Econ 2 on-line MacroMind

Economists Do It With Models — Warning: “graphic” content…

2012-01-11T19:48:00.000-08:00

Economists Do It With Models — Warning: “graphic” content…

Economists Adopt Conflict-of-Interest Guidelines | Inside Higher Ed

2012-01-09T14:24:00.000-08:00

Economists Adopt Conflict-of-Interest Guidelines Inside Higher Ed

How departments of economics evaluate teachers | Inside Higher Ed

2012-01-09T12:57:00.000-08:00

How departments of economics evaluate teachers | Inside Higher Ed

News: 'Now You See It' - Inside Higher Ed

2011-06-25T10:17:00.000-07:00

http://www.insidehighered.com/news/2011/06/24/new_book_on_the_brain_science_of_attention

On the Lake

2011-06-05T18:05:00.000-07:00

An ideal day at Lake Mission Viejo!

The Century of the Self - Wikipedia, the free encyclopedia

2011-06-04T20:54:00.001-07:00

The Century of the Self - Wikipedia, the free encyclopedia

Fareed Zakaria On The Post-American World | On Point with Tom Ashbrook

2011-06-03T14:13:00.000-07:00

Fareed Zakaria On The Post-American World On Point with Tom Ashbrook

Prof Steve Keen: Will there be a Double Dip in the USA? Part One

2011-05-29T13:28:00.000-07:00

The lost generation and merging of credit bubbles – College graduates go into massive debt and enter a low wage job market. Median starting salary for the class of 2010 is $27,000. Student loan debt soaring while wages decline and delay a generation from buying homes.

2011-05-25T08:25:00.000-07:00

The lost generation and merging of credit bubbles – College graduates go into massive debt and enter a low wage job market. Median starting salary for the class of 2010 is $27,000. Student loan debt soaring while wages decline and delay a generation from buying homes.

Community College If You Can Pay - Inside Higher Ed

2011-05-19T06:47:00.000-07:00

Community College If You Can Pay - Inside Higher Ed

Third Way - Publications - Publication Content

2011-05-14T17:29:00.000-07:00

Third Way - Publications - Publication Content

Universities Run E-Schools for K-12 Gifted Students

2011-05-05T08:41:00.000-07:00

Universities Run E-Schools for K-12 Gifted Students

More than a Lost Decade

2011-04-20T21:43:00.000-07:00

More than a Lost Decade

The Deficit We Want - NYTimes.com

2011-01-20T21:26:00.000-08:00

The Deficit We Want - NYTimes.com

The Crisis of Credit - by Jonathan Jarvis

2010-11-16T09:08:00.000-08:00

The ‘Community College’ Internationally - Inside Higher Ed

2010-06-16T12:29:00.000-07:00

The ‘Community College’ Internationally - Inside Higher Ed

In Bangkok

2010-03-13T16:46:00.000-08:00

prayer / 24 - Inside Higher Ed

2009-11-24T08:45:00.000-08:00

prayer / 24 - Inside Higher Ed

The Science of Trust: Economics and Virtue [Speaking of Faith® from American Public Media]

2009-11-15T17:41:00.000-08:00

The Science of Trust: Economics and Virtue [Speaking of Faith® from American Public Media]

The Best Blogs in Econ

2009-08-04T15:04:00.000-07:00

Here is my list of the best blogs in economics:

-Naked Capitalism
-The Baseline Scenario
-Marginal Revolution
-Calculated Risk

Some blogs that focus on teaching econ include:

-http://economicsforteachers.blogspot.com/
-http://jerryslezak.net/pedablogy/

No wonder I don't have much time to blog these days!

Depression in the OC

2009-06-16T17:54:00.001-07:00

Hat tip to Mike J.

Subprime!

2009-04-23T22:47:00.000-07:00

subprime from beeple on Vimeo.

Economics 2.0

2009-04-11T20:58:00.001-07:00

Check out this SlideShare Presentation:

Economics 2.0

View more presentations from cfbloke.

What a great list!

2009-04-08T13:30:00.000-07:00

Ten principles for a Black Swan-proof world
By Nassim Nicholas Taleb

Published: April 7 2009 in the Financial Times

1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks – and hence the most fragile – become the biggest.

2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.

3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess. Instead, find the smart people whose hands are clean.

4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks. Odds are he would cut every corner on safety to show “profits” while claiming to be “conservative”. Bonuses do not accommodate the hidden risks of blow-ups. It is the asymmetry of the bonus system that got us here. No incentives without disincentives: capitalism is about rewards and punishments, not just rewards.

5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex economy is already a form of leverage: the leverage of efficiency. Such systems survive thanks to slack and redundancy; adding debt produces wild and dangerous gyrations and leaves no room for error. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious.

6. Do not give children sticks of dynamite, even if they come with a warning . Complex derivatives need to be banned because nobody understands them and few are rational enough to know it. Citizens must be protected from themselves, from bankers selling them “hedging” products, and from gullible regulators who listen to economic theorists.

7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”. Cascading rumours are a product of complex systems. Governments cannot stop the rumours. Simply, we need to be in a position to shrug off rumours, be robust in the face of them.

8. Do not give an addict more drugs if he has withdrawal pains. Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.

9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement. Economic life should be definancialised. We should learn not to use markets as storehouses of value: they do not harbour the certainties that normal citizens require. Citizens should experience anxiety about their own businesses (which they control), not their investments (which they do not control).

10. Make an omelette with the broken eggs. Finally, this crisis cannot be fixed with makeshift repairs, no more than a boat with a rotten hull can be fixed with ad-hoc patches. We need to rebuild the hull with new (stronger) materials; we will have to remake the system before it does so itself. Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the “Nobel” in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties.

Then we will see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage. A world in which entrepreneurs, not bankers, take the risks and companies are born and die every day without making the news.

In other words, a place more resistant to black swans.

The writer is a veteran trader, a distinguished professor at New York University’s Polytechnic Institute and the author of The Black Swan: The Impact of the Highly Improbable

AND NOW, A WORD FROM THE ECONOMY HERSELF - song parody from versusplus.com

2009-03-27T10:30:00.000-07:00

Ten Trillion and Counting

2009-03-25T21:38:00.000-07:00

Frontline does it again. I plan to encourage my students in my macro principles class to watch this outstanding video on the exploding national debt.

"All of the federal government's efforts to stem the tide of the financial meltdown have added hundreds of billions of dollars to an already staggering national debt, a sum that is expected to double over the next 10 years to more than $23 trillion. In Ten Trillion and Counting, FRONTLINE traces the politics behind this mounting debt and investigates what some say is a looming crisis that makes the current financial situation pale in comparison."

Hey Paul Krugman

2009-03-23T22:26:00.001-07:00

Scenes from the recession - The Big Picture - Boston.com

2009-03-18T23:43:00.001-07:00

Some pictures of the recession courtesy of Boston.com:
Scenes from the recession - The Big Picture - Boston.com

Posted using ShareThis

Dmitry Orlov: Social Collapse Best Practices

2009-03-05T13:54:00.000-08:00

Will we come to this?

Planet Money

2009-02-15T22:48:00.000-08:00

There is an economics blogcast that I plan to use as a current events supplement for my introductory macro courses. Planet Money is a multimedia project from NPR that covers the global economy without the use of a lot of econtalk. Planet Money is a social website (podcasts, blogs, twittering) that is aimed at folks who are relatively new to the world of economics. Explaining economic jargon is a key component of its mission.

Incorporated within the Planet Money blog are regularly updated podcasts which feature interviews and analysis from economists, reporters, and even regular folks concerning the top econ stories of the day. Podcast conversations are often interrupted to explain economic terminology.

You can also interact with the Planet Money staff in real time, thanks to their Twitter feed, and/or join the Planet Money Facebook group

Simon Johnson and James Kwak at Baseline Scenario have started collaboration with Planet Money to supply introductory articles on important topics in economics. For example there is an article on the National Debt for Beginners.

Planet Money is charmingly open educational blogcast that explains the challenges facing the economy in a way that any interested person can understand. It is consistently among the top podcast downloads on i-Tunes.

Baseline Scenario

2009-02-15T16:42:00.000-08:00

I’ve spent a lot of time lately scouring the blogosphere looking for materials to incorporate into my macro classes that will explain the financial crisis to beginning economics students. I’ve uncovered a treasure trove of material that I will be sharing in future posts. I’d like to start with a remarkably informative website that I have only recently discovered.

Simon Johnson is a Professor of Economics at MIT, senior fellow of the Peterson Institute for International Economics, and a former chief economist of the IMF. Professor Johnson hosts a brilliant blog called the Baseline Scenario that is dedicated to explaining what happened to the global economy and what we can do about it.

In a riveting interview on Bill Moyer’s Journal on PBS Professor Johnson argues that there can be no real solution to our economic predicament until we restore basic integrity to the financial system. Johnson is highly critical of Treasury Secretary Timothy Geithner’s plan to address the financial crisis which proposes to inject up to 2.5 trillion into the financial system.

Professor Johnson's argument is that the big money center banks constitute an oligarchy that is exerting excessive influence on our system of political economy.

Some excerpts from Professor Johnson’s interview with Bill Moyers:

"I think I'm signaling something a little bit shocking to Americans, and to myself, actually. Which is the situation we find ourselves in at this moment, this week, is very strongly reminiscent of the situations we've seen many times in other places.

But they're places we don't like to think of ourselves as being similar to. They're emerging markets. It's Russia or Indonesia or a Thailand type situation, or Korea. That's not comfortable. America is different. America is special. America is rich. And, yet, we've somehow find ourselves in the grip of the same sort of crisis and the same sort of oligarchs...

I have this feeling in my stomach that I felt in other countries, much poorer countries, countries that were headed into really difficult economic situation. When there's a small group of people who got you into a disaster, and who were still powerful. Disaster even made them more powerful. And you know you need to come in and break that power. And you can't. You're stuck...."

While some of the material on the Baseline Scenario blog is quite challenging there is a section called Financial Crisis for Beginners which has explanations of some of the key financial concepts for the newbies. Professor Johnson has also posted webcasts of some of the sessions of his MBA level Global Crisis class at MIT last semester.

Minsky Meltdown?

2009-02-09T13:00:00.000-08:00

While I have been on sabbatical preparing webcasts to supplement the text book treatments of core macro issues (growth, business cycles, inflation, deficits) it is apparent that the severity of the current economic crisis has taken many macroeconomists and policy makers by surprise. One economist who would not be surprised by the current debt crisis is the late great Hyman Minsky who is finally getting some of the respect that he deserved in his lifetime. In the mid-1960’s when prominent American economists were debating whether "fine tuning" made business cycles a subject only for the economic history books, Minsky developed his unique financial theory of the cycle. Minsky argued that the economic conditions that converge to create a deep depression are generated and tend to accumulate over a series of more mild cycles. During the upswing phase of a long wave when only milder contractions take place, Minsky argued that "systematic changes in the financial structure occur.

According to Minsky interrelated systematic changes in the financial system that occur over a long wave expansion are of several types. First, the ratio of debt to income tends to rise progressively for all economic agents. People increasingly finance their spending by borrowing and debt-service payments rise relative to incomes. The financial changes that build up during the expansion and allow a growing debt-income ratio eventually constrain the economic sectors that are leading the continued expansion making them much more vulnerable to any shortfall in income.

Secondly, stock market prices and real estate assets tend to rise quickly as the upswing of the long wave matures. (Sound familiar?) As the long wave progresses the market value of these assets are bid up not only on the basis of their past performance, but also on the basis of expectations of future growth. If these inflated asset prices are reincorporated in the financial system as security for debts, as in the case of the low margin stock market during the decade preceding the Great Crash of the 1930’s, the financial system becomes highly vulnerable to any decline in asset prices.

Third, over time there is a decrease in the size of ultimate liquidity relative to other financial assets which makes the financial system less stable and more prone to losses. An economy's stock of ultimate liquidity consists of those assets whose nominal value is essentially fixed and which are not the liabilities of any private unit within the economy. Because these assets have no risk of default they are readily available to meet various payment commitments.

Minsky suggested that these systemic changes will impair the overall stability of the economic system and will lead eventually lead to a deep depression. Although Minsky passed away in 1996 the systemic changes that he described in his writings seemed to have converged to create a “Minsky moment” which is not melting away quickly even with the unprecedented use of monetary and fiscal policy.

Indebted: We're broke, let's fix it!

2009-02-03T18:27:00.000-08:00

“MTV has joined forces with the Peter G. Peterson Foundation to create Indebted, a campaign for college students that raises awareness about the dangers of excessive personal and government debt, and promotes action to help stop the fiscal crisis in the U.S.”

IOUSA

2009-02-03T11:31:00.000-08:00

"Check out the acclaimed film I.O.U.S.A. now. It's 30 minutes that will change everything."
After reading your text book section concerning the national debt, watch this video. Imagine that you are a policymaker, advisor, or opinion columnist. What is causing America’s fiscal meltdown, and what do you think should be done?

Ascent

2009-01-31T18:06:00.001-08:00

Harvard economic historian, Niall Ferguson, has written an accessible and entertaining survey of the history and workings of the financial system entitled: The Ascent of Money-A Financial History of the World.

I recently read Ferguson’s book and I would recommend it to any curious student as way of tackling the question of what money is and the roots of the current economic crisis.

Professor Ferguson has teamed up with PBS to produce an engaging video version of the Ascent of Money. The two hour version is available on the PBS website by clicking here. This is a great resource for macro minds who want to go beyond the text book treatment of money.

I'm back

2009-01-30T21:16:00.000-08:00

It’s been over a year since I last posted on MacroMind. The U.S. economy entered a recession just about the time I took a hiatus from the blog and went to Argentina to examine the consequences of financial crises. I was hoping to wait until the economy began to recover before I started blogging again. Unfortunately it looks to me like the downturn will last through 2009 and beyond. The "long emergency" is upon us. There is a lot I want to talk about.

What will the Fed do next week? Wanna Bet?

2007-12-07T09:41:00.000-08:00

The Federal Reserve Open Market Committee (FOMC) will be meeting next week. The buzz on the street is that the Fed will cut the target Fed Funds rate for the third time this year. The size of the interest rate cut will be a tough decision for the FOMC.

The Wall Street Journal had a nice article this week on the Fed's policy meeting next week which is useful for understanding the challenges of stimulating the economy in the face of a credit crunch. Click here to view the full article on WSJ.com

The Iowa Electronic Markets sponsored by the School of Business at the University of Iowa lets you “bet” (buy futures contracts) on whether the Fed will raise or lower rates. The Federal Reserve Monetary Policy Market is “a real-money futures market. Contract payoffs are determined by monetary policy decisions of the Federal Open Market Committee regarding the federal funds target rate.” You will get a big payoff if you buy a contract with a bet that the Fed will keep rates the same or raise them. Check it out.

