More Sports Economics... How Much are You Willing to Pay?

Continuing on with some more sport economics, this article explains the prices paid by the public when a team stadium is introduced and subsidized by the city. I found it very interesting that so many stadiums have been built in the last 20 years. On average, over half of the teams in the MLB, NFL, and NBA have received new stadiums. The argument is about whether these stadiums should be subsidized by the public, for private gains. Some economists argue that it hurts the local economy by lowering personal income. Others say that it is increasing the worth of the city and providing positive economic leisure benefits. I agree that stadiums are an important part of a local economy. Everyone here in Utah knows what the Delta Center is even if they don’t follow sports at all. The problem with subsidies is if a team happens to relocate and the public is left with the tab. This article about the Astrodome provides more information on the downside of stadium subsidies.

Whose fault is it anyway?

This is an interesting blog post in BizTimes.com, a Wisconsin-based newspaper. The article discusses the common perception that insurance companies are to blame for the current health care crisis. The author lists several reasons why insurance companies are not to blame. First-health insurers were already in favor of reform to require insurance companies to enroll anyone-regardless of preexisting conditions. Second-health insurance companies were also in favor of place limits of what they can charge for elderly premiums. Third-insurance providers are businesses, trying to maximize their earnings. To victimize them is childish and shows a lack of understanding of financial institutions. While it's true that a reform was needed (although certainly not a complete overhaul), demonizing a for-profit company is ludicrous.

Houston: We Have a Problem

Initially, when I first heard reports of Obama planning to cancel part of the NASA program, I was annoyed and wished he would keep his hand out of things. However, after delving more in depth into what he envisions happening, it may be one of the few things I agree with. The New York Times reports that only certain parts of the global-leading program will be cancelled. Constellation, the program geared to developing a new rocket to replace the Space Shuttle, is to be phased out, while $18 billion annually will be budgeted to develop new space technologies. The major part of the program that I agree with is that taxiing humans to and from space will now be head by private companies, which should increase efficiency and reduce wasteful spending. Seeing this makes me wonder why Obama wouldn't think of privatizing Social Security, Medicaid, or some of the other bulky programs to save money and increase efficacy.

The Oil-pocalypse

Econbrowser posted an interesting article on their blog with lots of fun graphs about the cost of oil and it's effect on the recession. We have discussed in class the effects of rising prices during recessions and it doesn't take a genius to realize that they won't help us overcome these tough economic times. These gas prices may end up sparking production in the auto industry for even more fuel efficient cars as we could see gas prices are likely to reach $3.50 this summer. As college students, we have all been feeling the pain of gas prices rising but Econbrowser assures us that although "$87 oil is certainly not helping the recovery. But I would be very surprised if it proves to be the kiss of death."

Statistics for Dummies

With all the talking we have been doing in class about statistics, it is nice to know that there are other ways to lie about the GDP. As Dr. Greg Mankiw points out in his article posted on his blog, there is one very interesting publication that we see each year in which actual statistics make very little difference. The article is talking to Parade magazine and their annual report on working individuals and their salaries. Mankiw makes an interesting point in how the distribution of income is not well represented between jobs. Another reason that this article doesn't make statistical sense is the fact that areas around the country are compared without adjusting for things like the cost of living. Obviously an actor in Hollywood in Los Angeles is going to make more money than a plumber in South Dakota. At the same token, a plumber in Los Angeles would make much more money than that same plumber in South Dakota. This article is a poor representation of America. You can find the actual article.

Exporting, We Hope

I found this article to bring a little possibility of more hope for the economy. We hope that we can do more exporting. I found this article in the Economist. In it we learn that if we are going to increase new exports, it will be coming from new firms. There are some companies that do quite a bit of exporting, like Intel, but we will need a whole lot more if we are going to export enough to really make a difference. It will be harder to have new emerging companies to do more exporting because they need more capital which is harder to come by. We also have this new health care bill that will make it harder for new companies to the point where they are effective. Time will tell.

There Ain't No Such Thing as a Free Laborer?

This morning, Greg Mankiw posted a very interesting article on his blog from The New York Times. The article makes a good point on the minimum wage requirements for interns working for no pay. This is a good thing for college students like us because we are trying to find pay in places that also offer real-life experiences for the work place. Under the law, companies are required to pay interns the minimum wage except under special circumstances where the companies comply with the six federal legal criteria the article references. But for every internship that will be paid, there is no doubt some will be cut from companies. They simply can't afford to start paying people that don't contribute in the same way the experienced employees do. It is much like adding more labor to our models but not increasing output. Although the lawmakers might think this is a good idea, there is good reason to think it will actually hurt students looking for internships because there will be fewer available.

