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THE US ECONOMY IS SUFFERING FROM LOW DEMAND

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We have concluded that demand matters for productivity growth and that increasing demand is key to restarting growth across advanced economies, write James Manyika, Jaana Remes, and Jan Mischke in Harvard Business Review.

A little over a century ago, Henry Ford doubled the minimum pay of his workers to $5 a day. When other employers followed suit, it became clear that Ford had sparked a chain reaction. Higher pay throughout the industry helped lead to more sales, creating a virtuous cycle of growth and prosperity. Could we be at another Henry Ford moment?

Some major companies have announced plans to boost employee pay. Target raised its minimum wage to $11 this past fall and committed to $15 by 2020. More recently, Walmart announced plans to match that increase to $11. In banking, Wells Fargo and Fifth Third Bancorp also announced pay increases for minimum wage employees.

These pay increases have occurred against a backdrop of weak economic growth and rising income inequality. Economic growth has been stuck in low gear for almost a decade now, averaging around 2% a year since 2010 while productivity growth, the key to increasing living standards, has been languishing near historic lows since the financial crisis. But more recently there has been a glimmer of hope. After stagnating for years, wages have begun picking up slightly, as has productivity growth, while corporate profits remain near record highs.

Are these recent wage increases merely necessary in light of a tightening labor market, or could they start a broader trend that may change our economic growth trajectory?

After a year-long analysis of seven developed countries and six sectors, we have concluded that demand matters for productivity growth and that increasing demand is key to restarting growth across advanced economies.

The impact of demand on productivity growth is often underappreciated. Looking closer at the period following the financial crisis, 2010 to 2014, we find that weak demand played a key role in the recent productivity growth decline to historic lows. In fact, about half of the slowdown in productivity growth — from an average of 2.4% in the United States and Western Europe in 2000 to 2004 to 0.5% a decade later — was due to weak demand and uncertainty.

For example, in the mid-1990s to the mid-2000s, rising consumer purchasing power boosted productivity growth in both the retail and the auto sector, by encouraging a shift to higher-value goods that can be supplied at higher productivity levels. In the auto sector, as customers in the early 2000s purchased higher value-added SUVs and premium vehicles in both the United States and Germany, they spurred incremental productivity growth of 0.4 to 0.5 percentage points. Today, that trend has slowed slightly in both countries, contributing only 0.3 percentage points to productivity growth in the period 2010 to 2014.

Similarly, in retail, we estimate that consumers shifting to higher-value goods, for example higher-value wines or premium yogurts, contributed 45% to the 1995-2000 retail productivity acceleration in the United States. This subsequently waned, dragging down productivity growth.

To put it simply, when consumers have more to spend, they buy more sophisticated things. That’s good not just for consumers and producers, but for the overall economy, because making more sophisticated, higher-value things makes everyone involve more productive, and therefore helps increase overall standards of living.

In addition, we found two other ways weak demand hurt productivity growth in the aftermath of the financial crisis: a reduction in economies of scale and weak investment.

First, the economies of scale effect. In finance, productivity growth declined particularly in the United States, United Kingdom, and Spain due to contractions in lending volumes that banks were unable to fully offset with staff cuts due to the need for fixed labor (for example to support branch networks and IT infrastructure or to deal with existing loans and bad debt). The utilities sector, which has seen flattening demand growth due to both energy efficiency policies as well as a decline in economic activity during the crisis, was similarly not able to downsize labor due to the need for labor to support electricity distribution and the grid infrastructure, and here, too, productivity growth fell.

Second, the effect of weak investment. We have found from our global surveys of businesses that almost half of companies that are increasing their investment budgets are doing so because of an increase in demand. Demand is the single most important factor driving corporate investment decisions. Investment, in turn, is critical for productivity growth, as it equips workers with more – and with more recent and innovative – equipment, software, and structures. But we have seen capital intensity growth fall to the lowest levels in post-WWII history. Weaker demand leads to weaker investment and creates a vicious cycle for productivity and income growth.

