Fed likely to raise rates again

Interest rates are once again on the rise. I think that the main reason for the hike in the interest rate is an attempt to slow down inflation. With higher interest rates comes slower growth. Fed officials are watching the economic data closely as they try to determine when they can stop raising rates, but the last report on personal income and spending last month is unlikely to change them from their current trend. After our country recovers from its recent disasters I know it will become a flourishing place for a long time.

Tiny Vegas House Sitting in the Middle of Housing Craze

Click here to see this 700 square foot home nestled in the shadows of billions of dollars of new condominium projects. The house has “Feliz Navidad” painted on the front windows that won’t wash off. The landscaping consists of four shriveled cacti and the patio is piled high with empty cat food boxes. This home is on the market right now for $1.2 million, and the owner won’t accept anything but cash. They say that it is like beach front property they’re not going to be making any more of it. This craze is going throughout the city of Las Vegas. A vacant one acre lot in Las Vegas is up to $601,600 that is an 88 percent increase from last year. I can’t believe this outrageous real estate market. The most outrageous thing is that speculators think that it is going to keep going up. I think that it is quite scary we as students are about to graduate and find jobs, but how are we going to find a house that we can afford?

Gates gives BIG!!

I came across an article today that amazed me! According to an article found on the Yahoo site, Bill Gates is giving $258.3 million dollars to fight malaria. Not only was I impressed with his generosity, and goodwill, but I also thought that his act directly related to a principle that I have heard about in many of my economic classes, dealing with positive externalities, particularly those that stemp from vaccinations. While part of the money Gates is donating will be used to conduct further research, a huge chunck is going to the production of a likely successful vaccine. Like I have learned in many of my economics classes, while those that will receive this vaccination in the future will benefit from the fact that they won't be able to contract the disease, positive externalities will also fall upon those that will never receive the vaccine. Because those that are vaccinated can't spread the disease, even those that aren't vaccinated won't be able to contract the disease from them, thus showcasing how a positive externality could potentially result from this great amount of funding from Gates. I have heard examples of positive externalities dealing with vaccines countless times in economics, but reading this article gave real meaning, and actual life application to me.

Bush's Pick for the Supreme Court

President Bush has nominated Samuel Alito into the Supreme Court. After the conservatives derailed his previous pick of Harriet Miers Bush is seeking to shift the judiciary to the right and mollify the conservatives. Democrats argue that Alito may curb abortion rights and be “too radical for the American People.” I think that Alito is a very good candidate for the job. He was at the top of his class at Yale University, which is one of the most prestige law schools in the nation and he has more judicial experience than any Supreme Court nominee in more than 70 years.

Consumer spending bounces back in Sept

I found this article and thought that it was interesting. I think that it is a good sign that people are spending money. It helps people to invest money in our economy knowing that the trends are positive. It said that there was a 1.7 percent growth in the income in America and there was a .5 percent increase in consumer spending. Economists expect consumer spending to be moderate in the last three months of this year. Auto sales are dropping off with the end of employee pricing and energy prices cause cut backs. I hope the trend continues and our country continues to get better.

Does Wal-Mart Equal Quality?

Wal-Mart will roll out its holiday advertising campaign next week, and jitters that the seasonal pricing competition is getting an early start put pressure on shares of electronics retailers Circuit City and Best Buy. Wal-Mart said it would launch an "aggressive" advertising campaign for the holidays starting on Nov. 1, which would make it the earliest launch in the retailer's history. They are trying to lure higher-spending shoppers into their store by offering more high-end items such as: high definition, flat screen televisions, portable DVD players, and a wider variety of digital cameras. Haven’t we learned that a lower cost usually means lower quality? I don’t mind going to Wal-Mart to purchase a camera or an MP3 player, but if I am going to buy something as expensive as a flat-screen television I would much rather go to Best Buy. Stores like Best Buy and Circuit City can’t necessarily compete with Wal-Mart’s prices, but when it comes to extra warranties and guarantees I feel more comfortable at Best Buy. It’s no secret that Wal-Mart will take nearly anything back, but that’s because that is exactly what you’ll do when buying a high-end item from them is take the piece of junk back.

Outsourcing, will it become the new airline trend?

One of the remedies that Northwest Airlines is attempting to implement into their bankruptcy case is the outsourcing of flight attendants, ground crews, and pilots occupations if they do not agree to revise their current labor contracts. This proposition to the courts if passed will eliminate hundreds of millions of dollars in debt for the company due to cheaper labor rates and intern eliminate thousands of currently held jobs. Personally, I do not believe this process is ethically sound on the airlines part. It seems to me as a devious way to terminate the contracts they cannot pay and force labor rates in the airline industry down more than they already are. The MSNBC article reported the fact that if this proposition receives the courts approval for Northwests request many other airlines are likely to follow suit.

School loans and Social Security

Retirees and others recieving social security checks are using a percentage of the check to pay off school loans. I read of a particular man who is trying to pay off his $80,000 school loan from 20 years ago via his social security funds. The problem he is running into, is that the law states that the loans cannot be older than 10 years. However, the Public Citizen Litigation Group is fighting to remove the "10 years old" clause. If they are successful in this battle, will this have a significant change on how quickly students pay back their loans? I mean if they do not have to pay back the loan immediately because they know they can rely on their social security check in the future, then why not just let the loan accumulate interest. Then by the time they start collecting the social security check, they have a huge loan to pay off. By allowing this to happen, we would really be hurting the loan industry, because if people hold off on paying their loans until they are in a condition to receive social security checks, they probably will not be able to pay off the entire loan (using a small percentage of the check each month) before passing away. Again we must remember the "Forgotten Man" concept, which is to take into account all those who will be affected both positively and negatively when making decisions.

