Higher Rock Education - Economics Blog

Tuesday, August 09, 2022

Economics in the News – Aug. 1-7, 2022

Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.

o   Amazon announced a $1.7 billion deal for iRobot, the maker of the Roomba vacuum cleaner. But experts believe that Amazon is more interested in the maps that the Roomba creates than the vacuum cleaner itself. Amazon continues to prioritize the smart home gadget space amid concerns over privacy and the ability to integrate the maps created by sensors on the Roomba to gain greater insight over consumers’ homes and integrate with other products

The Roomba will become the latest device in Amazon’s growing smart home product arsenal, joining the Amazon Echo smart speaker, video doorbell-ringer Ring and the Astro robot. The deal with iRobot is subject to shareholder and regulatory approval. It would come on the heels of Amazon’s acquisition of One Medical for $3.9 billion last month and would be the company’s fourth-largest acquisition. [Associated Press]

o   Hiding American dollars inside their coats, shoes and mattresses. Such is life in Argentina where inflation is surging, and many Argentines are looking to spend their pesos as quickly as possible. Economists expect inflation in Argentina to reach the 90 percent mark by December, by comparison, inflation throughout the United States is nine percent. The exchange rate is 298 pesos for every U.S. dollar. Argentina’s current inflation worries is like many other countries in that it stems from the war in Ukraine, supply chain constraints and public spending.

Many experts believe that Argentina holds more U.S. currency outside the United States than anywhere. But what the period of high inflation has shown in Argentina is that people find a way to adapt to high prices. Argentina has struggled with inflation over the last 50 years, including a period in the 1980s when prices soared 3,000 percent. Economists believe that Argentina’s inflation issues are self-inflicted based off printing more pesos to fund free or subsidized health care, universities, energy and public transportation. [The New York Times]

o   The U.S. Senate passed a transformative $740 billion package called the “Inflation Reduction Act of 2022,” on Sunday night. The bill aims to combat climate change, levy a 15 percent tax on big corporations and cap prescription drug costs at $2,000 for seniors. The bill will next be voted on by the House of Representatives.  

The biggest revenue generator for the bill calls for a 15 percent minimum tax on corporations earning more than $1 billion in annual profits. The bill plans to invest $375 billion over the next decade to combat climate change. It includes investments in renewable energy and the offering of tax rebates to consumers purchasing a new or used electric vehicle. The bill is also aimed to lower costs of medicine for seniors, capping prescription drug costs to $2,000. [Associated Press

o   More Americans are embracing frugal living. As a way to combat higher costs, many families are looking for more ways to save and are turning to dollar and discount stores. Others are turning to more store-brand items.

Average grocery spending at discount grocers has increased 71 percent from Oct. 2021 to June 2022 at discount stores, according to analytics firm InMarket. The same items at grocery stores have sold five percent less during that same time period. Dollar General plans to expand fresh produce to 10,000 stores in the next several years. Many Dollar Tree and Family Dollar stores offer frozen fruits and vegetables. [The Wall Street Journal]

o   Tesla shareholders approved a 3-for-1 stock split at the company’s annual shareholder meeting. Shareholders of Tesla will receive two additional shares for every share that they own at the end of trading Aug. 24 with trading of the new stock-split adjusted price to begin Aug. 25.

The stock split comes two years after the automaker’s first stock split in Aug. 2020 – a 5-for-1 split. Stock splits don’t influence the value of a company, but they do increase liquidity for investors and make the company seem more affordable for retail investors. [FORTUNE]

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