Burgers Beware

This article here states that Cargill is recalling 850,000 pounds of hamburger that may have E. coli contamination. The news of this bacteria possibly being in the market may disrupt hamburger and other meat sales in the short-run. One company, Topps Meat, has completely shut down due to the costs associated with taking back 22 million pounds of ground beef.

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.

Big Music Smiles

In this article here Big Music is smiling as a Minnesota jury ordered that Jammie Thomas, a 30-year-old single mother is responsible to pay $9,250 X 24 songs ($222,000) that she uploaded to Kazaa (a file-sharing program). There are a reported 26,000 similar trials to take place in the future.

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 consumer buying binge is over

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.