Edward Gamber of Lafayette College who helps to edit the Weekly Review on Macroeconomics for the Wall Street Journal has prepared some questions that might be useful in writing a Discussion Board Post about the Fed:
1.) What is the Fed expected to do to the target interest rate at its December meeting? Why?

2.) What is the Fed expected to do to its policy statement at its December meeting? Why?

3.) What is the difference between the federal funds rate and the discount rate? What would be the benefit of reducing the discount rate along with the federal funds rate?

4.) Why are banks reluctant to lend?

5.) What policy tools in addition to the federal funds rate could the Fed use to stimulate lending and economic activity?

Extra Credit: You can answer one and only one of the following questions for extra credit this week: Who is on the FOMC? Explain and cite your source. OR what would the payoff be if you were to buy a futures contract now from the Iowa Electronics Markets that bet that the Fed will hold rates the same at its January 2008 meeting. In other words how much would you gain if you bet $1.00 that the Fed-Funds Rate target set at the FOMC meeting scheduled for January 29/30, 2008 is the same as it was the day after the December 2007 FOMC meeting. Explain. If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions

The Falling Dollar

2007-12-02T16:28:00.000-08:00

This week’s Economist magazine (my favorite, of course) focuses on the depreciating dollar and the threats to its role as the international reserve currency. There are two articles on the falling dollar and the panic about the dollar that should help to put the material in Chapter 19 in its current context.

Paul Krugman, the co-author of your textbook is an expert on international finance and currency crises. Chapter 20 of your text is a bonus chapter on Currencies and Crises if you are interested. Currencies and crises would make a great Discussion Board topic.

Extra Credit: Paul Krugman and his spouse, Robin Wells, are the coauthors of your e-book for this course. Aside from being a Professor of Economics at Princeton, what are Krugman’s other activities. Cite your source. If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions

It’s the Economy Stupid!

2007-11-28T22:14:00.000-08:00

The presidential primaries are in full swing and the state of the economy is a big issue. In this election cycle the debates can occur on YouTube.

In the Republican debate tonight the questions included:

· What measures will you take to tackle the national debt?
· What are the top three federal programs you would cut?
· Do you support a 'Fair Tax'?
· Will you pledge never to raise taxes?
· Will you eliminate farm subsidies?
· Repay the $2 trillion borrowed from Social Security?
· How can we repair the infrastructure of America?

Sounds like Macroland to me!

An interesting idea for a Discussion Board post might be to analyze the macro policy planks of your favorite (or least favorite) candidate(s). You should focus on fiscal policy (tax policy, spending priorities) and trade policy. How does your candidate plan to deal with the budget and trade deficits? What about the depreciating dollar? How will they pay for the retirement of the Baby Boom generation?

The usual Discussion Board rules explained on the syllabus still apply if you chose to post on a candidate’s proposed macro policy. Make sure that you read the Guidelines for Your Discussion Board Post inside on the Complete Your Discussion Board Successfully forum, as well as the syllabus, before you submit your Discussion Board post.

Extra Credit: Answer one of the following questions: Which past successful presidential candidate used the phrase: “It’s the economy, stupid” as a campaign theme? OR What country currently has the highest rate of inflation (hyperinflation) in the world today? Explain your answer and cite your source. If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Traveling Economists Sound Alarm on Fiscal Crisis

2007-11-19T20:37:00.000-08:00

You will be learning about fiscal policy and the public debt as you read Chapter 12 in your text. The Concord Coalition's "Fiscal Wake-Up Tour," is a series of forums designed to educate the public about the growing structural deficits that we will incur as a result of the impending retirement of the “Baby Boom” generation and rising health care costs. The star of the tour is David Walker, Comptroller General of the United States Government Accountability Office, which evaluates the performance of the federal government. Walker is dedicated to educating folks about the need for “generationally responsible” fiscal policy.

Can’t make it to the tour? Well you can watch recent tours by clicking here.

According to NPR: “The Fiscal Wake-Up Tour is ramping up its schedule in the coming months, trying to crowbar budget issues into the agendas of the presidential candidates. If they can get regular Americans to think about the budget, and start asking politicians for a solution, these budget experts will be satisfied.”

Extra Credit: How big is the national debt — plus the obligations the federal government has promised to pay out in the future? Cite your source. If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

$100 Oil May Mean Recession as U.S. Economy Hits `Danger Zone'

2007-11-12T19:58:00.000-08:00

From Bloomberg

By Simon Kennedy and Joe Richter

Nov. 12 -- Rising fuel prices that businesses and consumers took in stride earlier this year may now be near the point of pushing the weakened U.S. economy into recession.

``We are in a danger zone,'' says Nariman Behravesh, chief economist at Global Insight Inc. and a former Federal Reserve economist. ``It would take two shocks to bring the economy to its knees. We got one shock in the form of the credit crunch. Oil could be that second shock.''

Crude-oil prices are poised to cross the $100-a-barrel mark while the U.S. economy is still reeling from a surge in corporate borrowing costs. Europe and Japan are vulnerable as well, after the U.S. subprime-mortgage collapse contaminated their credit markets.

For the complete article from Bloomberg, click here.

For a video interview with economist, Nariman Behravesh, on how $100 oil could lead to a recession, click here.

Extra Credit: How does an increase in oil prices affect aggregate demand and supply, and the price level in the short run? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Romer Rules!

2007-11-07T21:59:00.000-08:00

Paul Romer of Stanford University is one of my favorite economists. Romer is the founder of Aplia and a pioneer in the new growth theory that was discussed in Chapter 8 of your e-book. Romer’s father, Roy Romer, was the former Governor of Colorado and the Superintendent of the LA Unified School District. I was fortunate to have dinner with Paul Romer a few years back and I can tell you in spite of his brilliance he is a truly nice guy. I have no doubt that he will win the Nobel Prize in economics for his contributions to growth theory.

To learn more about Romer’s work on economic growth see David Warsh's book Knowledge and the Wealth of Nations , or look at the Economist article "The Growth of Growth Theory" in its 18 May 2006 issue. . You can also listen to a recent podcast interview with Romer in the excellent EconTalk series hosted by Russ Roberts. Or alternatively you can read the transcript of the EconTalk interview with Professor Romer.

Once macro minds start thinking about economic growth it is hard to think about anything else. You may want to consider a topic relating to economic growth as the subject of your Discussion Board posting.

Extra Credit: Address the question: Is Aplia an effective tool for improving student learning? Do the Aplia homework assignments increase your learning potential? I don’t want to hear whining that the questions in Aplia are hard. The questions on Aplia may seem hard, but they are not any harder than they would be in any standard transferable economics course. What I want to know is if you think that Aplia is a technology that leads to better educational outcomes. What do you like about Aplia? What are its weaknesses? Do you have any suggestions for improvement? Aplia’s pitch to professors is that the students do more work and the professor does less. I am also interested in knowing what other techniques that you think are useful to create a successful online learning environment. I have set up a forum on the Discussion Board called Aplia Forum. I will give between one and four points for every thoughtful post on Aplia and creating a thriving online learning environment. One post per student please. The number of points that you will be awarded to your Discussion Board Extra Credit account depends on the length and quality of your post. To earn the maximum of four points your post should be thoughtful and several paragraphs in length.

Supermodel Bundchen Joins Hedge Funds Dumping Dollars

2007-11-05T20:48:00.000-08:00

“Nov. 5 (Bloomberg) -- Gisele Bundchen wants to remain the world's richest model and is insisting that she be paid in almost any currency but the U.S. dollar.

Like billionaire investors Warren Buffett and Bill Gross, the Brazilian supermodel, who Forbes magazine says earns more than anyone in her industry, is at the top of a growing list of rich people who have concluded that the currency can only depreciate because Americans led by President George W. Bush are living beyond their means. “

Read the complete Bloomberg story here. You’ll learn more about exchange rates when we cover Chapter 19 at the end of the course. If you do any travelling outside the United States you will know that the U.S. dollar has been depreciating against most other currencies for several years. I wish I had been paid in Euros in the last several years. I wouldn’t have needed a raise denominated in dollars.

Extra Credit:Three years ago Suzie Q Hilton left California to seek her fortune in Euroland as a super model. Upon arrival in Euroland Suzie took $10,000 (USA) and opened up a checking account denominated in Euros, but paying no interest. Suzie has decided to return to the good old USA and luckily for her she didn’t need to spend any of the Euros in her account. If Suzie takes her Euros and exchanges them for dollars, how many real dollars will she have now after three years in Europe? Explain your answer. If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

The Employment Situation, October 2007

2007-11-03T12:55:00.000-07:00

From MarketWatch: October job growth strongest since May:
“Shaking off fears about weakness in housing and credit, the U.S. economy created 166,000 net jobs in October, the best job growth since May, the Labor Department reported Friday….

The unemployment rate was steady at 4.7% as expected, the government said…..

However, a separate survey of 60,000 households showed a loss of 250,000 workers, the third decline in the past four months.”

The government report shows good job gains, but a separate survey showed that fewer Americans were employed over all last month. Okay!? Don’t miss the “Back Story” interview with economics reporter David Leonhardt to find out how we can have more jobs and less jobs at the same time.

Payrolls grew mainly in the service sector according to the Labor Department report.

The New York Times reports: “Some economists saw distortions in the data. With seasonal adjustment factors removed, nearly half of the gain in private jobs came from an estimate that the Labor Department makes each month about how many jobs were added by new businesses, known as the “birth and death” model. The Labor Department did not actually find evidence of these jobs; it assumed they were created based on historical patterns…. The unemployment rate held steady at 4.7 percent in October, the highest rate since August 2006, but only because the survey found that more people stopped looking for work and were therefore not counted by the government as unemployed.”

The New York Times article also has an excellent graphic on the Labor Market Picture in October.

Here is the Employment Situation Summary for October from the Bureau of Labor Statistics (BLS).

Extra Credit: Explain how the Bureau of Labor Statistics came up with a 4.7%. unemployment rate in October. Use the actual numbers in the Employment Situation Summary to illustrate. Hint: See Figure 6.1 in your e-book. The unemployment rate is calculated by dividing the number of unemployed individuals by the number of people in the labor force and multiplying by 100 If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

GDP up more than expected

2007-11-02T09:00:00.000-07:00

In Chapter 7 of your e-book, you are learning about the main macro measure: gross domestic product or GDP. GDP helps us to measure the performance, speed, and health of the macroeconomy. Looking at the path of real GDP allows us to evaluate our monetary and fiscal policies, our investment and savings patterns, and our material well being.

This week there was good news on the GDP front. The first estimate of third quarter economic growth was better than most economists (including myself) had expected. The Bureau of Economic Analysis reported this week that U.S. real GDP grew at a 3.9% annual rate in the third quarter.

The most common way to calculate GDP is to add up all spending on domestically produced final goods and services, leading to the equation GDP = C+I+G+X-IM. There was good growth in nonresidential fixed investment (I) helping to make up for the weakness in housing. There was also good growth in exports (X) because of the weak dollar. I am still trying to figure out why consumer spending grew at three percent! Government purchases grew by 3.7 percent at annualized rate almost entirely because of defense spending growth.

Click here for a sample of the reactions of various economists to the latest GDP report, and here for a detailed analysis of the GDP picture. Anyway if GDP growth is so could why did the Fed feel the need to cut interest rates this week? Do they know something that isn’t in the stats?

Extra Credit: Why does the BEA Press Release refer to real GDP? Is there a fake GDP? Explain. How much did the GDP deflator rise in the third quarter? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

The Fed cut rates

2007-11-01T08:35:00.001-07:00

The Federal Reserve cut two important interest rates yesterday, and indicated that it may be reluctant to cut rates further in the future. The Fed is predicting a slowdown of growth.

Here is the Press Release from the Federal Reserve Open Market Committee (FOMC).
Press Release

Release Date: October 31, 2007

The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/2 percent.
Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction. Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time.

Readings on core inflation have improved modestly this year, but recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.

The Committee judges that, after this action, the upside risks to inflation roughly balance the downside risks to growth. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; Eric S. Rosengren; and Kevin M. Warsh. Voting against was Thomas M. Hoenig, who preferred no change in the federal funds rate at this meeting.

In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 5 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Richmond, Atlanta, Chicago, St. Louis, and San Francisco.

You’ll learn more about the Federal Reserve and monetary policy in Chapter 13 of your text.

Extra Credit: How many regularly scheduled open market meetings does the Federal Reserve Open Market Committee hold each year? When is the next meeting? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answers, you will be rewarded with two extra credit Discussion Board points. Only one blog extra credit question per student can be answered in any given week for Discussion Board extra credit.

Maxed Out!?

2007-10-30T20:06:00.000-07:00

Credit card debt and personal bankruptcies are at an all time high. One of the better books that I have read this year is about the serious issue of consumer debt in the United States. The book is entitled Maxed Out: Hard Times, Easy Credit and the Era of Predatory Lenders by James D. Scurlock.

The book has a companion movie which is also for sale on DVD, and it may be available at your local video store. Click here to see some clips from Maxed Out: The Movie on YouTube.

Isn’t it common sense that if you want to avoid be “maxed out” you shouldn’t take on debt to the max in the first place? The way to avoid drowning in debt is simple: live within your means or even better below your means. This hilarious old Saturday Night Live routine gives the secret to financial success: “Don’t buy stuff you can’t afford.” A lot of American consumers don’t seem to get these simple truths.

I hope that you have noticed in your reading of Chapter 7 this week that consumer spending constitutes seventy percent of GDP in the United States. And American consumers are heavily dependent on debt to finance their spending. Consumers who carry credit card balances from month to month are not living within their means. Many folks have treated their home as a private ATM taking out cash to pay off credit cards. The housing ATM has closed down but American consumers are still buying stuff that they can’t afford, and credit card debt is soaring.

The subject of consumer debt and its importance to the macroeconomy would make for an interesting and relevant Discussion Board Post. Dr. Robert Manning, an economics professor at the Rochester Institute of Technology, has an excellent web site on consumer credit. You may also want to check out the Generation Debt website, especially the blog.

Extra Credit: Where does the household saving rate (expressed as a percentage) out of disposable income currently stand in the United States? Explain your answer and cite your source. If you are the first student to send me an e-mail at kwoodward@saddleback.edu with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

The Aplia Blog

2007-10-27T15:49:00.000-07:00

I didn’t get much reaction to my suggestion that students consider doing their Discussion Board Post on Alan Greenspan’s new book: The Age of Turbulence. I still think you would learn a lot of macro by reading the book, and it would reinforce the ideas in your textbook.

