The Consequences of Rising Interest Rates

Following the meeting that occurred a week ago, there are rising interest rates in the United States, which will have an impact on citizens. The effect is not limited to the States, as Canada will also face issues that result from the interest rate hike. The specifics involve the Federal Reserve and their conclusion for a 2.00% to 2.25% fund rate.

An interest rate is the percentage of the borrowed amount that needs to be paid for, in addition to the initially loaned asset. They can be referred to as an annual percentage rate, which extrapolates on how they are usually calculated yearly. Money is constantly borrowed in our society; this is especially true for prominent purchases or investments.

In particular, interest rates will lead to the increase of many facets of our lives: savings, rates for credit cards, and the prime rate. There will be a growth to savings, due to the money market and credit-deposit rates becoming higher. Although this sounds positive, the flip side is that people with financial burdens will need to use a greater amount to offset it. In addition, credit card rates will increase, as the prime rate—the rate of credit given to people with high credit—will rise. This mainly will affect people that need to be loaned money short-term, as these rates will be significantly higher than long-term agreements. A higher national debt will also result from this, as there will be an increase in the amount needed for the United States’ government to borrow money.

Rising interests rates will also lead to a decrease in money spent by consumers and the amount generated by businesses. As mentioned previously, with credit card rates becoming higher, people will think twice before swiping away money for items they may not be able to afford immediately. This will then lead to an impact on businesses—they depend wholly on being able to produce a steady income in order to expand. Banks may see a different outcome, but the profit for other types of companies will be lowered. This also has a significant effect on the housing market, as the overall increasement in the amount needed to pay back long-term loans are higher. Most people are unable to afford to purchase a house without assistance from a bank, which leads to less real estate being sold.

The impact on Canada is a repercussion of the close ties we have with the United States. Throughout the past year, the exchange rate has been an area of concern for most citizens, and foreign goods expenses will only increase. Imported items will have a higher cost to purchase, therefore limiting the buying power of many Canadians. This topic will be the most detrimental for people with debt, however, as the integration between the two countries will possibly have an effect on Canadian interest rates.

A New NAFTA?

When it comes to foreign trade, many US lawmakers are focused on one thing: re-negotiating the North American Free Trade Agreement, or NAFTA.  This comes amid the President’s promises to back out from, or at least re-negotiate, the trade deal as it is seen as unfair to American workers. So how did this all start?

        In 1994, the agreement was signed between Canada, America, and Mexico to ensure free trade of goods and services throughout the countries.  This ensured that tariffs would not be imposed on any products being traded within the nations. This resulted in the reduction of prices for many products as they were imported from other countries.  The lowered consumer prices were projected to help bolster the economy. However, many still had reservations about this agreement; namely, that it would export US jobs to countries like Mexico. This was then seen with manufacturing jobs, which have been sent to Mexico, as it was significantly cheaper to build cars and export them from Mexico rather than build them in America.  With a minimum wage around half that of the US federal minimum wage, it is evident that costs would be significantly cheaper in Mexico. This has rekindled the debate of free trade vs. fair trade, or in other words, whether all boundaries for competition should be lowered or local goods should be favoured over imported goods.

        Recently, the US and Mexico have already come to a bilateral agreement in principle.  They have even threatened to leave Canada out of the agreement if they do not meet the deadline by October 1st, however Mexico still believes that a trilateral agreement would be the most beneficial.  In fact, President Trump has stated his intention to rename the agreement to USM – United States and Mexico – and has said that he is willing to include an initial for Canada if they agree with the changes.  In the former agreement, the main target has been the automotive industry. Namely, they have agreed that 75% of automobile contents must be made in North America and that roughly 40-45% of components must be made by workers earning at least $16.  This was added to help reinvigorate the automotive industry in the US and discourage the production of most car parts from being manufactured through cheaper labour in Mexico.

        There are several reasons why Canada has not come to an agreement with the US.  For one, the US wants to get rid of Chapter 19 of the agreement, which is a provision that sends trade disputes to an independent panel rather than domestic courts.  Over the past few years, this panel has ruled against the US in a number of disputes. A bigger concern has been raised over Canada’s dairy products and the government’s quotas and prices that are set for the domestic products as well as the steep tariffs levied against any dairy product imported from the US.

        While both countries have not yet come to an agreement, they both have echoed similar sentiments as to the potential benefits of the trade deal.  With Mexico and the US Congress heavily leaning towards a trilateral partnership, it is left to see how the countries negotiate the remaining points of contention.

Op-Ed | Elon Musk: What in the world is he doing?

Disclaimer: the views presented in this article do not necessarily represent the stance of the Junior Economic Club of Toronto as a whole.

With the continued issues Tesla faced over the past month, things are only getting worse for the electric car company after CEO Elon Musk’s decisions during a podcast show interview.

During the airing of the daily Joe Rogan Experience podcast episode this past thursday, the popular CEO made an appearance as a guest, sipping whiskey and talking about flamethrowers, artificial intelligence, and electric planes. At one point, the topic of conversation became marijuana, the controversial drug that isn’t legal in all American states yet. Musk received the joint and took a puff, while claiming that he doesn't regularly use the drug. Though recreational use of marijuana is legal in California (the state where the podcast was made), the controversy surrounding the use of the drug still seems very unprofessional for a CEO to do on camera. Under federal law, marijuana is still illegal.  

