This article also mentions that offering a lower priced alternative to their own highest priced luxury car opened up a whole new market of consumers whose reservation price for a luxury car were much lower than the incredible $220,000 version they sold before now...good for their management team on that decision.
As for me, I believe my reservation price for a luxury car will never fit the price tag for one of these cars...and you know what, I quite okay with it.
The entire credit crunch problem that we are facing is a dirty and ugly situation without a clean and clear resolution. The justice side of me wants to make all consumers suffer and pay for all the debt that they accrued, as well as get after the credit institutions that created and promoted the environment that got us here. But nobody likes to kick families out in the cold dark street, it just seems so inhumane. So what is to be done?
I am a strong believer in the free market and the invisible hand. I think there will be many short-term and some long-term losses, but overall the market and consumers will adapt, and there won't be throngs of homeless scouring the streets of homes they once occupied. Hopefully this is a lesson learned for consumers to not live on the edge of their financial limitations, as well as a lesson to lending institutions to be more selective when handing out money. The truth of the matter is, there is no winner in this type of situation, and we will all suffer or feel the pinch in one way or another.
This move is indicative of other investors in the home loan industry when the market goes sour. Investors are constantly scanning the environment for the best place to invest their funds for the greatest return. When our housing market was booming, this was a great place to invest, and know it is the opposite.
From an economic standpoint, when the market fluctuates like this, it shifts the supply and demand curves back and forth. This article is an indicator that the demand curve has shifted back for home loans, so the supply curve (mortgage lender) is now shifting back as well to compensate.
If I were a security contractor and had the responsibility of protecting a US diplomat, I would really want the ability to make an informed decision in a split second and then be able to act on that without being blamed for accidental deaths in the line of duty. It seems to me that they have two choices: take action (pull the trigger when instinct suggests that it should be done) or watch as our diplomats and possibly the contractors themselves are killed on their way to important meetings by terrorists who don't necessarily care if they live or die (remember that Islamic terrorists get to have 72 virgins when they take the terrorist plunge).
Now I don't support just shooting people without a good cause, please don't take my argument in the wrong way. However, these contractors are usually ex-soldiers and ex-policemen who are well trained when it comes to this kind of thing and should be able to act when they feel it is appropriate.
I would think that it would really quash the demand for good security contractors in areas like Iraq and Afghanistan if we remove their immunity from prosecution when they act in the line of duty.
He suggests that a prudent investor would go and buy silver and / or gold in order to have what he terms as international currency that can be traded for nearly anything at anytime because the demand for those items will remain high no matter what the dollar does.
I agree that this would be wise since the value of the dollar has fallen and the value of silver and gold has really escalated in the recent past and if the reverse ever happens, gold and silver are easily traded back to dollars with relatively no problem at all.
I found this article interesting because it reminded me of a principle taught to us in Mean Joe Green's Microeconomics class about OPEC and why they truly don't have a monopoly on the oil market that works to fix prices. It seems that no single OPEC nation trusts the others to not cheat and sell more oil, so each country does cheat on the set production numbers, and their production plans continue to fail. Hey, it is good for those living in our country since we won't drill any of our own oil.
I do have to agree somewhat with those countries that do influence the "Key Industries" because there should be strategic moves made by the government to protect the citizens of that country if something in the market is threatening them. For example, having a steady supply of oil and / or coal should be a strategic interest for us in the United States because it is a very vunerable part of our society right now. I just wish we could get politicians and environmentalists to think that way as well.
In the article Jaren Patterick who is a framing division manager for the Utah division of BMC West which is a Boise-based building materials supplier said "The supply won't go down but prices will go up. They'll ride it for what it's worth. They're just like the oil industry, most producers of lumber and building supplies are looking for opportunities to raise prices."
Jaren seems to be showing a basic lack of understanding of supply and demand principles or else he just misstated what he meant. The price increase will not have anything to do with a change in supply but actually a change in demand. We can assume that the market is supplying lumber at the equilibrium quantity and that the market is currently buying at the equilibrium price. When the demand changes that will cause the price to increase. The market will adjust over time by either supplying more to meet increased demand, or the demand will drop as the rebuilding effort slows.