You shouldn’t put off picking a topic for your Discussion Board Post. In an eight week course things come at you fast and furious. With that thought in mind I’ll suggest another source of ideas for your post. Aplia has developed a good blog which covers current events in economics called Aplia Econ Blog (“News for Econ Students). “The Aplia Econ Blog offers a place to explore news articles that relate to your econ course. Each post highlights an economic concept by providing concise commentary and insight about a compelling news article. Posts conclude with open-ended discussion questions that encourage students to think about the article from an economic perspective.”

Some of the recent topics on the Aplia blog that might make for an interesting post, and are preapproved as topics include:
· Monetary Policy Reaction Function
· Remittances and Global Poverty
· Should the Government Tax Consumption or Income?
· The Dollar Is Sinking, but What Does That Mean to Me?
· The Dollar and the Drug Trade
· Loss Aversion and the Housing Market
· Out-Outsourcing

Extra Credit: Who founded Aplia? What is the founder of Aplia known for, aside from founding Aplia? If you are the first student to send me an e-mail at kwoodward@saddleback.edu with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Are we already in a recession?

2007-10-24T19:58:00.000-07:00

“When we look back next year at this time, it will be clear what caused the recession of 2007-08.” Click here to read David Wessel’s Three-Ingredient Recipe for Recession in the Wall Street Journal.

Extra Credit: How do economists define a “recession” in the United States? Defining a recession as a period in which output and employment are falling won't earn you any credit. Hint: Read Chapter 6 carefully. If you are the first student to send me an e-mail at kwoodward@saddleback.edu with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

The Age of Turbulence

2007-10-23T21:01:00.000-07:00

Alan Greenspan was the Chairman of the Federal Reserve from 1987 to 2006. Before that he was Chair of the Council of Economic Advisers under President Ford and an adviser to Presidents Nixon and Reagan. In my opinion no other single individual had has much influence and impact on maroeconomic in the past forty years as Alan Greenspan.

This September, Greenspan published a memoir of his experiences in the world of economics entitled The Age of Turbulence. Greenspan calls his book a “detective story”, and he received an advance of more than $8 million from his publisher. The Age of Turbulence is certainly one of the most important books of the year, and required reading for anybody who wants to stay on top of economic affairs.

The Age of Turbulence is divided into two parts. The first half is a memoir that traces Greenspan’s rise from student to jazz musician to the world's most powerful economist. We learn that Greenspan was the only child of divorced parent, and is an ardent student of math, music and baseball.

The second half of the book is an astute look into the economies of today and the future. Here Greenspan discusses of the current world situation and a prediction of what the economy will look like in the year 2030 while he outlines the rise of the modern global economy. The “maestro” discusses many different macro topics including stock market crashes, the rise of China, the transformation of Russia, economic populism in Latin America, energy, education, income inequality, the dot com and housing bubbles, and the effects of globalization. Reading the second half of the book one chapter at a time will give you time to reflect on the analysis.

I have enjoyed reading the Age of Turbulence which is why I am recommending it as a subject for you Discussion Board Post. The writing is direct and lively for an economist, and the paragraphs are short. Don’t worry there aren’t any graphs! Facts and statistics (positive economics) fill the pages, but Greenspan is not shy about giving his normative perspective on many of the macro issues that he discusses in the book.

I believe that reading the Age of Turbulence will make a lot of the ideas and concepts in your e-text come alive. Sharing the knowledge about macroeconomics that you gleaned from reading the book is preapproved as a Discussion Board post. If you decide to review the book for your Discussion Board post I would like you to concentrate on macroeconomic themes in the second part of the book: growth, recessions, inflation, globalization, deficits, etc. If you decide to review Greenspan’s book you will still need at least three references to key terms in your textbook, but you need not have any references to on-line sources. Your post should meet the minimum word requirement of one thousand words.

The book is available at fine booksellers everywhere, including Costco. It also should be available at most public libraries. If you are into podcasts you can download the book from i-Tunes.

Here is a direct link to a Jon Stewart interview with Greenspan on Comedy Central. Click here for an audio interview with the former central banker on NPR’s Fresh Air program.

Extra Credit: Greenspan advised six presidents in the course of his career. Which two Presidents does he consider the smartest and why? If you are the first student to send me an e-mail at kwoodward@saddleback.edu with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Are economic principles funny?

2007-10-21T15:27:00.000-07:00

Chapter 1 in your text is a review of the basic principles of economics. Sometimes these principles can seem pretty dry. Yoram Bauman, Ph.D. claims that he is “the world's first and only stand-up economist." Click here to see his comedy shtick on economic principles “translated for the uninitiated” from You Tube. Although Bauman’s principles are taken from another leading econ textbook, notice how similar they are to the principles outlined in your e-book in Chapter 1.

Late Start Econ 2 Extra credit: Which countries are the top three trading partners of the United States, Explain your answer and cite your source. The answer may not be in your text. If you are the first student to send me an e-mail at(kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Is Educational Technology Effective?

2007-10-18T19:03:00.000-07:00

I knew I wanted to become an economist when I read the Economist Magazine on a flight to Britain and found the content fascinating. Recently the Economist has launched an online debate series. This week’s topic may be of interest to Econ 2 online students. The proposition being debated is:
“Effectiveness of Technology - This house believes that the continuing introduction of new technologies and new media adds little to the quality of most education.”

Check it out and you may enjoy participating. Click here to enter the debate.

Late Start Econ 2 Extra credit: Send an e-mail to kwoodward@saddleback.edu with your vote on the above proposition along with the reasoning behind your vote, and you may be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Consumer Prices Rise

2007-10-17T20:13:00.000-07:00

The most widely reported measurement of inflation is the Consumer Price Index (CPI). The Consumer Price Index (CPI) is a measure of the overall cost of the goods and services bought by a typical consumer. The CPI measures the cost of a fixed basket of goods and services relative to the cost of that same basket of goods in a base year. The CPI is used to monitor changes in the cost of living over time. When the CPI rises, the typical family has to spend more dollars to maintain the same standard of living.

Today (October 17) the Bureau of Labor Statistics released the CPI Report for September. U.S. consumer prices rose 0.3% in September, which was the fastest rate in four months. Consumer prices were up 2.8% from a year ago. Sure seems like inflation is rising higher than that to me! Both the Wall Street Journal and the New York Times have good articles today about the September CPI News Release.

You learn more about the Consumer Price Index when we cover Chapter 7 of your e-book.

Late Start Econ 2 Extra credit: What do economists mean by “core inflation”? Why is it important? The answer may not be in your text. If you are the first student to send me an e-mail at(kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

The Recent Financial Turmoil and its Economic and Policy Consequences

2007-10-16T19:57:00.000-07:00

Yesterday on Monday, October 15 Federal Reserve Chairman, Ben Bernanke, gave a speech that seemed to scare stock markets throughout the world. In his speech to the Economic Club of New York Bernanke seemed much more nervous about problems in the housing market than in previous speeches, calling the housing slump a “significant drag” on growth into next year, and the outlook for the economy “uncertain.” Bernanke tried to assure the financial markets that the Fed will “act as needed” to maintain economic growth. You will be learning a lot more about the Federal Reserve System and monetary policy when we cover Chapter 13 in your text. You can watch the video of the Bernanke speech about the current state of the economy on Bloomberg or read the transcript here.

Speaking of the Fed last week Bernake gave an important speech the US Chamber Education and Workforce Summit. In this speech Chairman Bernake spoke about the value of education, calling it the “best investment.” He stated, “the benefits of education are more than economic. A substantial body of evidence demonstrates that more-highly-educated individuals are happier on average, make better personal financial decisions, suffer fewer spells of unemployment, and enjoy better health.”

Bernanke starts his education speech by saying: When I travel around the country, meeting with students, business people, and others interested in the economy, I am occasionally asked for investment advice. Usually (though not always) the question is posed in jest. No one really expects me to tell them which three stocks they should buy. However, I know the answer to the question and I will share it with you today: Education is the best investment. “

You can Read Bernake’s education speech online at :http://www.federalreserve.gov/newsevents/speech/bernanke20070924a.htm

Examining the role of education in economic growth would be a worthwhile topic for your post, and might serve to keep you motivated to do well in the course.

Fall Late Start Extra Credit: Where did Ben Bernanke teach economics before becoming Chair of the Federal Reserve? What was Bernanke’s main area of research when he was an academic? Explain and cite your source. If you are the Fall late start student to send me an e-mail at kwoodward@saddleback.edu with the answer, you will be rewarded with two extra credit Discussion Board points. Only one blog extra credit question per student can be answered in any given week for Discussion Board extra credit

Are we headed for a recession?

2007-10-15T11:03:00.000-07:00

The business cycle and how to avoid recessions is one of the major themes of macroeconomics. Recently the Bill Moyers Journal on PBS addressed the issue of whether we are headed for “an American recession”? You can watch the video, read the transcript, and follow the blog regarding this informative program online. You will find out more about business cycles when we cover Chapter 6 in your e-book next week, and this program might serve as a useful supplement if you feel the need for talking heads. I am guessing that the American economy is already in a recession, but I am in the minority among economists. The topic of how economists forecast a recession would make an interesting t Discussion Board Post.

Fall Late Start Extra Credit: When did the last recession in the United States officially start? Explain and cite your source. If you are the Fall late start student to send me an e-mail at kwoodward@saddleback.edu with the answer, you will be rewarded with two extra credit Discussion Board points. Only one blog extra credit question per student can be answered in any given week for Discussion Board extra credit

An iPod's global value

2007-06-28T13:17:00.000-07:00

Today’s Economic Scene column in the New York Times written by Berkeley Economics Professor, Hal Varian, addresses an intriguing question: Who makes the Apple iPod? My i-Pod has labeling that says that the product is “Designed in California by Apple.” The column describes the results of a study by three researchers at the University of California at Irvine that examined the parts that go into the production of an i-Pod. This case study suggests that it is impossible to understand the interconnections in an open global economy by looking at the standard trade statistics which focus on imports and exports.

Many American are legitimately worried about outsourcing or offshoring, which is the relocation of production once done in the U.S. to foreign countries. They are concerned about the outsourcing that occurs because many countries have a comparative advantage in labor costs. Varian points out that “(E)ven though Chinese workers contribute only about 1 percent of the value of the iPod, the export of a finished iPod to the United States directly contributes about $150 to our bilateral trade deficit with the Chinese.” Read the complete article by clicking here. Looking at a case study of the global production of a specific good or service and drawing economic implications might make an interesting and valuable Discussion Board topic.

Summer Session Extra Credit: How much does Apple get for each of the $299 video iPods that it sells? How much of the retail value is captured by “American” companies and workers. If you are the first Summer Session student to send me an e-mail at kwoodward@saddleback.edu with the answer, you will be rewarded with two extra credit Discussion Board points. Only one blog extra credit question per student can be answered in any given week for Discussion Board extra credit.

What's the Biggest Threat to the U.S. Economy?

2007-06-27T14:26:00.000-07:00

Robert Samuelson, the respected economics writer for Newsweek Magazine, asks the perennial question: “What's the Biggest Threat to the U.S. Economy?
A. Higher oil Prices; B. A prolonged housing slump; C. A steep rise in personal savings; D. A big hedge-fund failure. “

Click here for the answer.

Summer Session Extra Credit: In the opinion of Robert Samuelson, what is the biggest macro threat? Why? If you are the first Summer Session student to send me an e-mail at kwoodward@saddleback.edu with the answer, you will be rewarded with two extra credit Discussion Board points. Only one blog extra credit question per student can be answered in any given week for Discussion Board extra credit

Comparative Advantage Challenged

2007-06-22T13:25:00.000-07:00

One of the best websites for following the unfolding globalization process is the Globalist. This week the Globalist had a provocative piece: From Globalization to Localization? by Stephen Roach, the Chief Economist of Morgan Stanley, a reading global financial services firm. Roach argues that workers in rich countries are being squeezed by globalization, even as workers in China and India have seen rapidly rising living standards through expanded trade. Roach discusses a growing reaction in many rich countries in the developed world against the win-win model of comparative advantage, discussed in Chapter 2 of your text. Roach suspects that “a partial backtracking is now at hand” towards increased protectionism and localization. For the complete text of Roach’s article, click here.

Summer Session Extra Credit: What is the difference between comparative and absolute advantage? Why is this distinction important? If you are the first Summer Session student to send me an e-mail at kwoodward@saddleback.edu with the answer, you will be rewarded with two extra credit Discussion Board points. Only one blog extra credit question per student can be answered in any given week for Discussion Board extra credit

The R Word!

2007-06-19T18:19:00.001-07:00

This is the second day of the summer session version of Econ 2 online. Reading over the Discussion Board introductions I find that we have students from many different colleges and universities enrolled in Econ 2 at Saddleback, including UCLA, and arch rival USC.

The summer session is only eight weeks long and it therefore fast paced. Next week students will tackle Chapter 6 on "Macroeconomics: Big Picture" where they will be introduced to the core concepts of macroeconomics.

The following article from today's L.A. Times caught my eye because it featured an analysis of the macro economy from UCLA macro forecasters, and quoted one of my favorite Profs from my grad school days: David Shulman.

THE ECONOMY

Report from UCLA team skirts the R-word

First-quarter growth fell. Forecasters say it's not a recession, but 'it is certainly close.'

By Annette Haddad

Times Staff Writer

June 19, 2007

The sluggish housing market is starting to drag down the rest of the economy, leading UCLA forecasters to conclude that although the U.S. is not actually in a recession, "it is certainly close."

The nation's economy grew by a sickly 0.6% in the first three months of the year, the smallest increase in four years and a sharp decline from the fourth quarter of 2006, according to the widely watched UCLA Anderson Forecast.

UCLA economists don't think economic growth will slip for a second straight quarter, which would signify a recession. But they predict that the economy will stay in a funk till next year as falling home values and rising gas prices put a crimp on consumer spending.

"We suspect that the weakness in the housing market is finally spilling over into consumption spending," wrote senior economist David Shulman in the quarterly forecast being released today. "Retail sales appeared to stall in April and automobile sales have become decidedly weak.

"This is not a recession, but it is certainly close," Shulman said.

The Anderson Forecast is closely watched because it predicted the 2001 recession before others.

In a separate report on the California economy, UCLA forecasters predicted home values would continue to fall slightly or remain flat in most parts of the state as many homeowners struggled to make higher payments on adjustable-rate mortgages.

