their already-strong first quarter's earnings. Their profits rose to $16.7 million, equivalent to $0.52/share, while revenue increase by 20% to $53 million. They continue to have very high levels of business and credit quality within all four of the western provinces that they service to. Insurance profits, banking and trust operations are also continuing to rise. The Canadian Western Bank operates through Canadian Western Trust Co., Valiant Trust Co., and Canadian Direct Insurance Inc. They are very happy to "offer western Canadian customers a high-service, local alternative to larger national financial institutions".
Relation to Chapter 7 - financial institutions
The Canadian Western Bank is a Canadian chartered bank. Acknowledging the fact that the Canadian Western Bank has been making so much profit in the past 18 years, this indicates that they have a reasonable difference between the rate of interest paid to depositors and the rate of interest received on loans, as this difference represents the profits for a chartered bank. However, not all of their profits are based on this, because they also operate through other types of financial institutions, such as trust companies. Although demand and savings deposits are available for trust companies, their major sources of funds are from estates, trusts, and agency accounts. There are benefits to having a variety of chartered banks within Canada. With an increased numbers of banks, there will be competition to keep optimum interest rates for businesses and consumers. People will also be able to choose which financial institution will be most favourable to them.
Chapter 6 - Determination of National Income
"Canada's Economic Growth Slows in Q4", CBC News - February 28th, 2005
In 2004, the fourth quarter of Canada's economy grew at a slower rate than the rest of the year. Statistics Canada reported that the RGDP of the year 2004 had a total increase of 2.8%, rising only 0.4% in the fourth quarter. The previous quarter was at an increase of 0.7%, while the highest increase of the year came from the second quarter, with 1.1%. The annualized growth of the fourth quarter was only 1.7% in Canada, with the majority of the growth coming from domestic demand (with an increase of 1.1%), compared to the U.S.'s annualized growth of 3.8% in the final quarter. Corporate profits within Canada stayed the same as they were in the third quarter, at 1.5%, while exports and manufacturing profits declined. Inventories also rose by $19.2 billion in the final quarter, and businesses increased investments in machinery and equipment by 9.4% as corporate surpluses grew by 17.7%. However, Canadians continued to spend freely, causing the savings rate to decrease to its lowest since the 1930's.
Relation to Chapter 6
As reported by Statistics Canada, Canada's econonic growth has declined to a total growth of 2.8% in the year of 2004. This has been mainly due to the drastic increases in the Canadian dollar, which has caused all of manufacturing, exports, and corporate profits to suffer. Inventories rose by a fairly significant amount, but with the majority of the increase being accounted for by durable goods and wholesale trade and manufacturing. As investment by businesses increased, this would lead to an increase in aggregate demand, which in turn, would cause GDP to increase. Also, as consumers were continuing to spend and not save their income, the profits of financial institutions were harmed. The decrease of the savings rate could also partly be due to the low interest rates during the beginning half of the year, as with low interest rates, the opportunity cost of not saving would be less.
Chapter 5 - Economic Indicators
"U.S. Jobless Claims Up", Globe and Mail - March 2, 2006
The U.S. Labour Department observed that there was an increase in the number of Americans filing new claims for unemployment benefits in the past week. The number of filings have increased by 15,000 since the previous week, coming to a total of 294,000 Americans currently filing for jobless benefits. Even though the number of filings have increased, a healthy labour market is still being indicated. Government analysts say that this increase is due to problems adjusting the data for seasonal variations in February of weather and holidays. Despite this recent increase, the number of new benefit applications has been under 300,000 for the past seven weeks. In the past January, the unemployment rate dropped to a 4 1/2 year low of 4.7%, as businesses added 193,000 new jobs. This is considered fairly good, as it shows (along with other economic statistics) the U.S. economy rebounding strongly from its disasters caused by hurricanes and also, their high energy prices.
Relation to Chapter 5 - unemployment
The recent unemployment rate in the United States of 4.7%, compared to Canada's unemployment rate of 6.6%, indicates that the U.S. economy is doing well. There are many types of unemployment – one of them being the natural rate of unemployment. Businesses had helped to decrease U.S.'s natural rate of unemployment, as they created many new job openings. The higher levels of unemployment insurance filings can be blamed on the U.S. economy currently still rebounding from their recent catastrophes, specifically Hurricane Katrina. However, even amongst this time of regrowth, Americans could possible be taking advantage of the unemployment insurances and therefore, producing a higher unemployment rate falling under the category of insurance-induced unemployment.
Chapter 4 - Government in Canada
"Liberal Tax Cuts Mustered Cool Reception", Globe and Mail - February 27, 2006
In last November's mini-budget, personal income tax cuts were put forth by the former Liberals, finance minister Ralph Goodale. These reductions would have added up to almost $30 billion within the next five years. However, instead of creating a positive reaction, a negative reaction was received by the Liberals from focus groups in three major Canadian cities: Toronto, Montreal, and Vancouver. A survey was conducted by Decima Research Inc. to study the people's reactions in these three cities to the November 14th mini-budget. From these focus groups, it was concluded from the people that they thought the Liberals' economic update was not enough to create a significant impact on their tax gains. Even if it was significant, their tax gains would be taken back by the municipal and provincial governments through other means. The Conservatives were against the Liberals' personal income tax cuts. Instead, they planned to reduce the goods and services tax. This survey also informed the government to put more emphasis on the education and skills training spending of the budget.
