The ECB Faces some Tough Decisions now that Syriza has Won the Greek Election

syrizaRecently the European Central Bank (ECB) took an aggressive step to curtail the deflationary trend of the Euro. The ECB decided to initiate what they termed a ‘quantitative easing’ plan; the plan involved funding in excess over 1 trillion Euros.

With hope of that working, the ECB can know turn their attention back to Greece and the worry about the country’s just finished elections. As expected, the Syriza party wona majority of the vote and Alexis Tsipra was elected Greece’s new Prime minister. What worries the ECB is that the Syriza party ran based on an anti-austerity platform.

One of Syriza’s campaign promises was to aggressively lobby Eurozone and the ECB to reevaluate the amount of their debt holdings to Greece. The new government then will look to increase spending in an attempt to promote job growth.
Why is the ECB worried about this? There is a big fear that if Tsipra and the Syriza party get their way, then it could be enough to offset any gains made through the quantitative easing plan and send the European economies spiraling downward again. The results of the Greek election have definitely generated a feeling of uncertainty in global markets and have given rise to a lot more volatility in the markets at the same time.

The positive part of the election results are that Syriza has stated it no longer wants to leave the European Union; there was a big fear about this three years ago when Greece’s struggling economy severely faltered. Since that time and their subsequent bailout, under the terms of the agreement, Greece has been subject by periodic inspections by the International Monetary Fund (IMF), the European Union commission and has also been subjected to ECB reforms brought on by the urging of Germany.

Despite their new ambitions, it will be hard for Greece’s newly elected government to satisfy its campaign promises and at the same time ease tensions with the IMF and Europe.

The Surprising Economic Impact of Facebook

facebookSometimes there is some economic news that is more than just a little bit surprising. Such is the case with social media giant Facebook. It is a lot like the snowball that gets bigger as it is rolling down the hill; Facebook, its appeal to the masses and its spin off businesses and advertising have shown to have a large domino effect on the economy.

A recent study on Facebook released some overwhelming numbers on the economic impact of the website. Its over 1.3 billion users and the desire for businesses to reach them had an economic effect of over 200 billion dollars and helped create over 4 million jobs last year. Those are some staggering numbers.

The study focused mainly on businesses that had both a page on Facebook, the sites mobile apps and the games that were featured on the website. It looked at the resulting economic activity that was connected to them. This report also focused on Facebook users demands for gadgets and other online connectivity type services. There were several businesses whose sales and profits were directly associated with their advertising that was done by targeting Facebook’s customers.

A great example of Facebook’s influence in the social media market is the silly but purposeful Ice Bucket Challenge, a challenge that was aimed at raising money to help fund research that would help those affected by Amyotrophic Lateral Sclerosis (ALS). Through the attention the disease received on Facebook and the subsequent auto play ads with videos, over 100 million dollars was donated by the websites users to help fight it.

Ironically, the report came out at a time when many people were becoming overly critical of tech startups and were suggesting that these new businesses were having a negative effect on the economy and hurting job growth. The numbers from the report would certainly suggest that startups that were created to target Facebook users had quite the opposite effect.

Can the Price of Gold Rise for the First Time in Two Years

goldThe markets in 2015 have gotten off to a very volatile start, but those same markets have also contributed to the best start to a year for rising gold prices in a long time. That is a good sign for the precious that has seen a drop in its value for two consecutive years. Gold investors have been seen smiling a lot lately.

So what is behind the resurgence in gold? A lot of it has to do with central banks trying to manipulate the values of their currency, especially when two of those countries are Japan and Switzerland. Both have tried to devalue their currencies to stem inflation. When stable economies like Japan and Switzerland do this, they make their once stable currency more volatile, so investors react by looking for more stable investments such as gold. This drives the price of Gold back higher.

The price of gold is up over 6% on the year. As the central banks have tried to manipulate their currencies it has also driven up the value of the American Dollar; it’s no secret that gold and the dollar often trend together. The gains are even higher when you value gold based on other currencies. Gold is at its highest level in Euros since 2013. Gold has long been an investment source that investors turn to in times of volatile markets and economic uncertainty; as the world looks for the volatile trend of economies and the markets expected to continue, many analysts see gold going up as much as another 11% by the years end and close at around $1400.

With gold gaining over 5% in the last few weeks and reaching a four month high, the analysts may be right on with their predictions.

The United States Economy is Back on Top

useconomyAfter years of being behind China and other emerging markets, 15 years to be exact, The US economy is once again the largest economy in the world. With a projected growth of 3.2% this year, it should be the first time since 1999 that the US economy has not seen itself falling behind in terms of global growth. That is great news for the once again world’s largest economy.

What is behind the economic resurgence in America? It starts with an increase and jobs and a decrease in unemployment. With the creation of over 250,000 jobs in the month of December, Americans saw unemployment drop to its lowest level since 2005 at 5.6%. A lot of this job growth has been in the area of construction and business services and the industrial sector have continued adding to their payrolls also.

Over 3 million US Citizens entered the job market last year because of the creation of new jobs, a figure that is the highest in over 15 years. The outlook for America to continue this trend is favorable, despite the fact that many other economies around the world will continue to struggle. The USA has also successfully managed to reduce its debt and cut spending, this helped the country to overcome the worst recession that they faced in history.

As the USA continues to see its economy grow, BRIC countries that were previously in the economic spotlight, such as Russia, Brazil, China and India, now find themselves struggling a economically. America has once again become the center of attention for the worlds many investors. If the American lawmakers continue to make prudent policy decisions, then analysts see no reason as to why the countries new push to the top will not keep them there for a long time to come.

Switzerland Surprisingly Unpegs the Franc

swiss francOne of the most stabilizing factors of the Euro over the years has been the fact that it was always pegged to a fixed exchange rate with the Swiss franc. Surprisingly, that came to an end recently as the Swiss decided to end this policy. The move resulted in a market shockwave that saw the Euro fall substantially against the Swiss Franc and send the market into unexpected chaos in other areas too.

Stunned economists were left wondering why this event had such a big impact on the markets, especially the Swiss Stock Exchange. The move triggered a decline in the Euro that saw it go from being worth 1.2 Swiss Francs down to .84 Swiss Francs. It also caused many Hedge Funds to suffer huge losses and led directly to the overall collapse on the Swiss Stock Exchange. Economist realized that the unpegging of the Swiss Franc would have an impact, but they never expected it to be such a profound one.

The Swiss Franc has long been a popular choice with investors because of the high credibility the Swiss government has in the economic world. When the currency was unpegged, it created even more demand for the Swiss Franc as its value started to immediately rise significantly. Most people would think this would be good for the Swiss economy, but it actually had the opposite effect.

Switzerland is a county that is highly dependent on exports; they make up over 70 percent of the Gross Domestic Product. The unpegging of the Swiss Franc had the effect of making the Swiss Franc very expensive and drove up the price of its exports so the demand for them went down. It gets a bit complicated, but in response to this the Swiss government created new Francs and used them to buy euros. This move was designed to cause the value of the Swiss franc to go back down.

No one is quite sure what will shake out of all this manipulating, but the forecast for Swiss growth has been downgraded to less than 1% for 2015; it was originally forecast to be closer to 2%. When central banks have tried to manipulate currency in the past, history shows that this often has a negative effect on a country. Economists are keeping a close eye on the Swiss economy to see what happens next.