"The pipeline of mortgage resets suggests it may be mid-2009 before California sees a normal housing market again," said the report by economist Ryan Ratcliff.

Randy Becker doesn't need to read UCLA's forecast to know the housing market is in a world of hurt.

A Redlands-based subcontractor, Becker helps developers hook up their new homes to sewer lines. With the fall-off in new construction, Becker has laid off more than 40 workers — or about half his staff — since last fall.

"Builders used to sell 14 homes a week; now it's four a month," he said. "When I lay people off, I tell them it's nothing personal, but I can't make any promises."

To keep his people busy, Becker is competing for contracts in Arizona and Central California. His company, Advanced Underground, no longer farms out jobs such as laying wires and cables — it keeps the work in-house to save jobs.

"It's a matter of survival," he said. "We will tweak and bend and do whatever we need to do to stay busy."

Like UCLA, he sees the tough times lasting for about two more years.

As bad as things are, economists expected there would have been more job losses in the construction sector by now, given the depth of the housing downturn. Median prices have fallen by 10% in some counties over the last year, the report notes, while defaults and foreclosures have risen sharply.

On top of that, thousands of people lost their jobs earlier this year as borrowers with shaky credit defaulted on their sub-prime loans, leading prominent lenders to close their doors.

"Real estate has taken a bite out of job growth — just not as big a bite as we expected, and not in the way we expected," Ratcliff said.

In the first quarter, payroll growth (excluding farm jobs) slowed into the 1.5%-to-2% range, Ratcliff found — still not bad, all things considered.

"The relative strength of the California labor markets has been surprising," he said.

But there might be an explanation. UCLA economist Jerry Nickelsburg theorizes that there is a lot more joblessness among construction workers than the official numbers show, noting that self-employed workers and day laborers aren't counted in state payroll data.

"The official unemployment rates are understating the unemployment as they are unable to count the hidden workers," Nickelsburg said. "But the contraction in housing employment falling on the self-employed and hidden workers cannot go on forever."

Indeed, state officials reported Friday that the jobless rate grew to 5.2% in May, up from 5.1% the month before, largely because of mounting job losses in construction and real estate finance. Ratcliff predicts that job losses in those two sectors will help push the state's unemployment rate to 5.5% in a little over a year.

The dour assessment of the state and national economy from UCLA may seem contradictory given a continued bull market on Wall Street. The Dow Jones industrial average is up more than 9% this year, while the broader Standard & Poor's 500 index has advanced nearly 8%.

According to UCLA, however, the fortunes being made by investors reflect strong growth in overseas markets, in which U.S. companies are major players.

"Indeed, it is the strength of the global economy that is powering the stock market to new highs," Shulman wrote. "It is no accident that the Wall Street rally is being led by the giant global corporations who are benefiting most from the worldwide expansion."

In determining economic growth, UCLA forecasters measure gross domestic product adjusted for inflation, which is called real GDP. They said growth in real GDP fell to 0.6% in the first quarter, from 2.5% in the last three months of 2006 and 5.6% in the same period one year ago.

Forecasters say the economy will grow at about 2% for the rest of the year.

The UCLA economists said inflation remained a concern, making it unlikely the Federal Reserve would cut its benchmark interest rate — now 5.25% — until late this year.

Shulman said housing prices were still headed lower nationwide and would be down about 10% from their peak by 2009. But the economic damage from the housing market will ebb by the middle of next year as other business activities and strong exports help make up the difference.

By mid-2008, the economy will be on a pace to grow at a healthy 3%, UCLA predicted.

Kevin Panet is hoping for a quicker recovery.

Last year, the Moorpark resident was making close to $100,000 a year with benefits as a training manager for Ownit Mortgage Solutions Inc. of Agoura Hills.

Then shortly before Christmas he was laid off as the company struggled to get financing for its sub-prime loans and later filed for bankruptcy protection.

Panet regrouped, obtained a real estate agent's license and found another mortgage job six weeks ago. But this time he works as a loan salesman on commission. The big salary is gone, and he must pay for his own health insurance and marketing expenses.

"Am I scared? Yes," he said. "But I got a great job for myself and I know that the real estate market goes in cycles

annette.haddad@latimes.com

Summer Session Extra Credit: How is a recession defined in macroeconomics? What is the current unemployment rate in California? If you are the first Summer Session student to send me an e-mail at kwoodward@saddleback.edu with the answer, you will be rewarded with two extra credit Discussion Board points. Only one blog extra credit question per student can be answered in any given week for Discussion Board extra credit

More Growth Needed?

2007-06-16T19:27:00.001-07:00

Summer school in Macroland starts in a few days. For the summer session I am trying out a new Aplia e-book by Paul Krugman and his spouse, Robin Wells. In addition to being one of the most highly regarded economic theorists, Krugman also writes an interesting and sometimes very partisan economics column for the New York Times. Krugman's latest column is most interesting:

June 15, 2007

Op-Ed Columnist

America Comes Up Short

By PAUL KRUGMAN

LONDON

Traveling through Europe recently, I've been able to confirm through personal experience what statistical surveys tell us: the perceived stature of Americans is not what it was. Europeans used to look up to us; now, many of them look down on us instead.

No, I'm not talking metaphorically about our loss of moral authority in the wake of Guantánamo and Abu Ghraib. I'm literally talking about feet and inches.

To the casual observer, Europeans — who often seemed short, even to me (I'm 5-foot-7), when I first began traveling a lot in the 1970s — now often seem tall by American standards. And that casual observation matches what careful researchers have found.

The data show that Americans, who in the words of a recent paper by the economic historian John Komlos and Benjamin Lauderdale in Social Science Quarterly, were "tallest in the world between colonial times and the middle of the 20th century," have now "become shorter (and fatter) than Western and Northern Europeans. In fact, the U.S. population is currently at the bottom end of the height distribution in advanced industrial countries."

This is not a trivial matter. As the paper says, "height is indicative of how well the human organism thrives in its socioeconomic environment." There's a whole discipline of "anthropometric history" that uses evidence on heights to assess changes in social conditions.

For example, nothing demonstrates the harsh class distinctions of Britain in the age of Dickens better than the 9-inch height gap between 15-year-old students at Sandhurst, the elite military academy, and their counterparts at the working-class Marine School. The dismal working and living conditions of urban Americans during the Gilded Age were reflected in a 1- 1/2 inch decline in the average height of men born in 1890, compared with those born in 1830. Americans born after 1920 were the first industrial generation to regain preindustrial stature.

So what is America's modern height lag telling us?

There is normally a strong association between per capita income and a country's average height. By that standard, Americans should be taller than Europeans: U.S. per capita G.D.P. is higher than that of any other major economy. But since the middle of the 20th century, something has caused Americans to grow richer without growing significantly taller.

It's not the population's changing ethnic mix due to immigration: the stagnation of American heights is clear even if you restrict the comparison to non-Hispanic, native-born whites.

And although the Komlos-Lauderdale paper suggests that growing income and social inequality in America might be one culprit, the remarkable thing is that, as the authors themselves point out, even high-status Americans are falling short: "rich Americans are shorter than rich Western Europeans and poor white Americans are shorter than poor Western Europeans."

We seem to be left with two main possible explanations of the height gap.

One is that America really has turned into "Fast Food Nation."

"U.S. children," write Mr. Komlos and Mr. Lauderdale, "consume more meals prepared outside the home, more fast food rich in fat, high in energy density and low in essential micronutrients, than do European children." Our reliance on fast food, in turn, may reflect lack of family time because we work too much: U.S. G.D.P. per capita is high partly because employed Americans work many more hours than their European counterparts.

A broader explanation would be that contemporary America is a society that, in a variety of ways, doesn't take very good care of its children. Recently, Unicef issued a report comparing a number of measures of child well-being in 21 rich countries, including health and safety, family and peer relationships and such things as whether children eat fruit and are physically active. The report put the Netherlands at the top; sure enough, the Dutch are now the world's tallest people, almost 3 inches taller, on average, than non-Hispanic American whites. The U.S. ended up in 20th place, below Poland, Portugal and Hungary, but ahead of Britain
Whatever the full explanation for America's stature deficit, our relative shortness, like our low life expectancy, suggests that something is amiss with our way of life. A critical European might say that America is a land of harried parents and neglected children, of expensive health care that misses those who need it most, a society that for all its wealth somehow manages to be nasty, brutish — and short.

I'm glad that Professor Krugman has the means to travel in Europe this summer given how much both the Euro and the British Pound have appreciated against the dollar.

Summer Session Extra Credit: Which country has the world's tallest people? If you are the first Summer Session student to send me an e-mail at kwoodward@saddleback.edu with the answer, you will be rewarded with two extra credit Discussion Board points. Only one blog extra credit question per student can be answered in any given week for Discussion Board extra credit

Housing Update, June 2007

2007-06-04T17:38:00.000-07:00

Orange County’s own Calculated Risk blog provides a comprehensive Housing Update, June 2007
“Here are a few simple facts:
• Housing inventories are at record levels, in both absolute terms, and as a percent of owner occupied units.
• Households are already dedicating a record percentage of their income to mortgage obligations.
• Banks are tightening mortgage-lending standards.

So what will happen to the housing market? For normal markets, these facts - excess supply, falling demand - would foreshadow falling prices. But, for housing, prices are sticky because sellers tend to want a price close to recent sales in their neighborhood, and buyers, sensing prices are declining, will wait for even lower prices. But sticky doesn't mean stuck. Prices are now falling by most measures, and will probably continue to fall. However, in a typical housing bust, prices tend to fall slowly over several years - so buyers wait, and transaction volumes also decline.”

You can read the whole blog entry here. “In conclusion, the outlook for housing remains dismal” and this puts a damper on the outlook for the macro economy.

Summer Session Extra Credit: Read the entire Housing Update, June 2007 on Calculated Risk. Is the analysis an example of positive or normative economics? (See Chapter 2 in Krugman and Wells) Justify your answer. If you are the first Summer Session student to send me an e-mail at kwoodward@saddleback.edu with the answer, you will be rewarded with two extra credit Discussion Board points. Only one blog extra credit question per student can be answered in any given week for Discussion Board extra credit.

Econobrowser on Peak Oil

2007-05-23T18:25:00.000-07:00

James D. Hamilton is a Professor of Economics at the University of California, San Diego. Along with Professor Menzie Chin of the University of Wisconsin, Professor Hamilton publishes an first-rate macro blog called Econobrowser, which analyzes current economic conditions and policy. Recently Professor Hamilton posted an article (Peak Oil in America) on Econobrowser that he prepared for the Peak Oil Review on U.S. oil production and its decline. With the exception of President Reagan, every President since the 1970’s has given speeches on the theme of energy independence. Yet nothing significant has been done. The subject of peak oil and its macro implications is a intriguing Discussion Board topic and here is the article to get you started. ]

Summer Session Extra Credit: Which two countries are currently the world’s biggest oil exporters? Cite your source. If you are the first Summer Session student to send me an e-mail at kwoodward@saddleback.edu with the answer, you will be rewarded with two extra credit Discussion Board points. Only one blog extra credit question per student can be answered in any given week for Discussion Board extra credit.

EconTalk

2007-05-21T16:00:00.000-07:00

As I am finishing up the Spring final grades for Econ 2 online, I’ve been listening to some of the very interesting economics podcasts available on Econ Talk (“economics podcasts for daily life”) hosted by George Mason University economist Russell Roberts. The one hour Econ Talk interview with John Bogle, who is the founder of the Vanguard Funds and the creator of the index mutual fund, is particularly insightful. Click here to listen. This interview is a useful supplement to the material covered in Chapter Nine of the Krugman and Wells Macroeconomics text, which deals with Savings, Investment, and the Financial System.

Summer Session Extra Credit: What is an index fund, and why are index funds important to many individual investors? If you are the first Summer Session student to send me an e-mail (kwoodward@saddleback.edu) with the answers, you will be rewarded with two extra credit Discussion Board points. Only one blog extra credit question per student can be answered in any given week for Discussion Board extra credit.

Housing Bubble Videos

2007-05-19T19:48:00.000-07:00

I found a fun video showing US Home prices adjusted for inflation plotted as a roller coaster: Click here for a scary ride.

Paul Krugman the co-author of the Macroeconomics e-book that we will use this summer in Econ 2 online predicts the biggest housing bust in history. Click here for the Krugman video on You Tube.

Federal Reserve Chairman Ben Bernanke issued a warning on the U.S. economy last week, saying that the housing market will continue to struggle, and that the Fed sees "significant risks" in the leveraged-buyout boom.

Finally for a little dark economics humor: Click here! http://www.youtube.com/watch?v=T...related& search=

Is their green in going macro green?

2007-04-16T08:31:00.000-07:00

In an earlier blog entry, I suggested that The World is Flat by Thomas Friedman may be one of the most important books that you could read in college. Now Thomas Friedman is back with some further ideas on how to sustain the long run growth of our economy.

Check out Thomas Friedman's cover story on the “Power of Green” in yesterday's New York Times Magazine. According to Friedman: “The bottom line is this: Clean-tech plays to America’s strength because making things like locomotives lighter and smarter takes a lot of knowledge — not cheap labor. That’s why embedding clean-tech into everything we design and manufacture is a way to revive America as a manufacturing power.”

Here is a video interview with Tom Friedman on how America can regain its international stature by taking the lead in alternative energy and environmentalism. Or if you prefer an audio interview with Friedman on his proposed green makeover for the economy, click here.

California Dreaming: Green is Good Econ for Arnold

2007-04-12T10:13:00.000-07:00

If California was a separate economy in would rank among the top ten economies in the country. Increasingly it is pursuing macro policies that are different than the United States government based in Washington. Our governor made the cover of Newsweek this week for his lead on environmental issues.

The ‘Governator' likes to call California a nation-state with its own economy. Here is an interesting quote from Mr. Schwarzenegger reported in the recent Newsweek interview:
“What we do here will have such a huge impact. We have such an unbelievable influence on the rest of the globe. We are a nation-state. We are the sixth largest, seventh largest economy in the world. We make our own deals with countries, with Japan, with China and Canada. We rely on the federal government, but we are also relying on ourselves. We're acting as a new country. "

For a provocative podcast conversation among some stellar economists on the short run and long run prospects for California’s economy, click here. There are lots of ideas in this Forum for your Discussion Board Post.

Extra Credit: Here is some extra credit for all of you budding accountants out there. What is the AMT? Why is your professor (and many other folks) grumpy about the AMT? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two points that will be added to your Discussion Board Extra Credit Account on Blackboard. Remember to cite your source(s). Only two points in extra credit can be earned in any given week from the blog questions.