Wal-Mart Seeks to Save Energy

Wal-Mart's chief executive announced specific environmental goals to reduce energy use in its stores. Their goals are to increase the fuel efficiency of the truck fleet by 25% over the next three years and double it within ten years, invest $500 million in technologies that will reduce greenhouse gases from stores and distribution centers by 20% over the next seven years, and they also want to design a new store within four years that is at least 25% more energy efficient. Wal-Mart is also pressuring thousands of companies worldwide to follow their lead. Most critics said that while this is an admirable gesture to save energy Wal-Mart is just trying to divert attention away from their image problems. I think that they really do care about the envoronment, but maybe they are trying to divert attention away from the lousy wages they offer.

Price linked to car safety. . .

Recently, I read an interesting article concerning some of the most unsafe cars. According to the unsafe cars article, it said that the Insurance Institute for Highway Safety gave poor ratings to econo cars such as the Optima, from Kia, and the Elantra, from Hyandai. The article also noted that although optional in cars, side air bags can dramatically improve the state of safety within a vehicle. After reading this article, there are several economic concepts that come to mind. In a market full of relatively affordable commodities, such as the Optima, and Elantra, people are willing to buy an inperfect product, because the price is right. However, there are also those that are willing to pay a high price for a distinctive quality factor, and in the case of most higher priced cars, that generally equates to higher safety. One class of cars, the economy variety, seems more elastic, if a car increases features, but substantially increases the price, certain buyers are likely to purchase a cheaper car instead. For those that don't put a price on safety, higher priced cars, or safer cars are generally more inelastic, and if the price goes up, but safety features improve substantially, buyers will still keep buying that car. It is amazing to look at the world in terms of what money can buy. If money isn't an object, one can attain nearly anything, from a safer vehicle, better education, or even great healthcare. While some people's quality of life is related to how hard they work, others' is simply a factor of money, whether earned, or inherited, and while even the richest person in the world has "limited resources", it is interesting to see how those resources can improve their life, and available opportunities.

Stocks are on the Rise

This past week was a tremendous week for many companies' stocks. Companies such as Avon and Texas Instruments Inc. saw great jumps in the price of their stocks. After the announcement of Bernanke, the market only continued to raise. With the rise in interest rates, investors are selling off their bonds and investing the money into stocks. The major point of this article was to show that our economy is responding well to the recent hurricanes and even more recent charges filled against Vice President Dick Cheney's chief of staff Lewis Libby. I feel that it is a good reminder that we as a nation can not only get through the difficult times but can do so successfully so long as we do not flip out when the media tells us how doomed we are!

Can Ben Bernanke Do the Job?

Alan Greenspan's era is about to come to an end. Even though he may no longer be the Fed chairman, it is believed that if and when Ben Bernanke is confirmed that he will continue with similar policies as Greenspan. As this article states, Bernanke will be entering at a difficult time due to the rise in inflation. With his academic knowledge, he appears to be capable of the tasks they lie before him. For the most part, Bernanke has tremendous support from both sides. However, the one concern that has surfaced is his lack of real world experience in the stock market (he has never worked on Wall Street). My question is, how does one successfully fill the shoes of Alan Greenspan? And in the process of doing so, will our economy feel any negative effects?

Government Stepping In.

In this article, I was happy to hear that our government is finally trying to help out the citizens of this country with the current gas prices. Price gouging is a problem all over the country, and finally those who try to benefit themselves while hurting those around them will be stopped. Currently, democrats are proposing new ideas to stop these efforts and help us as citizens when we really need it. It is good to finally see the government step in and take charge on important issues like this.

Aggressive Initiatives Save Fuel At UPS Airlines

UPS has the world's ninth largest fleet of planes. Can you imagine the fuel bill they run up? New initiatives have been implemented to help them reduce fuel costs by up to one million dollars a month. I think that this will be the trend in most companies. There is no way around the price of an individual gallon of fuel but if you can become more efficient you can save money. The management of UPS measures everything. This is just another improvement they think needs to be done and will make them even more competitive in the shipping world.

UPS Expands Real-World Testing of Hydrogen Fuel Cell Technology

As an answer to the rising fuel cost the shipping company UPS has implemented the use of a hydrogen powered delivery car. UPS has a fleet of over 88,000 vehicles and could make an impact in their costs if they move to this new technology. Not only is the vehicle clean burning, the different system offer 10% more cargo room. As technology continues to increase the long run effect of increasing fuel prices can be countered.

Sarbanes & Oxley Act Pointless?

The Sarbanes & Oxley Act was created to protect investors by improving the accuracy and reliability of financial disclosures. It was signed into law in 2002. I found a recent article on businessweek that talked about a recent scandal with Refco whose CEO had hidden $430 million of debt. Refco's financial statements have been unreliable since 2002, which was when the Sarbanes & Oxley Act was passed. The issue has just surfaced and Refco has declared bankruptcy causing their shares to go from $28/share to under $1. Obvioulsy governmental regulations don't scare people enough to simply be honest and investors are losing millions of dollars over this type of fraud. Like Kevin Laundry said "If a CEO wanted to commit fraud, he could probably do it successfully." This unethical and immoral behavior is still going even though it's supposed to be more regulated. Maybe we need to start questioning these potential CEO's of their own ethics and morals before giving them such a powerful position. What do you think?

Running a Business Like a Girl

Being a girl isn't as bad as it used to be. Elizabeth Cogswell Baskin tells of the advantages of running a business and being female. She says that women have natural tendancies to go with their gut instincts. In doing so, they usually hire the better person for the job, because they don't go souly on resume's, they take the interview into account alot more than men. By going with their gut instincts they usually end up hiring the better employee. After dediding on a decision, they back it up with the facts and figures they need, and it usually ends up being a pretty good choice. I agree with Elizabeth on this one. Men tend to look only at the numbers and what looks the best on paper, but by letting yourself see into the whole picture, as women often do, the end result could end up benefiting you, and getting you that promotion you've been hoping for.

