Saturday, February 28, 2015

Complication and Implication of Virtual Water- II

Fresh Water – Concern on Global Food Security

For several parts of the world, fresh water has become a scarcity and over exploited natural resource has now given rise to concern on global food security as well as damage to fresh water ecosystems. Situation seems to increase with the FAO making its estimate that the food production should be double by 2050 and hence food chains should be more efficient with regards to the usage of consumptive water. For geographically and small well defined Australian mango industry, with an average annual production of 44,692 ton of marketable fresh fruit, was 2298.1 kg−1 of average virtual water content, which is a sum of green, blue as well as grey water, at the orchard gate.

Due to wastage however, in the distribution as well as the consumption level of product life cycle, the virtual water average content of 1 kg of Australian grown fresh mango used by Australian household was 52181. This figure compared to an Australian equivalent water footprint of 2171 k−1is the volume of the usage of water in Australia with equivalent capabilities in contributing to water scarcity. Nationally, the distribution and consumption waste in food chain of Australian grown fresh mango to the consumers, indicate an annual waste of 26.7 Gl of green water with 16.6. Gl of blue water

Intervention in Reducing Food Chain Waste – Great Impact on Fresh Water 

These discoveries indicate that the intervention in reducing food chain waste would probably have a great or even a greater impact on freshwater resource available like other water use efficiency measures in food production and agriculture. Analyses of evolution and the structure of trade in virtual water had shown that a number of trade connections together with volume of virtual water trade had doubled for the past few decades. Developed countries have been drawing on the rest of the world to ease the pressure on domestic water resources.

Three studies have been done though it fills three important gaps in the research on global virtual water trade, the first being that in previous studies, virtual water volumes were put together from countries which were envisaging various degrees of water scarcity which was incorporated into assessments of virtual water flows. Secondly some previous studies assessing virtual water networks in terms of immediate water was used for food production though refrained from indirect virtual water used in the supply chains underlying all traded goods.

Global Virtual Water Network Structure

In the analysis, the use of input-output analysis included indirect virtual water, noting the existing conflicting views on whether trade in virtual water could lead to overall savings in global water resources. A re-visit to the Hechscher-Ohlin Theorem was done in the context of direct and indirect virtual water, to determine if international trade could be seen as feasible demand management tool in reducing the water scarcity. It was found that the global virtual water network structure changes significantly on adjusting for the purpose of scarcity.

Besides, the Heckscher-Ohlin Theorem can be validated when indirect virtual water is appraised. Water once seen as an infinite resource is in fact, a finite resource. Moreover, fresh water is an important resource to plants, animals, human and all living things on the planet Earth. Geographic zone of abundance and scarcity is due to unequal global distribution of fresh water and global climatic changes tend to redistribute precipitation away from geographic locations which has sufficient or excess supply to cope up with the population.

Thursday, February 26, 2015

Complication and Implication of Virtual Water- I

Water – Huge Number of Characteristics – Important Economic Good

Water, though not a normal economic good has a huge number of characteristics which distinguishes it from the other goods and these characteristic individually may not be important but its combination makes water an important economic good.`Virtual water’ term was first used in the context of water scarce in Middle Eastern and Northern African countries that imported huge quantity of their food and thereby reduced substantially the demand of water in domestic food production as well as compensated for lack of water.

Importing food was virtually equal to trading water for these countries. Allan (1966) termed water - embodied in food import as virtual water. The terminology as well as the scope of virtual water over the years is extended beyond the original purpose. Presently the definition accepted on virtual water is the water requirement for production of commodities and since food production in several countries is by the largest water user, topics on virtual water problems have been targeted primarily on food commodities.

Virtual water is politically silent and economically invisible (Allan 2003a) and in the past, this has made it possible for water scarce countries to manage with water deficit through food import without a policy discourse of national water scarcity.

Debates – Usefulness of Concept/Feasibility to Import Virtual Water

The term virtual water came into focus in mid 1990s and since then has drawn growing awareness among policy makers, general public and scientific communities. It has become a topic which is discussed recurrently at several international conferences as well as meetings, especially the World Water Forum organized by the World Water Council as well as the Stockholm World Water Week which is an annual event and convened by the Stockholm International Water Institute.

Relevant issues publications have been rapidly on the rise in the international journals. There have been intense debates on the usefulness of the concept as well as the feasibility to import virtual water to reduce local scarcity of water. More than a decade of efforts have been made in virtual water studies and it is time now for a critical review to be done on relevance of virtual water concept in heightening our understanding of real water resources management.

Water – Limiting Factor/Significant Impact

Water is now becoming an increasing limiting factor for sustainable growth and development of economy in many countries, its allocation having a significant impact on the whole economic efficiency especially the mounting physical scarcity in some regions. Need for huge water supply tends to increase the vulnerability in the affected areas.