Oil and the Macro Economy

2007-04-10T08:53:00.000-07:00

In one of his most striking declarations in his 2006 State of the Union address, President Bush said "America is addicted to oil" and set a goal of replacing 75 percent of the nation's Mideast oil imports by 2025 with ethanol and other energy sources. The President promoted the construction of nuclear power plants and renewed a call for the development of alternative fuel for automobiles, including ethanol, which is made from corn, as well as the development of fuel made from the waste of plant crops.

If you are interested in this topic, you might want to check out this CNN special:We Were Warned: Tomorrow's Oil Crisis

I read a lot these days about the topic of peak oil. Matthew Simmons has studied the subject and believes that we have reached a peak in global oil production and will soon see a decline in global oil market. For a fascinating set of interviews with Simmons on peak oil and its potential impact on our economy click here.

Some obvious Discussion Board questions include:
1. How does an increase in oil prices affect aggregate demand and supply, and the price level?
2. Is there evidence that we are near a global oil production peak? If so, what will be the implications for our economy?

Housing slump hits states where it hurts

2007-04-09T09:17:00.000-07:00

The New York Times reports that many states, including California, are facing lower property tax revenue because of the slump in housing prices:

“State tax revenues around the country are growing far more slowly this year and in some cases falling below projections, a result of the housing market slowdown that has curbed voracious spending on real estate, building materials, furniture and other items.”

For the full story, click here.

March Jobs Gain

2007-04-08T17:32:00.000-07:00

The monthly unemployment announcements receive headline treatment almost every month. Changes in unemployment are significant indicators of national economic conditions. The March jobs report looked pretty good, and seems to be at odds with some other macro indicators that are flashing caution.

According to the Employment Situation Summary :

“Nonfarm payroll employment rose by 180,000 in March, and the unemployment rate was essentially unchanged at 4.4 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Employment increased in construction, retail trade, and health care. The number of manufacturing jobs continued to trend down. Average hourly earnings rose by 6 cents, or 0.3 per-cent, over the month.” "Health care accounted for about one in six jobs added to payrolls in the past six months," noted Philip L. Rones, deputy commissioner of labor statistics.

The March jobs report seemed to lower the probability of a housing led recession later this year, which the former head of the Federal Reserve, Allan Greenspan, has put as high as one in three. The low unemployment rate and the strong jobs growth also lowered the possibility of a cut in interest rates anytime soon.

Extra Credit: Explain how the Bureau of Labor Statistics came up with a 4.4%. unemployment rate in March. Use the actual numbers in the Employment Situation Summary to illustrate. If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Offshoring Bites

2007-04-01T08:17:00.000-07:00

Alan S. Blinder is one of the most prominent macro minds out alive today. Blinder is a Princeton University economist, a former Federal Reserve Board vice chairman and a prolific author. Like most economists Professor Blinder is a strong proponent of the benefits of free trade based on the principal of comparative advantage.

Blinder has recently been studying the effects of the integration, technology, and information across national borders. He is predicting that many highly skilled, professional occupations will soon be subject to outsourcing. He has concluded that up to 40 million jobs are at risk of being offshored in the next ten to twenty years. The outsourcing of services will make it easier for owners of capital in the U.S. to gain from globalization even if many American workers do not.

Professor Blinder maintains that the loss of information services jobs will cause a growing domestic political reaction against globalization. The effect of easier information flows on U.S. jobs is a worthwhile topic for the Discussion Board.

Click here for an article in the Online Wall Street Journal outlining Professor Blinder's research, or hear Professor Blinder speak for himself on the University Channel.

Extra Credit: Which country is the largest trading partner of the United States? Cite your source. If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answers, you will be rewarded with two extra credit Discussion Board points. Only one blog extra credit question per student can be answered in any given week for Discussion Board extra credit.

Credit Card Nation

2007-03-27T11:54:00.000-07:00

The average American family today carries eight credit cards. Credit card debt and personal bankruptcies are now at an all time high. With no legal limit on the amount of interest or fees that can be charged, credit cards have become the most profitable sector of the American banking industry: more than $30 billion in profits last year alone. FRONTLINE and The New York Times examine how the credit card industry became so pervasive, so lucrative, and so politically powerful.Click here to watch the Frontline special, Secret History of the Credit Card, online and access other materials on the growth of consumer credit:
http://www.pbs.org/wgbh/pages/frontline/shows/credit/

Robert D. Manning, a leading expert on the credit card industry. He is the author of CREDIT CARD NATION: The Consequences of America's Addiction to Credit (Basic Books, 2000) and a highly publicized study of college student credit card use. CREDIT CARD NATION has been released in paperback.Dr. Robert Manning, an economics professor at the Rochester Institute of Technology, has an excellent web site on consumer credit: http://www.creditcardnation.com/

World Economic Update

2007-03-25T09:50:00.000-07:00

“The University Channel is a collection of university lectures, panels, and conferences on the public and international affairs issues of the day” from academic institutions from around the world, which you can view, listen to or download. You could get an online education just watching this excellent web channel. Recently the Council on Foreign Relations held a forum on the world economy entitled World Economic Update featuring three of the most distinguished macroeconomists in the country. You can view the forum by following this link. There are lots of potential Discussion Board topics that are discussed. The University Channel has an Economy Topics section of their website.

Extra Credit: Who was the Chair of the Federal Reserve System before Dr. Bernanke? What odds does this person assign to the probability of a recession this year? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answers, you will be rewarded with two extra credit Discussion Board points. Only one blog extra credit question per student can be answered in any given week for Discussion Board extra credit.

Problems in the Subprime Market

2007-03-23T18:03:00.000-07:00

From the Wall Street Journal ECONOMICS:MACRO WEEKLY REVIEW

Subprime Mortgage Woes Are Likely to Spread
by Phil Izzo
Mar 16, 2007
Page: A4

Click here to view the full article on WSJ.com:
http://online.wsj.com/article/SB117387835283036763.html?mod=djem_jiewr_em

TOPICS: Housing
SUMMARY: This article reports the results of a new WSJ.com survey of economic forecasters. Most forecasters who participated in the survey believe that turmoil in the subprime mortgage market is likely to spread to the broader mortgage market. The forecasters think the U.S. will avoid a recession and a significant rise in unemployment. The forecasters also believe that the worst of the housing bust is behind us. The teaser rates on sub-prime mortgages tend to expire sooner than the teaser rates on prime mortgages so the sub-prime market will be hit with higher mortgage payments first. But once the teaser rates expire in the prime market, there might be some difficulties in that market as well. The overall impact of these mortgages may be small. Only 10% of all mortgages are adjustable rate mortgages. Some economists blame the Fed for keeping interest rates too low for too long, which led to a possible over stimulation of the housing market.
QUESTIONS:
1.) What is the subprime mortgage market? Why is it in trouble?

2.) How might the problems in the subprime mortgage market spill over to the rest of the economy?

3.) What is the difference between an adjustable rate mortgage and a conventional mortgage? What are the costs and benefits of each?

4.) How might the Fed have contributed to the problems in the subprime mortgage market?

5.) According to most of the forecasters surveyed, is the U.S. economy headed for recession?
Reviewed By: Edward Gamber, Lafayette College

The Steady Fed

2007-03-22T10:14:00.000-07:00

One of the main learning objectives in Economics 2 online is to understand the impact the Federal Reserve System and monetary policy. (Chapter 12 in the Colander text, Chapter 13 in Krugman and Wells)

Yesterday, March 20 2007, The Federal Reserve decided to keep the all important federal funds rate steady at 5.25%. This lack of action was widely expected. The Fed has not changed rates for six straight meetings.

According to Bloomberg, which is an excellent source of economics news: “For the first time since the Fed ended a two-year run of interest-rate increases in August, the central bank yesterday signaled that its next move might be either to lower or raise borrowing costs, instead of just the latter. The Federal Open Market Committee's statement omitted a previous reference to ``additional firming'' in favor of the more general ``future policy adjustments.''

The shift indicates officials may have concluded the risks of a deeper recession in the housing market make it hard to raise rates to bring down inflation more quickly.”

Here is the full text of the Fed’s statement about the state of the economy:

“The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 2-3/4 percent.

The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. Output evidently continues to grow at a solid pace despite the rise in energy prices, and labor market conditions continue to improve gradually. Though longer-term inflation expectations remain well contained, pressures on inflation have picked up in recent months and pricing power is more evident. The rise in energy prices, however, has not notably fed through to core consumer prices.

The Committee perceives that, with appropriate monetary policy action, the upside and downside risks to the attainment of both sustainable growth and price stability should be kept roughly equal. With underlying inflation expected to be contained, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured.

Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability. “

The stock market moved higher after the release.

A Picture Can Save a Thousand Words

2007-02-14T15:03:00.001-08:00

Robert Samuelson is one the country’s foremost economics journalists. In the current issued of Newsweek he has an article that is worth reading before you study fiscal policy, budget deficits, and the national debt, topics that are covered in Chapters 14 and 15 of your text.

Samuelson’s article focuses on the attached chart called “Shifting Priorities”. The pie chart compares the composition of federal government spending in 1956 and 2006. There has been quite a change in the face of federal spending.

Samuelson maintains in the article that:

“It might help if Americans called welfare programs—current benefits for select populations, paid for by current taxes—by their proper name, rather than by the soothing (and misleading) labels of "entitlements" and "social insurance." That way, we might ask ourselves who deserves welfare and why. We could consider all of federal spending and not just small bits of it. But most Americans don't want to admit that they're current or prospective welfare recipients. They prefer to think that they automatically deserve whatever they've been promised simply because they've been promised. They do not want to pose the basic questions, and their political leaders mirror that reluctance. This makes the welfare state immovable and the budget situation intractable.”

Extra Credit: Briefly explain why Samuelson maintains that “both liberals and conservatives, in their own ways, peddle phony solutions” to the budget deficit problem. If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with a plausible explanation, you will be rewarded with two extra credit Discussion Board points. Only one blog extra credit question per student can be answered in any given week for Discussion Board extra credit.

Back Blogging

2007-02-13T18:59:00.000-08:00

Yes, it’s been a while since I have time to blog. My duties as President of the Faculty Association have taken up more of my time than I predicted. I’ll try to do better with my blogging. It not like there isn’t lots of macro news out there.

In the meantime for you blog addicts out there here is a suggestion for keeping up with the economics blogs. Scroll through the leading economics blog aggregator in order to instantly find out the hot topics in macro or micro land. Economics Roundtable aggregates (you should know that word) a large number of the leading econ blogs. By perusing the roundtable you can keep up with the world of econ blogs. The Economics Roundtable site is maintained by Professor Bill Parke of the University of North Carolina at Chapel Hill.

The Aplia site maintains an excellent blog, but with a greater emphasis on micro issues:
http://econblog.aplia.com/

Extra Credit: Find a blog entry on the Aplia blog that relates to macroeconomics, rather than micro. Identify the entry and briefly explain why you think the entry deals with a macro issue. If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. If you answer the Discussion Questions from the macro entry on Aplia, I will give you one point of Discussion Board extra credit for each question that you answer correctly.

News of the Week from Macroland

2007-02-02T12:45:00.000-08:00

One primary focus of Econ 2 online is to explain what causes macro numbers such as the GDP, unemployment rate, inflation, interest rates, exchange rates, etc., to go up and down (positive economics). Recent economic indicators have been mixed

This week there was a glut of news about the state of the overall economy. On Tuesday the government reported the economy’s GDP (Chapter 7) grew at a healthy 3.5% annual rate in the fourth quarter of 2006. A surge in consumer spending, helped by falling energy prices, boosted GDP growth.

Not long after that the Federal Reserve (Chapter 12) left the target for short-term interest rates at 5.25% for the fifth consecutive meeting. In a statement released after their meeting, the Federal Reserve Open Market Committee (FOMC) seemed more optimistic about both growth and inflation than the last time that it met in December. The central bank said its major concern is in the firs part of 2007 is inflation.

On Thursday, February 1, the Commerce Department announced the personal savings rate for American households for 2006. It wasn’t pretty. The personal savings rate is at its lowest level since the Great Depression of the 1930’s.

Finally, today on Friday, we got the Employment Situation Summary or jobs report for the economy. Overall we saw job modest growth in January, but things weren't so great in the manufacturing sector. Employers added 111,000 jobs to payrolls last month, according to the Labor Department report, down from a revised 206,000 jobs in December.
Extra Credit:
Today there are two extra credit questions. Answer only one if you are interested in earning extra credit.

1. What was the personal savings rate for all of 2006? What does this mean for our economy?

2. What was the overall unemployment rate in January 2007? Is the unemployment rate going up or down?

If you are the first student to send me an e-mail to kwoodward@saddleback.edu) with the answer to one of the questions, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

MacroMind is back

2007-01-30T06:30:00.000-08:00

Welcome to the Economics 2 online blog for the Spring 2007 semester. The MacroMind is back after a fascinating trip through northern Thailand and Burma,

I created this blog as a way to facilitate discussion about current issues for my online students taking macroeconomics. My hope is that the blog will be a way for students to apply the theories and concepts that they are studying, and to help them discover the relevance of macroeconomics to their lives. I also hope that the blog will give you ideas for topics to write about for your required Discussion Board post. I plan to post new entries on current macro issue every couple of days.

You are welcome to look over the blog entries from last semester. Please do not answer the extra credit questions from last semester (Fall 2006). I will be providing new extra credit questions this semester (Spring 2007, see below).

A good way to start off the blog this semester is to review the state of the global economy. The World Economic Forum meeting in Davos, Switzerland every winter is the Woodstock of the Global Economy. The forum's site allows you to view speeches by major business leaders, academics, and politicians on the subject of the evolving world economy.

One of the most interesting sessions at the World Economic Forum is the panel on the state of the world economy. Leading macroeconomists from around the world give their economic forecasts for the upcoming year.

This year most of the panelists were relatively optimistic about the world as a whole, although slower growth was predicted for the United States. “Even with a US slowdown, it should be another Goldilocks year for the global economy thanks to encouraging growth from Europe and Japan,” said Laura Tyson, Professor of Economics, University of California at Berkeley. Most of the participants of this Global Economy update session agreed with Tyson’s assessment. The exception was Nouriel Roubini, who is a Professor of Economics at New York University and Chairman of Roubini Global Economics. Professor Roubini warned of a global “hard landing” and identified the housing recession as a major warning sign.

You can view other 2007 World Economic Forum sessions by clicking here.

Extra Credit: This semester we are using Aplia to complete regularly scheduled, auto-graded homework assignments in Economics 2 online. Who is the founder of Aplia? What is the founder of Aplia known for in the field of macroeconomics? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Happy holidays!

