Oil Prices going up

Oil prices have recently risen to its highest so far this year. As Ben Bernanke announced his optimism for the economy, energy prices have risen. This article explains briefly why this happens and applies what we have learned in class. During a recession people try to cut back on spending in case of unemployment. The demand has gone down for gas as people try to save on what they can. America has predicted we are now slowly beginning to get out of the recession as Bernanke and other economists announced. But we are now facing the problem of the value of the dollar. The Fed continues to print money making a decline in international value of the dollar. This is a problem when trading with countries in East Asia for oil. They would rather receive euros than dollars because they are worth more. Another reason for the price of gas to rise is because of inflation, because the dollar has lost its value they must raise prices (which in a sense is not changing gas prices). Overall this article explains the positive outlooks for oil as they compared this year's prices compared to the prices in the summer of 2008. Crude levels for this past week have risen by 600,000 to 375.3 million according to the Energy Department's Energy Information Administration. The demand for gas fell one percent for April and refineries increased capacity by more than three percent. Oil has been traded for 50 dollars a barrel which is much cheaper than in July which was $147. However, in February it was only 35%. Let's hope we will never have to see the higher prices that we saw in the Summer of 2008.

Japanese Getting Maried in US?

This article explains what we have been learning in class in our international trade unit. Japanese have found it is cheaper for them to get married in the US. At first it sounded a little ridiculous when I came upon this article, wouldn't it cost them more? According to this article, traditional Japanese weddings cost at the minimum $100,000 dollars. For the Japanese the bond of marriage is a big celebration which requires family, friends, business associates to be invited along with many dresses and outfits to buy. Japanese have found an alternative that would both save money and give them a spectacular wedding ceremony. The number one place Japanese come to get married in the US is in Hawaii. What better place than the wonderful tropical islands? The second place is New York city. Why you might ask? According to this article it gives a "Sex in the City" atmosphere that has attracted Japan. Reverend Dick Leonard says he does on average 120 to 160 weddings a year in New York. Leonard informs us that it started with only a couple weddings a year. He recently discovered his church, Unitarian Church of All Souls, has been written up in the traveler guides in Japan. Most Japanese are not christian but church weddings have become very popular because it saves them a lot more money than doing it in Japan. Leonard humorously describes how they have difficulty in pronouncing their vows. For Japanese it is cheaper for them to have a wedding in the US than to have it in their homeland and therefore have turned to the US as a solution. Have the Japaneses' wedding traditions changed just to save money? In this situation (as we have learned) the supply for yen goes up and the demand for dollars goes up (appreciating our dollar).

Finding Solutions in Economy

The Fed has recently announced economy will turn around by the end of this year but very slowly. But for some this won't be fast enough. The current unemployment rate is 8.5% and as a result many people have lost their jobs. As we have learned this is called cyclical unemployment (unemployment due to a recession in the economy). With companies closing down and going bankrupt people are struggling to pay off their mortgages, taxes and other expenses. In this article they talk about a man name Dorie Clark who has been laid off factory worker. He has a six year old son to support from his ex-wife. The only problem is he is 65, and there aren't many opportunities for him. What do people like Clark do in this situation? Clark decided to become an Officer. He enrolled in the University of Missouri law enforcement. According to the article he is the oldest person ever enrolled into the law enforcement program at Missouri. He knew it would be a challenge but also knew he had almost no other choice. Clark has had many jobs some in which include a teacher, truck driver, private investigator and security guard. "Age will be a factor but his experience and his ability to talk to people will help. A lot of times you can talk people out of things," said Instructor Ken Hawkins. The requirements he had to obtain for the program was adjusted by age, giving Clark a significant advantage. While most (ages 20-30) were running a two miles in 16 minutes, Clark only had to do it in 19 minutes giving him an advantage. He graduated in April and is on the prowl for a job in these rough times. Hopefully for Clark (and others in similar devastating situations) can find a job between now and when we see complete recovery in the economy.