In the past few months, Musk’s behaviors have been repeatedly criticized. As of right September 14th, Tesla’s stock has plunged almost 120 points, more than 30% since Musk’s first announcement of Tesla’s privatization, which he later took back due to widespread public outrage, lawsuit threats from market manipulation, and investigations by the SEC. This time, within hours of release, the podcast went viral, and Musk once again received tremendous backlash. Now, in addition to their CEO, Chief Accounting Officer Dave Morton and Head of Human Resources Gabrielle Toledano are also making headlines due to their sudden resignations, which can only mean further declines for Tesla.  

Tesla’s quarterly reports have been showing growth, though. Quarter 2 shows more than $4 billion in revenue, as compared to the $2.78 billion to quarter 2 of last year. However, Tesla’s financing and spending is quickly catching up as well. Tesla reported a $718 million loss, but they still have a positive cash flow. Unfortunately, with Model 3 production being pressured as much as possible and research happening with the Model Y, that could soon change, especially if Tesla keeps up their money-burning habit. Especially with the PR damage done by the CEO, things aren’t exactly looking bright right now for Tesla.

At the end of the day, this is another example of how severely the actions of the CEO reflect on a company, despite its great efforts to retain its public image. For Tesla, if Musk doesn’t change his strikingly odd behavior soon, they’ll need more than a positive cash flow to keep them afloat.

What Do You Care About?

Chances are, the first thing that came to mind wasn’t economics. Maybe it was school, your friends, a significant other, or an extracurricular activity. As high school students living in an increasingly busy world, we tend to place most of our focus on the immediate and pressing issues in our lives. It’s difficult to give any significant portion of our attention to something that seemingly doesn’t affect us in the least, which de-prioritizes keeping up with current economic and political trends.

But, difficult as it may be, we need to remember that just because you don’t notice how it affects you, our rapidly-changing economy plays a huge role in your life. And the older we get, the more our lives will be affected by changes in the economy. Policies we never gave a second thought to will have a direct impact on what jobs will be available to us, how much we’ll make at those jobs, and how much student debt we will (or won’t) be buried under. That’s why it’s so important that we start to do our research now, so that by the time we notice these effects on our lives we have the knowledge and power to deal with them. Here are just a few reasons why you should make time to care about economics:

1. It’s a reality check.

Unlike almost every other facet of the current political climate, economics is objective. There is a concrete right and wrong, which helps us analyze and understand the effects of economic policy. As human beings, we often focus on the emotional and sensationalized component of current events, so studying and understanding economics helps us take a subjective situation and understand its objective effects.

2.  It helps you make financial decisions.

With the way our economy is constantly fluctuating, learning financial literacy is unfortunately not a one-size-fits-all experience. Once you’ve learned the absolute basics, making financial decisions involves a solid understanding of the current state of the economy. Global wars, elections, and crises will all have an effect on the value of your assets and investments. Knowing what stocks to invest in, how to manage your debt, and how to prepare for unemployment all depends on what is currently happening in the economic climate, meaning that you will need to keep up with current trends if you want to be able to make sound financial choices.

3. It prepares you for the future.

As previously mentioned, our economy is constantly changing, and a part of that involves the job market. As millennials or Gen Z-ers, the jobs available to us aren’t the same as the jobs that were available to our parents. Technological progression and development is causing uncertainty and turmoil in industries that were previously thought untouchable, and is creating demand for jobs in sectors that didn’t exist until only a few decades ago. Keeping up with these changes will help prepare you for entering a job market different from anything else in history.

As youth living in the twenty-first century, it’s a privilege to be connected to the rest of the world, but it also makes it our responsibility to use all that information to educate ourselves and stay up-to-date on current events. The older you get, the more imperative it is that you gain a deeper understanding of the world around you. As busy as we all are, if you take a little bit of time every week to read the news and learn something new, you’ll be surprised about how much it’ll change your perception of the world. The economy affects us all, like it or not, so don’t let a busy school year distract you from the bigger picture.

About the Author

Olga Starenky is an experienced writer and political enthusiast. As the Head of the Junior Economist, she advocates for student voice and involvement in economics and politics.

What to expect from JEC in 2018/2019

To Whom It May Concern:

Thank you. To begin, I would like to thank everyone and anyone who has been involved with JEC in the past.

To our past alumni, for forging a path that will lead this year’s team confidently from past years of success and growth.

To our sponsors, for allowing JEC to continuously promote financial literacy to the best of our ability to all students in the GTA.

To our guest speakers and mentors, for guiding us and leaving your wisdom and advice on those who have attended our past events.

A final thanks to our attendees and readers. Without an audience, JEC would have little impact in our community. You make JEC worthwhile for all the above-mentioned people.

The past year has been the most successful and rewarding year to date. From the top of the Globe and Mail Centre to the floor of the Toronto Stock Exchange, JEC prides itself in being able to say that we’ve had over 300 students attend our events last year alone. We are also proud to say that with the help of dedicated sponsors and mentors, we have fostered the growth of student-led start-ups in the GTA by investing $3000 into their development.

Entering our third year of operations, this year’s team plans on making 2018/2019 the best JEC can offer. We are planning more frequent events relating directly to helping students grow their financial knowledge and setting them up with connections, opportunities, and a network for their future endeavours during and after high school. We are branching out and will be hosting events with other student-run organizations in the GTA, aiming to reach out to other networks of students who are yet to benefit from JEC. With new technologies in the financial industry, JEC is looking forward to discussing such topics at our events throughout the course of the year.

Our website is being revamped, specifically through the introduction of our Alumni Network  as well as an update to our Junior Economist. Our Alumni Network will display contact information of all former JEC executives, including what they are currently doing since parting JEC. Our Junior Economist will transition over to a shorter blog-style format, improving the efficiency of the blogs and also posting the content on a timelier basis. We will also be introducing Junior Economist blogs and promotions related to our events, including recaps on the success of our events after they have happened.

