Housing Crisis

In the Bloomberg Businessweek article, Mortgage Mess: Shredding the Dream, we learn the frightening story of what was really happening in the mortgage industry between 2005 and 2007.

Due to the “housing bubble” and perceived “good times ahead,” mortgage lenders were frantically closing home loans for anyone who applied; regardless if the applicant was qualified. Even though closing loans for unqualified borrowers is bad business, the problem becomes worse as lenders habitually “fudged” on the paperwork by not adequately completing documents or filing them properly.

To compound matters further, the lending industry relied on Fannie Mae’s digital overlay system, known as Mortgage Electronic Registration Systems (MERS), to create images of their paperwork. MERS would serve two purposes. First, they would digitize the agreements and thus businesses would not need to keep hard copies of their files. Second, MERS would become the “third party that would foreclose if a borrower stopped paying.”

The major problem with MERS, however, is their system was unable to keep up with the flow of agreements. As a result, a number of contracts were never scanned and thus became lost or accidentally destroyed. Of those contracts which were digitized, a number of them were not correctly filled out and thus the agreements were not legally binding.

According to the article, due to the recession, between $2 trillion and $6 trillion in “U.S. mortgages and home-equity loans that were securitized during” 2005 and 2007 are “likely to go into default.” In other words, those individuals who should not have received loans but did are now unable or unwilling to make their monthly payments and thus the banks need to foreclose.

However, due to the problems of incomplete documentation or un-scanned (lost) contracts, banks are having a difficult time proving they have the right to foreclose on said individuals and thus, it appears, they have no legal rights to reclaim their properties.

From and economic standpoint, this article brings to light major flaws within the mortgage industry and foreshadows more difficult times in the future. Who will bear the expense of the losses if banks are unable to reclaim their properties? Will the Government, once again, feel compelled to “bail out” the banks? If that were to happen, taxes would unavoidably increase. Will the banks find a way to prove ownership and thus evict tenants? If that were to happen, the supply of houses for sell will shift to the right and thus home prices will continue to fall and citizens nationwide will continue to see their wealth deplete.

From any angle one approaches this news, it is apparent, in the near future, home values will continue to fall, banks will lend less, and the Government may very likely raise taxes. Hold on to your wallets!

Poor Mortgage Documentation Shredding Housing Dream

As if the housing market wasn’t bad enough, Bloomberg Businessweek produced the article, Shredding the Dream, in their October 25-October 31, 2010 issue in which they quote J.P. Morgan Securities reporting, “some $2 trillion of the $6 trillion in U.S. mortgages and home-equity loans that were securitized during the height of the bubble, from 2005 through 2007, are likely to go into default. The report says the housing bust will ultimately cause losses of $1.1 trillion on those bonds.” Due to such a decrease in credit standards during these lending years, a lot of these default loans are lacking appropriate documentation if there is documentation at all. As a result of this, foreclosures are being frozen and some people are living in these homes payment free. The fear is that as consumer confidence in the housing system declines the amount of people willing to walk away from their payments will increase and something is going to have to change, most likely a political intervention. The government’s current attempts at modifications are not succeeding and some suggest reducing principal loan amounts. While this solution sounds good to all home owners, lenders probably don’t share the same enthusiasm. The answer is there is no easy fix. By the looks of things the housing market is in a bigger mess than anticipated, and there are going to be more problems than answers in the near future so start dreaming of something different than the dream home.