Bird Flu Isn't Affecting Consumption

It would make economic sense for something like the bird flu to cause a decrease in demand for poultry. This is true in some European countries, but surprisingly, U.S. consumers do not seem to be affected by the pandemic. Analysts have been worried that news of the bird flu would be damaging to the U.S. poultry industry, but so far chicken consumption has not dropped below the seasonal dip that occurs after summer grilling season is over. We've seen the same thing in the case of mad cow disease. Knowledge of the disease hasn't decreased the consumption of beef in the U.S. either. It's interesting to see the value consumers place on different pieces of information. We know we are at risk of getting sick - possibly even dying - but it doesn't affect our consumption of food. Our utility or benefits outweigh the risk of getting sick.

Gas Prices Cause a Shift in Demand

It seems that the recent rise in gasoline prices has influenced a shift in consumer demand from gasoline-powered cars to hybrids. Toyota came out with their first hybrid model about a decade ago, when gas prices started rising. They predicted that gas prices would continue to rise, and there would be a point where consumers would not be willing to pay for gas. American car companies, such as Ford and General Motors, are now in trouble. Consumers are switching from their gas-guzzling SUV's to the smaller, more fuel-efficient Asian cars. The Toyota Prius, a hybrid, gets 65 miles to the gallon in the city and 51 miles to the gallon on the highway. Toyota claims that the hybrid is also powerful, for those who are worried about driving a car with no power. The hybrids will not only be cheaper in gas, but they will also be better for the environment.

India to Space

As noted in a current post, India is seeing progression in the world of technology. They are also close to sending a citizen to space, compliments of the United States of America. This article did not share many of the details concerning this trip. It did share that the trip will be fully funded by the Bush administration. The whole purpose of the trip is to acknowledge our partnership with India. I believe that partnerships are vital, expecially on the global market. However, I feel that the U.S. government is kicking its own butt by always trying to please other countries and neglecting some major domestic issues. If the government was to focus more on in-house issues (ie. welfare programs, the homeless population, and illegal citizens) versus trying to make the rest of the world happy, I believe that it would receive more support from its own people. I am not saying to drop the rest of the world and only focus on our country, because that would not be a feasible solution concerning the necessity of our importing/exporting businesses. But the government needs to do a self-evaluation and figure out how to keep more of its funding here within our country in order to boosts its morale. When a country's morale is strong, usually the economy is too!

Advances in India

In the developing nation of India, computer use is not widespread, and according to the IT Innovator, it is particularly difficult because of differences in language. However, new steps are being taken to offer more access to the Indian people. Ironically, the article states that Indians make vast amounts of software, yet can't really access it, or use it for their benefit because of the fact that many programs are not translated into their native language. Shekhar Borgaonkar has developed a "gesture pad" which he believes will enable more Indians the opportunity to use computers, and the internet in their language. The keypad will also help them perform basic tasks on a computer such as entering information for documents, etc. I am excited that things like this are happening in India. In a nation plagued by poverty, such an invention could offer a ray of light into many struggling peoples' dark lives. I think that the more knowledge, and access to technology an individual has, the greater their potential is to thrive in a global technology. Perhaps one day, more Indians will be able to make profits over the internet selling their beautiful, handcrafted goods, or unique services, etc. With access to the web, people living in desolate villages could have a forefrunt for their products and services unlike ever before. The key for India's economic growth is less corruption, and more opportunity. The bright, and gifted people of India will hopefully soon have more access to the world through the use of computer, and internet technology, and with that comes greater possibilities for a better life.

Bush speaks again...

As Bush's approval rating has slipped to an all time low, Americans, and nations abroad are questioning him, and his motives for keeping U.S. troops in Iraq. In a recent speech, covered by BBC, Bush gave yet another foggy, and unsubstanital explanation as to why the U.S. is still in Iraq, and after reading his remarks from this article, I had a number of thoughts come to me. In economics, I learned that in an efficient society, marginal social costs should be equal to marginal social benefits, so shouldn't a multi-billion dollar war be measured in terms of its social costs, and social benefits? At a cost of billions of dollars every month, according to Iraq War, why hasn't more been accomplished in terms of gains, or benefits for humanity? The Iraqi people, particularly women, are still as oppressed as ever, and I believe that all the U.S. has to show for their presence in Iraq are more headstones, widowed wives, orphaned children and grieving friends, and family. The same can also be said for the Iraqi's. Is it really our job to save Iraq at the expense of thousands of our citizens? Bush, true to form, continues to sentimentally tell the people of the World that the U.S. needs to continue its mission in Iraq, but I must speak out in opposition. The U.S.' economy, and state of humanity is deeply suffering, and it is time for President Bush to come up with a new venture that will equalize society's marginal costs, and marginal benefits. Why isn't Bush shelling out $7 billion of our hard earned tax dollars every month to help us? There are homeless missions throughout the United States filled with people who could receive job training, and a sense of hope for their lives. If those people could be given a second chance at life, could attain employment, could provide for their children, and could contribute to society, everyone would be better off, not just one man in pursuit of a major political power stroke.

Alaskan Pipeline

Alaska has proposed a contract that would initiate a 3,400 mile pipeline that would transport natural gas from Alaska's North Slope producers to the Lower 48 states. The governor of Alaska was quoted as saying, "We think that we are entering a very important milestone in the history of Alaska." The project would cost at least $20 billion. If the pipeline actually passes legislation it will be in use for decades to come, pumping an estimated 35 trillion cubic feet of conventional natural gas known to be contained in the North Slope oil fields. The pipeline proposal comes in a perfect time. Heating bills are expected to rise between 50 and 70%. The increase in available natural gas would shift the supply curve out and prices would begin to fall. Opportunities like this don't come around that often; I hope that the misguided individuals that make up our political left don't screw this up!