As I mentioned at the beginning of this message, I’d truly like to thank everyone involved with JEC to date. I feel that this new year will bring bountiful experience and knowledge to all the students affected by JEC’s mission, including myself. Here at JEC we always strive to understand our audience and offer them experiences regardless of their social or financial background. After all, “Investing in Toronto’s future- Equal opportunity through financial literacy”, is what we do.

Warmly,

Robert Di Marco

September 3, 2018

Cambridge Analytica

       Recently, Cambridge Analytica, a British data mining company has recently come under scrutiny for its use of Facebook data to try to influence the US election and Brexit.  While this is a pressing issue, it also raises bigger questions in regards to our privacy over the internet. So how did this all start?

       Cambridge Analytica, as previously mentioned, is a data mining company that tries to analyze the vast troves of data they collect to provide clients with richer insights.  The way they would do this is by collecting information about a person (ex. what Facebook they liked, their posts, locations, etc.). With this, they would create psychographic profiles on the each person, and this information would be passed on to campaigns.  These campaigns would then use the personality traits about individuals in certain states to drive behaviour. They were initially used by the Cruz and Carson campaign in late 2015. However, when it was reported that the company may have used personal information from Facebook users, Cambridge Analytica reportedly deleted them.  And so the question remains, why is this still relevant?

       It turns out that Cambridge Analytica’s parent firm, SCL (Strategic Communication Laboratories), received the Facebook information from Aleksandr Kogan, a Russian-American psychology professor at Cambridge University.  He built a Facebook app called “thisismydigitallife” and it would collect information on users who completed the quiz. Not only was it able to collect data from the approximately 270 000 users, but was also able to collect private information of the friends of these users such as their likes, posts, location, etc.  This technique is known as “seeding” and it was pretty effective because on average, each user would have around 300 friends. This is how Kogan was able to collect the private data of over 50 million users. This data was then passed on to SCL who created psychographic profiles based on the Big Five personality traits – Openness, Conscientiousness, Extraversion, Agreeableness, and Neuroticism.  This is where the controversy lies, not only did millions of people have their private data collected without their knowledge, but it was passed on to various campaigns. While users do consent to having their data passed on to researchers for academic purposes when they create a Facebook account, it is prohibited to transfer this data to any third party ad network, data broker, or any other monetization related service.

       Around the time Trump was campaigning, Steve Bannon was the vice president of SCL who not only introduced Cambridge Analytica to the Trump campaign, but also secured funding from conservative mega donors Rebekah and Robert Mercer.  This is what has led to widespread investigations into this company. Congress and the Senate have both asked to hold hearings in regard to Facebook’s link to Cambridge Analytica. Robert Mueller has even requested the company to turn over internal documents in relation to the possible election meddling.  In addition, there are hearings being held in the UK over Cambridge Analytica’s role in the Brexit campaigns. With all these reports coming out about data leaks, these investigations are starting to raise concerns over the security of our data over the internet going forward.

---

Ritvik Singh is a grade 11 student at the Academy for Gifted Children – P.A.C.E. His interests primarily lie in mathematics, economics, and computers. He is also an academic coordinator at FUSE Society and a member of his school’s robotics team.

Sprint and T-Mobile Merge

       America’s third and fourth biggest mobile network companies, Sprint and T-Mobile, have been talking again about the possibility of a merger, now for the second time since last November.

       Now, T-Mobile is about to seal the deal again with Sprint to acquire it for $6.50 per share, or $26 billion in total, and will likely have T-Mobile's John Legere to run this new company. SoftBank, who owns more than 85% of Sprint, will own just 30 percent of the merger, while Deutsche Telekom, who owns about 60% of T-Mobile, would own about 42 percent.

       Talks had been called off last year after SoftBank CEO Masayoshi Son decided he didn't want to lose control of a combined company, as well as after concerns of the potential inability of reaching a general consensus, and thus losing competition against bigger competitors like Verizon and AT&T.

       However, several changes have been evident in the past months that have made Son accept a lower share. Lower corporate taxes from the federal government, 5G deployment transparency, and a changing wireless landscape that now includes cable providers. In the past few years, Sprint has acquired $32 billion in debt and lost millions of users since it was taken over by SoftBank, and T-Mobile is generating a mere fraction of Verizon’s and AT&T’s.

       If this deal goes through, a new mobile giant with over 127 million active customers will emerge, large enough to challenge Verizon, or even AT&T, who despite federal interventions in the late 1900s, still holds a huge chunk of the market. To users, this could bring about some bad news. With the merge of these two companies, they are now more evenly faced against the industry’s other two leaders, meaning they don’t need to offer as competitive prices and products to stay in the game anymore. This could result in drops in quality service, or less promotions/deals.

       Others are contemplating the possibility in which this highly saturated market is taken by a new triopoly, now with the third and fourth biggest companies becoming one, reducing the number of competitors. The US Federal Communications Commission made its point when it sued (and won) AT&T after an attempt to buy T-Mobile back in 2011, and with the final decision being in the hands of government authorities, it will take a while to become official even after the merger deal passes from both of the companies themselves.

---

Derek Liu is an experienced cryptocurrency and stock trader with a background in finance. He follows and writes about controversial economic topics and American politics. Other than a writer, he is also an ambassador for multiple other student led economics and leadership clubs, such as Target Alpha and PUYO, and a grade ten student at St.Roberts CHS.

The Future of Plastic

       Look around you right now.

