Visa to Introduce NFC-Based Virtual Wallets

     Visa is planning to introduce a virtual-based payment method with the implications of Near-Field Communications. Visa has been in business since 1970, leading as an authorized payment method ever since. This has led them to think outside the box and introduce this method of payment to stay ontop and to keep customers happy and introduce the convienence of things. Their main goal for this virtual-based system is to have multiple 'wallets', as currently we have multiple cards. Visa claims that they are prioritizing the security holes that potentially could be associated with using such machine, with the need of stricter authorization for big-ticket purchases needed. With many other competitors that have tried to use such wireless-based payments, it hasn't really caught on. However Visa hopes that based on their reputation and a rework of the system, that a majority of people will be using their system.

     With this new form of payment, this could potentially further devalue physical currency, such as our bills and coins. Many more consumers will be looking for such convenience because a majority of them would already be carrying their virtual wallets around, without the need of carrying anything physical on them. However, as many competitors have tried this system, it seems as people still rely greatly on the implications of physical currency. It's just more convenient for the average credit card holder when it's just a quick charge for something. However consumers will be led to use their wallets more because there is no physical link attached to them. Everything's digital and people will spend more than they need to due to this fact. As from a business standpoint, there would be an average of increased transaction charges as this is solely a new business, incurring those higher costs associated with installing and providing such services at an early stage, defeats the profitability aspect for a virtual-based system initially.

     I believe that in the future, this will work. People will be travelling with virtual wallets everywhere. However the virtual wallet, in my opinion, will be limited to just payment methods. It's just too risky to further increase the potential of virtual wallets by keeping our own identification on it as it just doesn't work that way. Being virtual doesn't necessarily mean good though. Consumers will be spending more on average, which from a business standpoint is fantastic. However as a consumer, they'll be left in greater debt, potentially causing another recession. From a business standpoint, early adopters will have to spend more on average per transactions due to the initial installation and the inner workings still being worked out for the system. Eventually, this system will be most convenient and cost saving but as for now, it still hasn't reached its potential.

Source: http://www.cbc.ca/news/technology/story/2011/05/11/technology-visa-digital-wallet.html
             http://blogs.forbes.com/tomiogeron/2011/05/11/visa-digital-wallet-with-one-click-buying-to-launch-this-fall/

Smart (Phone) Money

1. Based on current technological advances, it will take around 5-10 years to fully implement a virtual system. However it will take a longer period of time for people to switch over due to the cost and time to make the switch.

2. It will take that timeframe to fully implement them because of the ongoing integration of Near-Field Communications from the likes of Apple, RIM, Microsoft and Google. Also to develop the system will involve several trials to make sure the security of personal information and duplications are safe with the consumer.

3. People that wouldn't like this method would be people who value physical material because of the more secure nature, prone from hacking and difficult to duplicate or obtain.

4. Companies that would be negatively affected are printing (demand of pritning identification going down), mobile handset companies (increased costs to implement NFC into their devices, lower profit margin) and potentially banks (due to the elimination of physical currency)

5. Companies that will benefit would be Wireless Carriers (providing the data for these transactions to exist), travel industries (convenience and cheaper to operate) and advertising industries (ease of implementing advertisements and generation of awareness and revenue).

The Great Depression vs. The Current Recession

1.       The Great Depression started by the future expectations financially were high, as many items peaked in prices and climbed further up. However this led to people overinvesting and relying too much on the future expectations. As real estate gradually fell from its peak back in the mid-20s from an excess supply of them and the US Government, the market gradually became unstable right up till Black Tuesday hit. It signaled panic buying and selling of shareholders.  The great depression made a further impact to the worth of the US dollar when they raised interest rates to maintain the currency and that it was primarily based on the ownership of gold the government had.

2.       The Current Recession was started by Banks creating sub-prime mortgages for people that couldn’t afford to pay off the whole mortgage. The result was that the Banks acquired these properties for foreclosure, however weren’t able to recover most of the mortgages because many couldn’t afford any of these foreclosures, resulting in the breakdown of the banking systems in most of the world, resulting in the stock markets crashing in a similar fashion. This eventually led to the stock market crashing on the news that Lehman Brothers were filing for bankruptcy and it became a snowball effect of people frantically selling their assets to recoup whatever they had left.