China investments in US housing

I researched this article.  Of late there has been plenty of hostility toward the 8 largest democracies (G-8) and their acts of globalization around the world.  Specific to America, are the trade and investment negotiations we've established with China, and how our policies or starting to look more communist as many of our privatized industries are becoming global.  It seems, in this situation, that we are at the will of the Chinese in the housing market.  Current investment opportunities in China's real estate are becoming hard to come by as there prices remain high and the US dollar remains weak.  Like wise the real estate in America is some of the best, specifically New York and Washington as according to Association of Foreign investors in Real Estate (AFIRE).  So as more and more housing packages are swept up by the Chinese for rent and selling, the more so we become reliant on China as the foreign revenue stream increases.  Seeing as how 22% of US foreing debt belongs to China many think these acts will only up that value.  Many joke that this rise in globalization is making us seem less capitalist because all of our industries are becoming less privatized.  Fortunately US actions disapprove this with such actions as their 278 billion dollar investment into housing recovery.  We mentioned in class the downfalls of protectionism and it is too bad for such a dilemma because with so much foreign trade it would make sense that America place more tariffs to help out their struggling industries.  Though some acts of globalization our good, don't get me wrong.  But those include outsourcing for cheaper assistance or when it's more efficient not sacrificing US independence by letting China into our housing market so much.  I for see some sort of stable trade agreement in the future that will decrease our indebtedness to China and highlight the qualities of globalization like getting a Big Mac in Hong Kong.       

Japan Feels the Sting of the Economy

Japan has recently announced their unemployment rate has risen to 4.8% which has been their highest in years. They have been cutting jobs to save money and have recently hit a seven-year low on the number of people having jobs. Japan is suffering due to the domino effect. Japan does not have many natural resources, so for decades they have relied on their brains to create a successful economy. They are very advanced in their technology and without that who knows where they would be now. Being able to trade for natural resources is key for them. Things have been looking good for them as they announced in March they have hit a growth of 1.6% in production which they haven't seen for six months. However, they predict recovery will not begin until 2010. Japan's car companies have not been very successful. Nissan and Toyota sales have fallen by 28.6% this year. Japan might have to wait until the world economy resolves itself before they can begin to see results. Right now a way they have tried to resolve their situation is by lowering consumer prices to encourage buyers to purchase more. But, will this affect them in the long run? "Deflation will be damaging to the economy. Companies will have a difficulty increasing profits, and their effective burden from borrowing money will increase," says Analyst Takeshi Minami (chief economist of Norinchukin Research Institute).

Obama focuses on reducing oil consumption

I researched this article.  President Obama's commitment to the reduction of oil dependence in the near future by referring to other technologies could dramatically help our economy.  His attention has been drawn to solar and wind power as the electrical impact on the situation.  This, along with his push for less driving and hybrid cars could cause lower prices in heating oil used in homes across America.  By capping carbon emissions and lessening America's need for fossil fuel we will be potentially paying much less.  It is thought by diminishing our dependence others will follow suit, decreasing world demand for oil, and increasing its supply relative to demand, therefor lowering the equilibrium price for oil.  This is much needed for currently in our economy crude oil prices have inflated because of demand-pull inflation where too many people need something we have less and less of.  Like we have discussed in class, our expectation on what will happen to the price of oil will greatly effect the way we act now because we act in a way that is most beneficial to us.  By believing in the strength of these policies our demand for oil will decrease and worldwide prices will fall.  This situation is a great example of the importance in understanding the difference between short run and long term results.  If the American people act more efficiently in the short run by reducing their carbon footprint prices will fall in the long run.  In the future I see these policies implementing a stronger dollar because America is starting to go green and seek out alternate energy sources such as clean coal, and by doing so our oil prices will drop.

Chicago's sales tax becoming noticeable burden

  I researched this article. It is well known in the midwest region of the United States that Chicago IL is one of the highest taxed cities in the area.  This is quite an understatement for Todd Stroger head of the Cook County board, approved another one percent increase in Chicago sales taxes making it's final value a staggering 10.25%.  This will possibly be followed up with a parking tax.  This contractionary policy is supposed to help the area recover from a 234 million dollar deficit with expected revenues as high as 400 million dollars!  This is a great example of why economic recession can be so difficult because in the effort to decrease the deficit by raising taxes, the demand for goods in downtown Chicago will decrease heavily.

 My brother lives in Linkin Park, about a block from Michigan avenue, and has recently turned to online shopping for all his purchases because Chicago tax is so outrageous.  It is a strange coarse of action because a majority of Chicago's revenue comes from out-of-town visitors who are looking to experience the Magic Mile.  This amount of tourism can decrease drastically with the recent tax change, offsetting the possible decreased recessionary gap.  This is worrisome because by Illinois raising taxes the act might sweep across the nation so other markets can compete.  As we've seen in class from the Laffer curve is that increasing taxes will give you increased revenue, only to a certain maximum.  Not only is it unfair to the Illinois people but even Chicago Chamber of Commerce head, Jerry Roper, states, "the people of our region should be outraged".  I see this tax decreasing in the future because like Art said after a while the constant increasing of taxes will become pointless.  