Utah's Monopoly on Liquor

Is Utah's monopoly on selling hard liquor good for the state or for the consumers? Mark Shurtleff is requesting that the United States Congress allow Utah to keep its unique system. Utah's system creates a governmental monopoly on the hard liquor sold here. With that system in place, the state liquor board can set any price it would like to set for the liquor. Utah does not want to give up the system in place because that would significantly decrease the revenues to the state. And in such a time as this where the state budget is so tight, Utah is not going to have any motivation to loose that revenue.
- Ralphie

Demand

The Cash for Clunkers program provided incentives for automobile consumers, essentially lowering the price of the product. This lower price increased the quantity of cars demanded and sales dramatically went up. When the program was over and the price went back down, so did the car sales. This is a very accurate example of the change in demand through price. We can also see that the program was effective for the fuel efficient cars but not for the gas guzzlers. We can see that fuel efficient cars are a substitute for gas guzzling trucks because the decrease in price of the fuel efficient cars decreased the quantity demanded for the other. We can also see at the end of the article where automakers manipulated price again to decrease the quantity demanded so that they could replenish their inventory. What a good article for the topic of demand.

Google: Supply, Money, and Copyright Law

Google has set a goal to digitize millions of books and create an online library. This would shift the supply curve for such material to the right; which, economically speaking would drive down prices at any given point on the demand curve. This program which Google positions to be a public service and a research aide has many skeptics. Authors, publishers, even competitors are outraged with Google’s intentions and especially the way that Google has gone about its intentions. Google made a legal ploy by making those with copyrighted material opt out from being a part of their plan, instead of the traditional opt in that in the past has always been necessary along with negotiations of terms. Many with copyrighted material, including thousands of authors whom have opted out, feel threatened and don’t understand how they are going to benefit and make their money in Google’s business model, let alone what control they will have over their works.

Marxism Economics: Karl Marx’s Das Kapital

I was encouraged by one of my professors to read a book by Karl Marx, Das Kapital. I am a self proclaimed capitalist and this reading along with The Communist Manifesto was supposed to help me be more objective in my views. I do believe that Karl Marx whom lived during the industrial revolution saw a different capitalism than I know today. In fact the capitalism I see today in many ways could be viewed as a socialist capitalism to Karl Marx who wanted a progressive income tax and public education among other things in his ideal communist society.

One of the most important parts of Karl Marx’s economics is to describe value and how money works in this system of assigning prices/values to objects. Money serves society by performing various tasks. Namely it provides the means by which exchanges of goods can be made in an efficient manner. I believe that when a price is given to a good or, as Karl Marx would say a commodity, it represents the value that the market is willing to pay for such a good or service. This is a free enterprise and capitalistic way of looking at the value of a good/commodity and one which Karl Marx opposes. Rather his is the view that, “but what is the value of a commodity…the objective form of the social labor expended in its production. And how do we measure the quantity of this value…by the quantity of the labor contained in it” (Marx Das 255). Simply put in Karl Marx’s terms, “price is the money-name of the labor realized in a commodity” (Marx Das 79). Especially, in today’s automated manufacturing and service oriented businesses the price of a good or service definitely doesn’t represent the labor that goes into it. I think this is one aspect of economics that Karl Marx got very wrong.

Nevertheless, Karl Marx did use his thoughts on the exploitation of labor to identify how capitalists use such labor to create surplus value and combined with greed establish a wealthy class in society. I have attempted to piece together Karl Marx’s idea of how capitalism works in the following; “the capitalist buys labor-power…that…labor may reappear in a commodity… capable of satisfying a want of some sort” (Marx Das 143). This object of want which needs to be sold for a profit, or rather at a surplus value above the capitalists expenses, so “the rate of surplus value… (Is) the degree of exploitation of the labor-power” (Marx Das 174). This surplus value adds to the profits of capitalists “who extracts unpaid labor directly from the laborers, and fixes it in commodities” (Marx Das 280). Then the capitalist becomes greedy and “becomes a hoarder of money…gold and silver thus become of themselves social expressions for superfluity of wealth” (Marx Das 109). This social class of the wealthy becomes ever more lustfully greedy, “the expansion of value… becomes his subjective aim…ever more and more wealth in the abstract becomes the sole motive of his operations” (Marx Das 124-125). I agree that this cycle does take place in capitalist societies, but I disagree that it becomes each capitalists’ sole purpose and driving force in life. Bill Gates, Warren Buffet, and other wealthy capitalists whom start and fund charitable foundations that benefit society and humanity are examples of the utopia that can come from capitalism. Karl Marx would have never have fathomed such benevolent philanthropy from the wealthy capitalist class of society.

