APEC's Fight to Curb Corruption Continues

Craig A. Kelly, U.S. Ambassador to Chile has called for a renewed effort in the war on corruption. The Asia-Pacific Economic Cooperation (APEC). APEC is a group of Government anti-corruption agents that meet and discuss methods of corruption reform. Ambassador Kelly feels that the high rate of corruption among foreign nations is slowing their economic growth.

The two main parts of the economy that are most effected by corruption are:free markets and sustainable growth. With the constant threat of terrorist type leadership many are un willing to foster the ever popular democratic way of thinking. Fear is most detrimental to a capitalistic society. Corruption of government leaders fosters this fear.

Curbing this fear is a big problem, APEC is working towards implementing a transparency act which would give countries relief from corrupt leadership. Countries would be monitored by U.N. Officials that would deter corruption.

I feel that in order for the world trade to work and function properly every country must be able to enjoy the same capitalistic freedom that we do here in the United States, thus for this to happen we as a nation need to support our leaders in their quest to over power these corrupt governments and leaders.

Fingerprinting Our Allies?

In an article found on the Fox News web site I ran into an article that spoke of how we have implemented a new system for people entering the country. All it takes is 15 seconds longer for them the get their fingerprints digitally taken and also their picture taken.

Now honestly, is that to much to ask? Is 15 seconds longer in an airport to much to ask to do what we think is best for our security? I read as some of the people were offended by it, now seriously, don't be a wimp. I think people in this world are way to offended, way to easily. People need to get outside of the box that they put around themselves that says "I am the most important person in the world."

The need to put into perspective the effect that this will put onto terrorists. Suddenly there is a much greater chance for them to get caught. We always speak in economics of people responding to incentives, that is what this war is all about. We are providing ample evidence that there are major incentives for not being a terrorist, i.e. not dying from a bomb dropped by a unmanned Predator plane. So with those incentives is the way and which we can find you, and this is a darm good way to help us find them.

Lets look beyond our own self intrests for a few minutes, and if foreigners have a hard time with 15 extra seconds; then STAY THE HELL HOME!

Economic Improvement Due to Election?

An article written in BusinessWeek discusses improvement in the economy from the second quarter of the year. At the beginning of the year, I believe most Americans were occupied with the events that were taking place oversea's, which would have an impact on any economy. It mentions that many consumer's were impacted by the affects of increased gas prices. The sudden growth in the third quarter make many believe that it will continue to grow, or will it? Is this just the affects the Presidential election? Many have turned their attention to the election and I believe are influenced by promises that each candidate may have given if elected. These promises about continued economic growth may influece the consumer to believe it is growing and will continue to grow, and thus persuading to buy more. It will be interesting to see where we stand as an economy in the early part of 2005.

Assault Weapons Ban

The recent expiration on the "1994 Federal Assault Weapon Ban" has caused a political frenzy. It has been said that lifting the ban would "make the job of terrorists easier and make the job of American's police officers harder." With 23,000 gun control laws already on the books, what affect did the ban on assault weapons really have?

The ban was passed in 1994 after a series of shooting in US schools and fast food restaurants. The ban restricted the manufacture and sale of 19 different types of military assault weapon, which were selected by how they looked and not by how they operated. Also banned were high-capacity ammunition magazines holding more than 10 rounds. Many of the weapons targeted had been banned from importation in 1989.

A recent survey, conducted by the Bureau of Justice Statistics, found that firearm-related crimes have declined 54 percent since 1993. Yet a study commissioned by the National Institute of Justice stated, "We cannot clearly credit the ban with any of the nation's recent drop in gun violence." The most obvious factor attributable to the infrequent use of assault weapons in crimes is that most assault weapons are rifles and are harder to conceal, consequently, they are used less often than hand guns. Between 1985 and 2000, there was a decline in the number of law enforcement officers killed in the line of duty, however, the decline was in the use of handguns. The use of other types of guns stayed about the same.

Under the 1994 law, assault weapons already in circulation could continue to be sold. Buying and selling such weapons built was legal, but as the supply decreased under the ban, the cost of these weapons skyrockted. As I see it, the primary affect of the ban was on the value of the estimated 1.5 million privately owned assault weapons.

Oil Optimization

Another interesting way that optimization can be seen applied is in the oil industry. American oil refineries are scrambling to fix bottle necks in their systems in order to maximize profit and production.

Most refineries are running at almost-full capacity. Some are at 98% and the demand for oil doesn't appear to be decreasing even with higher prices. Some question the possibility of building new rifineries because of the cost and environmental regulations. Optimization will help them decide on how to overcome the capacity squeeze facing the restraints involved in oil production such as inventory and supply of raw material.