Homeowner Crisis

With house prices being at its lowest, it’s the best time to be looking for a new home. However, if you already own a home you might not be in the best of luck. This article is illustrates the issue that many people are facing due to the economy, owning a home you can’t afford anymore. Because people are being laid off and stock markets are down many people are finding that they can’t pay off their mortgages and having to refinance. Nevada has the largest number of “upside-down mortgages” in the country (55%) and Michigan right behind at 40%. At the end of the third quarter there were 18% of mortgages underwater. Home values have gone down significantly this past year making many people frustrated with owing the banks more than their property is worth. A couple of years ago Tucker Roberts bought a 500,000 dollar home hoping he could pay it off with time and use his house as a bank. Back then, his plan seemed promising because the value of a home was rising significantly. But now his home is only worth 150,000 dollars. As many are nowadays he is struggling to keep up with the mortgage payment. What hope is there for people similar to Roberts? U.S. Treasury Department program is planning on helping people like Roberts to offer cash incentives to home owners up to 729,750 dollars so that not too many homes are owned by banks. Some people are trying to increase their homes’ value by investing in hopes they can receive more money for what the home is truly worth. However, right now not many people are looking to buy a new home because of the economic trouble (unemployment rate is up and stock numbers are down) therefore raising the value of the home may have no effect to help sell their homes. Until we see a rising economy there is not much hope for people like Roberts.

Restaurants Struggle To Keep Up

Considering becoming a server anytime soon? You should probably think twice about that. Right now restaurants are seeing the troubling economic effect. Servers are receiving a significantly smaller tip and not as busy as they have been in the past. This article describes the overall downturns for restaurants and how it is affecting the restaurant business. Many people need to make changes in their budget and eating out is an easy one to change. People substitute by going to the grocery store (which is more healthy), eating at cheaper restaurants or eating fast food. The demand for fast food has gone up significantly, so companies like McDonald’s are not suffering like many restaurants are. Restaurants like Joey’s Seafood & Grill are seeing an opposite affect that of McDonalds. Co-owner Marc Wilder describes the ups and downs of Joey’s Seafood & Grill; some days there’s a 30 minute wait while others there’s none at all. People are not willing to pay as much to eat out as before. Because of this many employees that work at a restaurant are getting laid off or struggling to make payments that were as hard in the past when people were willing to give a 20% tip on a 100 dollar tab. Once the economy resolves itself in the future, being a server won’t be so bad because people will be more willing to eat out and be more gracious in their tips. Until then, the income of a server will be scarcely lower than what it has been the past two years.

Mexico Hopes Spring Break Will Help Their Economy Crisis

Mexico is the ideal place to go on spring break; white sand, hot sun and a spectacular ocean view. According to the article 2009 has been one of the best years to go despite the economic troubles. Airfare prices are cheaper than before making it affordable and more attractive to go to Mexico. Not only this, but the dollar exchange in Mexico is excellent, “In August, it was trading at 10 to the dollar. Now it is 14 to the dollar”. Tourists from the US are able to buy more for their dollar than they would in America making it more appealing. Hotels are offering good deals for a week on the ocean. Erin Erwin (from this article) is going to Cancun with five girlfriends only costing her 1000 dollars for an all inclusive for a week. Can’t get any better than this, but why and how is this so affordable when an economy is at a recession?
Mexico, just like the US is suffering the raft of the economy. One way they are hoping can help them out of this crisis is tourism during spring break. Like this article mentions other Caribbean Islands are not receiving as much tourists as Mexico, one of the factors being the airfare tickets are far more expensive to go Costa Rica, than Mexico. This is giving Mexico a huge advantage and attracting US citizens. By attracting tourists to Mexico they are able to increase their GDP, helping them out with the economy. For how much longer can Mexico rely on this? It’s hard to say but as long as they continue to have excellent deals on hotels, food and activities spring breakers will be sure to be going.

AIG bonuses result of government bailout

I have recently researched the bad decision making of AIG (American International Group). Following current anger with Obama's bailouts issued under the recent introduction of the trillion dollar stimulus package one company has stood out in a big way. AIG a company owned majorly by the US government was recently bailed out by the FED in hopes of avoiding future collapse of yet another big name firm. Unfortunately in AIG's case, the free market system punishes us for bad decision making. Following a 86 billion dollar push from Greenspan and friends AIG issued major million dollar bonuses to many employees. Unfortunately, even though the major equity stake of 80% belongs to the government the only punishment they can issue is a large tax on the bonuses; some 35% has been proposed. The inconvient truth of the matter is the lag between creating law that prohibits this or installing the tax will make quick recovery hard. Many politicians and citizens have become enraged at the situation because it further supports how inneficient these government bailouts are. Though expansionary fiscal policy says it is important to increase government spending and decrease taxes, too much aid could eventually cripple the American free market system. But this lose, lose situation makes the decision making hard. Either risk inflation and further debt by helping out greedy banks and lenders or back off and let the country fall into a recession. On the upside the mass amounts of money the FED is pumping out, and government is spending, will eventually stabilize our economy because we still have a very small rate of inflation and these firms that are being saved are a vital part of American economic success.

