One down, hopefully more to come

The evening news two days ago brought what I believe is encouraging news to the government bailout plan. GM CEO Rick Wagoner was forced out of the company by the Obama Administration as part of its agreement to loan the failing car company more money. Finally, after billions of dollars already handed out to companies such as Ford, GM, Chrysler, AIG, etc. Someone is being held accountable for the mistakes that helped cause such financial problems within these organizations. I just hope the same thing happens with AIG, who has infuriated the public and congress for handing out $165 million in employee bonuses since first receiving government assistance. No employee, especially CEO’s, CFO’s, and other top tier managers who are directly responsible for the success or failure of their companies should be getting million dollar bonuses. While bonuses were not a deciding factor at GM, I am happy that the government is finally holding people accountable for poor management. You can’t give some who’s lost billions of dollars due to poor choices another couple billion in aid and expect them to suddenly be much smarter in their management decisions. Hopefully this is just the first of several “boots” of failing company’s managers. You can read about Rick Wagoners forced resignation here: http://abcnews.go.com/Business/wireStory?id=7204767

A Possible Turnaround

Fed’s Stern: Expects Some Econ Improvement Midyear
Gary Stern who has been through the previous two recessions as head of the Minneapolis Federal Reserve Bank offers a few words of encouragement towards the possible end of the current recession. As we have discussed in class it is hard to predict when recessions end and the economy picks up again, and normally don't have evidence until well after the event takes place. That being said, as the first quarter of draws to an end there seems to be initial signs that by midyear things could be turning around. March seemed to be a great month for the Dow-Jones-finding many stocks hitting lows and now rebounding well. Other reports show that while many retailers have offered, and continue to offer great deals, their are faint signs that pickup in the consumer spending trend should continue. With the G-20 summit looming with loud cries from several governments calling for increased regulation over companies with multinational financial risks, time will tell how strong this possible turnaround may be.

We Don't Want Your Money

There is an article on cnnmoney.com that talks about how hard it is to give the money back that banks received from TARP funding. Some banks are saying that the funds that were given to them are actually preventing them from growing. The banks want the government out of their hair and allow them to run their bank as usual. None of them want to be the next AIG.

If the government was going to force banks to take money even though they didn’t need it to try to cover up the ones that did, why are they not making it easier for the people to pay back what they didn’t need in the first place? It is obvious which of the big banks needed the funds; the government really isn’t covering up anything.

(Bankers: Take your TARP money back http://money.cnn.com/2009/03/27/news/economy/tarp_takeback/index.htm)

Could it just fix itself?

In the news lately I am seeing a huge influx of information regarding approval polls of something. One of the latest is who is being blamed for the current economic crisis. Surprise that the banks are being blamed the most for it and then George Bush Jr. This is not a shocker considering they are highly suspect in the current economic crisis. With President Obama being elected only a handful of people are saying it’s his fault, in fact 42% of Americans are saying the country is on the right track. (Washington Post, March 31, 2009: Blame for Downturn Not Fixed on Obama) I was a huge fan of saying that once a new president is elected the economy would turn around. I believe that any change would have spurred the economy around, rather that people seeing change, make them change and would help to make things better. With history we have seen that all recessions have a trough, and that a lot of presidents loose elections because bad economic problems. But would all recessions end if we did nothing and let them run their course? Do we need to do anything at all, or would a simple change of thought help to pull us from despair.

White House to Accept Some Blame for Economic Crisis

An interesting article was published in the Wall Street Journal this week. http://blogs.wsj.com/economics/2009/03/31/white-house-to-accept-some-blame-for-economic-crisis/?mod=rss_WSJBlog?mod=marketbeat. It is entitled Real Time Economics, White House to accept blame for Economic Crisis. This is a surprising article to find in our day and time. It talks about a statement that a White House Official made. He stated how the White House was accepting some of the responsibility for the economic situation that we are currently in. The article does not specify exactly for how much they find themselves at fault for, but just the fact that they are accepting any at all and actually admitting it is quite amazing! He tells how part of the problem is believed to be in the weakness of the regulatory system of our country. This confession came about due to accusations by other large Economy countries that the US is running some sort of a "free-wheeling style capitalism" that led to the crisis crushing their economies, and they are now looking to punish the US for this. Prime Minister Gordon Brown of Britain said, "This crisis was caused by no black man or woman or by no indigenous person or by no poor person. This crisis was fostered and boosted by irrational behavior of some people that are white, blue-eyed. Before the crisis they looked like they knew everything about economics, and they have demonstrated they know nothing about economics." Plans have been made to expand the scope of regulations to any institution, market or product that's important to the international financial system.

Is Inflation the Answer?!?

In the March 30, 2009 issue of the Wall Street Journal, an article entitled, "Inflation Is Tempting for Indebted Nations", discusses the implication that inflation can have on a country which is heavily indebted. The United States is considering using inflation to reduce the value of the U.S. dollar, which would significantly reduce the burden of money owed to other countries. Economists are saying that it would be "epic, a terrible thing to do" but it would be better than outright default. The United States is planning to increase the money supply by more than $1 trillion with the hope of causing some inflation to weaken the value of the dollar and reduce the current federal deficit. Some are concerned with the idea and speculate that this will cause hyperinflation, comparing the current situation to that of the 1920s Germany and the 2000s Zimbabwe in which the local currency was debased and hyperinflation followed. Most economists are saying that this "doomsday" is possible but extremely unlikely. Policy makers will be trying to stimulate some inflation but will be closely monitoring it to prevent it from getting out of hand. While I agree that hyperinflation is not a likely possibility, I am concerned about investing and the stock market. As the dollar weakens, the amount of consumer confidence could fall, causing the stock market to continue to plummet. On the other hand, the burden of debt, which in the U.S. rests heavily on the taxpayers, would be lightened and nominal wages, house prices and tax revenues would increase while mortgage and bond debt would remain constant.

Mid-Size Success

I ran across this article on the WSJ website today. The article caught my interest immediately because Provo and Ogden were among the cities that were beating the recession. The article did mention that a lot of the smaller cities that are doing well have been fortuitous with regard to the housing crisis that has stopped a lot of lending, yet that cannot be the only reason they are doing well.

Obamanomics

Recently I stumbled across this opinion piece in the Wall Street Journal. It is written by Robert Rieich, a professor of public policy at the University of California at Berkeley, and a former U.S. Secretary of Labor under President Clinton. In it he defines "Obamanomics" and compares them to the conservative coveted "Reaganomics". One point I found particularly interesting because it relates to our recent lectures in class; Top Down vs. Bottom Up economic policy.
Top Down Policy: During the Reagan administration, it was widley believed that lowering taxes on the top earners would incourage them to invest more into capital in hopes of attaining a higher return. The theory here is by allowing them to be rewarded more, they would in turn create more opportunities for everyone from the "Top Down" and the economy would benefit. This is the idea that growth is enhanced when people are allowed to retain their wealth and be rewarded for investing it, or Alpha form our model.
Bottom Up Policy: Obama's Administration believes that the economy grows better form the other direction. By increasing taxes on the top 2%, Mr. Obama plans to better fund U.S. infrustructure, create more pell grants for low income students, and improve health care and education. In doing so, he hopes to create a better educated more efficient workforce which will help the economy to grow.
Personally I would like to see the Model that Team Obama is using. Each of their goals is admirable and on a social scale would improve the lives of many. However if by accomplishing these goals they hamper the growth of the economy the effects would surely be short lived. It seems to me they are missing a key point from Adam Smith's Wealth of Nations. Most people don't set out to become better educated to improve the lives of others, but rather to improve their own life. Unfortunate as this may be, it is a fact of life. Removing the incentive to earn more, by raising taxes, is not going to result in a better workforce.