Jaren may have meant that the increase in demand because of the rebuilding would be so small that it really should not effect prices but that the suppliers will just increase prices because of a perceived increase in demand (or as he states decrease of supply).
The next principle it brings up is that fact that this kind of supply shortage will probably not be felt among the consumers of American grown products. This causes me to think that it is really not that big of a shortage and really not that big of a problem.
The article then goes on to say that this will cause us to lose our domestic production of food and shift it to foreign farms who can supply it to us cheaper. I think we call this a competive advantage. If they can do it better and cheaper are we not better off to do what we can do more efficiently and then trade with those countries? Now I understand that we need a food supply for our national security, but come on...we have enough available land to grow food in a time of need.
The article then mentions that it doesn't matter how much farmers pay their workers, because raising the wage doesn't seem to attract enough workers. I disagree. I bet there is a point where workers will begin to shuffle into that kind of work. It is hard work that Americans feel they should be justly compensated for or they can go elsewhere. I don't buy the fact they just won't do the work because we are above it. The fact that Americans or legal immigrants can find a substitute for working on farms will make the farmers need to pay more to get legal help.
This article makes me wonder when we traded national security and a desire to turn a blind eye to the immigration problem for the almighty dollar. I think it is wrong deep down to allow people to come here illegally just so farmers don't have to pay a decent wage to those that pick their crops. I think a good solution is to make it easier for immigrants who want to come here legally to do it much easier and more efficiently than our current system. Then we would at least know who is here and that we are not allowing just anyone to cross our borders to keep our prices low in this post 9/11 world.
I'd like to think of those comments as a shift variable in the demand for Chinese stocks and other emerging markets; because it gives people expectations of future prices there. I think that Warren Buffet has such a good reputation for picking stocks and other good investments (as well as when to get out of them) that many, many people will listen to his advice and pull their investments in China and other emerging markets in regions affected by China's stock market run-up. To be totally honest, I've seriously thought about arranging my own portfolio tomorrow when I get to work to reduce my exposure to this potential retirement landmine.
All these future expectations could then possibly affect the demand of the stocks trading there and a fall in prices could then occur, possibly affecting demand for other stocks on other indexes such as our own. We should not forget the huge drop in stocks earlier this year when China's stock market stumbled and rattled our own Down Jones Industrial Average to the tune of a 416 point fall.
My favorite part of the article states 'this is California. We are not strangers to these kinds of tragedies.' That means that Californians are used to environmental conditions that are dangerous, not only to their physical self but to their pocketbooks.
Insurance companies in California will continue to raise the price of policies issued in that state, especially the areas that have been locally effected since it seems to keep happening in the same place (not if but when).
But there is no way that individual policy holders in these affected areas can compensate the insurance companies monetarily for the insurance claims that are pouring in. Luckily, my insurance company is not listed as having policies with claims in that area. If they did, I would expect an increase in rates for my personal policy to offset the difference, even though I live nowhere near the affected area, nor do I plan to.
My point is this. Why does the collective have to pay for the poor mistakes of the few? If you decide to move to California, and it is a matter of when you will have an insurable claim, why not charge these people out the nose for living in such a hazardous environment? Is it because a private insurance program instituted locally would go bankrupt after the first major incident? This would discourage insurance companies from offering policies in that area and homeowners would go uninsured. Is it important enough to our society that we have people live in known hazard zones that we are all willing to fit part of the bill? Is that economically efficient?
I see that the government has stepped in and declared disaster zones, offered manpower and other aid for this event, which I believe they should. That is what we have a governmental body for, to deal with issues that the private sector cannot, or would not if left alone. In this manner, however, we are again all pitching in toward the cause with our taxes going to provide relief.
This is an example of a few economic principles, but the one I want to focus on is government's role in the free economy. Normally, I like to let the market run on its own without government involvement, but in this case, the free market would behave self-interestedly enough that it would be unfair and government involvement is needed.
