Benefits that saving money brings to one’s financial status and economic life II. Main Points [Transition to Importance: First let me begin with the importance of saving money.] A. Different reasons why saving money is important 1. Save for emergency funds: cover unexpected expenses such as a. sudden job or income loss b. medical emergency c. financial crisis d. You all know that the main cause of the 2008 financial crisis was the increase in the default of loan mortgages made to borrowers with poor credit ratings, but according to a study followed by The University of Harvard, called The State of the Nation’s Housing, “if there would have been a bigger saving money culture and usage, the crisis could have been two times smaller.” 2.
This is easy to say, but hard to realize - building and sustaining the maze of institutions to keep the matchmakers responsible, in particular. After all, societies have five sources of capital: inheritance/resources; savings; access to financial markets; government; and, last but not least, "crime", through military power in particular, the use of such power being rationalized by various ideas. During the 1920s and 1930s, the series of monetary blunders and lack of international cooperation decimated people's savings and the Versailles Treaty kept resources captive. These factors combined caused the weakening or the destruction of capital markets and international trade. Banks failed, markets crashed, unemployment rose, the middle classes lost their anchors, and the 1930s saw a series of devaluations and introduction of tariff policies, Smoot-Hawley being one of them.
We have and now we have the bailout bubble. Stimulus packages were executed in hope to keep the economy going. Unfortunately, both president Bush and Obama put the money from the stimulus package. On top of that, they “burst the bubble” by lowering interest rates even lower! But now we have this giant bubble.
Case Study 2 Lauren Grippo What indications occurred in the 2000 – 2006 housing market that a bubble bust was eminent? Within mainstream economics, it can be posed that that real estate bubbles cannot be identified as they occur and cannot or should not be prevented, with government and central bank policy rather cleaning up after the bubble bursts. The pre-dominating economic perspective is that economic bubbles result in a temporary boost in wealth and a redistribution of wealth. When prices increase, there is a positive wealth effect (property owners feel richer and spend more), and when they decline, there is a negative wealth effect (property owners feel poorer and spend less). Explain the concepts of loss aversion, value attribution, and group dynamics.
The author of this article, Jeannine Aversa, is stating that key economic indicators point to the likelihood of a recession. Aversa supports her thoughts by noting the real GDP; “crawled at a 1.3 percent pace in the opening quarter of 2007…even weaker than the sluggish 2.5 percent rate in the closing quarter of last year.” The author suggests the main cause of the economic slowdown is due to “the housing slump.” Consumer expenditures are driving the economy, but Aversa worries about a “fallout from risky mortgages and rising energy prices.” Uncertainty of the Feds actions concerning the interest rates is leading to lower investment spending. The author also states that the Feds decision on raising or lowering the interest is due to the
ii. What is the gross amount of inventory at the end of 2006? 2007? The gross amount of inventory at the end of 2006 is $282,425.00 (265,110 + 17,315) and $273,130.00 ($253,001 + $20,129) at the end of 2007. To get the gross amounts we add the total amount of reserve for obsolete inventory ($20,129 for 2007 and $17,315 for 2006)) to the net Inventories for ’06 and ’07.
The downside to bank credit cards is part of the effect that we see today in our economy. Consumers were living well beyond their means. Banks essentially lent out money that caused the economy to rise. Companies were producing mass amounts of items that consumers demanded. People were buying houses with variable interest rates.
CASE STUDY BARACK OBAMA AND THE BUSH TAX CUTS 1. Were the Bush tax cuts of 2001-2003 and 2008 a good idea given the information available at the time? Identify the pros and cons of those tax cuts We find two interpretations for the Clinton Boom by the two political parties in USA. The democrats consider that the boom was caused by the increased in the taxes on most successful individuals that led to a reduction in the deficit meanwhile the republicans considered that it was due to reduction of taxes and deregulation. The central banks, the Fed in USA and the ECB in the European Union, used following tools to deal with the Credit Crisis.
Researchers have identified an association between household income inequality and mortality rates. The Robin Hood Index is a chart that displays the distribution of income and the mortality rate within each state. Consequently, the results show the more unequal the distribution of income, the higher the death rate. The large gap between America’s poor and wealthy can cause major depression and low-self-esteem to our citizens. This gap is also being said to cause “higher prevalence of hypertension and smoking, and higher rates of teen pregnancy and birth, as well as lower self-rated health (i.e., people reporting that their health is only fair or poor, as opposed to excellent or very good)” (Page