Taxation?

I had a thought that may have been obvious to some, but for me, it was a little slow at becoming a reality. I thought of the true meaning of taxation, and if it was, in fact, the source for government revenue. I stumbled upon a book online that briefly covered my thoughts in skimming it. Why do we care of taxation? I can see that the money I suddenly can't choose to use due to taxation is a issue we all must tackle. I cannot, for the life of me, understand why we worry about how it is used. In the news lately, anyone with a online associates degree will arrive on the television and protest the use of the public's money in the recent "stimulating" acts of congress. I haven't seen anything that would suggest the money that is taxed from me going to the government is used for anything specific. The instantaneous restriction and subsequent expansion of the monetary system would lead me to see that all that is happening has to be the revenue services of our government are taking our money, placing it into a pile on the white house lawn, and burning it. At the same time, they print more and decide to use it for something that would make them happy. The distribution of wealth is a concept of child's play in that scenario. Someone please tell me that I am an idiot, and that I am missing the elephant in the room. Explain to me what i am missing!

Decreasing Trade Deficit Not So Good

In a recent article in the Wall Street Journal titled: “Trade Slump Spreads Pain Across Globe,” it was reported that the U.S. Trade Deficit has shrunk significantly to approximately $36 billion. This news should be perceived positively right? After all, it means that Americans are importing less foreign goods therefore reducing our dependency upon them and bringing the nation’s balance of payments closer to equilibrium right? Interpreting the data in this manner is misleading. The primary reason for a declining trade deficit can be attributed to the poor state of the economy. The current state of the Economy has discouraged everyone from the business sector to individual households from making additional purchases. All have scaled back and settled for only the immediate and necessary purchases. If times were good, economically speaking, most likely the deficit would be growing. The truth is that Americans are still highly dependent on foreign goods, especially oil which constitutes a large portion of that deficit. The United States will not see a truly significant decrease in the trade deficit until it provides alternative forms of energy to reduce its dependence on foreign oil. In the meantime, the decline in trade could actually be seen as harmful to all participating economies. The decrease in trade has been mostly among consumer goods that are more elastic to changes in market conditions. Assuming a basic economic theory to be true, that trade makes everyone better off, the recent decline in trade harms standards of living in all participating parties. Consumers in the United States have less consumer choices and their trading partners receive less income. Layoffs as well are becoming more frequent among parties. It is fast becoming a downward slope.

Trade Slump Spreads Pain Across Globe
http://online.wsj.com/article/SB123694710187818981.html

ABC's 20/20 Bailout Special

This last Friday, John Stossel of ABC's 20/20 news program had a piece called "The Big, Bad Bailout." I have provided a link to watch the 6 1/2 minute video here: http://abcnews.go.com/2020/. It talks about a ton of stuff that we have gone over in class. It shows a lot of clips of our current politicians explaining to the news media that this is a "crisis" that we have not experienced since the Great Depression, and that we need a stimulus package now, and we need it to be BIG!
As I first began to watch the show, I was pretty sure I was in for the normal "hell, fire, and damnation" story about the economy that is the norm in today's media. John Stossel, however, calls the importance and benefits of the stimulus package into question. He explains, and the news clips show, how politicians like President Obama say that when it comes to the need for the current stimulus package, there is a complete consensus among the economists of this country that it is important and vital to our recovery.
Afterward, however, John Stossel interviews a group of economists who all believe the stimulus package is bad, and not helping but hindering our recovery. He points out that a lot of the current stock market drops have immediately followed federal government press releases announcing more federal money to help struggling sectors. Investors really seem to dislike the government's help!
I thought the video was really informative and sums up a large portion of what we talk about on a day to day basis in class. I would really recommend taking the time to watch it.

Preventing the Next Fire While This One Blazes

According to the Wall Street Journal,http://online.wsj.com/article/SB123679308980797581.html#articleTabs%3Dcommentspreventing all future crises is not the goal. The goal is to prevent mishaps from burning down the world economy. I really agree with this issue. as article said, preventing all future crises would be the equivalent of banning stoves and furnaces. Here are three of the threshold questions that need pondering:

Who shall be saved, and who shall be allowed to die?
The goverment must draw a circle to identify which firms or kinds of firms will be saved.

How paternalistic should regulation be, and who should be the parent?
We're foing to get a gurdian even we know a gurdian could get mistake. The question is how much power to give it.

Can we install air bags in the financial system that deploy automatically?
There is the rules for each firms, so understanding each other would be the key.

Can the government really spend our money better than us?

We have been talking a lot lately about whether the government can spend our money better than we can. I don't know whether that is true or not, but they do spend our money differently than we would ever spend it. http://online.wsj.com/article/SB123707854113331281.html

The article that i have linked in this post explains how the government is giving our money to AIG. They will in turn be giving 165 million dollars in bonuses to executives in the company who have obviously done an outstanding job. Tell me that this is how we would spend our money. I would quote the article in saying that the use of our money in this way is "distasteful and difficult." We deserve to have our taxes go towards fixing the problem and not towards rewarding failure.

Am I the only one getting jipped??

So here's an interesting scenario for anyone who might be in the same boat. I am a full time student at SUU and am within a year of graduating. I was married about a year ago here and have planned to stay here as long as I can. When I married I realized that the play days were over and that it was time to get a real job. So for the past year I have been working full time at a factory at nights to try and provide for my family. A medical situation arose within my family that called for immediate attention. So in an attempt to try and stay afloat, we applied for medicade and financial assistance through the hospital. As a full time emplyee however, I was denied any financial help at all and was left with a $5,000 bill to pay. My wife and I started with literally nothing, not even a car, and to put up this kind of money, and to pay for school was impossible. So we are now paying every month for the next six years to try and dissolve this debt. Late, due to non-economic reasons, I was layed off at my work along with 100 other employees. They left us in a time of practically no chance whatsoever of finding something new, and especially something that would be enough for the bills we need to pay. So I applied for unemployment in order to get at least what ever i could. I was denied because I am a full time student and am not available for full time work. What??? I spent the last year working full time and going to school full time! So as a full time employee, I'm not entitled to government help with medical issues. But as a full time student, I'm not entitled to government help with being unemployed! Were I just one or the other i would have qualified. But I guess in our society you get punished for being more productive and working harder for your family to survive. The basic message I'm receiving is that to be more lazy is actually encouraged!! You are rewarded to be a bumb. Wonderful.....

Should Obama give every one $425,000??