       No matter where you are, plastic is all around you. It’s in toys, bags, electronics, and almost anything non-edible (hopefully) that you can think of.

       Plastic is undoubtedly a global resource. But at the rate it’s being produced and polluted out of our control, plastic is becoming a global issue.

       Ever since its rise to mainstream use in the 1960’s, plastic has become the go-to material for all kinds of consumer goods, and was even hailed as a “miracle product” at the time. Fast forward a few decades, and global plastic production has gone from annually producing 15 million tonnes of plastic in 1966, to 311 million tonnes in 2014 alone.

What numbers are we looking at?

       Many of us are probably familiar with the "Pacific Garbage Patch", and some of its similar cousins in other oceans globally. Nowadays we are learning more about what effects plastics have on our planet, and our global sustainability as a human species. To give perspective, even those small plastic bags you may get from your supermarket take anywhere from 10-1000 years to decompose, meaning some of those bags can outlive you and me around 12 times.

       Globally, we produce over 300,000,000 (300M) tonnes of plastic each year, which is not that surprising when taking into account increasing global population and purchasing power in developing nations. However, although plastic is a recyclable material, a 2015 University of Georgia study showed that only 9% of the world’s plastic is recycled annually. In the same study, they found that over 9.1 million tonnes of this plastic is ending up in the world oceans every year.

       In another study by The Ocean Conservancy, half of this plastic waste is coming from 5 specific nations: Thailand, Vietnam, Philippines, Indonesia, and China. It was calculated that with the correct measures, these nations can reduce their own waste output, while also reducing the overall global plastic waste levels by 45%.

       All this presents some key questions we need to answer within the next coming years:

(1) How do we manage this plastic waste being produced by developing economies which cannot prioritize environmental sustainability over economic growth?
 

(2) What can be done in Canada to reduce our dependence on plastic?
 

(3) What else can economies of scale use that would ecologically and sustainably substitute plastic’s affordability and convenience?

(1) Social Plastic: Stopping Problems Abroad

       Social plastic is a concept coined by a Vancouver startup: The Plastic Bank, and its implications are paramount to global environmental sustainability.

       Social plastic is a model of using plastic waste as direct currency, where individuals who collect such plastic can exchange it for consumer goods such as: stoves, groceries, etc. The Plastic Bank’s scalable business model that allows it to spread its mission worldwide, which it has already done in various nations globally. This model also allows for plastic waste to be traded in for standard currency as well.

       When implemented in Haiti recently, the Plastic Bank help started a civilian-level cleanup and reward process, right at point sources of ocean plastic dumping. All of this worked to provide those involved with appliances, groceries, and various other consumer goods.

       This is a new concept, and the idea of using plastic waste as a currency will be inevitably met with some skepticism. However, what powers this model so well is the constant global demand for recycled plastic, which will always give plastic an inherit value as a potential currency/tradable good.

       I’ve given a fairly brief overview of what social plastic. If you want to get involved and help with the cause, check out the website of the Plastic Bank at: plasticbank.org.

(2) What are we doing back home?

       Canada has a mediocre waste disposal record per capita, but in the field of plastic we are faring better each year. In a 2015 study, 67% of plastic bags were recycled at the municipal level, and 78% of rigid plastics were recycled too. This reduction trend is due thanks to the efforts of Canadian citizens, startups and lawmakers alike, especially with a new policy that's becoming more popular in Canadian cities.

       With Canada’s improving record, lawmakers in Montreal and other large Canadian cities have implemented “plastic bag bans”, where the distribution and use of standard plastic bags are banned by the city.

       What makes this solution well executed is the consideration for local business who relied on these bags. Ideas such as incentivizing reusable shopping bags and financial incentives, ultimately make the ban of plastic bags more feasible for a city’s environment and economy. This balanced approach to the by-law was met with general bipartisan support in the respective cities.

(3) Fight plastic with better plastic

       Although I’ve trashed talked plastic throughout this entire article, the reason why we are where we are right now, is because plastic is perfect for economies of scale. It’s cheap, uses a resource (oil) that’s already being extracted in mass, and is extremely convenient to transport. Knowing how crucial plastic is in our global economy, the solution to our original problem may lie in the way we produce plastic, rather than in a different material altogether.

       Recently, certain producers have begun creating plastic based off of various forms of starch, into biopolymers, which substitute for the oil-based polymers used in traditional plastic. These basic starches can even be vegetable-based, such as with potatoes.

       What is created as a result, is biodegradable plastic. This plastic can take 3-6 months to fully decompose, which is on par with various food items, and certainly beats out the 10-1000 year decomposition range of normal plastic. As biodegradable plastics become even cheaper to produce and use on a large scale, businesses will be further encouraged to use them, at the very least to boost their brand image and corporate social responsibility (CSR).

Final Thoughts

       Plastic has gotten us far and has undoubtedly played its significant role in developing the economies of the second half of the 20th century.

       Doing our part as everyday citizens can include anything: helping out global efforts like social plastic, recycling your plastics at home and on-the-go, avoiding always using plastic shopping bags, and countless other unnoticeable changes to our daily routines that we can make.

       However, the reality still remains that without our natural resources, there is no base foundation of our global economy. True economic prosperity is based on longevity, and plastic will be one of many lessons in the general realization: that economic growth must exist to physically preserve itself in the long run, rather than focus mainly on short-term gains.

Michael Trinh Orszag is a Grade 11 High school student, actively immersed in the fields of biotechnology, geopolitics, and sustainable technology. Combining both entrepreneurial and STEM experiences/perspective, he often writes about economical means of implementing sustainable change, upcoming biotechnology, and student advice articles in regards to starting one’s professional career in high school.