Left alone, counterfeits of well branded products would produce and sell as many of a popular product as possible. This would inundate the market and drive the price of the true product down. The true producers would be unmotivated to produce since there is no profit in the business, and society would be at a loss because it is not enhanced by the products and innovations that would have come.
Government is needed to protect property rights, including intellectual property rights like patents and trademarks. This protection gives businesses a safe environment to peddle their wares and make a profit. Now the exclusivity of their product raises the price, but the availability of substitutes helps keep the price at a competitive level.
This sub-prime loan debacle really doesn't help anybody. Consumers suddenly thought 'hey I can get a cheap loan' and instead of just refinancing or getting something affordable, they stretched their credit score to the max to get a bigger house. Well, the honeymoon is over, and the debts are coming due, especially the ARM loans.
So who is to blame, the consumers or the suppliers of these loans? Consumers are going to be naturally selfish and want a bigger house, and suppliers are going to be naturally selfish and want to make more loans (more commissions). Now we have people trading home ownership for bankruptcy and companies trading profits for losses. Where is the winner in this game?
The market scare will reduce the demand (shifting it back) and the suppliers will suffer. Strangely enough, the price may actually increase since the supply of uncontaminated meat will be more scarce and hamburger is an inferior good. A main factor that may deter the possible price increase will be the availability of substitutes, but their price may increase because of the sudden increase in demand.
What is the point in requiring an exorbitant amount of money from a single mother, who clearly cannot pay the fine, and force her and her children into bankruptcy and/or welfare? Is it really that important that you make a poster child of a young mother in such a blatant manner? Will this really deter file-sharing on a large scale as Big Music is hoping, or will it actually spurn file-sharing to reorganize and find safer ways to push more stuff? Humans are funny in the way that they love to push the envelope to see how far they can go or what they can get away with.
Big Music is hoping that sanctions on individuals like this will move the supply of illegal music sharing back, but I do not think that it will. As long as there is a demand, there will be a supply.
The blog also calculates the economic cost of A-Rod's salary to the Yankee's revenue. Stating that his economic costs are 2.3% of the value of the team. Compared to Barry Bonds (and does not play everyday) who's economic cost to the Giant's is 3.4% of the teams value. In the end A-Rod's economic cost is lower than other high profile player on other teams, and for the Yankee's the new deal would be a bargain.
It turns out that surging demand has bid up the price of polysilicon which is used in the solar wafers, which are in turn used in semiconductors. This in turn has caused the solar panel producing companies (which have been a good investment recently) to report bad quarters and to estimate poor quarters in the future. This in turn has caused the demand of solar stocks to fall, because the stock price has fallen.
It is good to finally be able to find a real life scenario for those topics that I learn in class. It makes me want to listen better so that I don't miss out on other opportunities and/or events that will have an effect not only on my life, but on my wallet as well.
This is a fun article that presents many economics principles in an extremely entertaining way. It all begins when a
Illegal immigration is an issue that our government is not quite sure of how to handle. If this is such a serious problem though, you think that our government would stop subsidizing one of the largest industries that harbors and employees these illegal immigrants then. Yes, I am talking about the agricultural industry. I think the government should stop subsidizing agricultural goods. It would not only do a great deal of good for that particular industry, but it would also result in less demand for the labor of illegal immigrants. Therefore, such a policy could end up killing two birds with one stone.
Since the creation of the European Union, citizens of this partnership have been allowed to work and live in any country that is a part of the
What is the value of a human life? Many economists in the past have put a dollar value on a human life based on the amount of lost wages that would arise if one died earlier than expected, but this article disagrees with this type of measurement. Lost wages only shows the value that an employer places upon the life of an individual, but it does not show what the individual personally values his/her life at. Therefore, this article states that the true value of a human life should be measured based upon the amount of risk a person is willing to accept in exchange for a certain amount of money. I think this is a great way to determine the amount of money that an individual life is worth, because it is the best way to measure the exact amount that the person valued his/her life at. Risk versus return, it makes sense to me.