It is always amazing to me what people will believe from the most random emails they receive. The only credibility they seem to rely on is something like how it's a person that they may have once associated with who took an economics class in junior high school. An acquaintance of mine was sucked into the same process by a certain email he received from a co-worker who was also his assistant scout master. Note that both of these men are truck drivers who at the most look at the New York Times maybe twice a year for the sports section! So in a random conversation that somehow made its way to the discussion of the current economic situation, he brought up this email that he had received about the latest stimulus package. Looking back on it i realize that the funniest part about this whole conversation was how converted he was to this idea! He told me about the 80 Billion dollar stimulus package that Obama was trying to pass and how he was using it all wrong. He explained to me that Obama should take the money, that would be used for bailing out large corporations, and split it up between the 200 Million working Americans evenly. If this were done, every person would receive $425,000! The people would be required to use the money to pay off all mortgages and other debts first, and that then the rest could be used in any way that they wanted in order to build the economy. What an awesome idea!! And this guy could not figure out why the government would be so dumb as to not see such a simple solution! Well i'm not big on trying to pull down other peoples views, at least not to their face. Plus i obviously wasn't sure myself whether it was a good idea of not. But obviously being quite hesitant to just except the idea, I asked Professor Tufte what he thought of the plan. A simple calculation of the numbers cleaned the matter right up. What turned out to be the truth is that obviously the stimulus was for 800 Billion to begin with. And if you divide 200 Million into 800 Billion, the answer is far from $425,00 per worker. It actually only works out to be . A further investigation on the subject lead to snopes.com where the issue was easily resolved. I never did tell my him about my findings, although i probably should. It is just astounding how easy it is for someone to read something that dumb and believe it so intensely.

Too Big to Fail…Really?

We have heard the phrase “Too big to fail” thrown around recently with all the talks of stimulus packages and bailouts. Obviously these companies weren’t “too big” to be immune from failure, but many individuals, and many in government argue that allowing a company of such size to fail would be crippling to the economy. This brings up two points I’d like to discuss. First, how do we allow a company to reach a point where it is too big to fail? I found a letter to editor from New York Times at the following link.
http://www.nytimes.com/2009/03/08/opinion/l08antitrust.html
As pointed out in the letter, Anti-trust laws are in place to protect us from large corporations who monopolize industries and destroy competition. Perhaps that definition needs to be expanded. Because even though there are more than 8,300 banks (according to a previous post: Nationalization of America’s Banks), and there is competition among them, I still think the American economy has been hurt in such a degree perhaps monopolizing banks would have been a better alternative? I certainly don’t think so. I think the solution is found in not allowing banks to become so huge. I think banks and other corporations should not have been allowed to acquire other companies, and been allowed to turn themselves into the monstrous giants they have become. I believe in economies of scale, but I think we have gone well beyond that at this point. In looking toward the future, politicians may want to rethink how we interpret Anti-trust policy.
My second point: I was also looking through to find data on the companies who had already received money from the first stimulus package (TARP funds). This list is found on at this link.
http://www.usatoday.com/money/economy/tarp-chart.htm
Take a look at the list and sort the companies by size of TARP funds received. The last Company on the list was the Calvert Financial Corporation which received $103,700 of TARP funds. I’d like to know how this company was 1) “Too big to Fail” and 2) how is that amount of money going to help out a financial corporation when that sum of money is not even enough to bail out former boxing champion Evander Holyfield? (http://sports.espn.go.com/espn/print?id=3428080&type=story)

Bizzare

I read an interesting, albeit a little morbid article from http://economics.about.com/b/2003/07/30/a-futures-market-on-terrorist-attacks.htm on a proposition of a program to induce a futures market based upon the probability of a terrorist attack on certain locations. In simpler terms, an idea was created to have people make bets upon the chance of a terrorist attack happening. Although the idea seems strange and morbid, I have to agree with the author that it may help in reducing the threat of terrorism. Futures and options markets are highly efficient, and are usually good predictors of where the stock market is heading. If a futures market existed for say, the risk of a terrorism threat to the Pentagon, it could help the CIA and Homeland Security understand the reason for the escalating risk, and ultimately reduce the risk. A problem I see with the program is the difficulty in assessing the dangers of a terrorist attack. The futures market is very efficient because stock market investors have access to an enormous amount of information on individual stocks. Terrorist threats obviously don't have balance sheets, income statements, dozens of financial ratios, etc. to accurately assess risk. Well anyway, this program was eventually denied, but perhaps it should be given a second thought, if we can find a way to fix the problems.

Nationalization of America's Banks

In Alan Blinder's article in the New York Times entitled, "Nationalize? Hey, Not So Fast", he argues that some of America’s banks are in pretty bad condition, but that nationalizing these banks might not be a good idea. He also acknowledges that some of these banks are "too big to fail". There may be many possible solutions to this problem, but nationalization should not be one of them. Many who are in favor of nationalization site Sweden as benchmark for the United States. It is true that Sweden was able to successfully nationalize its banks, but it does not guarantee that it will work in America. Sweden's government only had to deal with an extremely small fraction of the banks that the U.S. government would have to regulate, which is more than 8,300. It would also be difficult for the government to nationalize only a small number of banks and allow the rest to be handled in the private sector. Banks that are not nationalized would face a disadvantage in competing for funds with the government-backed banks, forcing these banks to pay higher interest rates to attract customers and their subsequent deposits, resulting in lower profits. Another problem that Sweden didn't have to face was the size and complexity of banks. Many banks in the U.S. hold billions of dollars in assets, causing more complications in managing these assets. If the government were to take control of the financial sector, banks would mirror the efficiency of the U.S. Postal Service, which anyone can tell you is a complete fiasco!! Finally, the confidence of the American people would plummet to all-time lows if banks were nationalized. It isn't American tradition to seek governmental help unless in dire straits, and nationalization would indicate that the financial sector is failing, resulting in less consumer confidence. Less consumer confidence would only deepen the recession and cause the stock market to continue its downward spiral. The government cannot be allowed to tinker with the free market. Every time it implements a new policy, such as the nationalization of banks, past history has shown that, although good intended, these policies make society worse off.

Media…The Source of the Problem.

The article, “Hopes of Quick Rebound in China Start to Fade,” by Andrew Batson in the February 26, 2009 edition of the Wall Street Journal, discusses China’s place in the current global recession. Because China’s stock market has had the best performance this year, hopes were high for them to lead the way out of the global recession. Steel prices have effected the expectations for the country’s growth, probably due to the fact that it consumes the most steel in the world. While steel prices have grown approximately 15% since November, they have declined by close to 9.5% in the past few weeks. Steel is a leading indicator for China’s economy; therefore, many people believe that the data produced in the past couple of weeks mean that the economy is not looking up. Another key indicator for the economy is their trade balance. Exports and imports have both declined. This is because international demand is down as well as domestic demand. A reason for this could be expectations. The title of the article attracts pessimism porn addicts, and disregards some aspects of the economy that are actually positive forces. News, like this article, could really be playing a big part of these plummeting expectations. An extreme solution to this issue could be restricting negative opinions of the economy; however, then it would be an infringement on the right of freedom of speech. Therefore, it seems our media is setting us up for a downward spiral of deteriorating economies.