The Oil Conundrum

       The question stands: where in the world is oil headed?

       Earlier this year the thesis was a potential long in oil, assuming major price levels in the $50’s price range were broken. That happened, and /CL futures rallied up to a high of $66.50 on January 25th, 2018. 

       Then, the retracement came. February 2nd to February 15th saw price go from $66.10 to $58.01. This shake in the uptrend took out a lot of the bears, and we see buyers flooding back in. 

       In fact, price refused to stay in the $50’s range for too long. There was such a lack of sellers and such a surplus of buyers that volume of 500k contracts managed to push price above $60 on Feb 14th, compared with the 720k contracts it took to push price below $60 on Feb 9th. So, the incentive is bullish below $60, or at least it was last week.

       What does this mean for the current price and trend? We can look at a chart to give us an idea.

       Let’s tear this chart apart. Firstly, we must recognize this is a daily chart, so price levels/areas here are far more weighted than lower timeframes. First thing I noticed is that the 200 EMA (red) has been respected. The price range around the 200 EMA has acted as a huge support, and the retracement paying dues to it only further affirms that it IS a retracement and nothing more.

       Now let’s look at the 7 and 20 day EMA’s. Notice how it’s nearing a bullish crossover. If price and volume pick up, we can expect a full crossover, which would give affirmation to the long positions.

       The Chaikin Oscillator is showing that volume is going into a bullish zone; the 94.988K line on it is a resistance level that once broken, has proved to garner stellar uptrends. Notice how the pull below that line did not go down to the previous pulls below it. This only further affirms that this was no more than a pullback.

       So, what is the trading plan? If you manage to get a long position on oil in the 60-61 area, lay back and let the trend ride. You are in a good place. If not, watch for light retracements during the week for entry opportunities.

       The facts and technical analytics show oil is headed up. How much is it headed up? Who knows; to take a guess would be no more than a gambling speculation. Nonetheless, this is a profitable swing for the longs, and the alpha returns will thank you for it.

---

Definitions

EMA: the exponential moving average is used as a momentum indicator. It averages out the closing prices for a time range (chosen by the trader). The exponential moving average gives a heavier weighting to the most recent closing prices, and so is optimal for trade signals, as it less lagging that a simple moving average (which gives no weighting).

Retracement: when there is an uptrend or downtrend, price will sometimes move in the opposite direction for a short time span, which the most common retracements being 20-30% of the trend. This happens in new price territory, for example the 60’s price range in oil.

Alpha: the excess return of a portfolio compared to a benchmark index such as the S&P 500.

Long: buying a stock/commodity. This is a bullish position.

Short: shorting a stock/commodity. This is a bearish position.

Future: a financial contract that specifies an amount of an asset/commodity to be sold/bought at a specific price on a specific date. These contracts are written in primary markets as forwards, and then traded in secondary markets as futures. 

---

Shayan is a finance enthusiast from Bayview Glen School. He actively manages his fund, Saturn Capital Management Corporation, and works in commodity futures markets.

Canada’s Marijuana Mania

       Just months away, sometime this July will be the long-awaited day where the recreational use of marijuana will be legalized in Canada. While this mainly creates many social issues regarding enforcement, the Canadian market and will also be affected on several fronts, including taxation, sales, and thus investment opportunities.

       The legalization fully opens up a large industry for Canada. Cannabis sales in provinces such as Ontario will be run by the government, keeping close regulation on the many dispensaries. Cannabis is expected to be in large demand from the legalization date, giving the Federal government a great opportunity for taxes revenue. Anyone planning to purchase must also be ready for the high taxes associated with purchase; though not confirmed, taxes are hovering around the $1 per gram of cannabis mark, excluding GST. Taxes are meant to be high enough to limit the growth of consumption, but low enough to compete with an illicit market.

       Alongside the increasing demand, Cannabis companies are in dire need of workers with the proper education in both plant cultivation as well as financials, just like any other company. Courses in post-secondary education such as Durham College have even been offering courses on marijuana, indicating the more and more significant growth of this industry’s popularity, as well as assuring the future of the industry itself, all while greatly increasing job and labour income possibilities. Deloitte's study on marijuana legalization concludes that a $22.6 billion boost could be evident annually.

       Investors have had eyes on the emerging Canadian marijuana industry as well. Canopy Growth Corp., Canada’s biggest cannabis producer has recently talked a possible $245 million dollar investment with Constellation, a massive American Fortune 500 company that produces wine and spirits. This bold move made by Constellation has been seen as a hedge against the weakening of wine and beer sales from cannabis disruption. Recent one-year return analysis of the Canopy stock reaches almost 280%.

       But make no mistake, although with great prospects, this industry is highly dangerous, with marijuana stocks being among the most volatile of the TSX. Leaders such as Aphria, Aurora, and even Canopy has been recorded with common price movements of more than 20% a day. The Cannabis market is becoming more saturated as well; now with hundreds of companies joining, even with an averaged $20 billion in size, most undercapitalized competitors will simply not last.

       Nonetheless, after years of debate, the legalization opens up new doors for Canada, and whatever changes we find will likely be here to stay.

---

Derek Liu is an experienced cryptocurrency and stock trader with a background in finance. He follows and writes about controversial economic topics and American politics. Other than a writer, he is also an ambassador for multiple other student led economics and leadership clubs, such as Target Alpha and PUYO, and a grade ten student at St.Roberts CHS.