3.       The Government took part in the great depression by introducing employment programs to help employ numerous people that were greatly affected by the depression. They also increased the interest rates to maintain the worth of the US currency. However their efforts did not help the situation greatly, until WWII as they needed a substantial amount of people to be employed.

During the current recession, the US government had handed out bail-outs to several corporations most notably: AIG, General Motors and Chrysler LLC. However they didn’t offer a bailout to Lehman Brothers and as a result, they filed for Bankruptcy.

4.       The factors that are present now that were not present during the Great Depression are that in the modern era, credit cards are a common form of payment. This gives individuals an advance period to pay for their purchases, while instating a high interest rate to penalize individuals who fail to pay their bills on time. This is a common way for individuals to become bankrupt due to insufficient funds. Another factor would be having the internet as a resource for news and advice. People can constantly monitor their financial assets as it changes. This would trigger individuals to take immediate action and sell their assets to maintain as much funds as possible.

5.       These two events affected the United States GDP greatly. In the Depression, unemployment was at an all-time high. People couldn’t afford luxuries anymore and had to resort to digging into their savings in order to pay for necessities. The production output of products low due to the overall demand declining, therefore affecting the exportation of these products and generated revenue from outside sources. During the current recession, government spending had been excessive as they tried to pull companies from the verge of bankruptcy. This was mostly due to companies not having free cash flow available as the banks have no money to loan out, therefore couldn’t approve any loans. This eventually lowered output of production and caused consumers to look elsewhere, while tight on cash.

6.       I feel that the great depression had a greater impact on the world. This is mostly due to the “bottomless pit” people in this era created for themselves physiologically. People thought there was no ceiling to the highs of the financial markets. They took out money from the bank system and gambled with it. Eventually this led to the downfall of the bank system which essentially triggered the great depression. People all over the world didn’t have money. There was nothing to spend on. Gold was the standard for currencies and the government tried to dilute it as much as they could in order to preserve the currency. This led to the lows of importation and exportation as companies realized the actual costs. And it was only until WWII that it created jobs and increased the GDP all over the world. It may have been a big impact negatively; however it created a huge positive impact that took most countries out of the depression. The current recession wasn't as huge of an impact due to the certain circumstances that occurred. However both of these events could have been avoided if certain circumstances were taken.

Sources

http://en.wikipedia.org/wiki/Great_Depression_in_the_United_States

http://elsa.berkeley.edu/~cromer/great_depression.pdf

http://americanhistory.about.com/od/greatdepression/tp/greatdepression.htm

http://history1900s.about.com/od/1930s/p/greatdepression.htm

http://en.wikipedia.org/wiki/Late-2000s_financial_crisis

Japan's Post-Earthquake Economic State, Gov't Injects Money Into Economy

     The earthquake and resulting tsunami that occurred on March 11th, known as the 2011 Tohoku earthquake and tsunami, had left Japan's economy shaken as they are assessing the excessive damage and estimated recovery costs. With the Nikkei 225 plunging over 1000 points, closing at 8605.15 on Tuesday, it has indicated that investors are uncertain of Japan's future. As the Bank of Japan is on standby, they are considering an injection of $246 Billion US into the economy to increase the overall GDP and help soften the blow from the earthquakes and resulting tsunami. The Industrial segment has been adversely affected by the damage the resulting earthquakes have caused, and the power outages due to several nuclear reactors not being able to sufficiently supply energy, causing rolling blackouts in areas such as Tokyo. Many analysts believe that the Bank of Japan could take a more aggressive approach in order to come out stronger, as their current plans seem to be more passive and conservative while they try to work out Japan's budget with the government's house opposition.

     An Injection of $246 Billion US from the Bank of Japan will increase the overall GDP during the recovery that Japan will have to go through during reconstruction of their country after the earthquake and tsunami. Exports have been hit hard due to manufacturing plants being damaged. This in turn would lower the GDP of the economy as not as much profit has been generated. However the demand of these products that are usually exported from Japan would grow, due to the unavailability of the products. With the future expectations of Japan's estimated costs to rebuild and restructure their damaged infrastructures, aggregate demand would be expected as a result. Japan needs to employ more workers and purchase more materials in order to restructure, and with all this investing into the economy, Japan should come out better than it has prior to the earthquake and tsunami. Many of the employed will have the extra disposable income generated by this event, pouring money into the economy and will eventually help jump start the economy back on track.