Economy in worst fall since '82

According to the Wall Street Journal, http://online.wsj.com/article/SB123574078772194361.html#articleTabs%3Darticle more recent figure -- which represents the steepest dropoff since the depths of the 1982 recession -- raises pessimism among economists. Until recently, many had been hoping for a rebound in 2009 and now sound downbeat about the remainder of this year. As saying on the video, it would be too soon to say that this is the bottom of the recession. Growth in both Europe and the U.K. fell at an identical 5.9% annual rate. Japan said last week its GDP had contracted more than 12%. The U.S. exports declined at a 24% annual rate, compared with the 20% rate previously reported. This recession is worldwide, so it would be good time to learn other country plan for recession.

Bank Failures

On Friday the 15 and 16, two more failing banks were closed. These closes has required the FDIC, Federal Deposit Insurance Corp, to fund approximately $100.7 million to purchase the assets of these two banks. With the smaller banks failing the government has been forced to bail out the larger ones like Citigroup. “The government has taken control of 36% of Citigroup, which had already received $45 billion from the government.” Will the government have to take more control of the banks to ensure that the money we deposit is safe?
If banks don’t get their criteria for loans tightened this may have to happen to make sure that the population still has faith in the US banking system.

http://money.cnn.com/2009/02/27/news/companies/bank_failure/index.htm?postversion=2009022721

Bailout or Handout?

An article in The Wall Street Journal is talking about GM seeking 16.6 Billion more dollars in U.S. aid. The question arising in my mind is with them already receiving a portion of the pre-allotted auto industry bailout, why do they need more? It seems that companies are using the United States Stimulus package as a bargaining chip. GM has announced that they will be cutting 47, ooo jobs, they are going to be cutting 3 lines of vehicles (Saturn, Saab, and Hummer), these things are all being said to justify them asking for more. With talks of all this money floating around it seems to me that companies are using this as a time to recoup everything that they have lost over the past decade. They are looking for handouts, “U.S Giving away free money”, seems to be the viewpoint of many industries right now. With companies using threats to create wide spread panic for jobs, the government will be forced to take some kind of action. (The Wall Street Journal: Wednesday, February 18, 2009 “GM Seeks $16.6 Billion More in U.S. Aid”)

The sky is falling, the sky is falling!

In Don Feder's article, "Demographic Winter' Exposes the Century's Overlooked Crisis" the author talks about how population growth across developed countries have been sinking considerably over the last 40 years. The author states that fertility rates have gone down 50% since 1968. In Europe, for instance, the average birth rate is 1.5, whereas the replacement level needed to sustain the population is 2.1. When the baby boomers pass away, coupled with our declining birth rates, is it possible that real estate and equity investments might decline for the majority of our lives? I think not only is it possible, but quite likely. Developed countries require growth, and never in history have we had economic prosperity accompanied with depopulation. Japan is already one step ahead of the U.S., as they never had the baby boomer generation to provide that final push. Japan saw their stock market fall over 80% in the last 15 years and watched real estate slip 60%. If we see the birth rate in the U.S. slip below the replacement level of 2.1, it's hard to imagine how investments/real estate could return anything at all. Maybe Dr. Tufte is correct in saying home ownership isn't such a great and secure investment! http://www.humanevents.com/article.php?id=25723

Never A Clear Answer

The 2% Illusion

I'll admit that as I watched President Barack Obama's speech Tuesday night I did have a sense of hope that he truly did understand the importance and urgency of the current economic crisis. My boss's words were ringing in my ears from what he mentioned the day before, "Your second job may be your only job next month." As I listened to him explain how he was going to distribute rebates and not raise taxes for essentially the working and middle-classes, his idea of taxing those that make over $250,000 seemed fine to me. However, good intentions and hope have never made money appear out of thin air. "The 2% Illusion" takes the most recent data available from 2006 on the tax revenue generated from the wealthiest portion of tax payers (the same portion President Obama is now proposing we increase taxes on) and finds that if taxed even at 100% of taxable income (generating $1.3 trillion), that was not enough to cover even half of the governments fiscal budget. The current stimulus plan released today has a price tag of $3.6 trillion. That was conveniently left out of Tuesday night's speech. Simply put, yes the rich have deep pockets, but not that deep. It is going to be very hard for President Obama to sell his concern that he does not want future generations to have to deal with paying for the current debt if he simply does not have a viable way to come up with the money.

Obama calls for a reduction in the U.S. deficit???

Only days after signing the largest stimulus package known to man, as well as instituting a number of other costly bailouts to various market sectors, President Obama issued a statement that he has set a goal to slash the United States annual deficit in half by the end of his term. Mr. Obama inherited a deficit for 2009 of close to $1.2 trillion, which is expected to rise to more that $1.5 trillion given the initial spending from the stimulus package. I am not criticizing Mr. Obama for either of the two issues but I am having a hard time understanding how he is going to accomplish both of these lofty goals. With the economy being in its worst condition since 1982, the U.S. government needed to step in to provide some much needed relief and did, coming in the way of the bailouts and stimulus package. By doing so, the U.S. deficit took a extremely large hit, but this was the lesser of two evils, hoping that the $800 billion stimulus package would stop this downward spiral and spark some hope in the eyes of everyone across the world. Also, Mr. Obama has intentions to deliver this year on ambitious campaign promises to implement his health care and energy policies, which undoubtedly will add to the already enormous deficit. Mr. Obama also has plans in the future to reconstruct the country's education system by providing schools with increased funding and pay for teachers. I don't claim to be a very smart man but even a child can understand that a great deal of money will have to be provided to accomplish these goals and agendas. One way of raising the necessary funds to achieve his aspirations would be for Mr. Obama to raise taxes on the citizens of the U.S., which in these economic times would only act as gasoline on an already out-of-control fire. Another option President Obama has at his disposal, is to borrow even more money from foreign countries to finance his political agenda, leaving the tax payers, me and you, with more and more debt, with interest, to repay. This is a classic example of having your cake and eating it, too!!! It just can't work!!! The two major goals that the President is trying to achieve are contradicting!!! In a recent article published in the New York Times, Mr. Obama was quoted saying, "We can't generate sustained growth without getting our deficits under control." If that is in fact true, and I personally think it is the case, it is vital that we put all other agendas, policies and goals aside and focus on reducing the deficit to generate growth in the U.S. The stimulus package may in fact be necessary to stop this economic downturn but the line needs to be drawn somewhere!!! Everything that the government has done to stimulate the economy is water under the bridge and now the government needs to take a step back, focus on reducing the deficit, and let the economy run its course. This isn't the first recession we have experienced and it certainly won't be the last. The economy has always come out of the contracting state and this holds true for the current recession. Once we have weathered this economic storm and the U.S. budget has been somewhat controlled, then if the President want to look into these political policies, I see no problem. A good leader is one who can assess the current situation and make adjustments to the overall objectives to ensure the best possible outcome for his/her team, company, or in this case, country. Let's focus on the most important objectives, economic growth, and then work our way down the list when the time is more appropriate.