Relation to Chapter 4 - tax, Wagner's law
Personal income tax is the major source of tax revenue for both the federal and provincial governments. But apparently, many people think that if there were to be a personal tax cut, they would not gain much from it. It's ironic how personal income tax is such a great source of revenue for the government, but Canadians think it to be insignificant for them. Wagner's law of increasing state activity states that people in urban areas require more services than people in rural areas. With Canada being an urban country, we would need many services to be provided by the government – such as education and skills training. However, if there were to be cuts in taxes–whether it be personal income or goods and services–then how are we to expect the same level of services to be continued being provided by the government?
Chapter 3 Media Article
"Russia to Restore Europe's Gas", CNN - January 3, 2006
Gazprom, Russia's state-owned natural gas monopoly, has stopped natural gas deliveries to Ukraine for two days. The reason for these halted deliveries is a dispute between Russia and Ukraine over a price increase. Currently being charged at $50 per 1000 cubic metres of natural gas, Russia wants to increase this price to $230 per 1000 cubic metres of gas. However, Ukraine refuses to pay this price, not because it is too expensive, but because they believe that Russia has raised the price so high in an attempt to penalize them for their Western-leaning foreign policy. Ukrainian Foreign Ministry has stated that this has caused economic pressure and is an attempt to destabilize Ukraine's economy by the use of energy to exert political pressure. Although Russia has only stopped its supply to Ukraine, Western Europe has also been affected, noticing reductions in pressure because the pipelines to Western Europe are the same that pass through Ukraine. Ukraine is now accused of stealing gas, but they deny it. As a result, Gazprom has decided to deliver more gas into the gas transport system in order to reach the other countries. The European Commission has arranged to meet this week to discuss contingency plans.
Relation to Chapter 3 - natural monopolies
A third of Ukraine's natural gas is supplied by Gazprom. Another half is supplied by Turkmenistan. If all of Ukraine's natural gas were supplied by a single company(in this case, Gazprom) and the dispute is not solved, then Ukraine would find themselves in pretty much a crisis situation. Their gas supply would eventually run out and temperatures could fall below freezing. Not only homes are affected, but the ability to power industries as well. This is the danger of utilities as a natural monopoly. If for whatever reason, a problem occurs with the distributor, then the whole country would be greatly affected. Another problem with natural monopolies is that some are not controlled by their own countries. If control of the natural monopoly is outside of the given country, they may not have the best interests of the country in mind. Energy security and supplies can become insecure and vulnerable.
Chapter 2 Media Article
"Pretty in Pink", The Economist - November 3, 2005
Motorola's sleek RAZR V3 mobile phone, currently the bestselling phone in America, has significantly helped the company's economy. In the past third quarter of this year, 6.45m of its 38.7m handset sales worldwide were of the RAZR V3. Available in silver, black, and pink, the RAZR is quickly becoming an icon, next to the iPod. However, not all of Motorola's phones are this successful. Take its ROKR music phone for example. It is quite big and looks rather unattractive. Even the RAZR itself is a little dissapointing with its second-rate camera and menu system. Being an early leader of "third generation" (3G) phones, Motorola has fallen behind. Will Motorola be able to follow up on its success of the RAZR? They plan to manufacture more RAZR and a 3G version of it, along with two new phones. Seeing how big of a success the RAZR is, Samsung and LG of South Korea have manufactured their own versions of the Motorola RAZR V3 handsets. But as quoted by Carolina Milanesi, a consultant, is that when everyone starts to do it, you lose the edge.
Relation to Chapter 2 - demand and supply
The introduction of the Motorola RAZR V3 has greatly increased Motorola's sales. Their RAZR is in high demand, resulting in Motorola having decided to increase the supply of it. Meanwhile, Samsung and LG have already produced their own RAZR-like handsets, creating competition and more substitutes of the RAZR V3. With the Motorola RAZR not being absolutely perfect, it is quite possible for comsumers to buy the Samsung and LG versions instead. If that happens, then there would be a shift to the left in the demand curve of the Motorola RAZR, and the supply will likely follow. Eventually, as time wears on and more newer models come out, cellphones will decrease in value as they have been out in the market for a longer period of time - with the RAZR being no exception. Soon, the quantity supplied of the RAZR would decrease also.
Chapter 1 Media Article
"Japan and China: Oil and Gas in Troubled Waters", The Economist - October 6, 2005
There is a territorial dispute between Japan and China over the two countries' Exclusive Economic Zones (EEZ). This dispute is due to the exploitation of undersea oil and gas deposits on the border line of the two EEZs. China has set up a "reserve vessel squadron" in the East China Sea and is suspected to have already begun production of gas and oil at the Tianwaitian/Kashi field, which straddles the border line. However, not far from the Tianwaitian/Kashi field, also straddling the border, lies Chunxiao/Shirakaba - which in July, Japan had granted Teikoku Oil with drilling rights to that area. If Teikoku Oil were to begin drilling, the tensions between these two countries would rise dramatically. There is no right answer between who is right and who is wrong because according to the UN's Convention on the Law of the Sea, an EEZ reaches out 200 nautical miles from the country's shoreline, whereas the East China Sea between Japan and China is only 360 nautical miles. Both Japan and China are now trying to work towards an agreement of joint development of these fields.
Relation to Chapter 1 - scarcity of resources (land)
Japan and China both want full rights to the area of the East China Sea which they have equal rights to. The reason of this dispute between them is not only due to territorial factors, but also, to the scarcity and demand for oil. Oil, as a non-renewable resource, could cause the devlopment of the Tianwaitian/Kashi and Chunxiao/Shirakaba fields to be very profitable for the country. However, if neither of the countries is willing to take a step down, then no agreement could be established and tensions would rise. China has set up military vessels near the fields to strengthen their position on this dispute. With the deployment of vessels and such, could this dispute soon lead to military conflict? Also, if the demand for oil and gas were not so high, and they were not such scarce resources, would this conflict have risen so great?