     Despite the short term economy hardships that Japan will have to endure, i believe that due to this aggregate demand that was generated by the continuous needs of reinvestment into Japan's economy and infrastructure, Japan would come out stronger than it has as a result. For many reasons, people would be against my opinion however the opposite does connect well. The earthquake and tsunami will only have a short-term effect on Japan's economy. With the resulting disruption, many manufacturers have had to resort to alternatives for the time being as there's a supply shortage caused by the earthquake and tsunami. This is an opportunity for many corporations in Japan to come out stronger by effectively planning out how to take advantage of this aggregate demand generated by a sudden burst of spending into rebuilding the infrastructures and economy. And as their infrastructure needs to be fed more money, this would in turn feed the economy above pre-earthquake levels.

Source - http://news.xinhuanet.com/english2010/world/2011-03/16/c_13780402.htm

Underemployment Hits Record Highs In The UK

 

     On February 16, the United Kingdom's Office of National Statistics reported that underemployment in the UK have hit record of 1.16 Million, the highest figure since they started taking reports since 1992. Within 3 months leading up to December, the number of underemployed raised by a rate of 44,000 people which include self-employed and employees. And the number of people that were self-employed fell by 49,000 people in that same period which resulted in the change to 3.98 million people that are self-employed. There are a staggering 20.5% of underemployed youths which make up 965,000. As noted, larger businesses are returning to profit however smaller businesses and youths are still struggling to recoup from the economic recession. The annual growth rates for total pay in the UK have fallen to 1.8% for the three months ending in December, down from 2.1%. Public sectors are still at a strong 2.1% however it is outweighed by the private sector, which is at a low 1.7%.

     As stated in "Working with Economics", the term underemployment describes a situation in which individuals are employed however not at a job that would utilize their skills fully. With that said, there are many people that have been hit hard with the recession and have been forced out of their jobs. And the unemployment rate doesn't include individuals who have lost their jobs and are working part-time to make up for their losses while they continue job searching, otherwise known as underemployment. This would greatly affects how the statistics are perceived as it would accurate draw the line between being employed, being underemployed and being unemployed. Underemployment and unemployment are harsh and being underemployment is an unfortunate situation especially after two years since the recession. With the underemployment hitting record highs in the UK, it has demonstrated that their economy hasn't been recovered in certain areas due to the rate of recovery being different in several sectors as inflation could have also been a contributing factor towards underemployment as small businesses struggle.

     With underemployment at record highs, there is obviously a shortage in full-time employment for these people. The general underemployment statistics need to be perceived as much as the unemployment statistics as they are just as crucial of an economic indicator. It seems that since most underemployed are within the 16-24 age group, which make up roughly 965,000 youths, that businesses are more willing to hire individuals with years of experience rather than newcomers in the industry. And with small businesses being hit hard, they are less willing to take a newcomer as they are striving to bounce back into the green after the global recession. This is unfortunate as the economy, as a whole, should be recovering at the same rate in all areas however it could be contributed to the overall underemployment of the economy, especially in the 16-24 age group, as many businesses aren't given this age group much of a chance to make a good first impression to these businesses.

Source - http://www.suite101.com/content/under-employment-hits-record-high-in-the-united-kingdom-a349324

Ontario To See Consumers Benefit From HST In The Future

     With the new HST in place, Ontario consumers should see a benefit to having the Harmonized Sales Tax by the year 2013. The benefits the HST would bring include tax credits and energy rebates, according to Ministry of Finance documents. Information also suggests that the HST would not cost Ontario households by its originally forecasted $385 million last June as instead it would be projected savings of $490 million to consumers in 2013. The HST has already brought forth a 10% bill rebate on electricity which is expected to be in place till 2016. 68% of Ontario taxpayers, people earning up to $90,000 a year, should see a net savings in 2013. That's increased compared to the 49% who would benefit from the HST in the 3rd year before tax credits get enhanced. However, 32% of Ontarians, earning more than $90,000, should be paying more in taxes in 2013. Even though there's a strong opposition towards the HST, it helps make businesses more competitive, eventually benefiting consumers.