Treasury Finds No Rise in Bank Lending

This article, titled "Treasury Finds No Rise in Bank Lending", quotes the Treasury Department of saying that the largest recipients of the $700 billion stimulus plan did not increase lending to consumers in the last three months of 2008. Actually the lending in the last quarter of 2008 was stagnant or declining, even with the "$250 billion capital-injection program" in place to stimulate lending. As was talked about in class, these banks that are receiving the funds from the TARP program are for the most part keeping them to make their own books look good rather than lending the funds out to stimulate the economy as was originally intended. This hoarding problem has Congress pressuring the Treasury Department to find out what is going on with the funds given to banks. If the banks are using taxpayer dollars to make themselves look good, instead of loaning the funds out, the stimulus plan is, for the most part, ineffective. What are some possible solutions to this problem? The Government could put in place a contract with the banks to require them to lend out a certain percentage of the funds within a specified period. Another solution could be increase incentives (such as low interest rates) for potential home buyers to take out mortgages. In any case, the bank side of the stimulus plan is not working so far, so the Treasury Department and those in charge of this section of the plan must step back and re-evaluate their strategy.

The Inflating National Debt: Threat to U.S.?

With the passage of the recent American Recovery and Reinvestment Act of 2009 the annual budget deficit took another dramatic leap for the 2009 fiscal year. The deficit was originally projected at $1.2 Trillion dollars, but with the addition of the Stimulus Bill that figure has nearly doubled to a staggering $2 Trillion dollars. This giant deficit will most assuredly add to the already-massive National Debt which is already in the ballpark of $11 Trillion or 60% of GDP. Some fear this consistently increasing number threatens the solvency and sovereignty of the United States of America as a political state. Is this a reasonable concern? Is the solvency of the Republic in danger? The answer is no, the current debt is not a viable threat to the solvency of the state. Though we do not wish to advocate deficit spending, the fact of the matter is that the United States has faced budget deficits and national debt before. The current debt represents approximately 75% of U.S. GDP, yet has been much worse in the past. For example, post World War II the debt reached 130% of GDP. The U.S. debt fares pretty well in comparison to other countries as well, it ranks 23rd in National Public Debt. Japan by comparison, ranked 3rd, has a debt that is an unbelievable 170% of GDP. As outstanding the debt may be, the simple fact remains that no creditor is bold enough to call in American debt. This would only spur a chain reaction in which the U.S., and every subsequent country, would also call in their outstanding loans and the world’s financial system would be left in ruin. No country or creditor would dare inflict such chaos, thus no matter the size of the U.S. National Debt, the solvency of the United States will remain intact. That’s the blessing of being the world’s economic superpower.



"A Short History of the National Debt" By JOHN STEELE GORDON

http://online.wsj.com/article/SB123491373049303821.html?mod=article-outset-box

Obama Makes History By Using History to Create Fear

The $ 787 billion stimulus bill that President Obama signed into law will clearly be noted in history. The fact that he used history, by wrongly comparing our current situation to the Great Depression, most likely won't. The point here is simple: cooler heads prevail. Passing a bill fueled by fear might not be the best idea. The fact is that we are in the middle of an economic crisis. In 2008, we lost 3.4 million jobs or 2.2% of the labor force. The financial sector is in trouble and everyone is wondering which bank will fail next. Things are not good. If this were to continue for some time, could we end up in a situation similiar to that of the 30's? Sure, but do the current signs predict this? That is not clear. What is clear is that the Obama administration has no qualms about using fear to rush legislation through the democratic process. In 1930 durring the begining of the Depression, the labor force contracted by 4.8%, in '31 it went down by 6.5%, and in '32 it shrunk 7.1%. In 1933, thousands of banks failed. The point is our current situation isn't quite there yet, and saying we are on the brink of another episode of the Depression is less than truthful. Machiavelli felt that fear was a good tool for a ruler to use. Hovever, I am unsure if he ever considered the economic consequences. Fear may cause a decline in conusmer confidence which would hinder any type of recovery. Comparison of 1930's to 2008-09.

White Collar Birthplace Essential?

Professor Tufte explained in class, awhile ago, that there are distributional consequences of recessions. Usually workers who have bad or lazy attitudes, social pathologies, are tied to a location, are at the bottom of the income latter, or do not have skills are typically the first to be affected in a recession. The article, “The Jobless Go Back to School and, They Hope, Work” by Amy Merrick and Roger Thurow in the February 5th edition of the Wall Street Journal discusses the unemployment issue in Rockford, Illinois. Rockford is a small town near Chicago, Illinois. The unemployment rate in Rockford is approximately 12.5%, which is well above the Illinois state unemployment of 7.4%, and even higher than the U.S. average of 7.1%. The town is characteristically a manufacturing town, meaning that many of the jobs there are "blue collar." Not surprisingly, there has been little incentive for residents to receive higher education. Only 19% of the residents have a four-year college degree which is much less than the national average of 27%. Would this be the same in a "white collar birthplace?" The burden of the recession is much worse in towns like these, which just goes to show that the location one is born in can determine their future financial situations.

For a more sustainable U.S.

http://proquest.umi.com/pqdweb?did=1645605171&sid=1&Fmt=3&clientId=1670&RQT=309&VName=PQD Article wrote by David P. Chynoweth who is a professor emeritus of agricultural and biological engineering at the University of Florida. One of his suggestion is a heavy tax on unhealthy product such as tobacco, alcohol, foods with added sugar and alcoholic beverages. It would be good idea to heavy tax on unhealthy product, but low income people consume alcohol heavier than middle or higher class people so unhealthy product company would have hard time if it is happen. I think idea of "Education through undergraduate college level should be free for all residents" is good idea to be a more sustainable country because we can learn so much things in the University, so it makes country more productivity.

Have Keynesian Economists Been Delt the Perfect Hand?

With the latest news that GDP fell at the annualized rate of 3.8% in the fourth quarter of 2008, Obama and his administration are preaching the urgent need to pass the stimulus package currently before the U.S. Senate. There is however, a great deal of debate as to whether or not this package is heading in the right direction. It is large enough? Should it focus more on spending and less on tax cuts or vice versa? From this article it is plain to see that there are many opinions and some are very contradicting. Economist Debate But contradicting opinions can be helpful in the learning process. The way I see it is if and when this stimulus plan is put into place it may possibly be the perfect situation to truly test Keynesian Fiscal Policy. The question is: Are we willing to take a trillion dollar gamble? If not we could always turn to China and Russia. Vladimir Putin and his Chinese counterpart are publicly critiquing the U.S. macroeconomic policies. Maybe we should ask them for advice.