Of course, the financial crisis is long since over, and the economy has recovered, at least by some measures. So what’s to worry about? Won’t demand return to pre-recession levels, and thereby increase productivity?

Unfortunately, there is reason to believe that some of the drags on demand for goods and services may be more structural than crises-related. Slowing population growth means less rapid expansion of the pool of consumers. And rising income inequality is shifting purchasing power from those most likely to spend to those more likely to save. This is reflected in slowing growth expectations in many markets. For example, across our sectors and countries studied, in the decade from 1995 to 2004, growth in demand for goods and services averaged 4.6%, slowed to 2.3% in 2010 to 2014, and is forecast to slightly increase to 2.8% in 2014 to 2020.

Today, there is concern about where the next wave of growth will come from. Some prominent economists worry that we may be stuck in a vicious cycle of economic underperformance for some time. Our analyses strongly suggest that supporting sustained demand growth needs to be part of the answer. Demand may deserve attention to help boost productivity growth not only during the recovery from the financial crisis but also in terms of longer-term structural leakages and their impact on productivity. Suitable tools for this longer-term situation include: focusing on productive investment as a fiscal priority, growing the purchasing power of low-income consumers with the highest propensity to consume, unlocking private business and residential investment, and supporting worker training and transition programs to ensure that periods of transition do not disrupt incomes.

Companies play a key role in promoting growth through investment and innovation as well as supporting their workforce through training programs. Yet companies may also want to consider the words of Ford when he said: “The owner, the employees, and the buying public are all one and the same, and unless an industry can so manage itself as to keep wages high and prices low it destroys itself, for otherwise it limits the number of its customers. One’s own employees ought to be one’s own best customers.” While this is certainly not true for individual companies, it is true for the broader economy, and we might be at a rare point where the representatives of employees and employers alike share a common interest in healthy wage growth.

 

 

 

 

Source:  Harvard Business Review.

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Business

BANK OF CHILE HIT BY CYBER-ATTACK, HACKERS ROB MILLIONS

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Shares in the Bank of Chile were down on Monday after it confirmed hackers had syphoned off $10 million (roughly Rs. 67 crores) of its funds, mainly to Hong Kong, though the country’s second-largest commercial bank said no client accounts had been impacted.

The cyberheist is the latest in a string of such attacks, including one in May in Mexico in which thieves used phantom orders and fake accounts to steal hundreds of millions of Mexican pesos out of the country’s banks, including Banorte.

Shares in the Bank of Chile, which is controlled by the Chilean Luksic family and Citigroup, were down 0.47 percent at CLP 100.4 ($.16) in mid-day trading.

Bank CEO Eduardo Ebensperger told Chilean daily La Tercera in an interview on Saturday that hackers had initially used a virus as a distraction, prompting the bank to disconnect 9,000 computers in branches across the country on May 24 to protect customer accounts.

Meanwhile, the hackers quietly used the global SWIFT bank messaging service to initiate a series of fraudulent transactions that were eventually spotted by the bank and cancelled but not before millions were funnelled to accounts abroad.

“The [attack] was meant to hurt the bank, not our customers,” Ebensperger said.

Ebensperger said a forensic analysis conducted by Microsoft had determined the attack was the work of a sophisticated international group of hackers, likely from eastern Europe or Asia, and that the bank had filed a criminal complaint in Hong Kong.

The bank said in a May financial statement that it would work with insurers to recoup the lost funds.

 

 

 

 

source: Gadgets 360

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VPN TUNNEL : WHAT IS IT, HOW CAN IT KEEP YOUR INTERNET DATA SECURE

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With growing censorship and regulations threatening global internet freedom and security, in turn, we’ve seen an increasing number of services become available to protect your online web browsing.

Virtual Private Networks (or VPNs) have become increasingly popular in recent years for their ability to bypass government censorship and geo-blocked websites and services, and do so without giving away who is doing the bypassing.