The Economy Works in Strange Ways

It is really fascinating to watch the economy work. Hurricanes Katrina and Rita have put 478,000 people out of work! That is an enormous amount of unemployed people just from two natural disasters! However, many individuals will eventually get rich from the disasters! Think about it, will the entire city of New Orleans have to be rebuilt? Of course it will, and who will do it? Private contractors, masons, concrete companies, sanitation companies, architects, engineers, business men, insurance companies, etc. Can you imagine the amount of work that will be required to put that city back together? Not all of the 478,000 people currently unemployed will get a job with one of these companies coming into New Orleans to rebuild it, but many will. The economy will rebound, unemployment will fall, and New Orleans will be a beautiful city again!

Have You Driven a Ford Lately?

Ford's CEO, William Clay Ford Jr., just announced a $284 million loss in the third quarter. He also announced a plan that will become active in January to close many American plants and make significant job cuts. Ford made this announcement shortly after GM announced a huge loss in the third quarter as well. What is wrong with our American auto industry? Ford is the founder of the assembly line, a novel system adopted world-wide to increase production speed and efficiency, yet they are losing money everyday and on the brink of losing it all if drastic changes aren't made! Where did they go wrong? I know that in economics we talk about trade-offs and opportunity costs, and we discard buzz-words like downsizing and out sourcing, but I truly feel as if "Total Quality Management," buzz-word or not, is where the American auto industry missed the boat. Of course, they are actively practicing it now, just 30 years to late! As Japanese auto companies continue to steal away greater portions of the market, Ford and General Motors will continue to feel the heavy hand of defeat and the disgrace of not acting sooner when the world began to expect QUALITY.

Carpet Swiffer

Proctor and Gamble's magic carpet sweeper is going to revolutionize the vacuum industry. According to Business Week online P and G invented a new type of swiffer but it works for carpet. It is surprisingly simple but it also is very effective. If you were to crush up some cheerios place them on the carpet and then drag a piece of cardboard across the top of them pressing the edge against the carpet at an angle what would happen? The cheerios would spring up in the air. If you attached a balloon charged with static electricity to the cardboard, the balloon would attract the pieces of cereal. This is how the carpet swiffer works. P and G has been trying to invent a product like this for some time and was finally able to do so. I wonder what this is going to do to the vacuum industry. Will Proctor and Gamble take market share from vacuum companies or will their new invention simply create a whole new market. I suppose that everyone only has a limited amount of income and we must decide where we are going to allocate those resources, so they would have to take it from other industries. My prediction is that there will be a combination of the two, where market share will be stolen from the vacuum industry but there will also be a whole new industry in which people will spend money they would not have otherwise.

Wholesale Price increase

I found this article and thought that it was interesting. It says that wholesale prices are up due to an increase in the fixed costs. "The real question is whether companies will squeeze their profit margins as costs increase or if they are going to increase prices." It will be the decision of the company leaders to whether they will raise prices or cut costs in other areas. I think that cutting cost will need to be the answer since the market is so competitive in today's economy.

The Impact of Gas

It is amazing how the increase cost in one good can cause such a change in the price of other goods. We all feel the pain when we go to the pumps to fill up, but not many of us have thought about how higher gas prices will cause other prices to increase. The article I found points out that we are facing the largest increase in wholesale in the past 15 years. I wonder how much more we can take before we face real problems.

Cell phones in Africa create true business opportunities

In America, cell phones are everywhere. In my family of four, three of us have a cell phone, and here at school, 100% of the roommates in my apartment have their own cell phone. Now, however, this trend toward increased cell phone use, is becoming widespread throughout Africa, and is truly being used as an economic tool in their society. According to an article about cell phones in Africa, merchants throughout Africa use cell phones as a means of determining their prices, and daily business activities. For example, one man mentioned in the article that he uses his cell phone to determine if it is worth his time to ship his fish to Tanzania. Others use their cell phones as a tracking device, and are now able to know where their elephants, etc. are at all times. While many people in the U.S. take their cell phones for granted, people in Africa truly value the opportunities that cell phones provide them. The article mentioned that cell phones not only save merchants time, but also increase competition among sellers of goods, lowering prices for farmers in the process. Although many people in Africa don’t have a cell phone, lower costs, and greater technology are enabling more Africans the chance to have access to a phone, offering them tremendous convenience, and business opportunity. I find it exciting that Africa’s people are gaining greater access to cell phones, and I look forward to seeing what happens to their economy, and quality of life as a result.

Prices are up, up, up!

As America is trying to recover from a recent string of natural disasters, including the devastating hurricane Katrina, prices are increasing, and all facets of the economy are feeling the affects. Consumers have experienced some of the highest price increases ever within the energy industry. In fact, the Price Article states that gasoline prices have gone up nearly 18 percent! In addition to rising prices throughout the economy, hundreds of thousands of people remain jobless because of the recent hurricanes. With people out of work, prices on the rise, and the current state of inflation looming over the nation, it seems that people’s ability to purchase has gone down, which has ultimately affected numerous industries throughout the nation, and the World. While it is impossible to predict when, or where a natural disaster will strike, it is nearly as difficult to foresee how the economy will respond after such a disaster. From an economic standpoint, natural disasters have the potential to change countless areas of the economy, including employment, supplies of commodities, consumer demand, and society’s overall purchasing power, proving that natural disasters have externalities that extend much further than the rubble surrounding destroyed homes, and buildings.