Spending Plan leaves many unstimulated

http://archive.columbiatribune.com/2009/jan/20090130comm003.aspAccording to article, suppose the value of all that we will produce in 2009, our gross domestic product, totals $14 trillion. There cannot be any disagreement that if Congress spends $4 trillion, of necessity there is only $10 trillion left for us to spend privately. In other words, if Congress is going to spend $4 trillion, it must find a way to get us to spend $4 trillion less. The most open and aboveboard method to force us to spend less privately is to tax us to the tune of $4 trillion.
Another method to force us to spend less privately is to print money and inflate the currency. I think tax and inflate the currency would not good way to do for this problem, because bottom of the income scale people suffer from inflate the currency and tax. I think people who are satisfied or happy with their life, would no problem to pay tax or inflate the currency. Goverment spend money to makes suffer people happy might make money more than they expect.

On the brink of collapse!!....., well, not really.

This article foresees doom for the sliding profits of the oil companies. Well, the profits are falling, but no one is talking about the potential collapse of the big names in global oil. Exxon posted a 33% fourth quarter earning shortage as compared to last year's Q4 earnings. It sounds rough, but I'm sure no one had been fired because the company only made $7.8 Billion in "Revenue-Cost". It is a volatile market for profits in the oil market right now, but when the question is "windfall profits or semi-windfall?", I would say it is safe to live in Texas for the time-being.

Kinda' Cool

Blogged gave you all a 7.6!

News for everyday life

It's hard to feel like this is breaking news anymore. The news that the price of oil hit a new all-time high is almost a daily occurrence anymore. This AP article is filled with all sorts of the economic principles we have discussed throughout the semester; supply and demand, constraints, etc. Relevant to our more recent study is the externalities of the situation. We are all intimately familiar with the effect this has on our personal, everyday lives. Just driving our personal cars is cramping our style and effecting our decisions. I'm not sure where the locus of control falls with this, but we should be aware of the effect these conditions have on all other aspects of life too. As stated in the article, with the rising costs of fuel, especially diesel fuel, the cost of anything transported by truck, rail, or ship is going to have to rise as well. Obviously, this affects everything. How's that for an externality?

Do Girls Cause Divorce?

In this article there were many things discussed about divorce. There is a lot of research and there are a lot of people reading the research to "create" facts. There is a relationship between low income and divorce but it is unclear which comes first. The part of the article I found interesting was that couples were more likely to get divorced if their first born was a girl. The other thing that I found alarming was that non traditional families cost the American people "$112 billion per year, or $1 trillion each decade" in taxes. That is money coming out our pockets. This statistic really surprised me. There are tax benefits to getting married and there aren't benefits to getting divorced. As I continued to read this article I realized that we all need to be careful of the facts we are believing, and the evidence that are supporting the conclusions. This article did a good job of explaining both sides in the end.

Economic Hypochondriacs Unite

Forget recession, bring on the depression, and make it a great one! I think there is a disconnect between the generation of Americans that made this one of the most influential in modern history and those that drive contemporary, mainstream opinion. Widespread diffusion of responsibly, spill over of the great society, and instant everything have changed the makeup of America’s character and I find it to be tragic. The greatest generation of Americans was born from one of the worst economic periods of our history, considering current sentiment, I welcome the forecasted economic downturn.

Squeezed By The Staples!!!

HELP HELP, the food costs are rising!! It’s ok though, because wages are also rising to offset… no wait, oh crap, only food and fuel costs are rising, everything else is unresponsive! Good thing these facts are kept under control with our exceptional MBA degrees that will undoubtedly land us successful high paying jobs no matter what the economy has to say about it right, right.

This little peach of an informative helps shed some light on our current inflationary saga. Interestingly enough the article begins by stating that the even Wal8Mart’s “Always Low Prices” aren’t so low these days and that around the world we are seeing food-related riots. That’s right, I am not just talking about the common food fight, these bad boys are riots! “Nearly every food staple has seen a double-digit percentage increase over the past year, including a 38% hike for a dozen eggs, to $2.16, and a 19% jump, to $1.78, for a loaf of white bread, according to American Farm Bureau data.” Basically the average American has turned into a coupon hunter. I don’t know about you, but it looks and is starting to feel like we have been thrown into a painful circle of, dare I say it, recession-linked inflation. Unfortunately for the consumer, all of the goods that are seeing price increases are staples, with little if any elasticity and discretionary spending. We need food, we need gas. Apparently we also need a big fat kick in the pants, or at least our pocketbook

Organ market-proof of concept

According to the article Organ Sales and Moral Travails: Lessons from the Living Kidney Vendor Program in Iran Iran has a program that allows donors to recieve compensation for donating a kidney. The government pays donors $1,200 plus some limited health insurance coverage. The program has been successful in eliminating the shortage of kidneys in Iran, proving the concept that if the price of a good is too low there is a shortage and increasing the price can stop the shortage. As we all know from our Aplia assignment "under an existing law passed by Congress in 1984, it is illegal to offer a financial incentive to organ donors." Perhaps it's time to take a look at these laws, make some adjustments, and save some lives.

The End of Windows XP

Microsoft has announced it will stop selling windows XP for new PC's beginning June 30, 2008. The decision has sparked some controversy, and a petition, among loyal XP users who prefer it over the company's new operating software, Vista. The article states that many chief technology officers and IT managers found "no compelling reason" to switch. Stating that the amount of money this is needed to be spent on new hardware and training to support the new interface is not worth what added features Vista has to offer.

Given Microsoft's market power; it only makes good business sense for the company to make this move. As current user's PC's age and they shop for a new replacement, they will have little choice but to buy a new PC with the more costly Vista OS. Microsoft is only doing what any business with market power would do. I say, let them go for it.

What's Your MBA Worth?

I enjoyed this analysis of the MBA curriculum and how it has been changing at particular business schools. Apparently, Yale recently shifted the emphasis of its program from functional to thematic--offering coursework covering customer, employee, investor, and so on. In the past several years MBAs have been the focus of much scrutiny, specifically the degree of coursework relevance for real world applicability and resultant unscrupulous activities of MBA grads in the business world (see Jeffrey Skilling of Enron and, depending on your perspective, President G. W. Bush). Many practitioners suggest that most MBA curricula still has some ways to go, in terms of career preparedness, before it gets to where it needs to be. Also, ethics doesn't seem to be so easily taught. Business grad students rank highest amongst other schools with regard to dishonesty with 56% admitting to cheating at sometime during their academic career. The article has a rosier picture to paint though; come graduation, we're not all deceitful first year cub scouts. Maybe I'm naive, but I've enjoyed the MBA curriculum so far and I think SUU offers a unique experience. Surely, there could be improvements here. Is our education meeting our expectations and if so, are our expectations in line with what lies ahead?

Bush's Economic Perspective of Iraq

President Bush gave a statement today (April 10, 2008) on the state of Iraq's political, economic, and diplomatic state.  The interesting part of the article was that Iraq is currently in a process of rebuilding.  The country is stabilizing, other countries' embassies are reopening, and people are now feeling safe enough to rebuild.  Iraq's proposed budget plans to outspend us ten to one in construction projects.  

With a stabilizing environment and rapid growth, I would not be surprised to see investors begin their search for high returns.  There will continue to be a large element of risk but a definite ability to find projects with higher returns.  Iraq's rebuilding will definitely afford many the opportunity to find high returns on their foreign direct investment.   

