Economics Newsletter – March 17, 2023

New UWES articles, CPI data, and more!

Written By: Benjamin Pipicelli, Noel Tom Paul, and Gordon Huynh

Economics Newsletter – March 17, 2023

Canada’s Economy at a Glance

Economics Society News, Events, and Articles

– Check out our latest original article – The Post-Pandemic Evolution of Risk Management by Olivia Vanleeuwen

– Check out the Econ Study Lounge! Every Thursday from 6:30 PM – 8:30 PM in HH2034 Project Cube! 

– The Stock Competition Sign-Up has closed! Keep an eye out for updates via our newsletters and Instagram! @uweconsoc

* All closing prices are based on Thursday, March 17, 2023

News and Noteworthy

The collapse of Silicon Valley Bank: What does it mean?

Silicon Valley Bank’s recent collapse resulted from several factors, including its specialized focus on the technology sector, rapid growth, and high levels of risky lending. The pandemic’s impact on the tech industry made the bank vulnerable, and it ultimately failed as a result. Although the failure of a specialized bank like Silicon Valley Bank is not uncommon, its collapse is unlikely to significantly impact the broader financial system. However, the event does highlight the importance of risk management and caution in the banking industry. Read more. 

Swiss central bank throws financial lifeline to Credit Suisse after shares pummelled

Swiss regulators have pledged to provide a liquidity lifeline to Credit Suisse following the bank’s shares tumbling up to 30%. In a joint statement, the Swiss financial regulator FINMA and the Swiss central bank reassured investors that Credit Suisse meets capital and liquidity requirements imposed on systemically important banks and could access liquidity from the central bank if needed. Pressure was placed on Switzerland to act after a major government and at least one bank became concerned over the bank’s stability. Credit Suisse would be the first major global bank to receive such a lifeline since the 2008 financial crisis. Read more. 

The new Chat GPT-4 update drops

After the recent widespread attention, Open AI has now released Chat GPT 4, which can now process images. This new ability means it can provide opportunities for technologies that help the visually impaired. This is taken even further where after being given a picture of a website layout, an Open AI representative asked Chat GPT 4 to create the code for said website, and it did. In terms of performance, it can now output more than 25,000 words and perform better than its predecessor in every way, although it still does poorly in English and literature. In the future, Open AI says it will look for consulting on ethics and advice “on how to weigh the competitive and safety considerations … against the scientific value of further transparency.” Read more.

More Meta layoffs

After the massive tech layoffs last November where Meta alone laid off 11 000 employees, they have announced an additional 10 000 cut and the closure of 5 000 job openings. Mark Zuckerberg attributes this reduction as a result of higher interest rates in the US, global geopolitical instability, and increased regulation. Additionally, Zuckerberg announced there will be no new hires until the restructuring, and that hybrid and remote work may come under scrutiny as an inside study showed in-person employees performing better. “We expect to announce restructurings and lay-offs in our tech groups in late April 2023, and then our business groups in late May 2023,” – Mark Zuckerberg. Read more.

Honduras says economic factors fuelling pursuit of China ties

The Honduran foreign minister has said that a decision to pursue diplomatic relations with China and ditch ties with Taiwan was motivated by economic interests rather than ideology. Speaking to the Canal 5 television channel on Wednesday, Eduardo Enrique Reina said that rising debt and the need for more investments motivated the decision, which was announced a day earlier by Honduran President Xiomara Castro. “The global situation is complicated. We need to open up,” Reina said. “We need investment. We need cooperation.” The minister’s comments highlighted the dilemmas faced by countries seeking strong economic ties with both the United States, a strong supporter of Taiwan, and China, which views the self-governed island of 23 million people as its own territory with no right to state-to-state ties. Read more.

People face biggest fall in spending power for 70 years (UK)

People face their biggest fall in spending power for 70 years as the surging cost of living eats into wages. The government’s independent forecaster said that household incomes – once rising prices were taken into account – would drop by 6% this year and next. Living standards won’t recover to pre-pandemic levels until 2027, it warned. It came as Chancellor Jeremy Hunt said the economy would shrink this year but avoid recession. Energy and food bills have shot up due to the war in Ukraine and the pandemic, and are squeezing household budgets. Inflation – the rate at which prices are rising – is currently in double digits. Read me.

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