Only costing more jobs?

I came across the article Obama Steps up Confrontation. I found Obama's recent moves a little too aggressive. Senator Lama Alexander said the moves would only hurt him in the end, and I aggree. Antonia Ferrier points out that the Senate doesn't exactly work like most game theorist believe. As far as the new overhaul of student-lending loans that the Democrats attached to the Bill, I think it will only do worse to the economy as a whole. To my understanding, it is predicted to result in thousands of job loses. That doesn't make me very enthusiastic about recovery.

Climate Deal Postponed

Unfortunately, this article is blocked unless you subscribe to the Wall Street Journal, but the preview for it pretty much gives away the point. With lackluster results in regard to the Copenhangen summit, apparently the environmentalists are waiting until 2011 before trying to persuade the world to adopt their environmentally-friendly policy ideas. I think the whole idea of adopting policy to reduce “greenhouse gasses” and the like is unnecessary and ultimately dangerous to the state of our economy. Aside from generally making many types of businesses much more inefficient and expensive, other unintended side-effects could take place. Smaller businesses may find it harder to compete (similar to how Sarbanes-Oxley significantly lowered the number of businesses going public since its creation because of the higher costs associated with compliance), and of course personal freedoms will be stepped upon. Though I don't have any specific data to cite, I couldn't see this kind of legislation helping, in any way, the state of our economy.

Why everyone wont have health insurance

The goal of the new healthcare bill is to ensure that everyone young or old, rich or poor has health insurance, however over 30% of uninsured adults are between the ages of 19 and 29. Many people in this demographic myself included could afford to get health insurance. They choose not to because the likelihood of needing it simply doesn’t out way the cost. In my case with the exception of work physicals I haven’t been to the doctor in over 7 years. If I do get sick I can go to the doctor for a simple illness for an insignificant amount of money compared to the cost of insurance. The only reason I would purchase insurance at this point in my life is to prepare for the unlikely chance that I could develop cancer, diabetes, or some other illness requiring long term care. For me and likely many people sharing my situation what the health care bill has done is to eliminate the only real reason I had to buy health insurance in the first place. Under the new plan I will have two options get Health insurance or pay a 750 dollar fine. The fine can be paid, and a person can go without insurance without any fear of not being covered in the future, because you can’t be denied for preexisting conditions. Doesn’t this defeat the purpose of insurance? Don’t we get insurance to prepare for the unknown? What the healthcare bill has created is a large portion of a demographic that will still not have insurance but will pay 750 dollars a year in fines.

Health... Auto... What's Next?

In a recent article, it told of the new reversal on a 20 year ban that President Obama announced today. This would increase offshore drilling around the Gulf of Mexico. The EPA and Department of Transportation are expected to sign the final rule on Thursday, declaring new standards for the U.S. auto fleet. This bill forces U.S. automakers to produce vehicles that average 35.5 miles per gallon by 2016 and will start in 2012. How much will this cost the consumer? We all know that hybrid cars get better gas mileage, but they also cost thousands more. This bill by the EPA will raise the prices of cars forcing the average consumer to spend more money on something that might pay off over time. Here is my problem with this. We don’t want to pay the high price for oil that comes from the Saudi Arabia and the Middle East, so we decide to drill for our own oil. Sounds nice, but then U.S. automakers are forced to increase car standards that result in the consumer paying more anyway. Where is the savings? How can President Obama push for economic growth by regulating everything so tightly?

Will the market rally?

In January of 2009, the Federal Reserve started buying mortgage-backed securities that would total $1.25 trillion by the time the program ended at the end of the first quarter of 2009. According to an article in The Wall Street Journal, this program led many investors to buy corporate bonds. The author attributes the “rebound in the stock market” to the bond boom that came as a result of the buyback program.

With the buyback program ending today, some people are questioning whether or not the market is actually as strong as it seems. One portfolio manager, Joe Ramos, points out: “If we have an anemic recovery, then most of the market is overrated.” Jim Sarni, another portfolio manager, however disagrees, saying that the demand for high-yield bonds will sustain itself and the market will continue to rally.

Personally, I think that the bond buying will continue for at least a short period, but I think it will stop sooner than bullish investors like Sarni think it will.

Is Barack Keynesian?

OBAMA is spending more and more and people are bent out of shape. You can find several articles that prove this. EXAMPLE. With all his stimulus packages it proves so.... The real question lingers in asking if he is spending more than other presidents and is he trying to fix other presidents mistakes? Another crucial point is can we fix debt with more debt?