Religions vs. Firms

I'm not sure if anyone had a chance to attend the Mountain Plains Management Conference, but i had the opportunity to go for another class. I attended a paper presentation that discussed how the Solow growth could be used to explain the growth of religions. The Solow growth model explains the growth of capital through accumulation. Religion uses proselytizers to accumulate members or capital. The less you put into production, or the less people you have trying to recruit others to your faith, the higher the burnout rate. Through this example, you can see that it is similar to firms that go out of business because they don't put evough focus on the rate of saving, depreciation, and population growth. This is just a very simiple overview of the paper, but it was interesting to see how an economic principle ties into the everyday aspects of our life. There was discussion after the presentation and someone mentioned how our military even works on a recruiting basis. Like i said, it was just interesting to be given such a good example of how economics really plays a part in our lives, and nobody really recognizes it.

Insuring Yourself

I found this article called “Insuring Yourself” it stated that the number of Americans without health insurance has risen by 800,000 just last year, reaching an all time high of 45.8 million. Of those 45.8 million more than 21 million were full-time employees. With the rising costs of health care employers are asking their employees to bear some of the burden for insurance premiums. Some people have chosen to purchase their own insurance through licensed companies in their state. There are only about five percent of Americans who are doing this, but this number is expected to rise in the next few years. This article kind of scared me. I can’t believe that there are that many people in America without insurance. Insurance is expensive, but with the increasing cost of health care I think that it is very necessary to have. In another class I learned that the Europeans just pay higher taxes and get their health care for free. You would think that if that was the case the health care would not be so good, but the Europeans think that it is great. Would you rather pay higher taxes in order to get your health care for free?

Linking Values and Attitudes

I went to the Mountain Plains Management Conferences and listened to Jerry Geisler. He has done an incredible amount of research on linking values, attitudes and behavior. He made a few points that I thought were interesting during his presentation. Some of his research has concluded that the presence of a father in the home predicts success to the whole family rather than if the family has an education. I think that is somewhat true. I have a lot of friends that have come from a broken home and they seem lost and confused about what to do with their future. He has also studied the differences in the terminal and instrumental values between men and women. I thought that this was very interesting. Women and men have pretty much the same values when it comes to their families, but somewhat different values when it comes to worldly issues.

Taxes

I read this article concerning the tax rate and am a bit surprised at what it had to say. It makes sense that the smaller the tax base, the higher the tax rate must be. However, when they say that we can cut our taxes in half if there were not so many deductions, credits and other tax loopholes, one may get excited. I know that was my first reaction. Then after thinking about it, I am one of those who benefit from several deductions (work related). Therefore, the idea of all personal income being taxed is not so appealing. This is exactly my point in writing this blog. Often politicians tell us of these wonderful programs or ideals that will benefit everyone and at first they appear to do so, but after crunching some numbers they tend to not be so beneficial for most of us.

The American Dream

Everyone has their own version of the American dream. Forbes recently did some research to see just how much it would cost to live the upper-middleclass American dream. The article makes many assumptions of what the American dream is including a vacation home, 2 nice cars, family of 4, a kid in college, ect. So what does it cost to live this lifestyle, only an income of $370,000 in California or around $200,000 in Montana. These numbers surprised me a bit as I thought low six figures was plenty to live large. I guess if someone wants to live the American dream, a typical 40hr a week job will not due.

Bullying out the poor, making room for the rich

Hurricane Katrina left a huge mess and created a lot of homeless people. People's houses are sitting around damaged and they are now entering the real estate market. Whether these victims are selling their property to go buy or build something else, they need to get as much as they can out of it. An article I found states that the housing market in the affected area is in such short supply that homes spared from the storm sell almost immediately and now storm victims are listing even damaged homes for top dollar. But with the sudden trend of everybody selling, it is widely believed that developers will soon buy up whole blocks of destroyed homes to put casinos and entertainment complexes up in their place. People in these areas will seemingly be forced out for good. There is a lot of poor people that need a place to live which brings up an interesting question. Is it right for these developers to come in and hog all the land? They are in a sense forcing some people out, but they are also rebuilding the area giving the opportunity for new business. Should the government step in and help mediate the problem, or will things work out the way they are going?

Law of Diminishing Marginal Returns

I attended the Mountain Plains Business Conference and had the opportunity to hear Doctor Tufte's presentation, titled "Models and Growth of Faiths and Their Faithful." He related the growth of faiths or organizations promoting beliefs to the Solow Growth Model. One of the questions was, "What does the model tell us about faiths' adherent growth rate?" The point was made that a faith that encourages adherant growth will have to compensate with more mission work, or in economic terms, more capital. I thought the point interesting, and thought about the LDS missionary system. The LDS church actually increased the number of missionaries (capital) in an effort to gain more converts (output), but what they found was the law of diminishing marginal returns. They reached a certain point where the additional output gained from an additional missionary began to decline. So now, the church has reduced the number of missionaries back to the point where marginal product is still growing. This goes to show that economics can be applied almost everywhere.

Mountain Plains Ponzi Scheme

I listened to Richard L. Vail from Mesa State College tell the story about a man named Ponzi in the 1920's. I wish that he would have had more time to complete the story because it didn't seem like the story had any point. It was a story about a man who scammed a bunch of people out of nine million dollars, by telling them that he had an investment opportunity overseas. Basically, He said if you give me one hundred dollars now, in ninety days I will give you back one hundred and fifty. At first many people were very skeptical, but as time went on, he convinced many people to give him their money. He told them that he was taking advantage of an overseas arbitrage situation. He claimed that he could buy stamps and coupons in Italy for a fraction of the cost in the U.S. and then turn around and sell them for a large profit. The model was actually a plausible business model but he never did implement the strategy; he just took the money and shuffled it between investors. To make a long story short Ponzi got caught, bankrupted himself and two banks and then went to jail. The moral of story is arbitration can be a viable business opportunity but make sure that it is legal.