Capitalism to Cure Healthcare

I agree that with rising costs in healthcare something needs to be done; however, I don’t agree that more government programs and oversight are the solution. In fact I agree with Mitt Romney that many of the problems in healthcare exist because of government’s involvement. Mitt Romney in his book, No Apology: The Case for American Greatness argues that the cure for healthcare is to overhaul it with the tools of capitalism that America has fined tuned over the years. In the current system there are very few incentives to shop around for lower costs while maintaining quality. In the free markets of capitalism consumers make trade offs between quality and costs daily in an effort to decide what they value enough to spend their money on. Value in the free market is created by a willing buyer and a willing seller coming to an agreement and exchanging goods or services for resources or money. Capitalism rewards individuals and companies that are able to improve productivity, innovate, cut costs, and still provide quality at a price that consumers are willing to pay. Competition drives these measures and reduces costs as more competitors enter the market. There is no lack of competitors in healthcare, but because the pay structure is not set up as it is in capitalism to reward and incentivize doctors and healthcare providers whom are able to increase productivity, innovate, and cut costs, then costs continue to rise for the consumer. One example Mitt Romney gives is that once an individuals deductable has been met then they no longer have to pay for their portion of their healthcare for that given year. Consumers at this point are not price sensitive and have no incentives to shop around for quality care that is offered at a competitive price. Another example given is the way that doctors and healthcare providers are paid for the amount of tests and procedures they conduct not the quality they provide in those given tests or procedures or in regards to improving the individuals health. Mitt Romney provides insights as to this problem and how capitalism could correct the problem without big government involvement. I have this book on CD and would recommend it.

Construction Wrapping up at New St. George Airport

Construction Wrapping up at New St. George Airport means that St. George will be in a better position to create business opportunities for its residents. City leaders say the primary benefit for locals isn't flights but the promise of higher paying jobs in the community because St. George can now compete for business oportunities throughout the country. The total cost will be about 260 million and is the biggest construction project in the city's history. The existing airport will still be used but is too small for commercial jets. It's location on the bluff makes it prime real estate. This should expand the local economy and should increase the number of jobs, not only from new airport employees, but also from new businesses entering the market. In the past, it may not have been cost effective for these companies to have done business there but that barrier is now gone.

Recreation Industry Provides St. George Economy Boost

The city of St. George has turned to its scenery and weather to entice athletes all over the world and of all ages to come spend money in the beautiful St. George of southern Utah. St. George’s growth based economy has been hurting since the housing market collapse and has been able to draw crowds of thousands to attend special athletic events. According to the ksl.com article, Recreation industry jump starting St. George economy, the marathon, senior games, and ironman bring in about $23 million dollars collectively and the southern Utah golf courses are estimated to be up to $35 million dollars. While St. George continues to pray for a housing recovery, these value-added events bring in spending dollars which is exactly what St. George needs to boost spending for our St. George business.

WalMart Price Cuts Backfire

In a move made to generate increased traffic at their stores, WalMart earlier this year decided to drastically cut prices on many of their food items. Their hope in cutting prices is that these items would be loss leaders and bring more people into the stores to purchase more profitable items. Unfortunately for them, this plan backfired, and people came into the store to purchase those extremely cheap items, and did not stick around to purchase other items. As a result, WalMart has been required to increase prices once again.
Some are questioning WalMart's decision in lowering their prices in the first place. The decision to lower their prices to spur revenue would have been a wise decision, had the overall economic well-being of our country been healthier. Since people are still hesitant to spend money on unnecessary items, their strategy backfired. Instead, WalMart should have taken a different approach, such as cutting the prices on some of the large ticket items, while maintaining a reasonable profit margin on complementary items to those large ticket items.
- Ralphie