Health-Care Fix

“Obama Signs Fix for Health-Care Measure, Student Loan Program”. This actually might be one good thing that comes out of the health care bill. The US government pays many students interest on college loans already. They might as well keep that money and be able to loan it out to more students as an interest free loan or even better, as bigger Pell Grants.

States' Debt looking like Greek Debt

This graphic shows state debt in three categories: bonds, unfunded pension obligations, and additional liability. The interesting part is the“additional liability” category this essentially represents hidden debt beyond the known pension obligation funding problems. The article this graphic comes from “State Debt Woes Grow Too Big to Camouflage,” Discusses just how bad the situation is as compared to the recent problems in Greece. One of the possible causes of the financial crisis in Greece was after the new Prime Minister announced that about two thirds of the countries total debt had been hidden by his predecessor investors did not pull out immediately, but they were no longer willing to continue investing in Greek debt. Although the author shows both support for trusting that the state debt situation is fine and opposition to that view. The fact that California paid last year’s vendors with i.o.u.’s, but still paid the bonds that came due, seems like the kind of move that won’t cause an investor panic, but could likely reduce future investment into state bonds, much like the situation in Greece.

BRIC's are Building

It is great to see that the BRIC's are helping out other countries. Especially, since that help is going to Africa. With all of the capital that they are receiving, they are slowly increasing productivity as we saw from an earlier article that we discussed in class. With this help they have been able to decrease the debts that they have with the West. Of course this works out to their benefit, because, as the article describes, they are able to receive things like copper and cotton to make finished goods with. We will have to see in the future how great these relationships are for both the BRIC's and Africa.

Economics in One Lesson

For another class, I read this summary of Henry Hazlitt's book, Economics in One Lesson. Thought written more than 60 years ago, his ideas have become more relevant with each passing decade, especially in the context of government spending during the past ten years or so. Even the summary is a bit lengthy, so you'll probably want to just skim it but here are two excerpts:

“It is highly improbable that the projects thought up by the bureaucrats will provide the same net addition to wealth and welfare, per dollar expended, as would have been provided by the taxpayers themselves, if they had been individually permitted to buy or have made what they themselves wanted, instead of being forced to surrender part of their earnings to the state.” (p. 36) "When the government makes loans or subsidies to business, what it does is to tax successful private business in order to support unsuccessful private business.” (pp. 47-8)

When government forcibly redistributes wealth from the rich to the poor, the increased costs that inevitably result cause a reduction in real wages.

Why we should hope the states win their lawsuits.

I found this really interesting article about the differences between US libertarians and their counterparts in the EU, check it out here. It points out that increased centralization decreases tax revenues because people no longer have a reason to "vote with their feet." The subnational governments will then have more trouble paying for projects without help from the central government. Some things are better dealt with at a federal level (national defense) however we must be careful about what powers we give up. Its a slippery slope to give up subnational power to the central government and it leads to less focused representation of individual citizens.

Who is ObamaCare Supporting?

The Wall Street Journal had an article titled “The ObamaCare Writedowns” that focuses on the effects the new healthcare plan will have on business. One of the major selling points of the new healthcare plan was that it will cut healthcare related costs over the next decade. However, it's already having immediate problems in the business world. Businesses like AT&T are making significant writedowns (estimated $1 billion) to compensate for the health bill. Everyone will have health insurance, but at what cost to business? Is it wise to pass something that may help the individual save on health costs or help those who are supporting the individual by giving them a job and monthly paycheck? This new plan neither supports the individual nor the company which leaves one question; who is ObamaCare supporting?

Square pegs & Round holes

The most unsettling part of healthcare reform to me is the amount of opposition present and the fact that it is still being pushed and passed. The President and Democratic Congress are like a child who is angerily pounding a square peg into a round hole just so they can show someone the work they've done. "The reformers' speed belies their words as well. If health care reform is so critically important, as they keep insisting, why not take the time to get it right? Hard as it is to believe, at one point Obama was urging the House and Senate to pass legislation by three weeks after they began debating it."Read more:
One big selling point of healthcare reform is that it will save money over time. I have a hard time believing that the goverment could correctly define "savings" at this point. I have yet to meet someone who believes that making private firms accept everyone as insured and then using goverment money which is generated through taxation to pay the difference of what they can afford and the newly generated cost will save money.
This has all the signs of Socialism written on it and in an economy that is down more taxation and imposed regulation will only slow the process of employment recovery and growth.