Big Three

I recently had the opportunity to attend the Mountain Plains Management Conference where I listened to Nicholas Avey discuss the big three of the auto industry. In discussing these big three the question was brought up in which of the three you should invest in. The big three are Ford, GM, and DaimlerChrysler. To figure out which one would be best in investing he and his co-author Robert Hull used the dupont model. There outcome was that Ford was the best followed by DaimlerChrysler and followed up by GM. This outcome was not a surprise to me especially with the hard times that GM has been having. One interesting note that Mr. Avey said was how many so-called experts predict that by the end of the year Toyota may very well take over DaimlerChrysler as one of the big three.

It Hit the Dirt?

Should baseball use instant replay? That is the question that one of the announcers asked last night after the questionable call by an umpire in the Angels/Whitesox game. The situation is still unclear today as the LA Times article shows. So would instant replay really have helped? I do not think that instant replay would be good for baseball for a couple of reasons that I will try to relate to economics. Though on the surface instant replay seems like a good idea, there would surely be some negative externalities too. The first is the time it would take to implement it 3 or 4 times a game. Do baseball games really need to be any longer? Next would be the history of the game. I do not think that baseball games were ever meant to be perfect, s%@! happens. I think that there should be an element of human error involved in baseball, what is next an electronic umpire calling balls and strikes. This situation is like many other economic situations where on the surface it seems like a great idea, but if you take a deeper look the picture is not so bright. In closing, I would like to say go CHICAGO because ever since Jordan left Chicago has sucked at everything.

Just Wanted to Say "Thanks!"

I don't know how many of you know anyone that is in the 222nd, but I know quite a few of them. People from my home town that I went to high school with and others that I have just met along the way. I know that some of you might not know that our National Gaurd unit was activated in January of this year and that they have been in Iraq since June. I sometimes get a chance to talk to some of them, or recieve a letter and they won't tell me what they do. All they say is that it is the worst of the worst. These individuals probably didn't realize when they were enlisting that they would be called to war, but when they were they dropped everything and went. They left families, friends, school, and work to go over there and keep us safe. I still don't know everything behind this war, or if I even agree with them being over there, but I do know that they are doing a great job while they have to be there. I have so much respect for them, and I hope everyone else does too because they are there for you as well.

Do I Really Want to Save Money in Gas?

According to new mileage ratings from the Environmental Protection Agency and the Department of Energy the Honda Insight a gas-electric hybrid car edged out the Toyota Prius as the most fuel efficient car in the U.S. The Honda Insight will give you up to 60 miles per gallon in the city, and 66 miles per gallon on the highway. That is just a shade higher than the 17 miles a gallon I get from my Ford F-150. I have crunched the numbers and found that if I were to drive 10,000 miles next year in my truck with the current gas prices I would spend around $1,500 in gas. If I were to buy a Honda Insight and drove the same 10,000 miles I would only spend about $500. Now the only thing I have to do is put together a cost/benefit analysis and find out if it would be more beneficial to take some of that extra $1000 dollars I would save and put it into more quality dates while driving my girl around in a little two seat, four cylinder Honda Insight, or whether I would be better off sticking to the “cheap date” approach while diving around in my big Ford truck. Let’s face it, if any of you guys have taken a girl out in Cedar City you already know what I’m planning on doing. Besides I don’t think the Honda Insight would have the towing capacity to get my boat to the lake (another gas guzzler), or my four wheeler up the mountain.

Utah Crimes

I had the opportunity to attend our very own professor David Tufte's presentation on his paper Crimes in Utah today. Even though his paper wasn’t all the way finished, he still did a good job of presenting his views and opinions. Not to mention he was very accepting of everyone else’s comments and ideas to better his paper. Tufte made the point that Utah may be high in one "crime" such as bankruptcy or fraud, but significantly low in another such as murder or rape. It was surprising to me to hear that Utah was so high in the bankruptcy area, although i can see how this might be. It seems to me that everyone in Utah is always trying to be better than their neighbor. Another "crime" Tufte talked about was perscription drug abuse. This may be due to mothers who are trying to be "super mom". We can only push ourselves so far before we break down, then it's on to the medications. There is so much pressure in Utah for mothers, and everyone else, to be perfect.

Business Plan to Improve the World

Many people in the world are just waiting for this brilliant, state-of-the-art idea to strike them, make them rich, and then live off the profits of that great invention for the rest of their lives. I found an article in Business Week that has a pretty good idea. Though it's great to see the advancement in technology, there is also a need for simpler products in third world countries. This article talks about a group of students that are combining all of the monitoring devices found in an intensive care unit into one simple device that can even be plugged into a T.V. This simple piece of equipment could bring the cost of getting all of those instruments down from $5,000 to $50. There are 5 billion people out there living at the bottom of the economic pyramid, they don't require the most state-of-the-art technology, but there is definitely money to be made by catering to the simple needs of these people.

Real Estate - Now Is Not The Right Time

People that have recently invested in real estate (2005), or are thinking about real estate as a possible investment plan for the future should carefully access their asset portfolio. As Geordie Crossan states that if your investment portfolio is 75% real estate holdings then you are overexposed to the current market trend possibilities. He compared our current situation to the 99' tech stock problem that arose due to many people being overexposed in those areas as well. Many analysts state the real estate boom will not crash but there is a strong possibility the market will retreat. The article Real Estate: Avoiding the Burn, states a few strategies that investors may want to consider if investing in the real estate market. Do not finance with adjustable rate mortgages, interest rates are increasing. In 2004, 64% of homes sold were second homes purchased as an investment. Some analyst’s say that those people "missed the train," the prime time to invest in real estate was 3-5 years ago. Along the same lines those people whom are buying these so called investments are actually using them as vacation homes rather than rental properties (if that is the purpose), the deficit can be tremendously unfavorable on the outcome of their investment. There is much more to this article, those points were just a few that stuck out. Personally, unless you are planning to use your home as a long-term investment, (which they say not to consider your home an investment) now is not the best time to jump into the real estate market.