Fight for Old Subway Cars

One of the best ways to make an artifical reef is to push old subway cars into the ocean. Many states are realizing how great the subway cars are for the fish population and want to use them also. However, the problem is that there are not a lot of subway cars to go around. Using subway cars for artificial reefs started in 2001 when Delaware was the first state to receive the old New York subway cars for free. First of all, this was not good for the New York economy because simply giving things away is not always the best way to get rid of old products. There should be a price involved. Secondly, New York needs to open up to other states besides Delaware so that the best market price will be received for the old subway cars. Utilizing the knowledge that the old cars from New York are useful to other states can increase the benefits of getting rid of the cars. The benefits would come in because the subway cars would then have a price on them. Overall, this will actually help New York, as well as the other states that are purchasing the cars. To better the economy, states need to work together, like a business, rather than just simply giving away free hand outs.

Nobody Can Say Indiana Jones Is Inferior

Everywhere I look businesses are worried sick about the thought of a recession. Every industry is looking for ways to either cut costs or increase profit margins. Every industry is panicking except one, movies. The first thought that ran through my head when I saw the title of this article was what a bad time for producers to release such a great movie like Indiana Jones. But upon reading the first sentence of the article, I discovered this is actually the best time for great movies. Dating back to the depression people with lower incomes have skimped and saved to visit the theater just to catch a glimpse of their favorite inspirational heroes and heroines. Movies are an inferior good. When people have less income they see more movies. Who would have thought? When money is tight Indiana Jones will come to an encouraging rescue.

A Second Stimulus Package?

This article discusses the possibility of a second stimulus package. Up to $1200 per couple is expected to be mailed in May and a talk of another package is swirling in Washington. Democratic lawmakers are trying to pass a second economic aid package that would help homeowners avoid foreclosure and increase spending on bridges and transit systems. Lawmakers believe that bridges and transit systems are deteriorating due to the lack of attention brought on by the Iraq war. The success of the first stimulus package is still unknown; therefore, would it be smart to compose another package? Many believe that infusing the economy with money is not going to help the economic situation. If you believe the economic stimulus plan is going to help, what do you think about a second stimulus plan? I believe that the first stimulus plan will work; on the other hand, it needs to be watched carefully in order to determine whether a second plan should be introduced.

Where have all the salmon gone?

If you love to eat King Salmon you probably won't be eating it for awhile. King Salmon populations in Oregon and California have dropped from 775,000 in 2002 to 90,000 in 2007 and the number is expected to drop to 59,000 this year. This is prompting fish and wildlife experts to ban the harvesting of King Salmon for an undetermined amount of time starting in May. Fisherman are not opposing this action and generally support it to allow salmon populations to replenish themselves. Scientists do not know exactly why this is happening but believe it has been caused by cyclical changes in the oceans environment. Because of short term temperature changes the food supply for juvenile salmon swimming to the ocean for the first time in 2005 was significantly decreased possibly causing the salmon population to decrease. Salmon disappearing. So what does this have to do with economics? If you like to eat seafood this problem is going to make your meal more expensive even though King Salmon won't be on the menu. Fishermen will need to make up income somewhere and the most likely thing for them to do is raise the price of the other seafood they catch. With the decrease in supply for King Salmon the demand for other types of salmon will increase and make them more expensive. Don't be shocked the next time you head to a seafood restaurant and your bill is more than you expected. The question that will remain unanswered is how long will this ban on King Salmon be in effect and what will this do to seafood restaurants during this ban?

Legalizing Polygamy

I was watching a special polygamy Oprah a few weeks ago, and as always my full attention was captivated by Oprah as she interviewed a young mother who escaped life in the Fundamentalist Church of Jesus Christ of Latter-day Saints community. Living so close to Colorado City, Arizona I believe the economics of the issue are very pertinent to Utah citizens. The woman being interviewed had many children. Her eldest daughter was turning 14 years old when she decided to leave the fundamentalist community in the middle of the night. She refused to let her daughter be married at such a young age, so she took her many children and started a new life.

In this article another underage girl became pregnant at the age of 15. Police raided a Fundamentalist compound but found no young girl. The Fundamentalists have only begun constructing these compounds to keep away outsiders. The woman interviewed on Oprah supported the legalization of plural marriage in attempts of reducing the religion’s secrecy. Authorities could more easily investigate underage marriage and save more girls like herself because polygamists would be less inclined to secrecy if polygamy was legal.

Would legalizing plural marriage decrease underage marriage in the Fundamentalist community? My answer is no. First of all secrecy is how the community survives. The church members are not allowed to view television, read the paper, and some days leave the “compound.” The religion is all people know and the fear of the unknown keeps people in it. Secondly, reducing the punishment for plural marriage would not reduce the demand for the religion to be secretive because the religion survives on this secrecy. The third reason is police more aggressively prosecute underage marriage rather than plural marriage. This still makes secrecy a priority.

Risk averse or a risk taker?

Men should forget studying economics and finance because psychologists have determined that their decisions come down to how much testosterone is flowing in their blood. A "new but growing field called neuroeconomics attempts to take the hard-wired science of brain biology and mix it with the softer sciences of psychology and economics to figure out why we make the financial decisions we do." Read More. With MIR technology psychologists were able to show that the same part of the brain that makes financial decisions was also active when men were shown erotic pictures. These same men were also more prone to making large financial gambles after being exposed to the erotic images. Is there a lesson to be learned from this study or is it just an article that we can all laugh at? Calculated risk taking is part of business but if certain other activities are going on risk taking can be taken too far. It is obvious that there are multiple factors in determining why people make risky decisions but we have seen recently several wealthy and powerful men pulled down because of their secret lives, such as the Governor of New York. So how can we draw a real life application to this study. If men can't keep their minds on their work, you know what I mean, they will make emotional and uneducated decisions that are too risky. So, I conclude, for men to make the best business and financial decisions they need to focus on their work and keep their minds out of the gutter. If this isn't possible then decision making should to be turned over to women because psychologist's haven't found evidence linking them to this problem.

Duck and Cover Boise

There are many economic factors in deciding how vulnerable a city might be against a terrorist attack. Boise, the same Boise located in the state of Idaho, was the only western city to be ranked in the top ten most vulnerable cities in the United States. The cities people might perceive as more probable targets like Los Angeles and San Francisco are ranked 41 and 66 respectively. Why so low and why lower that Boise? The research is based on socioeconomics, infrastructure, and geophysical hazards. Boise is a risky city because it is located near the Lucky Peak Reservoir. This creates an opportunity for potentially flooding the city. These issues are weighted to determine how terrorists could potentially hurt the most people with the least amount of action. Essentially the report defines the opportunity costs for terrorists looking to destroy American lives.

Doctor Give Me The News

Dr. Tutfe has explained this week the power of a monopsony or single buyer. One example he cited was teachers of secondary education in the United States. These teachers staunchly advocate for the government but do not realize that the government is the main source of their compensation. Privatizing education would actually help teachers be compensated more fairly because it would reduce the power this single buyer has in the market. Which is why I was surprised to read this article in Business Week, that stated the majority of doctors are now in favor of a single government-sponsored medical insurance. I can see only two logical reasons for their rising support. The first would be the doctor’s ethical responsibility to help low-income people in this country get the proper health care. The second is more self-interested. Many people now just do not visit the doctor because it is too expensive; however, with the government-sponsored insurance more people will be more inclined to see the doctor. With increased patients doctor’s offices are able to earn more despite the projected lower earnings resulting from a national insurance.