---

Images Courtesy of "Google Images"

First: https://www.medicinenet.com/marijuana/article.htm

Second: https://www2.deloitte.com/ca/en.html#

Third: https://www.canopygrowth.com/

---

The amazing work we do would not be possible with our wonderful sponsors!

2017 YEAR IN REVIEW – HURRICANE HARVEY

       2018 marked a year of political turmoil, social movements, and, perhaps most devastatingly, a record number of violent natural disasters. The title of “the most destructive”, however, irrefutably must be granted to the fiscal - and environmental - nightmare that was Hurricane Harvey.

       In late August, Hurricane Harvey slammed into eastern Texas and the surrounding area, becoming the first major hurricane to do so since Katrina and Wilma in 2005.  A category three hurricane, Harvey made headlines for the devastation caused not by its winds, but by its deadly and unprecedented flooding. Harvey’s floods turned Houston’s streets into canals, forced more than 30,000 out of their homes, and claimed the lives of more than 50 people.

       Besides the physical and emotional havoc Harvey wreaked, many were also concerned about the damage to national and local economies as well as the U.S’s energy sectors. Houston - with an economy that parallels the size of Sweden’s - is America’s fourth largest city and many economists estimated that damage from the storm would exceed $160 billion - more than Hurricane Katrina and Sandy combined.

       According to a composite analysis performed by Investment bank Citi, Harvey so much as temporarily levelled the entire Gulf Coast region of the U.S economy. “Just one week of zero economic output in the affected regions of Texas and Louisiana shaved 0.06 percentage points off the American GDP,” said a senior researcher at Citi.

       While 0.06 percent may seem trivial in the face of U.S.’s some 18 trillion dollars-generating economy, at a quarter-on-quarter annualized basis, Harvey reduced national economic growth in the third quarter by 0.3 percentage points, and the affected area - from Corpus Christi to Beaumont - were impeded from delivering on its expected 3% of the U.S. GDP, an amount equivalent to 571 billion dollars.

       Citi insurance consultants have also now estimated that the value of property and infrastructure obliterated by the storm at 20 billion, an additional 0.1 percent of the economy. The recovery and full replacement of these capital assets requires a drawn-out -currently still operating - process. Efforts has proved difficult, however, as a majority of the property that were lost to severe flooding (and in particularly those owned by households and small businesses) were not be covered by insurance policies.

       Unfavorable fluctuations in regional labor indicators (surge in jobless claims and depressed payrolls), inflation from soaring fuel costs, as well as a slowdown in factory outputs, and motor vehicles sales was particularly prevalent in the periods following Harvey.

       Nonetheless, even though negatives impacts of the disaster were daunting and large at first, economic conditions quickly normalized, and insurance as well as assistance funds were made available for the burst of positive restoration and reassembly activities of damaged capital stock (which compensated for lost value-added), and the net economic cost of Hurricane Harvey ultimately arrived at relatively low figures.

       Similar to past major weather events, payrolls picked up as responsive labor and massive reconstruction transpired, as lending activities accelerated, supply chains rallied, and vehicles factories, mines and utilities returned to routine operations.

       According to the Goldman Sachs group, there was even be a silver lining to this category three storm. While lawmakers scrambled to organize federal relief efforts, “the odds of a government shutdown or a delayed debt ceiling hike was dramatically lowered.

---

Author: Oscar WAnG

Oscar Wang is a grade 11 student studying at Upper Canada College. He follows and regularly writes about a number of Canadian and American social, political and economic issues. Other than a writer, Oscar is also an avid debater and participant in Model UN. He helps to organize and direct a number of annual student-led conferences, such as OMUN and The World Affairs Conference. 

Images Courtesy of "Google Images"

First: https://www.nasa.gov/sites/default/files/styles/full_width/public/thumbnails/image/harvey-goes-82517_0.jpg?itok=Ulq8cxY9

Second: https://en.wikipedia.org/wiki/Hurricane_Harvey#/media/File:Support_during_Hurricane_Harvey_(TX)_(50).jpg

2017 Year In Review – Venezuela Sanction Crisis

        Over the past year, President Donald Trump has made multiple foreign policy decisions, including levying sanctions against certain nations.  One of them happens to be the small, oil-producing nation of Venezuela.  In response to the country’s rising autocracy, the Trump signed an executive order to prohibit the trading of any bonds.  This would make it more difficult for the nation to refinance its debt.

        During the last couple of years, Venezuela has become a victim to economic downturn and political turmoil.  90% of their economy was based off of oil and so, in 2014, when oil prices fell significantly, they took a major hit.  Following this were a series of irresponsible government actions such as the expropriation of business and overspending which led to massive inflation within the country.  The government also started taking steps that have tread the country towards a dictatorship, such as nullifying the legislative assembly, or trampling on civil liberties entirely.  The only way for Venezuela to refinance their debt would be through their bonds and so cutting off these financial channels have a huge impact on the country.  While the government denies any wrongdoing, and accuses the US of engaging in “economic warfare”, the Trump administration maintains that this is simply to curb the rising authoritarian regime.

        The country right now has spiraled into chaos with citizens protesting everyday against the government.  In addition, there have been major food shortages with basic resources becoming scarce.  The recent crisis has even sent many residents to flee the country looking to escape the social tensions.  Venezuela has also been condemned internationally for its human rights abuses.

        These sanctions against Venezuela are a prime example of how the US plans on approaching human rights violations and corruption going forward.  Just this year, the United States has imposed sanctions on numerous other nations for not complying with them, most notably, North Korea.  These range from visa sanctions all the way to economic sanctions.  They have also sanctioned individuals, including notable high-profile members in the Russian government.  There are usually two possible outcomes from sanctions, either the entire country crumbles and all that is left is a power vacuum, or it solidifies the totalitarian regime.  Either way, it is the civilians who bear the brunt of these sanctions.  