Should we follow Canada's example in banking?

In February Paul Krugman compared Canadian and American banking systems and argued that by following the example of the Canadian system, where there was no real mortgage crisis, we could solve many of the problems with US banks, and directly contradicted those who argued against big banks. Now some momentum is growing to regulate US banks after the Canadian fashion and encourage large "mega-banks." In the New York Times this week Peter Boone and Simon Johnson argued that the Canadian example is not the answer. They cite many of the same facts as Krugman, noting that while regulations for lending and leverage are stricter in Canada, in fact Canadian banks are as leveraged or even more leveraged than US banks. They content the only real difference is that Canadian mortgages are nearly all guaranteed by the Canadian government. That in actuality Canadian banks are just as inclined to risk taking as US banks and are even more certain of being able to receive a government bailout should that be necessary. The article even asserts that it is only a matter of time until Canadian banks start failing. These interesting points once again bring into question what exactly was responsible for the most recent financial crisis and exactly how to prevent it from occurring again. It seems that strong regulation could still be advisable at least for things like sub-prime mortgages and oversight into the sorts of risky behavior that government agencies like Fannie Mae and Freddie Mac engage in. The question of large or small banks doesn't seem to have an obvious answer however. While it could be argued that large banks can be more diversified and better able to handle market instability, especially in a well regulated market, the failure of such a large bank could prove catastrophic. On the other hand, with many smaller banks regulation is more difficult and in a crisis many banks could fail, which might not be as severe generally but could have just as dramatic local consequences and increase the amount of distrust in the banks and banking which would have severe consequences for long term economic growth.

New Deal - A Good Idea?

In the article Nostalgia for New Deal Job Plan, Radnofsky talks about how our state mayors have been making proposals that resemble FDR's New Deal programs during the Great Depression. They believe that such efforts can be carried out successfully if done so by local governments. I agree America's cities are in need of a better sense of unity. However, it is not clear how much of a positive effect the New Deal programs really had on our nation. Sometimes too much government intervention just brings unintented consequences. These programs would be focused on our metro cities. This makes since to me only because they, combined, are basically our economic engine. My question is, how much of an impact will the proposals really have on our economic output as a whole? Personally, I don't think it woul be much at all. Also, a great point made in the article, we are starting from a different position than we did back in the 1930's. We are definitely living in a different world today; ofcourse we should be skeptical of such an idea. I am keeping my faith in the private sectors to guide us to some form of a recovery.

Industry Instability through Subsidies

Highly subsidized solar power plants have been producing a lot of power in sunny southern Spain. The hope of this project was to replace dirty coal power with clean, renewable solar power. The project recently took a heavy hit when Spanish government officials came to the conclusion that many of these power plants would have to be subsidized indefinitely. As a result funding was abruptly cut and a cap was placed on solar power plant construction.

This is a good example of government subsidies moving an industry out of equilibrium. If the government subsidies had equaled the environmental costs of coal power generation as perceived by the Spanish public, then the value of the externalities would still be paid through private means in a typical Coasean scenario making the “green” option viable with or without government help. The problem of the government subsidies is the governments have a hard time judging the true cost of an externality thus they often over of under subsidize or over subsidize projects that could be taken care of in the market.

Runaway

Over the past week I've watched in the news the account of the runaway Toyota Prius down the San Diego freeway. I did some research and I found an article concerning this incident. After reading this article I feel the owner of the car was just trying to cash in on the recent Toyota recall. What has caused this madness? Is it the capitalistic society that we live in today that is making American people so greedy? Or, is just the decline of America’s morals? Economically speaking is it easier to sue a big company for a huge settlement than to make an honest dollar through hard work? Is this a morally or ethically responsible way to operate? I probably have no right to judge this man but, isn’t it ultimately the responsibility of the vehicle owner to ensure the safety of their vehicle?

Has the Stimulus Bill Earned its Title?

As is often the case, Obama's "Stimulus Bill" received its title based off what it was designed to do; the big question, of course, is whether or not it deserves it. Economist Thomas Sowell writes very frequently of the perils inherent in accepting, as opposed to challenging, the validity of the titles of legislation, organizations, and the like. In his article "Stimulus or Sedative," Sowell puts Obama's optimistically named stimulus bill to the test, and ultimately concludes that the bill has indeed done more to harm the economy than help it. This seems to be the universal consensus for conservative economists in regard to this issue, along with most every piece of legislation designed to force the economy into recovery. (I'd bet nearly all of us familiar with Sowell's stances could have guessed his conclusion based off the title alone!)