Wireless Price War

Verizon Wireless recently commenced its $99 unlimited calling plan and competitors of course quickly followed suit. Is this really smart? Cell phone companies have typically sold minutes in “buckets” of time, packaging deals to get the most surplus out of customers. By creating plans with unlimited minutes, wireless providers “could lose 25% to 40% of the revenue from some of their most lucrative customers.” I'm not sure how lowering the price like this could be good for the industry, except to get people away from landlines.

MBA Grads in the Recession

This article conveys that MBAs and business undergrads who graduate during an economic downturn have much lower lifetime earnings, sometimes by millions of dollars. A Citigroup spokeswoman said their offers were down 10 to 15%. One study showed that for every percentage-point increase in the unemployment rate at graduation, there was a 7% to 8% initial wage loss. This loss is multiplied when the grad's annual raise comes around and there's not as much to multiply. Different industries are also more apt to hire than others during economic downturns, and so a grad's entire career path may have to be shifted. So how should grads combat the sagging market? The article suggests that students should stay in school until the economy picks up again, arguing that it may hurt in the short run, but it will pay off in the long run. I'm not so sure on that. Although it's always great to be learning, if you aren't going to use additional advanced degrees, it doesn't seem worth it to go in debt for it. I think we'll have to just take the economy as it is and try to make money with a degree instead of slowing down school and continuing a part-time, low-wage college job.

Elephantiasis and Philanthropy

The CEO of GlaxoSmithKline has spent a couple hundred million dollars to fight Elephantiasis in third-world countries. He has also spent countless hours promoting and working on the project. It's great that a person and company are so willing to help mankind. However, is philanthropy smart, economically speaking? There are benefits (good PR and that warm, fuzzy feeling), but there are also costs. I once heard someone say that Bill Gates has done more collectively for the world by creating jobs and personal computers for millions of people than Mother Teresea did for the few thousand lives she individually touched. What do you think?

Oil Chiefs Shift the Blame

Wow! Does anyone feel trapped by this endless ordeal over soaring gas prices? If you don't, then read the article "Congress Presses Oil Chiefs on Big Profits."

You can look at this conflict from two standpoints: a consumer or a producer. The consumer standpoint, as we all know, is extreme frustration over volatile gas prices and reported "big profits" for the oil industry at our expense. The last thing we want to hear after paying $3.29 per gallon at the pump is anything to do with increasing profits for oil producers.

As consumers, we know the complaints and frustrations of the American people; however, how much have we considered the oil industry as a business rather than the enemy. If you remove yourself from your consumer shoes and put on the hat of an executive in the oil industry, you'd be singing a different tune. Don't get me wrong--I am just as frustrated as the next person over the extremely volatile gas prices; however, as a business student I also recognize the reasoning behind some of the strategies practiced by businesses in order to grow and survive long term.

In the article, J.S. Simon made some "valid" points regarding the high profits of the oil industry. He pointed out that you have to put the profits in perspective relative to the investment requirements for the industry as well as the need for sustainability over down cycles that are likely to follow the market upswings.

As a business owner, what would you do? You are dealing with a potentially limited natural resource requiring a huge capital investment in order to distribute. There has to be some middle ground here: I understand that a business must be profitable in order to justify staying in business; however, does this justify virtual "rape" of the American economy?????

Cigarettes…… Do we still need more regulation?

I could not believe this article when I read it. It seems that they want to once again put more regulation towards cigarettes. According to the article they hope to, “dramatically reduce tobacco marketing, to ban many flavored cigarettes, and to prohibit the labeling of cigarettes as ‘light’ or ‘low-tar.’”
Is it just me or does it seem like our government focuses way too much on cigarettes. It may be because at one time in history they freely gave them out to all the military or maybe there are stronger groups pretesting against it. I am not quite sure, but it seems to me that there are a lot more harmful things then this that seem to get no regulation.
Economically we have talked about how regulation for anything ends up hurting the economy more. Instead of banning certain cigarettes I think they should allow them and possibly just tax them more heavily and use that money to help our school systems that seem to be lacking funds. I think banning would not solve the problem, in fact I think it could be even worse. Maybe I am just a biased business student, but I don’t think that regulation is the answer in this case.

Monopoly Power

In class we have recently been talking about monopolies. In reading this article about the recent writer’s strike and how now the major TV stations are starting to negotiate with the writer’s unions it seems as though the writer’s have somewhat of a monopolistic control over the TV stations. The TV stations seem to be at some point willing to meet the writer’s demands. I guess it is kind of how Dr. Tufte was saying that movie stars or famous sports players have a monopoly for their name. I think in this case the writers exemplify their monopoly through their special writing styles that no one else can duplicate. With having the monopoly power the TV stations are practically forced to follow their requests. I think over time this power will decrease (the long run effect). If the writers demand is too high then over time they will replace them with other writers that do not demand as much.

Truckers Protest

This article discusses the protest that was staged by some independent truckers on April 1. The truckers are hoping Pres. Bush will use the nation's oil reserves to help combat the rising price of diesel and hopefully influence some companies to pay more per mile. Though it was a small protest, some of the shippers chose not to send goods because they feared truckers who worked would be retaliated against. There are no articles about a continuing strike today or another strike being organized for a future date - yet. One wonders if any changes will come from this strike. Will the government help out the struggling truckers? Should the government step in and use the nation's oil reserves? Will there be more protests? How high will the price of food go as truckers protest more and shipments aren't delivered? Will there be any effect on food from these few hours of strike on April 1?

New Reform Moving Cuba Towards Capitalism

Raul Castro is furthering policy reform to help Cuba's economy and its citizens. This article reports that he has authorized the release of unused government lands to be transferred to private farmers and cooperatives that may choose which crops they wish to grow and sell. The government hopes that reforms like this will help put more food on Cubans table. One interesting statistic stated in the article was: 35% of arable lands controlled by private cooperatives produce 60% of the islands agricultural output. Numbers like these demonstrate the efficiency and productivity of capitalism over communism.

With this new reform, we can expect to see the supply curve shift to the right, causing prices to decline.

Start Packing Lighter, Folks

According to this article, Northwest is changing its luggage policies. Beginning in May of this year, passengers are only allowed to check one bag for free. The second bag will cost $25. Unless you're first class--in which case the second bag is still free. In addition, charges for overweight bags are getting steeper, too. Obviously, this move is in an attempt to discourage passengers from checking a second bag in order to better manage and cover fuel costs. But what do you think this will do to demand? I doubt people will fly first class instead of coach just to check their second bag for free. No, I think in the short run Northwest will probably suffer from lost ticket sales. But I have a feeling that (as fuel prices keep rising) more and more airlines will move to this kind of policy. So in the long run, it may not make a difference.