2006-12-14T07:11:00.000-08:00

I am winding down the blog for this semester. Dealing with the tax audit and the need to finish my grading has left MacroMind with very little time. Until late January 2007, my blogging will be very sporadic.

I’d like to close out the blog for the academic year by sharing an article by on of my favorite financial journalists, Jonathan Clements of the Wall Street Journal on happiness:
____________________________________________________________
The Pursuit of Happiness: Six Experts Tell What They've Done to Achieve It

By JONATHAN CLEMENTS, The Wall Street Journal

Yes, money can buy happiness. But you have to spend it with care.
Take your dad to the Super Bowl. Buy a home near the office. Get married. Go out to dinner with the family. Take a memorable vacation, and be sure to buy souvenirs.

Where does this advice come from? I talked to half-a-dozen academics who specialize in "happiness research" -- and asked what changes they had made in their own lives.

• Relishing the day. Possibly the biggest obstacle to greater happiness is so-called hedonic adaptation. Sure, you are thrilled when you first get promoted or get a pay raise. But soon enough, the thrill fades and you are lusting after something else.

When something good happens, you want to find a way to hold on to it for longer," says David Schkade, a management professor at the University of California at San Diego. For instance, you might go out to dinner to celebrate even modest career accomplishments. Similarly, you should purchase souvenirs or take photos when you're on vacation, so you remember the trip for longer.

Prof. Schkade tries to follow his own advice. As an undergraduate, he attended the University of Texas at Austin. When the Longhorns won the national championship in January at the Rose Bowl, he bought T-shirts that marked the occasion, so he wouldn't quickly forget the team's victory.
"You have to combat adaptation," Prof. Schkade says. "You want to celebrate the small things, not just the big ones. If you save all your celebrations for getting married or becoming vice president, you won't celebrate very much."

• Dodging traffic. Studies have found that commuting ranks as one of life's least enjoyable activities. The reason: While folks often adapt to changes in their lives, both good and bad, it's tough to adapt to commuting, because you can never be sure how much traffic you'll hit.
"Lack of control is what tends to induce stress in human beings," notes Andrew Oswald, an economics professor at England's Warwick University. "It made me re-evaluate whether I should be a long-distance commuter." A few years ago, Prof. Oswald moved closer to his office, slashing his commuting time from 60 to 20 minutes.

• Seeing friends. If commuting makes people so unhappy, why do they take jobs or buy homes that will mean a long commute? Folks rely on their initial reaction -- and, at first, the long commute may not seem so bad. "People don't think about how things will play out over time," says Cornell University economics professor Robert Frank.

Suppose you have the chance to take a higher-paying job that will leave you with less time for socializing. At first blush, that might strike you as a reasonable trade-off. But in all likelihood, you will quickly take the larger salary for granted.

Meanwhile, you'll miss out on seeing friends and family, which surveys suggest are among our happiest times. "Earlier on, I tended to sacrifice my family time to try and push research ahead," recalls Richard Easterlin, an economics professor at the University of Southern California. "I do that much less now. Going out to dinner with family for me is always an enjoyable experience."

• Buying memories. Some folks are inherently less happy and some more so, and this basic temperament seems to be remarkably enduring.
Nonetheless, you may be able to boost your level of happiness by thinking carefully about how you spend your time, says Princeton University economics professor Alan Krueger. On that score, try "buying memorable experiences," he suggests.

As an example, Prof. Krueger cites taking his father to the 2001 Super Bowl, which pitted the New York Giants against the Baltimore Ravens. "I got a lot of mileage out of that," he says. "I had the anticipation of the game, as well as the game itself. I framed my ticket, which reminds me of the trip." Still, he adds, "it would have been better had the Giants won."

• Limiting options. Having lots of choice might seem like a good thing. But in fact, it can lead to unhappiness.
________________________________________________________________________
During January I will be visiting Laos. I have attached a picture of some wonderful kids who live in a village that I like to visit there listening to my i-Pod. This particular Laotian village does not have electricity available yet.

I wish all my students in Econ 2 online a very happy holiday season.

The dollar is taking a dive

2006-12-02T11:53:00.000-08:00

Well, it’s official. The cover story of the Economist magazine this week is about the depreciating dollar. As you will discover when you read Chapter 18 on International Financial Policy, there are winners and losers from a depreciating currency which should know about for your final.

Here is some online media coverage of the macro story of the week. The New York Times (as usual) has a good story in today’s edition on why the dollar depreciation is not so scary to many American politicians. Here is a link to the coverage in the Economist magazine on the declining dollar. Earlier this week NPR news had a nice audio on the winners and losers from the dollar’s swoon.

Extra Credit: Identify two groups that stand to gain, and two groups that stand to lose when a currency depreciates and loses value against other currencies. Hint, I want to do some traveling abroad in January, and I am not pleased with the situation. If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with three extra credit Discussion Board points. Only three points extra credit per student can be earned in any given week from the blog questions.

Bah, humbug!

2006-11-29T21:58:00.000-08:00

The holiday season is getting off to a bad start for me. Frankly I'm pretty grumpy. The main reason for my grumpiness is that I'm being audited by the Internal Revenue Service next week. Wonder why I'm not blogging much, and only slowly getting to the discussion board posts and replies? The time that I am wasting getting records together from 2003 is the reason. Preparing for the tax audit reminds me of how badly our tax system needs reform. Only a tax accountant or lawyer could like our present federal income tax system. I don't know any economist, regardless of their political views, that thinks that our present tax system is either equitable or efficient.

President Bush appointed a bipartisan commission to study the American federal tax code in 2005. The bipartisan panel was to advise him on options “to reform the tax code

The President's Advisory Panel on Federal Tax Reform issued its final report in November 2005, and you can read the report online. The report starts off: “For millions of Americans, the annual rite of filing taxes has become a headache of burdensome record-keeping, lengthy instructions, and complicated schedules, worksheets, and forms – often requiring multiple computations that are neither logical nor intuitive.” No kidding, so what has been done to real tax reform a reality?

You will likely spend at least half of your life working to pay taxes. Feel free to use the Discussion Board to learn more about taxes and fiscal policy, and to educate your classmates. If you do decide to post on the macro impact of taxes and/or tax reform, do remember the distinction between positive and normative economics. You can find some basic information about federal taxes in chapters 2 and 15 in your textbook.

Extra credit: Is the United States a high tax or low tax country compared to other rich, developed countries, Cite your source, and briefly explain your answer. If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Blackboard is down, and that has got me down.

2006-11-26T11:50:00.000-08:00

This message is for all students in my Economics 2 online courses that may visit this blog. The Blackboard server has been down since sometime on Saturday, November 25 due to “technical problems.” Rest assured that the deadlines for your homework assignments will be extended by at least a week. For those of you in the late start course don’t worry about your first Discussion Board posting that was due tomorrow on Monday, November 27. I will extend the deadline for your first post to Thursday, December 7 at 11 p.m.

Extra credit: I need some humor. If you like you can send me a joke about macroeconomics that is in good taste. They are easy for find on the web. The first five students to find a high-quality joke about macroeconomics and relate the joke to their textbook will be eligible to receive extra credit Send me the jokes in an e-mail (mailto:kwoodward@saddleback.edu)and, and you may be rewarded with two extra credit Discussion Board points.

Macro blogging

2006-11-24T10:27:00.000-08:00

Since overcoming my TV news addiction I increasingly rely on blogs for information about the macro world. The Los Angeles Times had an article yesterday about economics blogs yesterday (Thanksgiving). Let me share a few snippets from the LA Times piece:

“Of the top 100 sites in the blogosphere, four or five are about economics, said Brian Gongol, a small-business owner who compiles blog ratings and is an econo-blogger himself. That alone is surprising….

"What academics are interested in is ideas," said David Colander, an economics professor at Middlebury College who has studied how the discipline has evolved. "Whatever leads to the furtherance of those ideas, they're interested in."Colander is skeptical that the blogs will ever make economists into pop icons. (So am I!) He was one of 100 members of the profession featured on promotional trading cards issued in 1996 by a book publisher in a program called Economists Hall of Fame. Although the cards are still floating around, it's doubtful many kids collect them.
The market value of the economist cards — or anything else signed by economists — is still pretty low, Colander said. His advice for investors thinking of gambling on the idea that economists are the celebrities of the future?‘I'd say buy a baseball card instead.’”

I hope that if you are a student in my Econ 2 online class that you recognize David Colander’s name.

Two blog aggregators that allow the reader to skim through lots of econ blogs at once to look for issues of interest are Economics Roundtable and BlogNetBiz/Econ/Econ.

Greg Mankiw of Harvard, who was the former chair of the Council of Economics Advisors, has a stimulating blog that is often quite conservative in its normative economics. Brad DeLong, a former Clinton administration official, and now at Berkeley writes an equally provocative blog that leans to the left. Both of these blogs are among my favorites because they generally practice the “art of economics.”

My crystal ball and psychic powers tell me that a major topic of conversation on the macro blogosphere in coming months will be the depreciation of the U.S. dollar. I hope that you will see why I think that way when you read Chapter 18 of your text. Then you’re done with the reading for the course. Whew! I hope that all of you had a restful Thanksgiving, and are ready to complete the home stretch of Econ 2 online.

Extra credit: What is the most visited blog that focuses on economics? What is the source of your information? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

China Surging

2006-11-21T16:52:00.000-08:00

“Let China sleep, for when she awakes, she will shake the world.” –Napoleon

One of the themes of this blog has been that China, India and other developing countries are giving the world economy most of its recent boost. The Economist Magazine in its recent survey of the world economy calls China and India (Chindia) the “new titans.”

Over at UCI, Professor Peter Navaro has published his new book called The Coming China Wars. Navarro also wrote an interesting article for this week’s Barron’s Magazine that explains how the Chinese manufacturers can undercut competitors' prices by 30% to 50%. In the article, Navaro describes the University of California/Irvine's China Price Project which is in the process of examining the major economic drivers of China's competitive advantages to provide “clarity about how China became the world's factory.”

I plan to read Professor Navaro’s book on my iPod over the break. If you want to review the book for a Discussion Board post that would be grand. I’ll read this book with interest since I have had a long standing interest in China and the Chinese economy, having visited China on numerous occasions. I don’t care for the “war” metaphor, but I suppose that is what it takes to grab attention and sell books in a competitive media market.

Recently the online media has begun focusing on the implications of rapid economic development in China. The growth of China's economy has no equal in modern history. Since China set about reforming its economy more than a generation ago, its GDP has expanded at an annual rate of close to %. The country is closing in on a 30-year run during which its economy has doubled nearly three times. China’s surge is a revolutionary upheaval in global economic power, comparable to the rise of the US between 1860 and 1910.

For an interesting series of broadcasts and podcasts about the Chinese economy from the Marketplace radio show, click here.

China's growing importance in global macroeconomics raises a number of interesting questions that you can thrash out on the Discussion Board. For example:

1. Is the rapid development of the Chinese economy be good or bad for the U.S.?

2. Describe the ways in which the U.S. may benefit from greater economic development in China.

3. Describe the ways in which the U.S. may be harmed by greater economic development in China.

4. What macro policies should the U.S. adopt to adjust to China's growing economic importance?

Extra Credit: Who is the guy in the picture? Critics and supporters alike agree that his reforms helped bring China closer to capitalism. If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Can America Keep Up?

2006-11-19T07:59:00.000-08:00

Recent economic studies have shown that technological progress accounts for more than half of the U.S. economic growth in the post-war period. Correspondingly, a workforce highly trained in science, technology, engineering and mathematics (STEM) is fundamental to our nation’s ability to remain competitive. The skills and knowledge of a country’s workforce play a huge role in determining its long run standard of living. With the process of globalization continuing, and the baby boom generation on the verge of retirement, attention is turning to the skills of America’s younger workers.

This past week I read a rather depressing article dealing with The Workforce Readiness Crisis. “Released in September, "The Workforce Readiness Report Card" from the Partnership for 21st Century Skills, The Conference Board, Corporate Voices for Working Families, and the Society for Human Resource Management found the nation's new workforce entrants "woefully ill-prepared for the demands of today's—and tomorrow's—workplace." Donna Klein, president, CEO, and founder of Corporate Voices for Working Families, says the study's results were ‘amazing and sobering.’ “ The article is well worth reading in its entirety.

Earlier this year in his 2006 State of the Union speech, President Bush outlined an American Competitiveness Initiative to deal with a new threat: intensifying competition from countries like China and India. He proposed a substantial increase in financing for basic science research, called for training 70,000 new high school Advanced Placement teachers and recruiting 30,000 math and science professionals into the nation's classrooms. "We must continue to lead the world in human talent and creativity," Mr. Bush said. "Our greatest advantage in the world has always been our educated, hard-working, ambitious people and we are going to keep that edge."

You may also want to check out a recent article in the U.S. News called “Can America Keep Up? Why so many smart folks fear that the United States is falling behind in the race for global economic leadership.”

Will the U.S. economy be able to maintain its historical edge in innovation? This would be a great topic for the Discussion Board.

Extra Credit: Where has President Bush been in the last couple of days and what has he been up to? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Globalization: May the Force Be With You

2006-11-16T21:48:00.000-08:00

I am busy this week without a whole lot of time to blog on macro data.. The Producer Price and Consumer Price Indices for October came out this week, and seemed to show moderating inflation.

I did have time to catch a good program on globalization on the British Broadcasting Corporation (BBC). (Correct me if I am wrong for extra credit but I have heard that the BBC website is the most visited website on the Internet.) Earlier this year the BBC produced a three part documentary series on globalization, entitled The New Rules of the Game. In the first program called, May the Force be with You, the BBC travels to China and the United States to explore the new globalized world. The program examines what is meant by globalization, where it come from, and how is it evolving. There are interviews with one of globalization's greatest advocates, Thomas Friedman, but also from several critics of the globalization process. I haven't yet listened to the other two parts of the series but I'm looking forward to it. You can listen to this series on globalization online on the BBC website, or you can download each segment as a podcast.

I think it is a good idea to broaden your perspective by accessing diverse global media sources, rather than relying solely on the U.S. media. And the BBC is a great place to start.

Extra Credit: One of the most influential economists of the twentieth century, Milton Friedman, passed away today at the ripe old age of ninety four. Was Nobel prize-winning economist, Milton Friedman, a Keynesian or Classical economist? Explain your answer in a couple of sentences. If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Are we "addicted" to oil?