Moreover, water has also become a strategic resource which involves disputes among those who tend to be affected differently by various policies. Some papers tend to analyse various policy interventions focused at improving water allocation decisions with a novel approach which could incorporate macro as well as micro level options in a unified analytical guidelines which could facilitate assessment of different linkages with other policies as well as their impacts in individual sectors and the wide economy.

Policy impacts comparison indicates the usefulness of the guidelines in information, which the policy makers could use to rank policy intervention as per the emphasis given on various policy objectives.

Wednesday, February 25, 2015

Virtual Water

Virtual Water
Virtual Water Trade – Embedded/Embodied Water 

Virtual water is defined as the total volume water which is needed in order to produce and process. Virtual water trade also known as trade in embodied or embedded water is related to hidden flow of water in case other commodities or food tend to get traded in different places.

On an average it takes around1,600 cubic meters of water to produce ` metric tonne of wheat and the accurate volume could depend on more or less on the climate as well as agricultural conditions. According to Hoekstra and Chapagain they have defined virtual content of product – a commodity, service or good, as `volume of freshwater which is utilised to create a product, measured at the place it was actually produced’ and relates to the sum on the utilisation of the water in the various stages of the production chain.

According to John Anthony Allan, Professor from King’s College London and the School of Oriental and African Studies had introduced the concept of virtual water in order to support his views that countries in the Middle East could save their scarce supply of water by relying on import of food.

He received an award of the 2008 Stockholm Water Prize, for his contribution. He states that `the water is considered to be virtual due to the fact that once the wheat is grown, the real water used to grow it is no longer actually contained in the wheat and the concept of virtual water helps in realizing how much water could be needed to produce different goods and services’.

Some Deficiencies in Concept of Virtual Water

He further states that in `arid and semi-arid locations, the value of the virtual water of good or service could be useful in determining the best use of the available scarce water.’ However there are some deficiencies in the concept of virtual water which means that there is a significant danger on depending on these measures in order to guide policy conclusions.

As per Australia’s National Water Commission it is considered that the measurement of virtual water has less practical value in the making of decision with regards to the best allocation of scarce water resources.

Recently the concept of virtual water trade has been gaining weightage in the scientific and the political arguments with the notion of its concept being ambiguous and changes have been moving between a descriptive, analytical concept and a political induced strategy.

From the point of view of an analytical concept, virtual water trade relates to an instrument which enables the identification as well as the assessment of policy choice not only in the scientific but also in the political discourse.

Concept Analytically helps Global/Local/Regional Level

From the point of politically induced strategy, the query is whether virtual water trade could be used in a sustainable way, or whether implementation could be managed in an economic, social or in an ecological manner and which countries would have a meaningful option of the concept offered.

In the framework of latest developments from supply oriented to demand oriented management of water resources, new field of governance has opened up which facilitates a differentiation as well as balancing of different perspective, interest and basic condition.

The concept analytically helps in distinguishing between global, local and regional level, together with their linkages. Which means that water resource problem needs to be solved.

Tuesday, February 17, 2015

Negative Inflation

Image credit: Sofia news agency
Inflation – Deflation 

Inflation is a term which tends to reduce the real value of money over time and deflation increases the real value of money, the currency of a regional or national economy, enabling an individual to purchase more products with the same amount of money overtime. In other words deflation is a situation when the price level decreases and the inflation rate tends to get negative.

Economist are of the opinion that deflation could be a problem in a modern economy since it increases the real value of debt and affects recessions, leading to a deflationary spiral. All episodes of deflations do not correspond with phases of poor economic growth. During the 19th century, deflation took place periodically in the U.S. and this deflation was the result of technological progress creating significant economic growth while at other times was due to financial crises particularly the Panic of 1837 that caused deflation during1844 as well as the Panic of 1873 triggering the Long Depression which lasted till 1879.

These periods of deflation were prior to the establishment of the U.S. Federal Reserve System and the active management of monetary issues. Deflation episodes were rare and brief with the development of Federal Reserve while American economic progress has been unprecedented

Negative Inflation 

Negative inflation is said to be an economic phenomenon wherein the economy tends to move out of an inflationary phase and enters into a phase where there is less money in circulation. Negative inflation tends to occur when the prices fall due to the supply of goods which is higher than the demand for those products.

It is often due to reduction in money, consumer or credit spending and could be the result of a combination of various factors which may include, having excess money in circulation that may decrease the value of money which in turn would reduce prices, with more products manufactured than the demand for the same.