The MBA's Challenge

This article talks about a San Diego State professor who challenged his MBA students to turn his initial $25,000 into one million dollars by December 31st to help small businesses in Louisiana get back on their feet. Seventy percent of the businesses harmed by Katrina were small businesses with 100 employees or less. The economy thrives off of these small businesses and if the business owners can't get their businesses up and running quickly the whole economy will suffer. I think this professor has a great idea. It gives the students the opportunity to make a business plan and then to execute it in real life, plus they have found a need in society and the means to fill it.

Smaller is Better

For all you truck lovers out there, myself included, it may be time to trade our Diesel powered automobiles in for a smaller compact car. Dealerships agree and are going to start supplying these cars so as to meet our demands. In this article it says that on average it costs SUV's over 70 dollars to fill up a tank. That is ridiculous when there are cars out there such as Honda that will cost you half of that, and will run just as good. (We just don't get the great sounding engine).

Flooded Cars, Easy to Spot!

Remember the blog awhile ago about those rotten car dealers who were selling cars that had previously been floating down a street in New Orleans? Well, from an article I just read, it seems as if many people are nervous about accidentally purchasing a flood car. According to the article, 571,000 cars were destroyed by water from Katrina and Rita. Half of those cars will be repaired and distributed to dealers! I agree with the efforts to salvage what they can, but I sure don't want to be the proud, but oblivious, owner of a Katrina Cadillac! Not to worry, FEMA and Carfax are here to save the day! It is easy to find out if a car has been flooded. All you have to do is enter the 17-digit VIN into the "Carfax 'Flood Damage' search field." The search will provide you with information about the car, when and where it was registered last, and if it was, in fact, a flood car. This is helpful, because believe me, car dealers won't voluntarily warn you about bad cars!

Reality TV, Not So Exciting Anymore?

Reality Television is experiencing the reality of the product life-cycle. Analysts say that the boom is reaching maturity and many of the most popular shows just one year ago are now losing ground. Even "Survivor," the hit show that started the reality craze is declining in popularity. But one reality show is feeling the heat more than all the rest... "The Apprentice." Analysts believe that "The Apprentice" is sliding south due to its competition which happens to be the most-watched show on television, "C.S.I." Both shows are broadcasted at the same time. I don't know about the rest of you business majors, but I watch the apprentice and I really like it. For those of you who don't, each week the two teams (the women's team and the men's team) compete at a certain task. For instance, this season the teams competed in such tasks as creating an add campaign for lamborghini, creating and promoting a work-out class at "Bally Total Fitness," and teaching the elderly about modern technological conveniences. The losing team meets Mr. Trump in the board room where one member of the team members is then fired. I think it would make quite a show if Mr. Trump and the folks at N.B.C. had the two teams try and design an add campaign for "The Apprentice." The campaign would have to be so dynamic and enticing as to pull viewers away from "C.S.I." What do you think?

Insult to Injury- Crime increases in wake of natural disaster

This past weekend, Pakistan and surrounding areas were devastated by a massive 7.6 scale earthquake. Over 20,000 people have died, and many more remain missing, or injured. Buildings, and homes throughout the area were completely destroyed, and thousands of people desperately await food, water, and supplies from relief parties. According to the Earthquake article, the United States has vowed to contribute nearly $50 million dollars in aid. Other countries throughout the world have also given their support, including Japan, Russia, and China, etc. While it is wonderful that so many nations have come together to help during this horrific time, many atrocities have also occurred. Some of the worst events that have occurred since the deadly earthquake have been violent killings, and robberies. The linked article reported that 10 people were killed by militant groups, while many stores and homes have been robbed because of owners’ vulnerability during such a difficult time. If people losing their lives, homes, businesses, and jobs, etc. isn't bad enough in the wake of a natural disaster, it seems that there are inevitably other negative externalities that occur simultaneously, causing victims to become victims again. When a poor, struggling store owner is robbed, who loses? Sadly, it is the store owner, and the other poor consumers that buy from him, because he will likely have to raise prices to compensate for losses, and so the negative cycle continues. It is my plea that criminals will take a much needed vacation, especially during times of natural disasters. I hope that criminals will give it a rest, and will start contributing to society in a legitimate way, behind bars!!!

Six Year Old Hero

I found an article on msnbc.com that I know doesn't really have to do with economics, but I thought was so touching I had to write about it. A six year old boy was found wondering the streets of New Orleans with a baby in his arms, and five toddlers, holding hands, trailing behind him. The little boy, Deamonte Love, said that the baby was his little brother, two more were his cousins, and the other three were kids from his apartment builiding. This little boy is so brave, that he took matters into his own hands, and became a leader so he could help find all of these children safety. It is so amazing to me that parents are teaching their kids at such a young age to be so responsible. Anyway, I thought everyone should here about this story.

Worth of a Worker

I read an article concerning the morality behind paying employees. There is a constant argument about what minimum wage should be. Especially in areas such as southern Utah, where the cost of living has gone up drastically, but the minimum wage has not. Yet would it really be beneficial to raise the minimum wage? I say no, because that will just result in increasing the rate of inflation. I agree with the "Angry Professor" that the wages will tend to increase in this area because as he stated, "everyone will be paid the same as the last one hired." If they are not, then they will cease working there. When looking at the construction industry here in southern Utah, one can demand higher pay because of the amount of work that must be done. This results in construction workers income increasing. Now we get to the question of this being morally correct or not. It is common sense to know that just because the wages are going up that the quality of worker is not automatically going up at the same pace. Yet if the employers do not pay equal wages to their employees they are ridiculed for not being a just boss. In my opinion, the boss should pay the worker what they are worth. Forget comparing what each worker is making and then averaging out an equal wage. When focusing on each employee and paying them what they are worth, you can help the employee become more of an asset by helping them understand where they can improve in order to receive a higher wage. This should benefit both parties. Is this morally correct? I do believe so; however, it is not for those of you that cry when you do not get to take the easy way out.