What to Believe?

I took a survey of films class, to fulfill a general requirement, and in that class I learned some things about how directors use camera angles, different types of lenses, and the actors positions in the seen to let the viewers see what the director wants them to see. Thus making the audience think and believe what the director wants them to think and believe.

As I watch the news, I see things that are happening throughout the world and also right here in the United States. I see a sixty minutes broadcast turn up papers on the president of the United States of American that basically says he tried to dodge the war in Vietnam, going against many things that he stands for and basically depicting him as a coward. After further investigation that turned out to be false and those papers were not authentic. We all know that the news, just like any other television program requires viewers. If there was no viewers there would be no television. Do we really know how much the news is "fudged", just a little, to get the latest breaking news?

Fannie Mae's Accounting Fraud

Recently, the US economy has seen many companies go under because of "cooking their books" by hiding liabilities. This is a clear view that accounting fraud has been done. Fannie Mae is one of the largest financial institutions in the United States and the OFHEO has found Fannie Mae's earnings misleading. The company did not hide its liability, instead they hide their earnings. Is this still accounting fraud by making the company look worse off financially? I believe that not disclosing all information is a criminal act and should be accounted for. The reason for this fraud is to keep earnings constant and not have large fluctuation. They wanted to be able to help themselves in times of need when they aren't make the large income. This has an effect on the small and large investor because there are still scandals going on even after Sarbanes-Oxley Act of 2002. The investor may not invest because they don't know if they can trust the financials of a company.

Are oil prices really to blame?

At the World Economic Forum (WEF) held Feb. 2002 in New York City one major focus of conversation was the critical role of oil prices on the global economy. High oil prices are generally seen as detrimental to the overall health of western consumer countries. With exception to countries in the oil exportation business, cheap oil prices are beneficial to developing countries. The WEF concluded that would increase OPEC revenues in the short run but that the price increases would have a negative effect on the demand for oil in the long run.
However, it seems that the effect of oil prices on the world econoomy might not be quite as critical as originally expected. IMF chief economist Raghuram Rajan siad that oil prices are going to have only a moderate effect on the world.

An article published by the BBC News states that the International Monetary Fund (IMF) raised its world's economy growth forecast to 5%, up from 4.6%, for 2004. If this forecast is correct, world growth will be that fastest it has been since 1973- despite the rising oil prices. Rising corporate profits and a solid housing market are cited as the reason for growth. The US is still the driving force behind global growth with a lot of support from Asian, Latin America, and Sub-Saharan African countries.

The increase in globalization and technological advances has given rise to many opportuties for growth in previously under-developed countries. Oil is important and oil prices definately have an impact on the economy but reasons for the world growth seem to be so diverse that it is only realistic that the economy would grow, despite oil prices.

High taxes for the rich hurt the poor.

The wealthiest Americans pay most of the tax burden in the USA. There are those that say that is fair. He who has more can pay more, but making the rich pay more in taxes may have a negative effect on the poor. If a poor person wants a job does another poor person hire them? Certainly not. The rich Americans are the ones who provide jobs for the poor or lower class. The more you tax the rich the less disposable income they have to hire the poor with. Some may be inclined to say, “you are just giving it to them anyway, so give it to them in government subsidies”. My opinion is that a person can get more from a wealthy American by working for them then they can get from a government subsidy. Tax the rich for what they use, not the welfare system and Medicare, and let them redistribute the wealth to the poor that deserve for it.

Ahhhhh, Moscow in the fall.

A story at msnbc.com describes the recent economic boom in Russia. Realistically, Moscow and St. Petersburg are booming while the rest of Russia is suffering. The main reason, if not the only reason, for the boom is Russia's oil reserves. However, the rest of their agricultural and industrial output are low. Something that is happening is a wide gap between the rich and the poor.

Inside of Moscow one will find expensive cars and luxurious homes, while just outside one will find homes without water or electricity. This has left some wondering whether or not they were better off in the communist days of the Soviet Union.

Some say that even though capitalism might create an uneven distribution of wealth, it increases the well being of the nation as a whole. In this situation, though, it seems that the populations of two cities are benefitting while the rest of the country's well being is decreasing.

One woman claimed that her refrigerator was always full when it was the Soviet Union. Another complains that while prices go up because of the economic boom, her pension remains the same.

Is this only a temporary effect? Will the rest of the country eventually catch up with Moscow and St. Petersburg?

Has Oil Prices reach the All Time High?