    The Ontario Government had chosen to introduce the HST to offset further spending of the government and to potentially benefit consumers. However with that in mind, government spending would go up with each passing year, which wouldn't benefit consumers much at all. Based on Wagner's theory, it seems that the Ontario Government holds the theory true. In general, government services are able to lead to increased costs and government spending. This may have been due to the recession back in 2008 which put the economy on hold, however we're in 2011 and several people are still feeling the effects. There are several provinces that need to borrow money, which could also mean that the Ontario Government wants to try to have a protection blanket from getting into the red. And finally, due to the increased in spending, this lead to the creation of the HST, which would increase tax revenue the government is receiving.

     I personally agree that it's not possible to pass on such an amount of savings in the next couple of years to consumers. Even based on spending expeditures, it's not possible to see much benefit to many consumers. Sure consumers will be able to pay less in terms of income tax, however that's only for a certain range of incomes. It's predictable that incomes of over $60,000 could be taxed more heavily than anticipated. There are still a number of people in that tax bracket that could potentially discourage consumers to work harder to get promoted or even a bonus due to taxing of incomes. And the regular spending of consumers on several items depends on their habits. There were certain things that weren't taxed, suich as physical-involved activities such as gym membership. Now that there's a 13% hike on that just due to tax, it could discourage consumers to live a more healthier lifestyle. Now while several items won't be affected, the government needs to take a look at just the simple things, such as keeping a nation healthy, before having a tax hike on items.

Source - http://www.cbc.ca/canada/toronto/story/2011/01/20/ontario-hst.html

Rogers Communications' Q3 Profits Fall

     Rogers Communications Q3 results have shown that their profits have declined. As competition has gotten aggressive with new pricing plans from the likes of WIND mobile, Bell Mobility and Telus Mobility, they've gained 25% less subscribers (125000) compared to the same quarter in 2009. Loss in revenue was also attributed by many early hardware upgrades for smartphones this last quarter. Rogers Communications earned $370 million or 64 cents per share in the last quarter, on a net-income ending September 30th. The earnings reported this quarter are off by 24% from the same quarter in the previous year when Rogers made $485 million or 79 cents per share. Rogers has been taking action lately and in related news, they bumped up the Hardware Upgrade Pricing eligibility from 24 months to 30 months with a 36 month contract. However, Rogers have of reverted back to 24 months HUP eligibility due to negative response from existing customers.

     As the case with most consumer services and products, Rogers Communications saw a drop in profit due to the drop in new subscribers or renewal of contracts as the competition got more aggressive. Consumers these days want more for their money, they want Caller ID, Voicemail, SMS and plenty of minutes to talk. However Rogers cannot offer an introductory plan that includes all that for what the competition is offering it for. At the other end, Rogers is offering good deals to some customers, that it actually attributes to Rogers losing potential revenue that could be gained. As there was an decrease in demand for Rogers Wireless, it was caused by substitute services such as WIND mobile, Bell Mobility and Telus Mobility. This'll eventually result in a decrease in pricing for introductory plans which would increase the amount of customers switching to Rogers. With decreasing pricing on price plans or even offering better bang for the buck, it'd help them a long way to have customers of other mobile services switch over to Rogers.

     Rogers should have been offering competitive price plans in the first place. From my own experience with Rogers, it appears as if their business model is based on the consumer coming to them, telling them what the consumers want and hand it out like candy on Halloween. It's how I got to where I stand with Rogers. Now that may very well work for people that are concerned about what they're paying for their service, however it may very well help if they revised their price plans to be slightly more competitive. And unlike any other wireless provider, they charge a Government Regulatory Recovery Fee which doesn't even have anything to do with the Government. It's just their way of having the cake and eating it too. And lastly, Rogers hasn't been offering many great phones for the past year or so. In order to stay competitive in the market, they have to update their devices to make them more appealing to consumers so they'd come over and settle for their price plans.

Source: http://www.bloomberg.com/news/2010-10-26/rogers-third-quarter-profit-declines-24-as-competition-pushes-down-prices.html