Saturday, May 03, 2008

Answers to some of your questions

Hey everyone -

I've gone back through lots of posts (finally, I know!) and want to comment on some of your comments.

Although we are doing Micro, lots of you have questions on Macro (recession, etc) - understandably. :) If you're interested, go to Taylor's blog (3 posts on cutting jobs, the weak dollar, and gas prices), and...well, I'm sure I'll add more in here later. And Phil's. And Savannah's. And Laura's. And Jake's. And Abby's. And Tony's (counterfeit money = good thing?). :)

Morgan asked what a recession is. The official (economic) description is a time period when GDP (the dollar value of all goods & services made in the US) is negative (not just falling) for at least 3 quarters (which would be 9 months). Are we "officially" in a recession? No. We've had falling GDP, not negative. Do I think that's where we're heading? Yep. And the fear of a recession makes it worse, because people stop spending, which means that things aren't being made, which makes GDP fall more.

But remember - we have always had recessions, and always will. It's a cycle (that's why it's called the "business cycle"). For an economy to be healthy, we can't be in times of prosperity all the time. Easy to say, of course, but it's not my job on the line. There's an old joke - it's a recession when your neighbor loses their job, but it's a depression when you lose yours.

Actually, the thing that is more concerning should be the rising prices. It's not common for inflation to occur when GDP is falling or in the negative. This happened in the 1970's - it's called stagflation. The real problem comes in trying to "solve" the problem. The common treatments for high inflation would make a recession worse. And the usual way to treat a recession will make inflation worse. So...what to do?

And - the Great Depression was not a time of inflation - it was a time of deflation. You want to see the government and the Federal Reserve get their undies in a fix? Talk about deflation happening. They are more scared of that than inflation, x100. It's a scary time. Prices keep dropping...and dropping...and dropping. Yeah, kind of cool for our budgets, but think of what it does to businesses. And (Brent will enjoy this one) Walmart has been accused of causing deflation in the US as close as about 2 years ago.

But for now, focus on the Micro more. We'll hit some Macro after the test. :)

There's also some interesting discussion on Phil's blog about universal health care. it economics, or is it politics?

Hmm...and pricing, on Melody's blog ("Antiquing it up"). Although I will admit I'm biased. It's my favorite hobby. I have all kinds of from roaming through second-hand stores and hitting live auctions.

Food shortages, on Maggie's blog. What happens when the cheapest food source in the world is rationed?

And taxes, on Maggie's blog. We live in one of the highest-taxed states in the country. Scary - or necessary?

Phil also commented on Laura's blog about requiring personal finance for HS graduation. You guys are just good at finding things close to my heart. This is one of the things I've been working with the state Dept of Instruction on for the last couple of years. There are state standards in personal finance, but they are not required. Our district, though, plans to incorporate them. It's one of the reasons why I'm so behind on stuff - we have a grant through the state to work on that, and our time is almost up, so lots of time is being spent looking at that. Since the reg Econ class gets a lot of those standards in their class, and you guys don't...guess what we'll be looking at after the national exam? :) :)

And some interesting info on credit and loans on Brent's.

Later -

1 comment:

EssenceofErika said...

I'M BACK!! Hey now that I don't have mono and I have a functional computer, I can write on here again!! I was checking the grading for the blogs and I was wondering if we could work out when I was excused? I was thinking about eliminating all of march and part of april?? that's when I was sick but if I have to make it up, I will. Alrighty well take care!