2006-11-15T08:26:00.000-08:00

Now that gas prices at the pump have fallen from their peaks, it seems that many people have already forgotten about our economy’s dependence on imported oil. The impact of our oil addiction has had and will have major macro consequences, and a lot of solutions are in being discussed. . Should energy policy get the same attention in macro as fiscal and monetary policy? I think so. Assuming oil prices are likely to remain high and increase in the future, which most economists do, what are the contours of a viable energy policy.

In one of his most striking declarations in his 2006 State of the Union address, Mr. Bush said "America is addicted to oil" and set a goal of replacing 75 percent of the nation's Mideast oil imports by 2025 with ethanol and other energy sources. The President promoted the construction of nuclear power plants and renewed a call for the development of alternative fuel for automobiles, including ethanol, which is made from corn, as well as the development of fuel made from the waste of plant crops.

President Bush, a former Texas oil executive, was hardly the first president to discover our economy’s addiction to foreign oil. You might want to review a speech that President Jimmy Carter gave on April 18, 1977. (You can watch it online courtesy of PBS.) It was the speech that established the strategic petroleum reserve, birthed the modern solar power industry, led to the insulation of millions of American homes, and established America's first national energy policy. "With the exception of preventing war," said Jimmy Carter, a man of peace, "this is the greatest challenge our country will face during our lifetimes."

Carter added: "It is a problem we will not solve in the next few years, and it is likely to get progressively worse through the rest of this century. We must not be selfish or timid if we hope to have a decent world for our children and grandchildren.” That speech was given thirty years ago!
"We simply must balance our demand for energy with our rapidly shrinking resources. By acting now, we can control our future instead of letting the future control us." Carter bluntly pointed out that: "The most important thing about these proposals is that the alternative may be a national catastrophe. Further delay can affect our strength and our power as a nation." He called the new energy policy he was proposing, "[T]he 'moral equivalent of war' -- except that we will be uniting our efforts to build and not destroy."

Watching Carter’s speech gave me a profound sense of deja vu? What happened to the Carter energy program? If you are interested in this topic, you might want to check out this very informative CNN special and website, which was created earlier this year: We Were Warned: Tomorrow's Oil Crisis.

An interesting new twist of our oil addiction is a possibility called "peak oil." Google the term, and you will see lots of debate. Many geologists and economists believe that oil production will decline in the world no matter how high prices go. If the "peak oil" theorists are correct, much higher oil and gasoline prices are inevitable. Many alternative technologies will become economically viable. Will the societies that take peak oil seriously be the ones that do better in the future? Are the President's proposals bold enough?

For a limited time, a 52 minute documentary video about the implications of peak oil for our society called "The End of Suburbia" is available for free online viewing at Youtube. Warning: this video is not for the faint of heart! Please watch the video at your own risk.

Some obvious Discussion Board questions on this topic include:
1. How does an increase in oil prices affect aggregate demand and supply, and the price level?
2. Is there evidence that we are near a global oil production peak? If so, what will be the implications for our economy?

Extra Credit: What percentage of our current energy usage does the United States currently import? Cite your source. If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Global forces have taken control of the economy.

2006-11-13T09:23:00.000-08:00

Mike Mandel who holds a Ph.D. in economics from NYU is one of my favorite macro mind writers. He has written a big think piece in the current issue of Business Week, called: Can Anyone Steer This Economy? The subtitle of the article says it all: “Global forces have taken control of the economy. And government, regardless of party, will have less influence than ever.” Mandel argues that the fiscal and monetary policy levers just don’t work the way they did in the past, and includes a nice chart to show why. U.S. policy makers become comparatively powerless as globalization expands. Washington just doesn’t have the economy under control anymore. I urge you to read the whole article or at least listen to the podcast. Along with the article Business Week Online includes a slide show on “Ten of the Biggest Blunders in U.S. Economic Policy.” Lots of good ideas here for a Discussion Board topic.

Let me share a few pithy quotes from Mandel’s article with you.

Excerpts from: Can Anyone Steer This Economy? By Michael Mandel:

“Sometime next year--perhaps around Christmas 2007, if current trends continue--the U.S. will hit a milestone. For the first time in recent memory, the cost of imported goods and services will exceed federal revenues. In other words, Americans will soon pay more to foreigners than they do to their national government…

No matter which party you belong to, or which Big Idea or school of economic policy you subscribe to, one thing is clear: Globalization has overwhelmed Washington's ability to control the economy. Whether you're a Republican supply-side tax-cutter, a Wall Street deficit hawk of either party, or a Silicon Valley techie type, your preferred levers of economic policy just don't work as well as they once did….

Clearly, education is key to competitiveness. "If an educated population is the engine of change, then we're doing a really, really lousy job," says Claudia Goldin, a Harvard economist who is co-authoring a book about education and technology. "We have been un-subsidizing higher education for some time."

…real wages for young Americans with a bachelor's degree have declined by almost 8% over the past three years. Nobody knows the reason for sure, but some economists suspect that global competition has something to do with it.

The idea of a national economic policy may be fundamentally out of date in a world of global markets. Washington is no longer the center of the economic universe.”

Extra Credit: Imports account for what percentage of U.S, GDP? Foreign money finances what percentage of U.S. domestic investment? The answers can be found in Can Anyone Steer This Economy? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answers, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

China: Scapegoat or Sputnik

2006-11-11T19:47:00.000-08:00

Those of you who are looking for a topic for a Discussion Board post might consider getting a copy of The World Is Flat: A Brief History of the Twenty-First Century. The author of the book is one of our country's most influential foreign affairs writers, New York Times columnist Thomas Friedman. I was impressed as usual with some of Friedman’s insights in an Op-Ed that he wrote yesterday in the New York Times (November 10) and I would like to share some excerpts:

Excerpts from: China: Scapegoat or Sputnik by Thomas Friedman.

“I still believe that when the history of this era is written, the trend that historians will cite as the most significant will not be 9/11 and the U.S. invasions of Afghanistan and Iraq. It will be the rise of China and India. How the world accommodates itself to these rising powers, and how America manages the economic opportunities and challenges they pose, is still the most important global trend to watch.

It really hits you when you see the supersize buildings sprouting in Shanghai, or when you look at the world through non-American eyes. Kishore Mahbubani, the dean of Singapore’s Lee Kuan Yew School of Public Policy, told me the other day that Asia right now “is the most optimistic place in the world.” More people have come out of poverty faster there — particularly in India and China — than at any time in the history of the world, and as a result, he notes, more people in Asia than anywhere else in the world today “wake up every morning sure that tomorrow is going to be better than yesterday.”…

Technology and globalization are flattening the global economic playing field today, enabling many more developing nations to compete for white-collar and blue-collar jobs once reserved for the developed world. This is one reason why growth in wages for the average U.S. worker has not been keeping pace with our growth in productivity and G.D.P.

“Economists call this phenomenon median wage stagnation,” noted The Financial Times. “Median measures give the best picture of what is happening to the middle class because, unlike mean or average wages, median wages are not pulled upwards by rapid gains at the top. As the joke goes: Bill Gates walks into a bar and, on average, everyone there becomes a millionaire. But the median does not change.”

Many Americans lately have started to get that joke, and it is one reason that with this new Democrat-led Congress we are likely to see a surge in protectionist legislation, more Wal-Mart bashing, a slowdown in free-trade expansion and increased calls for punitive actions if China doesn’t reduce its trade surplus — which surged to a record in October.

China, in other words, is inevitably going to move back to the center of U.S. politics, because it crystallizes the economic challenges faced by U.S. workers in the 21st century. The big question for me is, how will President Bush and the Democratic Congress use China: as a scapegoat or a Sputnik?

Will they use it as an excuse to avoid doing the hard things, because it’s all just China’s fault, or as an excuse to rally the country — as we did after the Soviets leapt ahead of us in the space race and launched Sputnik — to make the kind of comprehensive changes in health care, portability of pensions, entitlements and lifelong learning to give America’s middle class the best tools possible to thrive? A lot of history is going to turn on that answer, because if people don’t feel they have the tools or skills to thrive in a world without walls, the pressure to put up walls, especially against China, will steadily mount. “

I continue to believe that The World is Flat is worth a read or a listen if you want to understand globalization.

Extra Credit: What is the Chinese currency called? What is the current exchange rate between China’s currency and the U.S. dollar? Does China have a fixed or flexible exchange rate? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Macro Challenges Ahead

2006-11-09T19:58:00.000-08:00

In yesterday’s New York Times, economics, writer David Leonhardt wrote a provocative column about the macro challenges facing the newly elected Congress. I thought it was good enough to reprint in its entirety. There are lots of topics for a Discussion Board post.

November 8, 2006
Economix
Election’s Over. Now to Tackle the Realities.
By DAVID LEONHARDT

For everyone who is worried about the country’s big economic problems — energy policy, health care, the budget deficit — today is a good day.
It should be a good day regardless of whether you’re elated or disappointed by last night’s results, because a campaign that included almost no serious discussion of these issues has now ended. Today marks the start of the 2008 presidential race.

Unlike midterm elections, presidential races tend to revolve largely around economic plans, be it Bill Clinton’s 1992 promises to the “forgotten middle class” or George W. Bush’s vow in 2000 to cut taxes. As Gene Sperling, a former Clinton adviser, says, “In presidential campaigns, there is a premium on new ideas.”

We could use some fresh economic ideas right now. An honest accounting of the budget deficit would show it to be even larger than the government says it is. High oil prices have helped finance extremist governments across the Middle East, while the five warmest years on record have all occurred in the last decade. Health care costs, like the numbers of the uninsured, keep rising. Wages for most Americans have failed to keep pace with inflation over the last five years.

In some cases, the outlines of a potential — even bipartisan — solution have already begun to take shape outside of Washington. In other cases, the two parties each have a chance to claim a big issue as their own. With an eye toward Nov. 4, 2008, here is a breakdown of the four biggest:

THE DEFICIT When the latest budget numbers came out this summer and they showed a drop in the estimated deficit, I called some former Bush aides — Glenn Hubbard, Greg Mankiw, Doug Holtz-Eakin, Andrew Samwick — to give them a chance to gloat. But not one of them was in the mood.

They all said that the decline was obscuring a much bigger problem: the enormous long-term deficit caused by future Social Security and Medicare payments. “The real big problem is a decades-long generational issue,” Mr. Mankiw said. “That basic challenge often gets forgotten when the short-term situation is getting better.”

Fortunately, imagining a bipartisan agreement on Social Security isn’t all that difficult. Small groups of economists from both parties, including Mr. Samwick, have already negotiated some hypothetical deals.
Republicans might compromise by agreeing to increase the amount of income that is subject to the payroll tax — now $94,200 — and by cutting benefits for high earners. “We have a problem,” Mr. Hubbard says, “and the most well-off among us ought to bear the biggest burden.”
Democrats could then clear the way for an expansion of personal retirement accounts. Even people who hated Mr. Bush’s failed plan for personal accounts should be able to agree that more individual savings would be a good thing.

HEALTH CARE There are two main problems with American health care today, and they tend to get confused. The first is that far too many people don’t have health insurance. If you are not insured through your job, buying a policy is incredibly expensive, because insurers know that the people in the market for a policy are the ones who expect to get sick.
A few states — like Arkansas, Massachusetts and New Mexico, all with ambitious governors — are trying to address this problem by pooling together their uninsured residents into one buying group, much as a company spreads its medical costs across sick and healthy workers. It’s a great idea.

But it won’t solve the second problem: soaring health care costs, which are a much larger part of the long-term deficit than Social Security. Reining in these costs will require cutting back on expensive drugs and procedures that haven’t been proved to make a real difference. This issue is about the toughest one around, and I would be surprised if its political moment had yet arrived. We’ll probably have to wait for health care spending to go even higher.

GLOBAL WARMING Two weeks ago, Sir Nicholas Stern, a top economics official in the British government, released a report that should change the debate over climate change. Sir Nicholas and his staff concluded that without sharp reductions in greenhouse gases, global warming — and the droughts, hurricanes and floods that it brings — will probably reduce the world’s economic output by at least 5 percent a year. “The benefits of strong and early action far outweigh the economic costs of not acting,” the Stern report stated.

In this country, neither political party is serious about the problem. Instead, both have trotted out laundry lists of futuristic alternative-energy programs. No one can know which ones will actually work, and the planet will keep getting hotter in the meantime.

There are only two ways to slow global warming. One is to raise the cost of putting carbon dioxide into the atmosphere, through an energy tax. From Alan Greenspan and Mr. Mankiw on the right to Al Gore and Larry Summers on the left, there is enormous support for this idea, which would do far more to spur research than the current hodgepodge of alternative-energy tax credits.

That said, none of the big advocates of an energy tax are running for office right now. The second idea — less efficient but perhaps more politically palatable — relies on regulations like higher mileage standards for vehicles and limits on carbon use by companies. Senator John McCain says he favors such caps. I suspect we’ll hear more from him in the next couple of years.

LIVING STANDARDS Ben Bernanke, the Federal Reserve chairman, recently noted that sweeping economic changes threatened the livelihoods of many workers, and he warned that rising inequality could set off a political reaction. Henry M. Paulson Jr., Mr. Bush’s Treasury secretary, said that “many Americans simply aren’t feeling the benefits” of the current expansion. Nancy Pelosi, the Democratic leader in the House, puts it this way, “For the first time in generations, parents worry that their children will not be better off than they are.”
So where are the bold new solutions?
Republicans like to talk about education, skipping over the question of how better schools could help struggling workers in their 40s and 50s. Democrats have become fond of trade barriers, which don’t exactly have a good record of lifting a country’s living standards.

I’m not suggesting the answers are easy. But if we can agree that globalization and technological innovation have made the country richer — and they have, enormously — then we should be able to talk about how the winners can do a better job of compensating the losers.

An immigration policy that lets in fewer low-wage workers, but more doctors and scientists, might be a start, notes Benjamin M. Friedman, the author of “The Moral Consequences of Economic Growth.” So might tax cuts for the middle class — paid for by tax increases on the well-off, who have done very nicely of late.

There will, inevitably, be huge fights over the solution to any one of these issues. At times, the fights will get nasty, and people will come forward to decry the lack of civility in American politics. So be it. Economies, like democracies, can thrive without civility. They don’t thrive if they try to ignore their biggest problems forever.

Extra Credit: What is the current amount of the national or public debt of the United States? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Is Japan a global cool pop power?

2006-11-08T15:36:00.000-08:00

Japan has the world’s second or third largest economy depending on whether you adjust its GDP for purchasing power parity (PPP). Last summer I was lucky to get a grant to study the Japanese economy and society for a few weeks. It was a fascinating experience. I learned a lot about bubbles and the problems faced by an aging society.