Women today are making more of their own money and are relying less on men for financial support than at any other time in history. With this large increase in women’s income, economists are now trying to figure out whether or not the demand has increased or decreased for husbands. Thus, they are trying to figure out whether husbands are normal or inferior goods. Though most women would state that they think that husbands, and men in general, are inferior goods, this article states that they are actually normal goods. Who would have thought?
Some analysts suggest that it is simply a matter of global demand increasing, and supplies throughout the world tightening, but I don't think that is the case because the article states that "the Energy Dept. reported Oct. 17 that inventories of crude and gasoline rose more than analysts had expected."
Some analysts suggest that the price is spiking in anticipation of future events that may disrupt supplies, tightening the supply. Perhaps....
Others feel that hedge funds and other institutional investors are simply chasing profits by buying oil futures in hopes that the price would shoot through the roof.
Whatever the reason, I feel deep down that we will probably see a cutback in the demand for oil and gas in the future and hopefully that will bring our prices back to a more reasonable level.
Whatever happens, Kade is looking a lot smarter driving the moped to school and work as the price looks as if it will increase to new record levels.
This article shares the author's view that consumers are out of money, and that creditors are less likely to give them more. He is predicting that consumers will now buy less and that the economy will suffer for it. Although he is not predicting a recession, he states that 'one wouldn't surprise me.'
Are American consumers really out of money? Will the gluttonous spending habits of the recent past subside and 'practical budgeting' among consumers take over?
Personally, I feel that American consumers will justify a short extension to their gluttony through the holidays in order to maintain the perception that they are not in financial trouble. I am reminded of the television commercial where the guy is smiling much bigger than a person normally would, and states under his breath, 'look at my huge house and nice car...I am in debt up to my eyeballs...someone please help me.'
Our ambition to have more than the next guy will push us farther into consumer debt through the holidays. This will make 1st quarter 2008 an even greater dilemma as all of the credit card bills come due and American consumers finally realize that they don't have enough money to pay for it.
So I agree with the author that market indicators point to the consumer being out of money, I just don't think that the consumer is ready to admit it to themselves yet. The demand curve will artificially be maintained close to its current position, at least until 1st quarter 2008. Then I would agree that it will shift backward as consumers will be less willing to pay for the same level of supplied goods/services. Suppliers are forecasting this as well and will produce less since the demand will be for a lower quantity. The price may stay relatively the same; there will just be less available.
I see this as a classic example of the effects of supply and demand in our market. Demand was created when the Fed cut interest rates making housing more affordable. People and lenders reacted by buying up the available supply of inventory quickly causing a shortage of homes. Builders (and everyone that owned a truck) responded by bringing huge numbers of homes to the market to satisfy the demand that was created. I actually think a good portion of the demand was artificially created by out of town speculators hoping to flip the homes for a quick profit; and the early movers did make a profit. Soon, supply outpaced demand as the prices increased and the interest rates were raised by the Fed, causing a glut of homes and causing the prices to fall.
I hope that the government lets some of these speculators and sub-prime lenders fall on their financial faces. I feel much the same as the test question on our last iClicker quiz suggested about bankruptcy not being a totally bad thing. It will weed out the weak suppliers and will help our market get back to basics and help turn our market around. It may be painful, but I feel it is a necessary step in the circle of our economic lives.
"In the past decade, inflation has depleted the value of the minimum wage to the lowest level in more than 50 years," according to the first article. It seems that minimum wage increases are actually symptoms of inflation, not the other way around.
The other two articles discuss how inflation is affected by monetary policy enacted by the FED, and that the real pain of minimum wage increases are the workers that are the least employable. If an employee was barely worth the previous minimum wage, they do not 'magically' produce all of a sudden in a manner worthy to be compensated at the new wage level. Many of that group will loose their jobs if their employer cannot afford to pay the new wage.
Hence, the law that was passed to 'help the poor and less fortunate' may actually be hurting them, especially since the indicated inflation is already devaluing the few dollars they had before they were unemployed.