Move to the Cloud

There are few modern businesses in Southern Utah. I am increasingly surprised how many business majors are unaware of the advantages GoogleApps provides and the number of small-business owners who have not yet harnessed it. Google’s Internet-scale cloud computing framework accomplishes economies of scale that yield considerable cost savings for customers. With over 3 million users and 3000 organizations signing up each day, Google’s marginal cost is incredibly low, therefore it is able to offer the service at just $50 per year per user. This service is valuable to me because it is scarce. Few companies offer such efficient and user-friendly cloud software at a reasonable price. If I were to create it on my own I’d have substantially higher costs with a much lower rate of success.

FASB Proposed Changes and its Impact on Commercial Real Estate

The proposed FASB accounting changes will have a large impact on the commercial real estate (CRE) market. Sellers, Lessors, Buyers, and Lessees of CRE will all experience the changes differently. A summary of the impact of the proposed FASB changes on the different groups are outlined below:

Sellers- The commercial real estate market has been hit hard by the economic recession. CRE values have declined due to the bad economy. If the proposed changes occur, sellers should expect some stabilization of value due to an increase in demand.

Lessors- The changes will impact the lessors financial statement, but more importantly, will impact the terms of the leases. Lessees will desire shorter-term leases due to the reporting factor.

Buyers- It is already a great commercial real estate buyer's market and with the extension of the SBA fee waiver there are even more reasons to buy now.

The impact of the proposed accounting changes may not have a huge effect in the stabilization of the commercial real estate, but it should help provide some incentives for buyers. This is what the commercial market desperately needs in order to recover.

NFL Ticket Prices on the Rise

According to the article, NFL Ticket Prices on the Rise, even though sales are down average ticket prices have still increased. This seems a little backwards, but prices have actually risen on average 4.5 percent this year. Most the average price increase comes at the expense of the New York football fans, however. In reality, only nine of the NFL's teams have prices above the league average. David Carter, executive director of USC's Sports Business Institute, said "The tough economy is certainly playing a role in pricing decisions made by management, and that some teams soften the blow of a price increase by including price breaks on concessions or parking." Lowering the price for items may help, but not everyone buys from the concession stands or pays for parking to begin with. With the weak demand for tickets, most teams will want to decrease ticket prices to fill the seats.

If we can’t stop immigration why make it illegal.

The bar is set too high for immigrants to comply with the law of becoming legal, so they come here anyway. Some believe, although impossible, if we stopped illegal immigration, that the laws of supply and demand would increase wages to become more desirable for Americans. This might be true but the prices for the products from those jobs would not be so desirable.

If illegal immigrants are interrupting the laws of supply and demand as the article “The Dark Side of Illegal Immigration” would suggest why make them illegal. We should put them on the same playing field as Americans. Instead of tax free below minimum wage workers, why not manage the immigration problem by making it easier for foreign workers to obtain work visas? This would quickly increase taxes from workers who would now be complying with the law. It would also greatly decrease illegal immigration by those who want to comply with the law but have no other recourse if they want to work here (this still does not make it right but its reality).

Is the Recession Over?

The longest recession since the 1930's officially ended in June 2009. Lasting 18 months, this "great recession," as it has been called, has caused the loss of an estimated 8 million jobs. Although technically over, many are asking whether the effects of the recession are really over, or if this is just a temporary state for the economy. According to the LA Times, "Mark Zandi, chief economist at Moody's Analytics, said it was noteworthy that the panel settled on June, as it was during that month that the spending from the Recovery Act stimulus was at its maximum."
In order for the recovery to continue, it seems as though an additional stimulus package will need to be passed by the government.
And, while Warren Buffet is stating that there will not be a double dip recession, more economists are stating that the risk of a double dip recession is increasing.
In my opinion, this recovery is fragile at best. I believe there are more dips ahead for the economy. If allowed to recover at a natural pace, the cycle of the economy will eventually recover to a bullish economy (as Warren Buffet states). This current recession occurred due to economic and political policies which staved off the inevitable and natural downturn in the economy. In order for future "great recessions" to be avoided, reasonable policies need to be in place to allow the natural, smaller recessions to occur.