Weighing current supply and demand of crude oil

I recently researched on imbalances in the crude oil industry. Although in late 2008 and early '09 America was experiencing record shattering gas prices, the general change in crude oil supply was a mild one of about 2% in the amount of barrels produced daily. This recent exponential rise in gas guzzlers is what has caused the price per barrel to increase from 33$ to 132$ within a 6 year period. So you see that an increase in oil demand has incresed its price even though supply stayed relatively constant. As the oil industry continues to experience somewhat of a plateau, many question what will become of the long run oil supply. The possible shortage in the future is coupled with the growing incentive of oil companies to invest in scrounging more oil as it remains profitable. This growing incentive to hunt down open oil fields, or "elephants", has caused a rise in the demand for steel companies that provide equiptment for the job site. Though many citizens are becoming increasingly worried as companies continue to capitalize on this nonrenewable good and subsequently demand has also gone up in bio-diesel, and fuel alternative industries. Unfortunately I forsee major problems in the future as money hungry monopolies like OPEC continue to harvest as much oil as they can and don't decrease their output. Because though the American demand for gas and other crude oil products will remain constant, oil supply will not.

General Motors Suffers Wrath of Economy

As a result of the falling economy people are being forced to begin to budget their money, taking away luxuries such as coffee, new cell phones and especially new cars. People are not finding an incentive to buy a brand new car when a used car will do the job and save them money. While demand of used cars is increasing, companies like General Motors are suffering significantly and facing the possibility of bankruptcy. The number of new cars being bought through General Motors has dropped significantly in 2008 (by about 11%) and has continued throughout 2009. No one wants to buy new cars with the current economy conditions and are instead finding different solutions.

General Motors has been the number one automaker throughout the world for 77 years. However, what used to be the number one seller for automobile has recently jumped to number two with Toyota taking its place. Gas prices, unemployment rate, and the expectation of the future economy does not leave automakers in a good position. Unexpectedly in the summer of 2008, gas prices soared leaving General Motors struggling and Toyota with a significant advantage with their smaller fuel efficient cars. Before the rising of gas prices, big cars such as SUV’s were popular (especially in America) causing automakers like General Motors to continue supplying bigger cars. The supply outnumbers the demand, leaving General Motors struggling.

With General Motors enduring economic trouble, the government gave them a four billion dollar bailout to ensure their livelihood. The government expected General Motors to find solutions to a more fuel efficient automaker. General Motors is hopeful that government will again assist them financially; otherwise they are expected to file bankruptcy. They have cut jobs and closed some of their plants hoping it will help them with their debt, but it has not shown significant changes.

General Motor stock is suffering as a result of the decreased demand for their automobiles. Given their situation I think it would be beneficial for General Motors to start to create smaller cars that appeal to the buyers. Even at that it’s questionable whether or not people would want to spend the money on a new car during this economic trouble.

DHL cuts jobs and hopes of small Ohio town

I researched this article. The current recession the US is facing has hit many families very hard this past year. In this article an in depth look has been taken into the lives of natives to a small town in Ohio, called Wilmington. Like most small towns there tends to be a main occupation held by the residents in the area. In Wilmington it's all about the airplane distribution industry for a large airline shipping firm, DHL, has one of it's largest facilities located right near town. Unfortunatley as the economy has become worse and worse over the past year unemployment has sky rocketed and Wilmington suffered one of the biggest blows. The job cuts, and their effect in Wilmington provide a great example of the United State's current employment status. From previous cuts in May to the recent, the number of lost US employees from this German based company tops a staggering 16,000. Of these 16,000 Wilmington will contribute 3,500 of their 12,000 locals and thus almost a third of the town will be unemployed. The interviews conducted in the article express how these losses have also effected local businesses in a negative way. For since the economic slump DHL has been unable to keep up with big name competitors like FedEx and UPS. This inability has decreased demand for their services and they aren't able to supply as many workers so DHL employees find them selves caught up in cyclical unemployment. With many out of work, pockets run dry and local business suffer from a loss of consumers. Though this is an extreme example it does represent current struggle. The locals of Wilmington will have many problems in the future as jobs become scarce and someone still needs to bring home the bacon.