Another Butterfly Effect?

Recently, a post on the SUU Macroblog expressed the viewpoint that the stimulus package ultimately failed to generate the same return as the amount initially spent. In the same vein, this article from the Associated Press details the failure of Obama's recent repeat buyer credit program to stimulate sales in the sluggish housing market. Unlike the "Cash for Clunkers" program which artificially inflated sales before sharply falling (the "Butterfly Effect"), the repeat buyer credit program hasn't stimulated sales at all. The program was designed to ease the purchase of a new home by current homeowners. However, this time, the failure wasn't the program, just the timing. The severe winter weather and the fact that a third of homeowners are still underwater on their mortgages have effectively negated the chance of many homes being purchased this season. It remains to be seen whether the program can actually revive the housing market or if it turns out to be just another quick fix.

How to fix California's Economy

This a brief video from John Taylor. He is a economics professor at Stanford University. This video is a excerpt from a longer interview (the link is given). He lists 3 things that California needs to do to help it's recovery from this recession and limit the effects of future recessions.

1. Limit the growth of expenditures. He suggests, "Population growth plus inflation."

2. Put in some tax reforms that prevent the ups and downs in revenues to be so great.

3. Education, K12 is slipping. He mentions a setting up a program to encourage more teachers and their accountability.

According to the BEA California's economy in 2008 was 1,846 million (current dollars). It also reports the U.S.'s at 14,165 million. This makes California's economy 13.03% in 2008. I feel that if Califonia was able to limit the effects of a recession then that in turn would limit the overall affect on national GDP.

Mankiw's Take on Healthcare Reform

Many of us in class have expressed concern over the health care bill and what it means for that industry. Greg Mankiw, Harvard professor, wrote a post on his blog giving his opinion on this not-so-new idea. As he points out, price ceilings are nothing new to the government. For all of us in this class who have taken the beginning levels of Micro and Macroeconomics, this translates ultimately to a queue, lines, and even black markets. Now I am not saying that this bill will inevitably result in a black market of hospitals as the far-right congressmen would like you to believe, but there is room for organizations like this.
We have seen this type of bill before and not just from the Democrats. After all, as Dr. Tufte has pointed out on several times in class, Nixon introduced a bill with many of the same objectives. Mankiw points these similarities in his blog.


More GDP and Earthquakes

In the wake of Haiti’s devastating earthquake, another South American country, Chile, has been rattled by a huge quake. Registering at 8.8 on the Richter scale, the earthquake was 1,000 times larger than Haiti’s. Comparing other factors, the epicenter of Haiti’s earthquake was 16 miles outside of Port-au-Prince, the country’s capital with a population of roughly 700,000. In Chile, the earthquake was centered 70 miles away from Concepcion, home to 900,000 people.

The striking difference is in GDP and the death toll. In the immediate aftermath, Chile has estimated 78 dead, with that number expected to rise. By how much it will rise, though, is the question. Haiti initially estimated more than 100,000 dead, clearly outdistancing initial Chilean reports. As discussed in class, GDP can be a good estimator of well-being. Chile’s per capita GDP is $14,700, more than 10 times the $1,300 of an average Haitian. By simply looking at GDP, the death toll should be far less than the 230,000 recorded in Haiti.


Greek Credit Default Swaps

There is increasing evidence that Greece may be on the verge of defaulting on it's debt. The New York Times reported that many banks are expecting default on Greek government debt. The expectations of default are indicated by high demand for credit-default swaps. These are contracts that effectively act as insurance if the loan isn't paid. This marks the first instance of real demand for swaps on government debt. The article contends that by purchasing these swaps banks are effectively causing the default because it would be in these banks interest for Greece to default and therefore they would be unlikely to loan new funds. This seems unlikely however given that the purchasers of these swaps hardly represent all holders of loanable funds. It certainly doesn't encourage the Greek government to pay their debts however and that may be contribute to their decision to default. Swaps trading in Greek debt has also spurred similar trading in Portuguese and Spanish debts. While this doesn't guarantee that Greece will fail to pay it is another strong indicator and even more troubling it is a sign that government bonds from developed countries, once considered extremely secure investments, are no longer as reliable and may influence how governments finance themselves and operate in the future.


Stat Planet

This website gives a map of the world and then gives us several choices of what kind of data we would like to look at. There is HDI, GDP, Health, Educations and much more to choose from. You can also change to scales around to fit what you prefer.
As we have talked about in class I used the HDI setting and compared the U.S. to Haiti. The U.S. came out at a .96 and Haiti at .53 where the larger number means you're better off. I tried to compare the Dominican Republic with Haiti but this has classified Dominican Republic as part of the U.S.


How much Ammo will we give the Enemie?

While searching for a topic and a little inspiration I came upon an article written by Bill Gertz of the Washington Times titled, "The Chinese see U.S. debt as a weapon". http://www.washingtontimes.com/news/2010/feb/10/chinese-see-us-debt-as-weapon/. In the article the author quotes Chinese Major General Luo stating that China could Attack the U.S. "By oblique means and stealthy feints," as well as calling for retaliation for the arms deal that the U.S. made with Taiwan. The article goes on about how China's military has made a call for a sell off of U.S. debt backed securities. It seems to me that tough economic times have lead the U.S. to the wrong side of town where we have borrowed an 800 billion dollar bank role from a shady character. In a prior blog post someone stated that with the recent arms deal between the U.S. and Taiwan we have pissed off our friend. However, a communist society with volitile military leaders and questionable human rights views could hardly be a true friend. Is it wise to borrow money from a country and then turn around and make another deal with an enemy of theirs?

As a country they have volitile leadership, are largely populated and supposedly are growing at a healthy rate. Now, with the amount of U.S. Treasury debt China holds, it feels to me we have allowed them the leverage to influence our economy as well? How many more aspects of power can we allow them to have before they realize it and begin to abuse it? I'm not a nay sayer but it seems to me that at the moment we as a country are in a bit of a hole and the first thing to do is stop digging and begin paying off our debts.


Creating New Jobs

I found this article in the New York Times called “Stimulus Jobs on State’s Bill in Mississippi”. I thought that it was very interesting because it affects every American that is looking for a job.
Nowadays, finding a job has turned into an almost “Impossible Mission”. Due to the recession, more and more people are losing their jobs every day. As we all know, the economy works like a production line. In a production line, if the first step of the process fails, the product probably won’t be completed. The same thing happens with the economy. If the economy starts falling down it results in a domino effect, consumers spend less money and in return the economy suffers the consequences.
This article talks about how some states in America are trying to solve one of the major problems in the construction of a healthy economy: Unemployment. States, such as Mississippi and Florida, are working on what they call “The steps program”. This program uses, like the article says- “A sliver of the $5 billion in welfare money in last year’s stimulus act”- in order to create employment in the private sector.
In my opinion this is an awesome theory. It would help the business to grow and in return help people to find jobs, which will improve their buying power and help the economy to rise again. In a sense this is the same production line that caused the downfall of the economy, however in reverse.
I have two questions about this theory however;
The businesses will receive benefits for hiring new workers. But once this money has stopped coming in, will the businesses keep those workers in employment?
Will this scheme be financially viable for small businesses to increase their profits enough with the new workers so that they can keep those workers on once the benefits expire?

Click here to read the article:

Unemployment rates by state, seasonally adjusted, September 2009