- Ralphie

I-15 CORE project grows economy

In a small press release from ksl.com, we read the story that the Utah government is creating more jobs with its investment in an I-15 CORE project. According to the article, this new project is creating more jobs than a typical project of this size usually creates as the government is being strategic in utilizing local businesses to purchase the building materials needed for the job.

I appreciate this endeavor as it appears that the Utah government is doing something similar to what the National government did during with time of the “Great Depression” with their Civilian Conservation Corps program.

I believe that this project will shift the “job supply” curve to the right while the “jobs demanded” curve will remain in the same location. As a result, the price of labor may fall some (making it harder for those already employed to make better wages); however, more people will have the opportunity to be employed and thus the overall market will improve with more employed workers.

Matt Ridley's "The Rational Optimist" Is Free (Hurry)

The Rational Optimist, a pretty good seller about economics that came out in June, is priced at $0.00 if you download it to your Kindle.

This price was set by the publisher, and I have no idea how long it will last.

Small Business Bill

The Senate is likely to soon approve a bill to aid small business by providing easier access to loans and some tax breaks. This bill is intended to lower unemployment by stimulating hiring by small businesses and remove a potential barrier to new business start up. The question is will the bill accomplish its intended purpose and what might be the unintended consequences of such a bill. One such example might be an increase in supply in competitive industries with low barriers to entry. In such an industry the accessibility of cheap funding with govt backing might cause a number of new entrants to the market that shouldn't have been admitted. This could drive down prices and hurt all participants in that market until the market naturally returns to equilibrium and these companies will leave the market. In this example the intended purpose would also not occur as hiring might increase for a time but layoffs would follow in due course. The real question that should be considered by the Senate in determining to pass this bill is: is there a supply shortage caused by lack of available funds (likely as a result of recession paranoia) or is the market in equilibrium?

Complementing Tablets

Dodocase is extracting consumer surplus as a complement product to Apple’s iPad. This innovative idea of making a “book-style” case has been extremely successful and has greatly impacted the manufacturers struggling business—not as many books being bound in the US these days. In fact, all these new products have been quite successful with the release of the iPad, and many are being modified to complement the Kindle as Amazon reports an increase in demand.

An Amazing Managerial Economics Video

You have probably seen this.

It is the comedian Louis K C on the old Conan O'Brian show discussing technological advances.

This is copyright protected, so whenever it shows up on the internet it gets taken down very quickly. I won't be updating this link.

The relevance of this is for the perception of people sometimes that they have been ripped off. The relevant bit is just after the 2:00 mark (referring to internet access on planes).

I posted this because of a response I left to Brett's comment on this post by iPoser about Apple, Amazon and MacMillan Publishing.

Many people recognize that the consumer may have lost something after the producer changes something about the business relationship. But this often obscures the fact that the consumer's situation often had to change as well. When both change, it isn't clear that the consumer's have lost anything at all.

This is the sense of this video. How much has anyone lost if a business provides something for you, and then has problems providing it? The answers is ... sometimes ... not much at all.

New laws designed to protect U.S. jobs may be pushing them overseas

In February of this year, the article New farm labor rules comming, announced the Department of Labor's amendment of the H-2A program which now requires "employers who seek work visas for foreign workers [to]...document that they [also] sought qualified U.S. workers" for the same jobs. This new law was supposedly designed to protect jobs for U.S. Citizens as it encourages employers to use Citizens rather than foreign workers.

However, I believe that the exact opposite outcome will occur. Instead of protecting jobs, litigation like this will shift the job supply curve to the left as red tape and other road blocks like this will tempt employers to move their businesses overseas where they will have more freedom to act as they please.