Elasticity

I came across an article in Business Week talking about the sales forecasts of the upcoming holiday season for retailers. Due to hurricane Katrina, loss of jobs has led to a decrease in income for many people. The increase in gasoline and heating oil prices also exacerbate the situation, leaving less income to spend in retail stores. In light of our recent discussion on elasticity of demand, I found this article highly interesting. Not surprisingly, while many retailers saw a drop in same-store sales this September, Wal-Mart managed to show a 3.8 per cent increase in sales. Costco also saw an increase in sales. This is to be expected, since a drop in income would lead people to shop for cheaper things. Another thing I found interesting was the drop in sales from high-end retailers such as Ann Taylor and Talbots, since we've been talking about how a brand name tends to decrease elasticity. However, teens seem to be loyal to their brands. Abercrombie and Fitch and American Eagle seem to have a relatively inelastic demand, as increased same-store sales exceeded their September estimates.

Prepare for the Future, Keep Your 401(k)!

You're thinking, what 401(k)? Well, if you don't have a current 401(k) you will have one when you land your first job after graduation, or at least lets hope you do! Anyways, I read an interesting article about what many people are doing when they switch from one job to the next, they are cashing out their 401(k)s! The article mentioned that this type of action is common among employees in their twenties and early thirties, but now there is a large majority of individuals in their forties who are cashing out their 401(k)s! Are they stupid? If someone decides to cash out a 401(k) before they are 59.5 years old they will be required to pay a 10% penalty payment to Uncle Sam and a large amount of taxes due on pretax contributions. Try to swallow this, there is a good chance that the person who cashs out their 401(k) will end up losing up to 35% right off the top of whatever he or she has in the plan! No matter how small or how large your 401(k) is, no matter if you are 25 or 45, don't be tempted by the quick cash of cashing out. If you can fight the temptation, you'll have so much more money when the fun part of life comes... retirement!

The West Steps In On Energy Crisis

There is always a social contract between business, government, and social. When each one is equal in their contribution they create a perfect triangle. When one of the three slack, another will step in to make up the difference. In recent "whats happening," the west, particularly a small town in Wyoming, is stepping in to make up for the unequal triangle. There is a huge crisis of energy present in our economy right now and as our economy being a capitalist system some view this as an opportunity. In an article that can be found at the following website of csmonitor, www.csmonitor.com/2005/0411/p01s01-ussc.html. This article had an interesting story on how this small town has began to mine for oil. This is a huge boom for this little town and folks their that had retired from oil mining have come back to begin mining again. They view the high oil prices as an opportunity to spark their own small economy and give hope for those living their. It will not only contribute to the oil shortage but it will also create high paying jobs and keep the people their to live long term. I found this article interesting because it shows how there is always an opportunity in every down fall of the economy. When there is a slack in one end, there is always someone their to step it up and make up for the slack.

Sweatshops

So we all know corporations are greedy, that's a given, but to what extent and at who's expense? I recently became familiar with the topic of sweatshops and child labor and I thought this was a thing of the past, I was wrong. Truth is that sweatshops and child labor are a growing problem still. In fact they say a large part of the Americans' quality of living is spawned by use of these sweatshops and child labor. Corporation greed seeking to produce goods at the lowest cost are directly and indirectly abusing and exploiting workers. We don't hear much about it because it's no longer an issue in the US but relocating the problem doesn't eliminate it. Would you purchase a t-shirt for $20 knowing the person who had produced it only made 6 cents for their labor? 75% of consumers say they would boycott stores selling products made from sweatshops and 85% say they'd be willing to pay 5% more for goods that are legally made. Sweatshops The big deal is that it's ethically and morally wrong for corporations to profit off of these sweatshops. These workers need to be earning a reasonable wage to live instead they will work for 80 cents a day under horrible conditions and we are profiting off of that. I think it's outrageous but what do you think?

Minnesota Acts First

The squeeze on the pumps has sparked consumers’ interest in other resources for fuel. As the price of gas continues to increase there is an ever more urgent search for an alternative to keep Americans moving. In an article found on cnn.com Minnesota has become the first state to require that diesels use a mix of diesel and biodiesel. The mix only has to have 2% biodiesel but it is a step in the right direction. But the major hurdle this industry will have to leap over is getting their costs down to where they are more competitive with fossil fuels. I wonder how long it will take before we are all driving cars powered by something that was grown by a farmer.

Is The Boom Getting Quieter?

Last week I spoke with a friend of mine from Colorado, he enthusiastically told me about his plan to retire in 5 years with more money than he will ever be able to spend. He plans to get rich through buying and selling homes in the St. George and Cedar City areas. He is not alone in this housing frenzy of Southern Utah. I recently found an article that may possibly let some of the air out of my friends inflated plans. According to many industry analysts, the housing market on the east coast and California is beginning to slow considerably. Many economists have predicted that the bubble would burst, but the market would only slow down for a short time and then would begin to accelerate again. With gas prices near $3 a gallon, and house prices higher than their worth, analysts say that this slow-down may be the real thing. Will the market slow-down cross the Sierra Nevadas and reach our small protected valleys in Southern Utah? Will those individuals banking on the real-estate market become as rich as their dreams dictate? Personally, I feel that the boom in this area will continue for a relatively short time. Certain people will make enough money to retire in 5 years, but most won't. Real-estate is a great investment, but to be safe, generating income from some other source seems very wise.