Japan’s economy was once a world-beater. Twenty years after its defeat in World War II, Japan had emerged as the world’s second-largest economy and a major exporter of autos, consumer electronics, semiconductors and other sophisticated products. During the economic miracle from the 1950’s to 1980’s (“Rising Sun”), Japan evolved into the most productive manufacturing economy in the world. During the 1980’s books and studies extolled Japan as a paragon of the modern global economy, and Japan seemed on the verge of surpassing the United States as the world’s dominant power.

No country in modern history has moved so quickly from worldwide admiration to dismissal as did Japan in the 1990’s, as the bubbles in its stock and real estate markets popped big time. By any macro measure, the 1990s were a disaster for the world's second-largest economy. Macroeconomists asked how could a once-dynamic economy experience such a long period of meager growth? While the Japanese economy stagnated, Japan lent hundreds of billions of dollars to America helping to fuel the economy here.

Recently a number of more upbeat statistics and reports on Japan’s economy have begun to appear, suggesting the country may finally be recovering from its “lost decade.” However, last year Japan’s population saw its first decline in peacetime since records have been kept. The government predicts that the Japanese population of nearly 128m will fall to just over 100m by the middle of the century.

I have come across some good online resources that deal with recent developments in Japan. American RadioWorks has an entertaining program on Japan's Pop Power that you can access online. To many young people around the world, the capital of pop culture is Tokyo, not New York or LA.

On the other hand, Michael Zielenziger's new book, Shutting Out the Sun: How Japan Created Its Own Lost Generation, offers a pessimistic perspective on current Japan. He argues that Japan has not recovered from the economic stagnation of the 1990s, and he describes an tradition based economy now “jeopardized by disaffected youth.”

Extra Credit: What is purchasing power parity, and why is the concept important for macroeconomists? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Back to the Economy: Confronting America's Growth Challenges

2006-11-06T18:43:00.000-08:00

Economic growth is one of the most important topics studied in macroeconomics. On Halloween the New America Foundation held an important conference on economic growth called “Back to the Economy: Confronting America’s Growth Challenges.” The conference featured some of the best macro minds in the business that holds diverse normative perspectives. The vdeo of the complete event is available online. The conference really brings the concepts discussed in Chapters 6 and 8 to life, and provides lots of ideas and material for Discussion Board posts.

I really like the mission statement of the New America Foundation: “Powerful forces -- from rapid technological change to massive demographic shifts, from economic globalization to the rise of new global powers -- are remaking America. Now, more than ever, our nation needs a robust public debate that does justice to the complex challenges and opportunities of this unfolding era. Instead, there is a dearth of new thinking on both sides of the political divide, and a lack of investment in developing the creative young minds most capable of crafting new public policy solutions.”

Extra Credit: If an economy is growing at 3% per year, how many years would it take the economy to double in size. If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

The unemployment rate falls a five year low!

2006-11-04T19:15:00.000-08:00

The fall in the unemployment rate announce yesterday looks like good news. The Employment Situation Summary for October showed an unexpected drop in the U.S. unemployment rate to 4.4% which is the lowest rate since May 2001 at the beginning of the last recession. President Bush on the campaign trial lost time in spreading the good word.

MacroMinds know that the unemployment rate is not the only gauge of the health of the labor market. Recall from Chapter 6 of your text that the unemployment rate doesn’t tell us anything about the quality of jobs that are being created. Part-time and contingent workers are considered employed even if they want full-time work. People employed at jobs below their capability are considered employed. Finally discouraged workers are not considered unemployed. With all these caveats in mind it’s nice to see the continuing fall in the jobless rate. We can safely say that there is little cyclical unemployment and the present time, and that the unemployment rate is near its target rate.

Extra Credit: What are “discouraged workers” and why are discouraged workers important for interpreting the unemployment rate? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Productivity Stalls

2006-11-02T18:34:00.000-08:00

In the long run productivity growth may not be all that matters in macro, but it is just about all that matters if we want a higher standard of living. You should know from reading Chapter 8 that productivity refers to output per unit of labor input.

According to the Bureau of Labor Statistics, productivity growth went nowhere in the third quarter of 2006, which is not good news. Productivity growth was not the only number that was flat, so were Wal-Mart’s same store sales.

You can read the government report from the Bureau of Labor Statistics here. If reading the report would slow your productivity, you can listen to audio reports from NPR or Marketplace.

The chart on productivity is from the excellent Macro blog called The Street Light , which is written by economist Kash Mansori. For The Street Light spin on productivity report, click here. Let’s hope that the decline in productivity growth is not the start of a trend.

Extra Credit: Why is higher productivity the main source of long run growth and higher living standards in an economy? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

"Watch out for Wikipedia"

2006-11-01T14:11:00.000-08:00

Wikipedia is becoming an increasingly popular source for Discussion Board posts. While I am a Wikipedia fan, it is far from error free. I have even corrected some errors myself. The advantage of Wikipedia is that most of the wrong information gets corrected eventually.

Michael Mandel, the always interesting chief economist at Business Week has a post today on his Economics Unbound blog, about some of the pitfalls in relying on Wikipedia in doing economics research. Click here to read Mandel’s post.

Extra Credit: Define the macro “Misery Index”. What is the current level of “Misery Index” in the United States? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

"Where Stats Come Alive!"

2006-10-31T18:02:00.000-08:00

This morning on the Discussion Board I was asked which country was the world’s leading exporter. I know immediately where to go for the answer any time I need comparative statistics. I know that I’m weird, but I love macro statistics, and a really nice resource for country data is a website is called NationMaster. Choose a category, pick a stat, and compare the nations of the world.

Who is the most murderous? Columbia, followed by South Africa. Richest? Luxemburg. NationMaster provides data from reputable sources, such as the U.S. Census Bureau, The CIA World Factbook, the United Nations, The World Bank, as well as other international organizations. Sources for all facts and figures are cited, which is an absolute necessity in doing research. Give NationMaster a try. It’s addictive and easy to use.

Here is the data on richest countries as reported by the World Bank. Hats of to Ireland, the Celtic Tiger for rising to fourth place! It wasn’t so long ago that Ireland was one of the poorer parts of Europe, with people as its major export.

Extra Credit: Where does the United States rank in longevity or life expectancy at birth? What is the source of this information? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

I hope you have a great Halloween.

Krugman on Housing, Using Taco Sales to Predict the Economy

2006-10-30T20:16:00.000-08:00

I had an enjoyable dinner with New York Times columnist and Princeton Econ Prof, Paul Krugman, last Thursday. I also got to meet some of my colleague dismal scientists who teach at various local colleges. Much of the econotalk at dinner centered around the housing market and its effects on the macro economy. Soft landing (slow growth) versus hard landing (recession) is the question of the day for macro forecasters.

In the middle of dinner, Professor Krugman excused himself for a minute, and whipped out his laptop computer. It turns out that he was putting the finishing touches in the column in the New York Times that would appear officially in the next day’s paper. By the time I returned home from the dinner on Thursday night at 10 p.m., the column was already incorporated in the online edition of the Times, and the subject of intense debate in the blogosphere. The world is really is flat. I dream of using Web 2.0 technology to teach online from a nice beach in Thailand.

In today’s New York Times, Professor Krugman gives his take on housing in an article called: “Bursting Bubble Blues.” I am going to excerpt part of the article since to read the whole thing you have to subscribe to a service called Times Select.

Here are some excerpts from today’s Krugman piece.
“Over the last few years, most good U.S. economic news has been the result of soaring home prices. Spending on new houses created jobs and poured cash into the economy. Consumers borrowed against the rising values of existing homes and went on a buying spree, spending more than they earned for the first time since the great depression.
But the housing boom became a bubble, fueled by a surge of irresponsible bank lending, which continues even now…The question now is how much pain the bursting bubble will inflict.

Last week’s report on G.D.P. showed the first signs of serious economic damage. According to the “advance” estimates (which are often subject to major revisions), growth in the third quarter of 2006 slowed to its worst level since early 2003. A plunge in spending on residential construction, which fell at an annual rate of 17 percent, was the main culprit. But was that just a temporary setback or the beginning of something much worse?

Some say the worst is already over. Mr. Greenspan, who’s been an optimist all the way, now argues that the latest data on new-home sales and mortgage applications suggest that housing has already bottomed out. Business investment is still growing briskly, and so far consumers haven’t cut their spending. So maybe this is as bad as it gets.

But I think the pessimists have a stronger case. There’s a lot of evidence that home prices, although they’ve started to decline, are still way out of line. Spending on home construction remains abnormally high as a percentage of G.D.P., because banks are still lending freely in spite of rapidly rising foreclosure rates.

This means that home sales probably still have a long way to fall. And you don’t want to make too much of the fact that some housing indicators have turned up; those indicators tend to bounce around a lot from month to month.

Moreover, much of the good news in the latest economic report is unsustainable at best, suspect at worst. Almost half of last quarter’s estimated growth was the result of a reported surge in automobile output, which some observers think was a statistical illusion, not something that really happened.

So this is probably just the beginning. How bad can it get? Well, you don’t have to go far to find grim forecasts: Merrill Lynch predicts that the unemployment rate will rise from 4.6 percent now to 5.8 percent by the end of next year.”

But you may object to Krugman’s analysis. We live in The OC, and The OC is different. Jon Lasner, an entertaining and knowledgeable business writer at the OC Register has an informative real estate blog that you can access here. In fact, Jon Lansner is known to read the economic tea leaves at a taco stands. See Lasner’s article: “Weak sales at Mexican fast-food chains suggest sluggish overall economy.” Meanwhile Cal State Fullerton (CSUF) economists predict that the O.C. economy will slow through 2007, and housing prices will drop. Even The OC is not immune from macro forces.

Extra Credit: Who is widely considered to be the founder of macroeconomics as a separate branch of economics? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Wake Up: A Storm is Coming!

2006-10-29T10:26:00.000-08:00

A looming fiscal generational storm promises to make coping with Katrina look like child’s play. Yesterday’s Washington Post had an informative article on a very important long run macro challenge. The article “GAO Chief Warns Economic Disaster Looms” described the Concord Coalition's "Fiscal Wake-Up Tour," a series of forums designed to educate the public about the growing structural deficits that we will incur as a result of the impending retirement of the “Baby Boom” generation and rising health care costs. The star of the tour is David Walker, Comptroller General of the United States Government Accountability Office, which evaluates the performance of the federal government. Walker is dedicated to educating folks about the need for “generationally responsible” fiscal policy.

This statement from the article is on the money:
“The subject is short on political theatrics and long on complicated economics, scary graphs and very big numbers. It reveals serious problems and offers no easy solutions. Anybody who wanted to deal with it seriously would have to talk about raising taxes and cutting benefits, nasty nostrums that might doom any candidate who prescribed them.” In other words no politician is going to touch the subject of unsustainable long run deficits until the chickens come home to roost.

Luckily in this wired age, I didn’t have to just read about the tour. There is a webcast available of the event held at the University of Texas, complete with slides and a budget simulator. The webcast was scarier than Halloween.

Another great resource on our long run debt challenge is a recent book called The Coming Generational Storm. Authors Laurence Kotlikoff and Scott Burns warn that if our government continues on the course it has set, we'll see skyrocketing tax rates, drastically lower retirement and health benefits, high inflation, a rapidly depreciating dollar, unemployment, and political instability." The Coming Generational Storm is must read economics. There really is no such thing as a free lunch, and we’ll start to pay long after this course is over. If you are tired of reading, you can hear Professor Kotlikoff discuss his book at MIT by clicking here.

Chapter 15 on “Politics, Deficits, and Debts” in your Colander text provides a good background for thinking about deficits and debt. This is an interesting (if depressing) topic for the Discussion Board. Will there be a generational storm? What should we be doing now to prepare?

Here are some potential final exam questions on “Politics, Deficits, and Debts”:

1. What is a budget deficit?
2. What is a structural deficit?
3. Define the national or public government debt?
4. What are the implications of the fact that the U.S. Social Security System is a largely unfunded "pay as you go" system?
5. What are the challenges to the Social Security System and the federal budget that will arise with the retirement of the baby boomers?
6. Why do economists measure the national debt relative to GDP?
7. External government debt is________? What challenge does it present?

Extra Credit:

Send me the answer to any of the above final exam questions. If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with a given answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

Slowing GDP Growth

2006-10-27T18:47:00.000-07:00

The advanced estimate of third quarter GDP came out this morning from the Bureau of Economics Analysis. (BEA) It wasn’t pretty. In the FOMC statement earlier this week, the Fed projected that “going forward, the economy seems likely to expand at a moderate pace.” I am guessing that this GDP number is a little too moderate for comfort.

Here is the story from the BEA Press Release dated 10/27/06:
“Real gross domestic product (GDP), the most comprehensive measure of economic activity, and increased 1.6 percent in the third quarter after increasing 2.6 percent in the second quarter, according to estimates released today by the Bureau of Economic Analysis.

The deceleration in quarterly real GDP growth primarily reflected the following:
-Imports accelerated.
-Inventory investment turned down.
-Residential investment decreased for the fourth consecutive quarter; the decrease was the largest since the first quarter of 1991.
-Consumer spending for services and state and local government spending both decelerated. “

Housing subtracted 1.1 percentage points from third-quarter growth. To Nouriel Roubini the GDP report supports his forecast that a recession is in the offing in early 2007.

More information on GDP is available in Chapter 7 of your text book, highly recommended. It helps when you review a story in the digital media on GDP to remember the most important equation in macroland:

GDP = C + I + G + X – M.

Extra Credit: Why does the BEA Press Release refer to real GDP? Is there a fake GDP? What's so bad about 1.6% growth? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

The New Asian Tiger

2006-10-26T10:31:00.000-07:00

This article and slide show on the “roaring” Vietnamese economy in today’s New York Times brought back a flood of memories. In 1991 I was one of the first Americans to visit Vietnam since the Vietnam War ended in 1975. In the early 1990’s Vietnam was a desperately poor country hobbled by a legacy of Soviet- style socialism. (See Chapter 3 in your text.) In the years since Vietnam has gone from Soviet-style socialism to its own version of capitalism, it has begun to grow rapidly. Vietnam now has Asia’s second-fastest-growing economy, after China. The growth of Vietnamese exports to the United States is growing even faster than from China. Vietnam is on the verge of joining the World Trade Organization (WTO). You should know about the WTO for your midterm. I’d love to go back to Vietnam to see the changes.

Extra Credit: Why would Vietnam want to join the WTO? If you are the first student to send me an e-mail (kwoodward@saddleback.edu) with the answer, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.