For a VPN to do this, it creates what is known as a tunnel between you and the internet, encrypting your internet connection and stopping ISPs, hackers, and even the government from nosing through your browsing activity.

We explain the basics of what a VPN is here
What is a VPN Tunnel?
When you connect to the internet with a VPN, the VPN creates a connection between you and the internet that surrounds your internet data like a tunnel, encrypting the data packets your device sends.

While technically created by a VPN, the tunnel on its own can’t be considered private unless it’s accompanied with encryption strong enough to prevent governments or ISPs from intercepting and reading your internet activity.

The level of encryption the VPN tunnel has depends on the type of tunneling protocol used to encapsulate and encrypt the data going to and from your device and the internet.

Types of VPN tunneling protocols
There are many types of VPN tunneling protocols that offer varying levels of security and other features. The most commonly used tunneling protocols in the VPN industry are PPTP, L2TP/IPSec, SSTP, and OpenVPN. Let’s take a closer look at them.

1. PPTP
Point to Point Tunneling Protocol (PPTP) is one of the oldest protocols still being used by VPNs today. Developed by Microsoft and released with Windows 95, PPTP encrypts your data in packets and sends them through a tunnel it creates over your network connection.

PPTP is one of the easiest protocols to configure, requiring only a username, password, and server address to connect to the server. It’s one of the fastest VPN protocols because of its low encryption level.

While it boasts fast connection speeds, the low level of encryption makes PPTP one of the least secure protocols you can use to protect your data. With known vulnerabilities dating as far back as 1998, and the absence of strong encryption, you’ll want to avoid using this protocol if you need solid online security and anonymity – government agencies and authorities like the NSA have been able to compromise the protocol’s encryption.

2. L2TP/IPSec
Layer 2 Tunneling Protocol (L2TP) is used in conjunction with Internet Protocol Security (IPSec) to create a more secure tunneling protocol than PPTP. L2TP encapsulates the data, but isn’t adequately encrypted until IPSec wraps the data again with its own encryption to create two layers of encryption, securing the confidentiality of the data packets going through the tunnel.

L2TP/IPSec provides AES-256 bit encryption, one of the most advanced encryption standards that can be implemented. This double encapsulation does, however, make it a little slower than PPTP. It can also struggle with bypassing restrictive firewalls because it uses fixed ports, making VPN connections with L2TP easier to block. L2TP/IPSec is nonetheless a very popular protocol given the high level of security it provides.

3. SSTP
Secure Socket Tunneling Protocol, named for its ability to transport internet data through the Secure Sockets Layer or SSL, is supported natively on Windows, making it easy for Windows users to set up this particular protocol. SSL makes internet data going through SSTP very secure, and because the port it uses isn’t fixed, it is less likely to struggle with firewalls than L2TP.

SSL is also used in conjunction with Transport Layer Security (TLS) on your web browsers to add a layer to the site you’re visiting to create a secure connection with your device. You can see this implemented whenever the website you visit starts with ‘https’ instead of ‘http’.

As a Windows-based tunneling protocol, SSTP is not available on any other operating system, and hasn’t been independently audited for potential backdoors built into the protocol.

4. OpenVPN
Saving the best for last, we have OpenVPN, a relatively recent open source tunneling protocol that uses AES 256-bit encryption to protect data packets. Because the protocol is open source, the code is vetted thoroughly and regularly by the security community, who are constantly looking for potential security flaws.

The protocol is configurable on Windows, Mac, Android, and iOS, although third-party software is required to set up the protocol, and the protocol can be hard to configure. After configuration, however, OpenVPN provides a strong and wide range of cryptographic algorithms that will allow users to keep their internet data secure and to even bypass firewalls at fast connection speeds.

Which tunneling protocol should I use?
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Even though it’s the fastest, you should steer clear of PPTP if you want to keep your internet data secure. L2TP/IPSec provides 256-bit encryption but is slower and struggles with firewalls given its fixed ports. SSTP, while very secure, is only available on Windows, and closed off from security checks for built-in backdoors.