Tom Nassif, President of Western Growers, commented on this new law and shared his feelings in regards to how the very job the law is supposed to protect only makes them more scarce when the said, "We know our produce is going to be harvested by foreign workers, the question is, will it be here in the U.S. or will it be abroad?"

Clearly, laws like this have good intentions but their ramifications only make doing business harder and less desirable in the U.S. I believe the solution to this problem is to deregulate business and to allow the "invisible hand" of markets to dictate terms and not the Government.

Apple, The Puppet Master

Earlier this year Macmillan Publishers and Amazon had a public dispute over Macmillan’s requirement to charge between $12.99 to $14.99 for e-book versions of its bestsellers and some hardcover releases. Amazon retaliated by refusing to sell Macmillan’s books…but it only lasted about a week. Amazon gave in because, well, Macmillan has monopolistic power over its titles, and there’s not much they can do about it since they likely have a load of inventory they’d prefer to cycle through.

It’s important to realize there is another party in this dispute. Because market power is so short-lived (especially right now in the tablet market), Apple is being very strategic in its actions to maintain its market-leader position with the iPad. By persuading MacMillan to follow an agency model with Amazon, Apple has basically regulated Amazon’s Kindle by constraining any advantages the Kindle can gain in the sale of e-books.

Modest Gains

There seems to be a stigma going around that the result are to good to last. While listening to a couple of economist talk ( sorry for not being able to find the names) on "the squak box". They continued to refure to how well we thought we were doing in late 1997 before evey thing dropped out for the 2nd time. It may be my naivety to this type of thing, but it seems like if they think that even Grease is not going to default on their loans that we may have turned the cornner.

Bandaids

Another federal program seems to be on its way to failure. The New York Times reported that nearly 3,000 home mortgages that had been modified by the Federal Loan Modification Program have ended since the program started last fall. The vast majority of the modified loans that ended early were because of foreclosure, with only a handful ending because home owners paid off the mortgage, likely because they sold their houses. The problem with the program (and other similar programs) is that they just put a bandaid on the problem. What they should do is get to the root. Taxpayer dollars are wasted on extending the problem, rather than eliminating the source.

Gas prices and recessions, it takes two to tango.

I found this great post by James Hamilton of Econbrowser which discusses the correlation between gas prices and recessions. Mr. Hamilton provides data which shows that a sharp rise in gas prices precedes recessions. The article notes that the recent rise in oil prices probably isn't enough to cause a double dip on its own, however the recent recession was exacerbated by the steep rise in prices immediately before the crash. Hamilton concludes that the high oil prices are a drag on the economy but are not bad enough to cause another dip on there own.

Promoting Mediocrity

An interesting article in the New York Times featuring a ‘Republican’, Florida governor Charlie Crist, who is currently vying for a Republican seat in the senate, just vetoed a bill that would have essentially based teachers’ pay on results, primarily students’ test scores. It would have also eliminated the general, long-term tenure granted to teachers. It is simply another example of people wanting to be paid, regardless of their performance. If teachers were paid according to their students’ success, we would see a significant increase in their preparation, care, and time spent with students. It would also eliminate those teachers who create a suck on state budgets, as well as an overall improvement in education. Since the public education system has decreasing returns to scale and down-sizing is what they need, this would provide a channel to get rid of poor educators.

http://www.nytimes.com/reuters/2010/04/15/us/politics-us-usa-politics-florida.html?_r=1&hp

(Dr. Tufte, for some reason blogger isn't letting me hyper-link the article, so it's here instead).

Corruption

We have talked a lot in class about trust of strangers being an integral part of economic growth. I found the following chart very interesting. It is a survey on curruption in different countries around the world. Many of the countries at the very bottom of the list are also the poorest countries in the world. Haiti only scored 1.6 out of 10. With that much corruption how can their economy progress? How can people feel safe investing their money? We cant expect anything diferent from them if all we do is send more money through a long chain of corrupt officials.