        Currently, the government in Venezuela is trying to adapt to the new sanctions by releasing a cryptocurrency backed by their oil.  Now, all we can do is wait and see how the US will react to Venezuela’s new economic plans.

---

Author: Ritvik singh

Ritvik Singh is a grade 11 student at the Academy for Gifted Children – P.A.C.E. His interests primarily lie in mathematics, economics, and computers. He is also an academic coordinator at FUSE Society and a member of his school’s robotics team.

Images Courtesy of "Google Images"

First: https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iCj_Gxu8w2H8/v2/-1x-1.png

Second: https://www.reuters.com/article/us-venezuela-politics/venezuela-protests-against-maduro-escalate-dozens-injured-idUSKCN12Q0B6

2017 In Review – China's Pollution Levels Going Into 2018

        This year’s New Year was kicked off with a warning about pollution levels. Between December 31st, 2016 and January 1st, 2017, Beijing issued a notice to all citizens regarding the high smog levels. In fact, they issued the “orange alert” the second highest level of a four-tier pollution level index, a system developed in 2014 to primarily reduce carbon emissions. While winters in China—especially the northern regions—are more prone to higher levels of pollution due to higher demand for coal energy, this “orange alert” is very alarming. This means that the current level of breathable particulate matter (PM 2.5) is above what the World Health Organization deems as acceptable.

ECONOMIC EFFECTS

        At the surface, this may look like an environmental issue that needs to be addressed immediately. However, there are already implications in China’s economy. From this short incident alone, the airline industry was already affected. At the Beijing Capital International Airport, the smog from the pollution caused hundreds of flights to be cancelled. Beijing’s Airport is one of the busiest airports in the world. This cancellation has resulted in lost revenue for all airlines affected, including China’s own airline: China Airlines. It is unlikely that airlines will stop serving Chinese airports as a whole, but corporations will have to incur a lower bottom line, thus they may reduce fleets to China in peak pollution seasons like winter.

On ground level, effects have also been seen since mid-December, when authorities ordered coal factories to reduce production or close completely. Coal, while one of the biggest contributors to pollution, is still an integral piece in China’s energy portfolio and economy. Closures or cutbacks in production reduce profit, create unemployment in the long run, and incur higher costs for the government. Since many of these factories are state owned enterprises, less profit for them results directly in less profit for the government. With the government as a major stakeholder in these companies, current government funds will be allocated to keep the companies afloat despite little to no production. In the long run, these plants may just lay off workers if they are required to reduce production.

NEXT STEPS

        The above predictions may seem bleak, but it’s not far from the truth. For the weeks leading up to the last G20 summit in Hangzhou in 2016, the surrounding coal plants were completely closed. In order to incentivize the companies to comply, the government paid them and employees. On the other hand, this drastically decreased the PM 2.5 levels, hence there was no need for an alert being issued. There were clear blue skies and breathable air (within the safety parameters of the WHO). Even though this was only for a short period of time, it instilled hope and wonder into citizens.  What if this could be permanent? As we ring in the new year, keep in mind the next steps that the Chinese government could take. It is established that simply paying off companies to reduce production is not sustainable, so the need for green technology is more prevalent than ever. Recently, China just surpassed United States in being the number one investor in green technology. There is so much potential for these investments to create sustainable and environmentally friendly firms that can replace the current coal firms. There has already been an increase in solar, wind, and hydroelectricity farms. So, new year’s resolution? More renewable energy and less dependency on coal. Let’s try to aim for less orange alerts this year.

---

Author: Joy wang

Joy Wang is a Grade 12 student studying at Bayview Secondary School’s IB Program. She loves reading and writing about international relations — Foreign Affairs is her favourite publication. Outside of JEC, her interests include literature, community service and business.

Images Courtesy of "Google Images"

First: https://www.semp.us/wp-content/uploads/2017/04/Air-Pollution-in-China_edited1.jpg

Second: https://thediplomat.com/wp-content/uploads/2015/08/thediplomat_2015-08-13_18-47-51-386x257.jpg

A Guide to Net Neutrality

Imagine this. Recently, you came up with a ground breaking product idea and can’t wait to market it to the public. You created a website to sell your product online. However, when others try to purchase from your site, the internet service provider has deliberately slowed yours down in favor of larger companies. This may seem like a nightmare to you, but on December 14th 2017, this became a reality for many American citizens.  

WHAT IS NET NEUTRALITY?

Net Neutrality is the principle that all internet service providers (Bell, Rogers, Telus, etc.) must give users equal access to all legal sites, without blocking or favouring certain ones. Going back to the above example, under the net neutrality law, your website will be just as accessible as let’s say, Amazon’s.

TIMELINE

On February 16th 2015, the Federal Communications Commission (FCC) voted in favor of net neutrality rules proposed by the Obama administration. Prior to this event, there were policies that upheld ethical practices by Internet Service Providers that stemmed from decades of discussion.  The decision on June 14th 2016 by the U.S Court of Appeals to fully uphold the FCC’s net neutrality rule, reinforced previous actions. It may seem like December 14th was a sudden decision, but it actually has been occurring since Ajit Pai, the current commissioner was appointed. Throughout 2017, the FCC has been cancelling privacy rules and launching a campaign against net neutrality. This ultimately led to the fateful December 14th decision. See the image below for an extended timeline of net neutrality.

WHO ARE THE WINNERS AND LOSERS?