OpenVPN, with its open source code, strong encryption, and ability to bypass firewalls, is the best tunneling protocol to keep your internet data secure. While it requires third-party software that isn’t available on all operating systems, for the most secure VPN connection to the internet, you’ll want to use the OpenVPN protocol.

A good VPN service should offer you the choice of at least these four types of tunneling protocols when going online. We’ve compiled a list of the best VPNs in the industry for you to get started on protecting your internet data.

 

 

 

Source: Tech Radar

 

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Business

5 COMMON MISTAKES TO AVOID WHEN CHOOSING A WEB HOSTING SERVICE

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If you are relatively new to the world of web hosting, you will be bombarded by advices and tips once you start looking into ways to host your brand new website (or indeed, even when you are at the planning stage or trying to find out whether you actually need a website or should simply go to a website builder). This article will hopefully help you avoid making them.

1. Using a free hosting service
A free hosting service might be useful if you are running your blog/website as a hobby or a community group. It will likely come with banners and pop-up ads though and search engines tend not to like websites hosted on free services. Note that there are good free web hosting services too but it is a very tough market to survive.

They are notoriously unreliable when it comes to speed, uptime and availability and because you haven’t paid for anything, don’t expect any compensation if they disappear or suffer from downtime.

Expect support to be minimal with no advanced features like free databases. You also risk losing credibility, particularly if you are hosted on a domain name like yourbusiness.get-free-hosting.com, rather than using a genuine domain name (although, some free web hosting providers do allow you to park your domain).

The bottom line is you usually get what you paid for and if you paid nothing then don’t expect much. And web hosting doesn’t have to be expensive. We even compiled a list of the best cheap web hosting services here.

2. Choosing a web hosting package with no refund guarantee
Some web hosting companies do not provide a refund guarantee for their starter packages. Choose one that offers a money back guarantee in case you select the wrong package.

A good hosting company will gladly refund you or move you onto a new package that suits your needs. After all, it is in their interests to make sure that you are a happy customer even if you leave them as you may well come back in the future should your circumstances change.

3. Choosing a shared web hosting package when you need a VPS, or vice versa.
The two main types of web hosting packages you can select are shared or VPS. If your website is small and straightforward, shared hosting is the one for you. A Virtual Private Server is only required for websites with high traffic. If your small website grows in the future, you can always switch over to VPS or dedicated hosting, in the meantime save your hard-earned money with some shared hosting.

4. Buying based solely on price
There are two different ways you could go with this:
1. Assume all web hosting is the same, so buy the cheapest you can find
2. Assume the best hosting packages cost more, so go for a higher priced package in the hope of getting better quality hosting.

Hosting is a commodity, so it’s tempting to go for the cheapest plan available, on the other hand you might be tempted by some of the marketing jargon used to up-sell more expensive packages.

In a very competitive market, price cuts and special offers will often be used to win customers, so don’t pay more than you need to and keep your eyes open for discount codes. The saying “you get what you pay for” doesn’t necessarily apply to paid web hosting, as a cheap package will quite often be perfectly adequate for a start-up website or personal blog.

Keep in mind that the price you see advertised is a monthly price. When you get to the checkout that figure will be multiplied by 12 months and have VAT added on top. This is standard industry practice and most hosts will advertise pricing this way. You may also get a discount for going for longer periods (annual or bi-annual).

5. Not knowing your limitations
You will come across terms like “unlimited” and “free” while searching for shared hosting packages. If it seems too good to be true, it probably is. “Unlimited” bandwidth and storage will have a limit.

Check the terms and conditions to find out more, but restrictions of personal file storage are common, as are rules about certain types of media or streaming. Hosting companies have to implement these restrictions to ensure the smooth running of the service for everyone on a shared server since resources (the electricity the server consumes, the bandwidth used by the server, the hard drives) do cost money.

Ask your web host if you can do the following before signing up for a package: Maintain multiple POP accounts, add statistics to your account, install new software on your own, use a shopping cart on your website

Source: Tech Radar

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