 This could lead to businesses decreasing their prices in order to urge consumers to purchase those products and not having sufficient money in circulation causes those with money to hold on to it instead of spending it and decreased demand for goods decreases spending.

Though it would seem that lower prices are good, deflation could ripple through the economy for instance when it creates high level of unemployment, turning into a bad situation and this type of a recession could turn into a worse situation like a depression.

Leads to Unemployment => Decrease in Spending => Less Demand

Deflation could lead to unemployment since the companies tend to make less money and react on cutting costs to survive which may include in closing of the stores, plants and warehouses and laying-off their workers.

This results in the worker having to decrease on their spending leading to less demand with more deflation causing a deflation spiral which may be difficult to break. Deflation tends to work without affecting the rest of the economy when businesses are capable of cutting the costs of production for the purpose of lowering prices like in the case of technology, since the cost of technology products has reduced over the years though it was due to the cost of producing technology that had decreased and not due to decreased demand.

Monday, February 16, 2015

How to Save Hundreds of Dollars with Tax Credits

Tax Credits
Awareness of Tax Credit

Being unaware of tax credit is like losing on a pay check and sad to say, several individuals are not aware of it. Each dollar of credit is equal to a dollar in tax savings, for instance in a federal income tax bracket of 28% and getting a buck’s worth of additional write-off could save one with 28 cents. Individuals tend to miss out on tax credits mainly due to the fact that they seem to be in a hurry when the dreaded tax filing deadline is near. Credits tend to fall through these cracks since they panic resulting in making complicated calculation or filling out additional forms. Setting aside more time on your return could help you to net several hundred dollars or could be more. For example –

Foreign Tax Credit - If a person has worked in a foreign country or would be having substantial income outside U.S, they must be well aware about the foreign tax credit which is intended to save you from being taxed by the two different countries on the same income. If the person tends to invest in some international mutual funds they could collect credit due to the fact that it is likely you paid foreign taxes the previous year – knowingly or not. A closer look at the statement on the fund summary of the previous year will provide you with some calculations in order to know the exact amount of foreign taxes which should show up on Forms 1099-DIV and 1099-INT. Presuming that the foreign taxes are from these sources totalling to or less than $300, one can claim the credit on Form 1040, Line 48 and have around $600 of foreign taxes and continue to follow the easy procedure if filed jointly. In other cases, one could file Form 1116 to claim your credit, though it could be a bit nasty.

Dependent Care Credit - When a person is paid to take care of an under-age child of 13 while the parents are out at work, one could be eligible for the dependent care credit where the credit percentage could range from 20% to 35% based on qualifying expenses and depending on adjusted gross income – AGI. Maximum credit possible for a child could range from $600 to $1,050 and for two or more the range would be $1,200 to $2,100. One should also be eligible if expenses were incurred in taking care of any other dependent that could be physically or mentally incapable of taking care of themselves, a disabled person. For high income taxpayers, the credits have not been phased out though lower dollar limits mentioned could be applicable. Form 2441 – Child and Dependent Care Expenses could be filled and credits claimed on Form 1040, Line 49 on furnishing the name as well as the Social Security number of the care provider failing which the IRS would disallow the credit with recomputed tax and would either reduce the claimed refund or sent a bill for the difference.

Moreover the Form 2441 also informs the IRS if one owes the Nanny Tax if they have an in-home care provider. One needs to be careful in taking credit if they have also contributed to a pre-tax dependent care flexible spending account – FSA the previous year through their employer. The pre-tax FSA is usually a process since it could reduce the taxable salary cutting federal as well as state income taxes together with Social Security and Medicare taxes as well. The tax saving rate could exceed the 20% effective tax savings rate which could apply to several people claiming the dependent care credit.

Elderly/disabled Credit – is applicable to individuals who have reached the age of 65 at the end of a particular year or one who has retired on permanent and total disability. Strict income limits are applicable and the credit is not available to most of them. Credits could be claimed on Form 1040, Line 54.

Adoption Credit - is when an underage of 18 years in adopted, you could qualify for a 2014 tax credit up to $13,190 for the adoption expenses and if married, a joint return to qualify could be filed. Phase-out rule, for 2014 could cause the credit to vaporize between AGI of $197,880 and $237,880. On qualifying for the same, credit could be claimed by furnishing details on Form 8839 – Qualified Adoption Expenses, with one’s 1040 with the credit amount on Line 54.

Credit for Overpaid Social Security Taxes – is where there has been more than one employer in 2014 and the earnings have crossed over $117,000 with combined salary, one has withheld too much Social Security tax. Recovery of the excess can be done by reporting the overpaid amount on Form 1040 Line 72 which is treated as a tax repayment and the effect on the tax bill is that of a credit.