On September 28, 2004 the price for a barrel of oil reached and passed the dreaded $50 mark. The price hit $50.47 in New York crude futures. The question is will it go any higher and what is the outcome? On the 29 of September, the prices fell on average of $.80 for a barrel, but I believe the price will go back up. One of the largest suppliers of crude oil is Nigeria. Their country produces 2.3 million barrels per day. Recently, there is a fear from rebels saying they would start war with Nigeria unless some agreement can be made. If the war is started then we will see a large increase in the price of a barrel of oil. Many believe the price will soon push through $52-$53 a barrel. In the micros, this will have a large effect on many businesses. One in particular is the transportation business. Shipping cost will go through the roof and people will not buy as much because of high costs. I believe this will slow down the economy of the United States immensely.

Martha Stewart still going strong

Last Friday, September 24, 2004, it was annouced that Martha Stewart's contract would be renewed. According to the article that I read on msnbc.com, Martha will be receiving $900,000 a year for the next five years. It was also mentioned that she will be eligible for annual bonuses of 55% to 150% of her base salary. It should be noted that Martha will not receive any salary or bonuses in prison, but she will be allowed to receive this compensation will on home confinement.

When I first heard about this I was flabbergasted! Why would Martha Stewart Living Omnimedia, Inc. make such a bold move as to renew Martha's contract? Any normal person found in Martha's situation would have been fired, yet Martha Stewart still has a job. So did Martha Stewart Living Omnimedia, Inc. make a good decision? After looking at the economic benefits that the company would receive be renewing Martha's contract, I feel that they did.

Martha Stewart still has a strong image in the homemaking industry, and you can't just push her away for being thrown in prison. If Martha Stewart Living Omnimedia, Inc. was to do this some other company may hire her. It should also be known that a lot of people still enjoy Martha Stewart's ideas and the way she does things. Martha Stewart has made some bad choices in the past and I really don't agree with them. Martha Stewart Living Omnimedia, Inc. on the other hand, has made a good economic decision, and that is a really good thing.

Homeowner's Insurance

Regarding our class discussion from "The Armchair Economist" about insurance prices going up and pushing people out of the market, I found an article that talks about that very thing. Insurance companies are paying out $1.18 for every premium dollar they earn. They are have to raise their rates and stop writing new claims and stop renewing clients. They cannot afford to keep people insured so they are raising their rates. Those people at the very bottom cannot afford to pay for insurance so they deal without and drop out of the market.

When dealing with homeowners insurance there is a problem with prices rising for building a home and the upkeep costs. There was one story of a lady who had her house flood and the insurance company covered her claim but then refused to reissue insurance because there were other risks within her home. She now cannot afford insurance and has to find somewhere else to get coverage. It is interesting to me how you can find everyday items from Steven Landsburg's book.

Is Optimization too Late?

Not only has Delta declared bankruptcy, but along with them, US Airways says they may liquidate by February. They are concerned many of their investors will pull funding, including Air Transportation Stabilization Board (ATSB), which has financed US Airways and kept them functioning since March 2003 while in bankruptcy. However, funding in set to expire the 15th of October 2004.

In an effort to save themselves, they are making serious pay cuts to stewards and pilots, cutting salaries below other airlines' averages. They are also making reductions to retirement and pension plans. US Airways was one of the largest airlines, so what happened? Just as an airplane may set its course slightly off and end up miles from the expected destination, so has US Airways. I can't help but wonder if they had only tried to optimize sooner if they would not be having these difficulties. Obviously, they failed to maximize their profits, minimize costs, make their shareholders and stakeholders happy-- ATSB, current employees, retired employees, and cutomers. US Airways is a perfect example of why optimization is so important within a business. Without optimizing, a business can end up miles off course from its expectations and goals.

Productivity Trumps Demographics

Demographics are components in future economic forecasts. So naturally, baby boomers are a hot topic while discussing business, particularly economics. Economics predicted that savings will increase as baby boomers near retirement. They have also forecasted that housing demand would decline. Both of these assumptions have been wrong and chief economist Michael Mandel may have the answer to why.

Mandel states that demographics aren’t the dominate factor; instead it is growth, productivity, and income that have been taking the lead. Mandel also believes that it will stay that way unless there is a decline in productivity growth. Of course baby boomers will still have an impact on the economy, but the change will be spread out through so many years that the impact can be neutralized. The catch is that this will only happen if productivity continues to grow at current rates. Will productivity decline when the baby boomers retire? Perhaps. If there is a slowdown in productivity growth, demographic shifts may become larger. Mandel has a feasible solution to this economic dilemma: Focus on technological advancement (to increase productivity growth) and it will neutralize the demographic effects.

Should We Begin To Panic Yet?