Like all controversial decisions, different stakeholders will be affected differently. For large internet service providers (ISPS), this is a more lucrative business model. They will be able to block certain content and charge extra to use certain services. The repeal of net neutrality allows the ISPS to charge website owners in order to relay that content to customers, on top charging consumers for access. Furthermore, the slower access to sites may pressure businesses to upgrade to the “fast lane.” Larger online companies like Amazon or eBay will be able to offset this charge, however for start-ups it incurs an additional cost that may not be sustainable for them. Hence, it may prove a hindrance to market entry for start-ups.

As for consumers, effects will also be dependent on internet usage behaviour. In countries without net neutrality—most notably Portugal—the ISPS offer packages that tailor certain preferences. It is likely that American ISPS will adopt this method. For instance, consumers who primarily use Netflix or Youtube, may choose to purchase a package that allows for faster access to the aforementioned sites. While proponents of repealing net neutrality may argue that this a more affordable option to consumers, the reality is that people use a variety of sites. By limiting the choices that consumers can access on the base rate plan, it disproportionately disadvantages lower income groups. The prevalence of internet as a method for networking and communication may inhibit one’s ability to further their career.

WHAT WILL THE FUTURE HOLD?

Being high school and university students, there is no doubt that technology plays an integral part in our daily lives. We are able to communicate with our peers, network with others who share similar passions, create our own digital businesses and even read economic blogs. The constant sharing of ideas and information is what brings us together to find solutions to issues.

As Justine Bateman put it eloquently, "Net Neutrality is what makes the Internet so great - and so vital for innovation and creativity." The lack of net neutrality favours the current stable and profitable businesses, but not the future—the new generation of startups that provide services to better our world.

However, it need not be this way. The FCC passed the bill in 2016 due to millions of citizens raising their concern for the need of net neutrality. We, too, can take action to reverse the repeal. Please visit battleforthenet.com to sign a petition to do so.

---

Author: JOy Wang

Joy Wang is a Grade 12 student studying at Bayview Secondary School’s IB Program. She loves reading and writing about international relations — Foreign Affairs is her favourite publication. Outside of JEC, her interests include literature, community service and business.

---

Images Courtesy of "Google Images"

First: https://spectrum.ieee.org/image/Mjg1MzgxMw.jpeg

Second: http://mmmbody.com/wp-content/uploads/2017/06/51ba2b63ec37aa4779660bd7b082d56b.jpg

Third: https://cdn.vox-cdn.com/thumbor/2F3lry2d_xD4ETJhPm6BEGvSGmo=/0x0:1024x768/1200x800/filters:focal(431x303:593x465)/cdn.vox-cdn.com/uploads/chorus_image/image/54467103/nn.0.jpg

Bitcoin: Breakthrough or Bubble?

     Another day, and another price breakthrough for Bitcoin. Recently, the new price per token of this cryptocurrency surpassed $15,000. But is this seemingly endless growth of a cryptocurrency too good to be true?

     Due to its novelty, Bitcoin is arguably one of the most volatile technologies around. Currently, Bitcoin alone is pushing the cryptocurrency market past the $160 billion mark, and many are starting to believe that Bitcoin is simply another bubble. Bitcoin has grown to a point where investors are buying it solely for the purpose of making money, and not to use it as a medium for exchange, or a store of value, as a currency should be. This is dangerous, losing the purpose of being a currency. From a technical point of view, Bitcoin’s value has grown exponentially at an alarming rate–possibly past its actual value.

    There are a finite number of bitcoins in circulation (about 21 million or so), and unlike standard currency or even things like gold or silver at the moment, the price of Bitcoin depends solely on the demand as opposed to supply, given that it is limited. A country can print more currency, mine more gold and silver, but the amount of bitcoins in circulation is and will always be the same. To have only one factor of price fluctuation is a significant disadvantage.

    Few countries allow Bitcoin, with even fewer are in support of it, especially countries with a relatively large economy. Governments around the world fear a currency that they have no power over and no means of controlling its value. Other more countries such as China see Bitcoin as a direct way of leaking money out of their economy and into the international market, giving Bitcoin and the ideology of blockchain a very concerning future.

    Another issue is the over-reliance on the Blockchain algorithm. There are many other cryptocurrencies, all with similar functions, yet some have perks or traits that stand out, being improved versions of Bitcoin. Ether, for example, has a “smart contract” which is essentially an agreement between a couple of parties online that can be automatically executed on a transparent Blockchain. In other words, one can program their money to work for them, by investing, saving, and spending. Yet, these cryptocurrencies such as Ether don't experience a big of a hype as Bitcoin, solely because Bitcoin was the first to be decentralized, and thus more commonly known. Bitcoin’s growth slowly is no longer being dependant on its functionalities, but rather just hype. Unfortunately, hype will not last forever.      

    Frankly, it could basically just be a matter of time. Those daring enough to invest in this cryptocurrency can enjoy the gains, but one can only hope that they opt out before the inevitable burst.

---

Author: Derek Liu

Derek Liu is an experienced cryptocurrency and stock trader with a background in finance. He follows and writes about controversial economic topics and American politics. Other than a writer, he is also an ambassador for multiple other student led economics and leadership clubs, such as Target Alpha and PUYO, and a grade ten student at St.Roberts CHS.

Previous Editions of the Junior Economist

Disclaimer: The Junior Economist is a student-led publication branch of the Junior Economic Club of Toronto that is proud to host different view points from student writers so that they may voice their perspectives on salient current affairs. The permissible content published by student-authors is representative of their views solely and independently, and does not necessarily reflect the views of other organizational members nor the organization in its entirety.