The Newest Advancement in Eminent Domain

Senator Dodd's Financial Regulatory Reform bill will establish a new government entity under FDIC called the Financial Stability Oversight Council. This new organization will have the power to take over any company with $50 billion in assets or more that it deams too risky. This was explained (but buried) in the article GOP Takes Aim at Plans To Curb Finance Industry in today's New York Times.

"The Democrats’ bill, sponsored by Senator Christopher J. Dodd of Connecticut, would give the Federal Reserve oversight of the largest financial institutions, those with at least $50 billion in assets. And it would let the Treasury secretary — with support from regulators and the approval of a special panel of three bankruptcy judges — take over any giant company that posed systemic risk to financial stability, and essentially force it out of business."

Granting the Government an unchecked ability to take over the large private companies that appear to pose a "systematic risk" may well decrease the risk that financial institutions are willing to assume in lending to individuals and businesses. This would decrease liquidity and increase the likely hood of a new recession.

Dissent on Recessions end

After reading this article in the New York Times Mr. Robert J. Gordon is saying the recession ended in the second quarter of 2009. Is this correct? His colleagues have came out stating that the recession that started in 2007 is not yet over. These gentleman our on the National Bureau of Economic Research Business Cycle Dating Committee which determines the start and end dates of recessions. Why has Mr. Robert J. Gordon came out and made this statement when he’s colleagues our saying that the recession is not over? Here is some of the data Mr. Robert J. Gordon is going off real GDP has recovered strongly from a trough in the second quarter of 2009 to current quarter which is close to the peak it was at in 2007. Mr. Robert J. Gordon is going off of a private organizations data that has been pretty accurate over the past estimating real GDP changes a quarter or two in advance. Should we believe this information?
Article

Translating Bernanke

In an interesting article in the Wall Street Journal, Jon Hilsenrath translates Ben Bernanke's congressional testimony. The article states that monetary policy will most likely not be tightened any time in the near future because "there is no reason".

The article also points out that the Federal Reserve thinks the recovery is real, but there will be some problems down the road given the condition of many state and local governments.

I can only hope that the Fed leaving interest rates and monetary policy alone in the coming months will help improve the economy further and we won't go back into a recession.

A Zero-sum Mindset

Zero-sum mindset is bad for the world. Anti-capitalist terrorists have this mindset: We are poor because you are rich. This logic is so irrational. We can all agree that terrorism has a negative outcome in any aspect and is only destroying capital in most situations with has an adverse economical outcome.

Federal Funds Rate & Summer predictions of growth graphic

I found a graphic that gives a prediction for real GDP growth percentages in summer 2010 with a direct comparison to the federal funds rate in recent history. The article explains that the changes in federal funds interest rates provide one of the eleven factors used to create predictions. However, changes in interest rates come with a delay of about fifteen months before any changes in the economy are noticed. Unfortunatly growth over the summer is predicted to slow from that of the early months of 2010.

Good Job Washington D.C.

I found this article amusing. It explains how the Federal deficit is cut down by 8% for the first half of 2010, compared to a year ago. Only one word comes to mind when I read this, DUH! The officials contributed this by higher tax revenue and lower spending. So they are saying that if you save money, instead of spending it, you’ll reduce debt? Good work D.C.! The funny thing about this is they are serious and just barely figuring this out. The average child knows that if they want to buy a candy bar, they have to save money from their allowance to be able to buy it. It doesn’t take a Harvard degree and a six-digit salary to understand this. What is going on in this nation!?

US Debt Clock

Check out this website. It shows real-time, updated numbers for a multitude of various aspects of the economy. Moving the mouse over each topic provides a brief explanation of how that particular number is calculated, as well as the source of the numbers. A few of the numbers that stick out to me are the total debt per family ($690,000+) and the income per family ($62,000+). Another interesting number is the total assets per citizen, valued at around $234,000+. One caveat: many of these numbers come from Congressional Budget Office, which as we've discussed in class, is required to state the numbers based solely on the face value of written legislation and not necessarily on what ends up actually happening.