In the recent article "How long will the world's oil last" by John W. Schoen, Americans and the world are being put on notice in regards to the world's vastly declining oil reserves and there almost certain negative impact on societial issues. America reached its crude oil production capacity in 1970. Now people such as Princeton University geologist Kenneth Deffeyes are claiming that the world has only until November 2005 before it too reaches its crude oil production capacities. Still some individual's such as Morry Adelman, an MIT economics professor, contend that " there is plenty of oil around as long consumers are willing to pay the price to produce it". Basically, whether we as a society are willing to face the facts or not, the world's supply of oil is not keeping up with demand anymore.

Oil is a vital part of our economy. Some would argue the most vital part of our economy. I believe we must either open up to the idea of drilling in places that up to this point have been off limits or speed up the exploration of other alternatives that will likely take the place of crude oil when it runs out. Geologists claim that half of the world's oil reserves have been depleted. Some three trillion barrels will have eventually been removed from the earth. Americans presently consume 25% of the world's oil usage per day: some 20 million gallons. There are websites like dieoff.com that believe the world will become anarchist and return to Stone Age like conditions when the oil dries up. The one thing people are agreeing on is that neither Bush or Kerry are going to be debating this issue in the upcoming Presidential debates. The reason: there are no simple answers and neither candidate wants to break the bad news to the American public. We, as the American public, cannot ignore this problem because it will not simply go away. Any suggestions?

Technology and Cars

The new Toyota Prius, or similar cars, may be the key for americans in the future! Why? These cars include an electric-gas hybrid engine. It uses an electric motor at low speeds and a small engine at high speeds allowing the car to get up to 60 miles per gallon. Theses are very fuel-efficient cars.

Since the release of this gas miser in North America in the year 2000 sales have been slow due to initial high prices. The savings on gas will still not cover the cost of the more expensive car, but in the near future it will. According to the article gas prices would have to increase to about $3.00 per gallon for people to start buying these types of cars right now.

Toyota is focusing so much on technology right now. It is the new technology that is keeping them in the game and helping them grow as much as they are right now. As prices begin to decrease little by little we will see a lot more of these hybrid engine cars on the roads .

Who is raising America's children?

Recently, I was listening to a discussion about the shift in family and child care in the last few decades, and I found it rather interesting. One factor of this has been the shift to dual incomes in most homes these days, but people aren't reproducing that much less. So what is everybody doing with their children? Day-cares have bad repuations, and most mothers don't want to be that far away from their kids. So society is evolving, and many corporations today are placing in-house day-cares for their working mothers.

After thinking about this, I happened to run across an article in the Salt Lake Tribune about this specific topic. The article describes how a women got back into the "swing of things" after recently having a baby, thanks to her employer General Mills, Inc. The article also relates the information that Working Mother magazine released its 19th annual list of the best 100 companies for working mothers, with, of course, General Mills, Inc. having a spot on that special list.

This recent trend illistrates the basics of economics: supply and demand! The social shift in dual incomes results in the demand for better places to drop off our kids, therefore, here comes the supply!

Americans or Chinese?

Who is more willing to take risks: Americans or Chinese? Stereotyping is what we do best. We instantly say Americans because we of course take more risks while the Chinese are more conservative. However, when asking both American and Chinese students to choose between a high-risk, high-return investment and a low-risk, lower-return investment, Chinese were all about taking a high-risk investment. They enjoy risk more than Americans.

We concluded in class that men are more willing to take risks. But who defines risk? We all have our own definition of risk. Risky to a woman could be riding a motorcycle. But to a guy, that is just an everyday thing. We may think that we as Americans are all about risk-taking when compared to Chinese, but this is only our definition of risk.

Situations change the idea of risk. When it came to investments, Americans do not want the risk. We want to be able to get an investment without risking much. The Chinese are up for more risk in investments. However when it comes to other situations, like riding a motorcycle, Americans may find themselves back at the top.

Do we consider ourselves conservative when it comes to business? Or are we more knowledgeable to know when to take these risks?

Optimization in Football

On Sunday I happened to catch a short blip of a story on 60 minutes about the key success in football: the coach. They explained a little bit about how coaches today use stats to not only find the probability of what an opponent will do in a certain situation but other strategic moves involved in contracts and trades.

Bill Belichick, the head coach of the Super Bowl Champion- New England Patriots, was actually an economics major in college. I found that very interesting.

Anyone who follows sports knows about the salary cap. Teams cannot exceed this limit in aggregate salary paid to its players. Belichick, in particular, uses optimization to decide when it is time to release a high paid star and find a new, emerging player with star potential. This way, his team stays under the salary cap, while having a consistently successful team.