A Home: An Investment

I found this article in the New York Times called: "Great Time to Buy (Famous Last words)" and I have to say that I do not completely agree with what Frank Llosa,a real estate agent working in northern Virginia, says: “People are frequently buying for the wrong reasons,” . “In most cases, he says, they think that they are getting an income tax break or that their home is an investment.” From my point of view, buying a home as an investment is a good reason to buy a home.
I have been at SUU for close to four years now and, I have never heard one of my economics or finance professors say that buying a home is not a good investment. I ran some numbers to justify my point of view and this is what I found. My roommate and I pay $700 a month for renting a house in Cedar City, UT. We would pay this amount (700*12 months * 50 years) = 420,000 over our life time. Comparing this to if we were to borrow a $300,000 loan at 6 percent equals $367,680. There is a huge difference here, I can buy a home for $367,680 over 30 yrs and save $52,320 over 20 yrs not paying rent. I’m not counting the increase in value my home will gain over 30 yrs or the money I will be saving not making a mortgage payment over the next 20 yrs. What if I wanted to move and sell my house? Yes, the housing market could be in a slump and I might not recoup all the money I borrowed from the bank. So I lost some money but I also lose for paying rent for fifteen years and I decide to move. When housing prices rise rental fees rise, they do not remain the same. My conclusion it is always a good investment to buy a home when you are planning on staying somewhere for a long time.

An Austrian View on Health Care

This article was written regarding, the recent complaints about Congress’s failure to pass a health care bill. The article makes several good points.

1) This article notes that the state of US politics is not in an unusual position considering that we have changed into a large democratic regulatory-welfare state.

2) Secondly, the US is functioning as a large democratic regulatory-welfare state ought to.

3) Thirdly, because this article came from an Austrian School website, it also discusses the inherent inefficiencies of a command economy as would be the case with the bureaucratically run health care system as planed by the left.

Why Do People Trust Officials More Than Businesses?

The post "A Thought Experiment" on CafeHayek takes a quick look at the disparity of public opinion between elected officials and businesses. People seem to be more willing trust based on words than actions. Russ Roberts then poses a question about what would happen to a charity if it somehow became a public charity with a much larger budget and an elected official in charge. Read it and think about what would happen in that scenario.

Graphing Obama's Budget

Here is a post from Harvard professor Dr. Greg Mankiw about the president's budget from the CBO (Congressional Budget Office). As you can see, the CBO and the president disagree on where the line needs to be drawn as to what is too much spending. This comes as no surprise to anyone who follows Mankiw because he has written many posts against the healthcare bill and other bills that would increase spending. One thing to note about this graph is that it start's this year and moves in the future. So although the numbers are pretty accurate and the CBO would have a better idea than just about any other organization, this graph is only an prediction. As we have discussed in class, America is on the track to a rising GDP vs. Debt ratio. This is not necessarily a world-ending scenario but it is definitely something that the American people should be concerned about.

Changes in the Fed

Vice chairman of the Federal Reserve Donald Kohn is going to step down. This means that there will be three new seats for Obama to fill. This article is one that I found in The New York Times on the front page of Tuesday, March 2 paper. You can see the full article online at this link. Ben Bernanke will still be in charge of the Federal Reserve, but it will be interesting to see who will be filling the empty positions. The article talks about three individuals who Obama is eyeing to fill the positions. Daniel K. Tarullo, Kevin M. Warsh and Elizabeth A. Duke.

Unemployment Rate Graph

I found a simple graph of the whole countries unemployment over the last 20 years. The graph allows you to add on and compare any state, or county in a state, to the countries unemployment rate as a whole. I thought it was a good visual for comparison because it shows the big picture with just enough detail for comparison. Look up and compare your home town/county and see if you really do have in tough in comparison or not. Check out the counties in Michigan!

Pride? What is it good for?

After Speaking to Dr. Tufte, he gave me a cite that i found very interesting. Countries don't trade with each other people do. A country is nothing but a borderline of land, so why do some think that we must compete with others? I'm going to take the viewpoint that our "pride" is created by a cultural institution that makes us want to be better people; better than the next you could say. This pursuit to be better is a strong economic drive. We eliminate complacency and low self-satisfaction of our own lives and we search out our dreams. Many may have seen this mindset does not exist outside of our country borders when visiting third world countries. We have no limitations which makes us want to be better. Pride is a good thing as an individual basis which creates "pride" for our country.

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?

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Unemployment rates by state, seasonally adjusted, September 2009